2. Background
Pacific Gas and Electric Company (PG&E), San Diego Gas & Electric Company (SDG&E), Southern California Gas Company (SoCalGas), and Southern California Edison Company (SCE) filed the subject applications in compliance with a ruling issued by assigned Commissioner Dian M. Grueneich on October 16, 2006, in Rulemaking (R.) 06-04-010, the Commission's energy efficiency rulemaking docket.
In Decision (D.) 05-09-043, which preceded the issuance of R.06-04-010, the Commission directed the assigned Commissioner to:
... explore the issue of counting embedded energy savings4 associated with water efficiency by informal or formal procedural vehicles in our rulemaking proceeding ....We recognize that there are many tasks and priorities for the coming weeks and months set forth in today's decision, and therefore leave to the Assigned Commissioner to determine the appropriate schedule for considering this issue further. (Mimeo., pp.168-169)
The Commission cited this language in R.06-04-010. In the subsequent scoping ruling for that proceeding, dated May 24, 2006, the assigned Commissioner determined that it would be appropriate to convene workshops and receive subsequent written comments addressing the following issues:
(1) Should the Commission's Energy Efficiency Policy Rules be modified to include as measure/program benefits the embedded (upstream) energy savings associated with energy efficiency measures that also reduce water usage (e.g., clothes washers that save both energy and water)? Why or why not?
(2) If so, what approach (methodology and rigor) should be taken for counting those savings on an ex ante (forecasted) basis and for verifying and truing up those savings ex post (after measure installation)? Should this counting be undertaken for the 2006-2008 program cycle, or on a prospective basis when embedded savings are incorporated into the potentials studies and the updated savings goals for 2009-2011? Are there other key implementation issues that need to be addressed?
These two general areas of inquiry allowed parties to focus initially on the measures and programs that the energy utilities are administering currently. The assigned Commissioner also included, as Attachment 1 to the scoping memo, a list of more specific issues related to these general questions to be considered at the informal workshops and in written comments.
Assigned Commissioner Grueneich further stated that at some point in the rulemaking or another forum, as appropriate, the Commission should begin looking at the broader context for water-related savings, including the implementation of new water conservation measures not currently undertaken by either energy or water utilities, as well as related issues such as program co-funding by water agencies and energy utilities. Therefore, she asked the utilities and interested participants to spend some time during the workshops addressing the process for embarking on a Commission inquiry into these matters.
Interested parties participated in a workshop held in Downey, California on July 17, 2006. The participants discussed the policy questions set forth in the R.06-04-010 scoping ruling. With the benefit of the results of the workshop, parties filed opening comments by July 31, 2006, and reply comments by August 18, 2006.
Commenting parties agreed that (1) by saving water or developing and treating it more efficiently, it is possible to produce significant energy savings, (2) energy efficiency programs could be more effective if the electric and gas utilities were to promote water efficiency improvements that would provide cost-effective energy savings, and (3) there is a shared sense of urgency to begin accounting for this energy savings potential and incorporating it into the design of the energy efficiency programs.
In their filed comments, parties described two types of energy savings: cold water savings (related to the production, transportation and treatment of water), and hot water savings (those related to reducing the use of energy to heat water for end-use purposes). It is the former (which includes "upstream" as well as "downstream" savings) that comprises the embedded savings opportunities that are the focus of these applications. The commenting parties identified four ways to reduce net energy consumption related to cold water:
1. Conserve water;
2. Use less energy-intensive water (gravity-fed or recycling versus groundwater, aqueducts or desalination);
3. Make delivery and treatment systems more efficient; and
4. Produce more energy through water delivery and treatment.
In a ruling issued October 16, 2007, assigned Commissioner Grueneich observed that while any of these methods would reduce the net consumption of energy related to water use, the first three appear to be most consistent with an energy efficiency strategy. Those options reduce the amount of energy required to use water. The fourth option reflects an opportunity to take advantage of water delivery and treatment systems to produce more usable energy. This production would likely be in the form of small hydroelectric generating facilities along water delivery paths, or methane gathering at treatment facilities. She suggested that such projects would best be explored in a distributed generation, or renewable energy context.
Most parties asked the Commission to approve some type of pilot program, for implementation during the 2006-2008 energy efficiency program cycle, to explore the potential for future programs to capture water-related embedded energy savings. In order to improve the likelihood of implementing new programs in the near future, in the October 16, 2006 ruling, the assigned Commissioner directed the utilities to submit applications for the approval of pilot programs consistent with the following criteria:
1. No later than January 15, 2007, PG&E, SDG&E, SoCalGas, and SCE were to file applications seeking approval of one-year pilot programs, as described below.
2. Each utility was to form a partnership with one large water provider to implement a jointly-funded program designed to maximize embedded energy savings per dollar of program cost. The assigned Commissioner encouraged the utilities to work with municipal water utilities to the extent that they appear to be the most promising partners. However, the process was open to all water utilities and agencies in the utility service territories.
3. The assigned Commissioner suggested that funding for these programs would be separate from the funding established for 2006-2008 programs. She encouraged the utilities to work together to develop a common program and funding approach, and suggested that they propose limiting the statewide energy utility cost for these pilot programs to approximately $10 million.
4. While it would be important to count embedded energy savings related to this effort, and to calculate any such savings related to existing programs, the assigned Commissioner directed the utilities not to seek credit for these savings as part of any rewards or penalties related to the 2006-2008 period. She stated that the applications should include proposals for counting the savings for the purpose of understanding program benefits, rather than to affect rewards or penalties.
She further directed the utilities to schedule a planning workshop during the second quarter of 2007 to determine what needed to be done to prepare for full incorporation of water-related programs during the 2009-2011 planning period. This workshop would address developing a methodology to estimate the magnitude of energy and dollar savings at various localities (and review proxy energy savings developed by the CEC as part of its 2005 Integrated Energy Policy Report); evaluation, measurement and verification protocols; procedural guidelines; marketing, education and outreach; and training.
In addition, in D.06-12-038, which adopted budgets and broadly addressed issues related to low-income energy efficiency programs, the Commission directed PG&E, SCE, SDG&E and SoCalGas to file proposals for "energy efficiency water conservation programs for low-income customers." (D.06-12-038, mimeo., p. 17). The Commission stated, "[T]he design of the low-income programs should incorporate water savings measures that could enhance the overall cost-effectiveness of the energy conservation programs while providing additional benefits to low-income customers." (Id., pp. 16-17).
Assigned Commissioner Grueneich and the assigned Administrative Law Judge (ALJ) Steven Weissman held a prehearing conference on January 30, 2007. In a ruling dated February 16, 2007, after considering the comments and concerns offered by various parties at the prehearing conference, the assigned Commissioner and ALJ described a series of objectives for the pilot programs and encouraged the parties to apply them when discussing the pilot proposals, and any potential modifications. We discuss these objectives below.
2.1. Workshops
At the prehearing conference, various parties expressed an interest in having the Commission convene additional workshops to further understand and develop the pilot program proposals. The Utility Reform Network (TURN) and the Division of Ratepayer Advocates (DRA) asked that we begin this process by offering a training session designed to enhance the understanding of energy experts as to the nature of the water utility industry. In the ruling dated February 16, 2007, the assigned Commissioner and ALJ scheduled a training workshop to be held on February 26, 2007, as well as workshops on February 27 and 28. The objectives were as follows:
1. First Day: Provide a common level of industry specific information to facilitate a constructive discussion of the pilot proposals.
2. Second Day: Provide greater clarity about the goals of the program and the standard for reviewing the adequacy of the proposals. In addition, the participants discussed a strategy for the presentation of issues in the workshops to be held on subsequent days.
3. Third Day: Create greater assurance that the pilot programs would be cost-beneficial.
DRA and TURN filed protests on February 20, 2007. In addition, on that day, the Inland Empire filed comments.
The Energy Division staff conducted a fourth workshop on March 16, 2007 to discuss a straw proposal for a program redesign strategy intended to support more accurate testing and measurement.
The workshops led to very constructive discussions about the objectives of the program and the likelihood that the program, as proposed, would produce information that could guide future project development. One result of the workshops is that the utilities pledged to draft a list of questions that they would answer through the pilot programs. PG&E distributed the list of questions to all parties electronically on March 29, 2007.
The assigned Commissioner issued a Scoping Ruling on April 23, 2007, including a schedule for the proceeding, which the ALJ revised in a ruling dated April 30, 2007. The latter ruling called for an additional workshop, which the staff conducted on May 7, 2007, to discuss a proposed cost-effectiveness "calculator," developed by Energy Division consultants, to assess the potential cost effectiveness of the utilities' proposed programs. In his ruling, the ALJ directed the applicants to serve supplemental testimony on June 14, 2007 proposing revised pilot programs, and for the Energy Division to conduct a workshop on June 20, 2007 to discuss the supplemental testimony. He further set a date of June 26, 2007 for opening comments on the proposed pilot programs, and June 29, 2007 for reply comments.
On June 22, 2007, two days after the workshop, DRA and TURN asked for a short delay to enable interested parties to meet with the applicants on June 27, 2007 to discuss remaining areas of concern. They further asked that the applicants be allowed to serve additional supplemental testimony on July 11, 2007, reflecting changes that parties might agree upon as a result of the June 27, 2007 meeting. Finally, they asked that parties be allowed to file comments concerning the proposed pilot programs on July 18, 2007, with reply comments on July 25, 2007.
The ALJ granted the requested time extension. The meeting between the applicants and other interested parties was productive, and the applicants served additional testimony on July 11, 2007. Having received comments and reply comments as scheduled, the ALJ conducted a second prehearing conference on August 1, 2007. At that time, all of the parties stipulated to the receipt of the applicants' proposals and prepared testimony into evidence without cross-examination and without responsive testimony.
4 By "embedded energy," we mean the amount of energy needed to produce, convey, and treat a given quantity of water.
