20. Fund Shifting
20.1. Introduction
Each IOU has requested flexibility in shifting authorized LIEE and CARE funds with minimal Commission supervision. In addition, the dual-commodity IOUs (PG&E and SDG&E) have requested permission to shift funds between their LIEE electric and gas programs, which historically has required the filing of an Advice Letter.146 We have addressed similar budget flexibility requests many times over the past decade,147 and decide the issue consistently with prior decisions to allow partial but not full flexibility. We do not expand the IOUs' ability to shift funds.
In summary, we decide the following:
· LIEE: Fund shifting from one year to another within 2009-11 cycle: Allowed up to 15% of total LIEE budget without Advice Letter subject to limitation below; Tier 2 Advice Letter required for larger amounts;
· LIEE: Fund shifting into future cycles ("carry forward" funding):
o Long term projects that require funding beyond the three year program cycle; commitment of funds from the next program cycle to fund programs that will not yield savings in the current cycle: Allowed under strict limitations described below;
o Carry over of remaining, unspent funds from program year to program year or budget cycle to budget cycle: The utilities may carry over funds from previous periods to the 2009-11 budget periods but may not allocate carry-over funds to administrative overheads, regulatory compliance costs or pilots and studies.
o Fund shifting between gas/electric programs: Tier 2 Advice Letter required;
· LIEE: Spending of next cycle funds in the current budget cycle ("carry back" funding): Allowed only once the next cycle portfolio has been approved to avoid interruptions of those programs continuing into the next cycle and for start-up costs of new programs. IOUs may borrow funding without Commission approval up to 15% of the current program cycle budget, subject to the limitation below. Beyond that amount, the utilities are required to seek approval by filing a Tier 2 Advice Letter;
· LIEE: Fund shifting among program categories. Allowed except that IOUs may not shift additional funds to administrative overhead costs, regulatory costs or the costs of studies. In addition, moving funds into or out of the Education subcategory of the Energy Efficiency program category requires a Tier 2 Advice Letter. Transactions must be well-documented and reported on in monthly reports relevant to the period in which they took place. A Tier 2 Advice Letter is required if IOU wishes to transfer funds into or among the general administration, regulatory compliance, measurement and evaluation or pilots and studies categories.
· LIEE Limitation: IOUs must receive ALJ's written approval for how to allocate funds in the up-to-15% range if IOU proposes to allocate them to different program categories or to administrative overheads. IOUs may therefore shift up to 15% of LIEE funds among budget categories with the exception that allocations may be to program areas only, not administrative overheads or regulatory compliance costs.
We will allow the fund shifting requests from prior periods that the IOUs include in their budget applications. SoCalGas proposes to partially fund the 2009 budget requirements of $53.599 million by using $13.0 million in unspent LIEE program funds from previous years. For ratemaking purposes, SoCalGas is only seeking recovery of the net amount of $40.599 million. We grant this request.
20.2. Parties' Positions
In general, all IOUs:
· Request authorization to carry forward and carry back funding into 2009, 2010, and 2011; dual-fuel utilities look to transfer funds between gas and electric program departments, and.
· Request authority to shift funds among program categories.
20.3. Discussion
We adopt the following definitions to make our decision clear:
1. Program - organizational name given to LIEE and CARE.
2. Program Categories - organizational name given to budget elements that represent major activities for which funds are to be used. For example:
· LIEE Program Categories: Energy Efficiency, Training Center, Inspections, Marketing, etc.
· CARE Program Categories: Subsidies and Benefits, Pilots, M&E, General Administration, etc.
3. Subcategories - organizational name given to further detailed budget levels falling within a Program Category. For the current budget applications, only Energy Efficiency is split out into subcategories, which includes items like Gas and Electric Appliances, Weatherization Measures, Pilots, etc.
4. Program Department - Specifically relevant to dual-fueled utilities PG&E and SDG&E (SCE and SoCalGas have only one fuel, and therefore one Program Department), electric and gas make up two program departments that fall under one LIEE Budget. The program departments split the authorized LIEE Budget based on a preauthorized or newly requested ratio submitted by the utilities and based on projected need.
The LIEE table template below, from Attachment A-1 to the IOUs' applications, illustrates the distinction between these terms.
Authorized |
Planned |
3-Year Request | |||
|
PY 2009 |
PY 2010 |
PY 2011 |
PY 2009 - 2011 | |
LIEE Program: |
-- Program -- | ||||
Energy Efficiency |
-- Category -- | ||||
- Gas Appliances |
-- Subcategories -- | ||||
- Electric Appliances | |||||
- Weatherization | |||||
- Outreach & Assessment | |||||
- In Home Education | |||||
- Education Workshops | |||||
- Pilot | |||||
|
|
|
|
|
|
Training Center |
-- Categories -- | ||||
Inspections | |||||
Marketing | |||||
M&E Studies | |||||
Regulatory Compliance | |||||
General Administration | |||||
CPUC Energy Division | |||||
Each IOU asks for a varying degree of fund shifting. In the most recent low income decision, D.07-12-051, the Commission stated its desire to "encourage long-term LIEE investments and avoid program interruptions that might result from budgeting conventions."148 The Commission therefore applied to LIEE the fund shifting guidelines it had adopted for the broader Energy Efficiency program in D.07-10-032.
We allowed "carry back" funding (spending of next cycle funds in the current budget cycle) in D.07-12-051 and allow it under the same conditions here:
We will therefore modify our fund-shifting rules to permit the utilities to spend next-cycle funds in the current budget cycle (once the next-cycle portfolio has been approved) to avoid interruptions of those programs continuing into the next cycle and for start-up costs of new programs. We authorize the utilities to borrow funding without Commission approval up to 15% of the current program cycle budget. Beyond that amount, the utilities are required to seek approval by filing a Tier 2 Advice Letter. The utilities should tap into the next-cycle funds only when no other energy efficiency funds (i.e., unspent, uncommitted funds from previous program years, or 2006-2008 funds that will not be needed) are available to devote to this purpose. This requirement is consistent with the Commission's treatment in D.05-09-043 of "carry back" funding from 2006 for use in 2005.
"Carry forward" funding includes three possible actions. The first deals with providing funding for longer-term energy efficiency investments. D.07-12-051 held it was allowed in narrow circumstances, which we apply again here:
[W]e will allow the utilities to commit funds from the next program cycle to fund programs that will not yield savings in the current cycle. Long-term funding commitments will be subject to the following conditions:
· Long-term projects that require funding beyond the three-year program cycle shall be specifically identified in the utility portfolio plans and shall include an estimate of the total costs broken down by year and associated energy savings;
· Funds for long-term projects must be actually encumbered in the current program cycle;
· Contracts with all types of implementing agencies and businesses must explicitly allow completion of work beyond the end of a program cycle;
· Encumbered funds may not exceed 20% of the value of the current program cycle budget to come from the subsequent program cycle, except by approval in a Tier 2 Advice Letter process; Long-term obligations must be reported and tracked separately and include information regarding funds encumbered and estimated date of project completion; and
· Energy savings for projects with long lead times will be calculated by defining the baseline as the applicable codes and standards at the time of the issuance of the building permit.
The second type of "carry forward" funding involves the ability of IOUs to carry over remaining funds from program year to program year (and effectively budget cycle to budget cycle). Most recently, D.06-12-038, echoing previous Commission decisions,149 allowed the utilities to carry over funding from year to year (and effectively cycle to cycle). We apply the same rule here:
The utilities may carry over funds from previous periods to the 2007-2008 budget periods but may not allocate carry-over funds to administrative overhead costs, regulatory costs or the costs of studies. . . .150
For 2009-11, the policy allowing IOUs to carry funds from year to year and between budget cycles within the same program department budget (gas to gas, electric to electric) should continue. The IOUs should properly document these amounts, including interest, and report them in their annual reports and future budget applications.
The third type of "carry forward" funding entails the transfer of surplus funds in one program department (electric) over to balance the budget of another program department (gas), and vice versa. We disallow such transfers without an Advice Letter. PG&E and SDG&E provide both electric and gas services to their customers, and devise a percentage split of their LIEE funding to go into separate gas and electric department funds. They occasionally adjust these percentage splits based on forecasted need.151 Because the allocations are based on forecasts, over- and under-spending of funds can occur on both the gas and electric side. When this occurs, previous decisions have required the utilities to file Advice Letters before initiating any sort of transfer between the program departments,152 which PG&E did most recently in a 2007 filing for 2006, the process of which is detailed in a Commission audit issued in February 2008.153
We are not persuaded to alter our policy requiring the dual-fuel utilities to file timely Advice Letters for gas/electric shifting. We have disallowed cross-subsidization of gas and electric programs because their funding comes from separate ratepayer populations. In addition, PG&E, in its response to the aforementioned audit, agreed that as a "process improvement" it would set up triggers within its process and control system that monitor for pending over-expenditures in either category to allow them to initiate an Advice Letter in a timeframe that allows continuity in LIEE program delivery.154 This improvement, if properly implemented, should minimize the effects of the gas/electric shifting issue. We will require both PG&E and SDG&E to follow this process.
In formulating a course of action for this process, PG&E and SDG&E should keep in mind the period we are talking about falls at the end of the calendar year in November and December. This means that near the end of September of each year, the utilities should have a good idea of whether they have spent close to 75% of their authorized budget in each program department for the current program year. If there is potential for a serious shortfall in either category, no more than 5% over budget, a timely and forthcoming Advice Letter filed at the beginning of October should, without protest, become effective within 30 days. If the amount is under 5%, the budget transfer can occur through the process described next.
The Commission understands that full accounting of year-end activities could still be inaccurate given that LIEE activities can slow down, stop, or speed up around the end/beginning of each calendar year, and full costs of a project may not be realized until months after December of the previous year. PG&E and SDG&E should, if necessary, file an Advice Letter by April 1 of each year to account for any balancing that must be done between the two program departments. Through these two yearly Advice Letters, once in the fall and once in the spring, the utilities should be able to maintain successful continuity in program delivery.
We established fund shifting rules among program categories in D.06-12-038:
The utilities may shift funds between LIEE programs so as to promote the efficient and effective implementation of the LIEE program but may not shift additional funds to administrative overhead costs, regulatory costs or the costs of studies as set forth herein.155
This policy should continue through the 2009-11 budget cycle. To ameliorate any confusion going forward, the Commission interprets "[t]he utilities may shift funds between LIEE programs" to mean LIEE program categories, as defined at the beginning of this discussion; it should not be interpreted to mean shifting funds between program departments (electric and gas) or between LIEE and other low income programs like CARE.
The utilities may shift funds within each category, or between subcategories, as defined above, with the additional exception of moving funds into or out of the Education subcategory of the Energy Efficiency program category. Any funding shift into this subcategory requires that the IOU file an Advice Letter.
To be clear, funds in the program categories Energy Efficiency, Training Center, Inspections, and Marketing can be shifted among these at the IOUs' discretion. The Commission expects these transactions to remain well-documented and reported on in monthly reports relevant to the period in which they took place. We continue to require Advice Letters if IOUs wish to transfer funds into or among the General Administration, Regulatory Compliance, and Measurement and Evaluation156 categories as they require more Commission oversight.
The IOUs also request maximum flexibility in shifting funds between CARE program categories during the 2009-11 budget cycle.157 Decision 06-12-038 allowed for this flexibility,158 and we continue it here. All fund shifting, regardless of whether the Commission reviews it or not, must be reported in IOUs' monthly and annual reports as well as in future budget applications.
146 We approve the IOUs' requests for budget allocations across their electric and gas programs of 62/38 electric/gas for PG&E (LIEE) and 80/20 (CARE) and 50/50 for SDG&E.
147 See, e.g., Resolution E-3586 (1999), D.01-05-033, D.02-12-019, D.05-04-052, D.05-12-026 and D.06-12-038.
148 D.07-12-051, p. 51.
149 D.05-04-052.
150 D.06-12-038, OP 15.
151 For example, D.05-04-052, p. 26.
152 D.05-12-026, p. 21; D.01-05-033, p. 10.
153 California Public Utilities Commission - Division of Water and Audits, Regulatory Compliance and Financial Audit of the California Alternative Rates for Energy Program Administrative Costs and the Low Income Energy Efficiency Program of Pacific Gas and Electric Company (PG&E) (U-93-E), February 29, 2008, pp. 28-31.
154 Id. p. 29 & Appendix B.
155 D.06-12-038, OP 17.
156 See D.06-12-038, Sect. II. H and OP 6.
157 We use the same definitions of terms Program, Program Category, and Program Subcategory in this discussion as we do for the LIEE program.
158 D.06-12-038, OP 16.
