Discussion

There are three main issues the Commission must decide at this time. First, we must decide what budget level to authorize for SGIP for 2009, 2010, and 2011. Second, we must address whether to continue the practice of allowing unspent funds to be carried over to current budget years. Third, we should address SCE's request for flexibility in its collections so that it can use its current overcollection to fund current program activities.

On the first issue, we find merit to continuing the SGIP budget at the $83 million level for 2009, but we will gather further information before deciding on the proper budget level for 2010 and 2011. We have only recently authorized in D.08-04-049 the payment of SGIP incentives up to 3 MW, instead of the prior limit of 1 MW. In addition, the Commission recently expanded SGIP in D.08-11-044 to allow payment of incentives to advanced energy storage systems that are coupled with eligible SGIP technologies. We should not reduce the program budget until we can gauge the demand for these incentives. We should continue the program at the current funding level to provide market participants certainty when deciding whether to apply for these funds.

The 2009 budget shall be allocated across the utilities as follows:

SGIP Budget for 2009

We find it is premature to establish a budget for 2010 and 2011. As TURN and DRA suggest, we should assess the participation rate and demand for SGIP funds before establishing a future program budget. We agree with TURN that more information is needed on unspent funds, the ratemaking treatment of SGIP revenues, and the status of applications. We will direct the SGIP program administrators to provide this information, as discussed further below, so we can make future decisions for this program. We also need to retain budget flexibility in the event pending or contemplated legislation alters the technologies eligible for this program. There have been recent legislative proposals on this issue, and we expect further consideration of these proposals in 2009.

The second issue is unspent funds from prior budget years. We will continue the practice of allowing the program administrators to carryover these funds to their 2009 budget. In other words, if a program administrator did not spend its entire authorized budget in prior program years, it can augment its current budget by this amount. As we stated in D.08-01-029, this carryover includes unspent funds from non-PV applications that have dropped out or withdrawn. Unspent SGIP funds from PV applications prior to January 1, 2007 were either transferred to CSI on December 31, 2006, as directed in D.06-12-033, or should be transferred to CSI in the manner described in D.06-12-033 if and when these older PV applications drop out. (See D.06-12-033, pp. 33-34, and D.08-01-029, p. 7.)

Again, because of our recent decision in D.08-04-049 to fund incentives up to 3 MW, and in D.08-11-044 to pay incentives to advanced energy storage, we may see increased demand for the incentives and we want carryover funds to be available for this purpose in 2009. This will also allow us to gather information on the unspent funds from prior years and demand for the funds in 2009, to assess whether to continue this practice for 2010 and 2011.

The third issue is the utilities' requests for flexibility in how they collect SGIP funds from ratepayers. We discern from the comments that the utilities are not necessarily handling collections and accounting for SGIP in a consistent manner. It appears SCE collects its authorized budget annually regardless of demand for the program, and it now has approximately $110 million in unspent funds. Conversely, PG&E has apparently only collected from ratepayers after the fact based on the funds it committed each program year. At some point, however, PG&E switched to collecting its authorized budget annually. It is also unclear how much money each utility has amassed in carryover funds, either those funds it has collected from ratepayers but not spent, or funds that were budgeted but never collected. We need a better understanding of the authorized budget each utility has actually spent in each program year.

It is important to distinguish the authorized budget for SGIP from ratepayer collections. We have authorized an SGIP budget amount for each program year. It is up to the utilities either to collect it in advance from ratepayers or fund the money themselves and get reimbursed through ratepayer collections after the fact. It does not appear that previous SGIP decisions specified how the utilities were to handle this. Previous Commission orders authorized the carryover of unspent funds, but did not specify whether this was carryover of the authorized budget or carryover of money collected but not spent. It was also not clear if the practice of carrying over unspent funds would augment the budget in any given year, or merely offset the need to collect the current year's budget from ratepayers.

We clarify that we are authorizing the carryover of unspent budgeted amounts from prior program years to the 2009 SGIP budget, and this is meant to augment the current year's budget. We will gather information on the exact amounts of funds spent in each prior program year, determine the amount of cumulative carryover, and then determine whether we should continue to authorize the spending of this carryover budget for 2010 and 2011.

SCE, SDG&E/SoCalGas, and TURN urge us to return unspent funds to ratepayers, or suspend collection of future funds. We will not return unspent funds at this time because the demand for funding for projects up to 3 MW and advanced energy storage is unknown at this time. We do not know how much of the carryover funding from prior years will be needed in 2009, and it is unclear if some of this overcollection is actually reserved for specific projects that are not yet completed. Several parties remind us that DG investment decisions can take a long time. We agree that the market for DG investments needs some certainty about the amount of funds available for incentives. To decrease the funding source while customers may still be contemplating an investment could exacerbate market uncertainty. Nevertheless, we will allow SCE the flexibility to use its current overcollection to fund its 2009 SGIP budget rather than SCE collecting additional funds from its ratepayers at this time. SCE's carryover is large enough to fund its 2009 budget of $28 million and still have funds left for projects up to 3 MW or advanced energy storage, if needed. If demand for SGIP incentives in SCE's territory increases dramatically in 2009, SCE may need to collect its $28 million budget for 2009 at a later date.

Part of the reason there is uncertainty about carryover funds is due to the fact that there are incomplete projects from prior years for which funds are reserved. We are aware that in some cases, there are PV projects from 2006 or earlier, prior to the start of CSI in 2007, which have funds reserved under SGIP but have applied for extensions to keep their application in the system. The same is true for certain DG projects that applied in 2006 and 2007, before the program was limited to wind and fuel cell technologies as of January 1, 2008. The practice of granting extensions ties up budget funds, sometimes at outdated and higher incentive rates, and makes it difficult to assess the current budget picture for the program.

We will direct the SGIP administrators to provide information on all pending SGIP applications so we can understand the scope and dollar amounts related to projects that have been receiving such extensions. By this order, we notify the SGIP administrators that all pending applications for projects filed in 2006 or earlier must be completed and paid or rejected by December 31, 2009. After December 31, 2009, pending applications for incomplete PV projects may reapply under CSI, and pending applications for DG projects that are not based on wind or fuel cell technologies and were filed prior to January 1, 2007, will be rejected.

In summary, the SGIP shall continue to operate through 2011, and program administrators should follow the directions previously given by this Commission in all regards, including but not limited to the administrative budget, funding allocations, and allocation of funds between renewable and non-renewable projects. We adopt a budget for 2009 of $83 million. We direct the utilities5 to each file in this proceeding, no later than June 1, 2009, the following information (current to May 1, 2009) for each calendar year they have operated the SGIP, beginning in 2001:

5 SDG&E should coordinate with its program administrator, CCSE, to make this filing.

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