ORA's Protest

ORA filed "conditional" protests in this proceeding that echo some of the issues and concerns it has raised in the Consolidated AEAP.³ ORA's protest to SCE's application was filed one-day late. By this ruling, I find that this delay occurred for valid reasons and did not disadvantage any parties. Accordingly, I grant ORA's June 10, 2003 Motion for a one-day extension of time to file that protest.

ORA does not take a position on the reasonableness of costs booked to the Interruptible Load Program Memorandum Account in 2002 presumably for the same reason that it did not take a position on 2001 costs in the Consolidated AEAP, i.e., lack of resources to verify or audit those costs. ORA also does not protest the LIEE claims in this proceeding, for the reasons presented in its written PHC statement and orally at the PHC. ⁴

However, ORA is conditionally protesting the AEAP applications based on specific concerns with regard to the Standard Performance Contract (SPC) program and to the cost-effectiveness of energy efficiency programs in general.

By way of background, the SPC program was initiated as a new program in 1998 and represents a major portion of the reported costs and benefits of PG&E's, SCE's and SDG&E's Nonresidential Portfolio.⁵ As described in D.97-12-103:

"With SPC, the utility offers fixed prices to customers or energy service companies (ESCOs) for measurable energy savings achieved by the installation of specific energy efficiency projects. A standard contract will specify the operating rules of the program, including eligible projects. Payment will be subject to performance measurement, as detailed in measurement protocols attached to the standard contract, and will extend over a period of years."⁶

In its protests, ORA expresses concern that the utilities' management of this program may not comply with the Commission's policy rules regarding market share that are intended to avoid excessive dominance of any single ESCO or energy efficiency service provider. ORA's concerns about market share matters, and possible market share policy rule transgressions in one or more program years for one or more program administrators, are identified in ORA's most recent updated to its "Trends and Patterns Report," dated July 2002.⁷

ORA is also concerned that the utilities may not have complied with program design regulations regarding the completion of customer affidavits, based on ORA's verification efforts in prior years. Customer affidavits include the following information: estimated annual and life-cycle savings, total project costs, agreement by the customer to provide access to the site for inspections and measurement of the performance of the energy savings measures, and indication of the protocol to be used to measure and verify savings.⁸ In ORA's view, a pattern of incomplete information in the Customer Affidavits calls into question the validity of the reported costs and benefits for that program. This is because an aggregation of the information contained in the customer affidavits is generally what the utilities' present in their annual reports for program costs and benefits.⁹

ORA also argues that the AEAP is the appropriate forum to address the issue of "commitment true-ups," which primarily relates to the SPC program. As discussed at the PHC, SPC program funds are committed to ESCOs over a commitment period of some years-e.g., four years for PY1998 program activities. The purpose of the extended program period is to give the ESCO and the customers a reasonable lead time to negotiate their contracts, to install the measures, to negotiate the division of costs and savings, and establish measurement and verification protocols. However, the program benefits and the milestone achievements and payments of earnings are considered based on both actual and "committed" dollars. So, there is some pool of achievements and program benefits that are not based on actual installations but rather, on an initial commitment of dollars based on expected measure installations.¹⁰ Ordering Paragraph 4 of the 1999 AEAP decision (D.00-09-038) states:

"The shareholder incentives granted herein for PY 1998 non-LIEE programs are subject to subsequent true-up and adjustment in future Annual Earnings Assessment Proceedings (AEAP) for present program commitments that do not materialize."

Given the four-year commitment period authorized for PY1998, ORA points out that this is the first AEAP in which the commitment issue for PY1998 program activities can be addressed. In ORA's view, there are several purposes for conducting a true-up of commitments in this and future AEAPs. First, examining whether commitments actually materialized would help assess how the SPC program is performing. Second, this information would establish a basis for adjusting earnings, per D.00-09-038. Third, ORA argues that this information would be relevant to the overall cost-effectiveness issue described below.

In addition to specific concerns about the SPC program, ORA raises the general issue of program cost-effectiveness for all of the utilities' energy efficiency programs. ORA contends that, beginning with PY1998, energy efficiency activities have been subject to the "cost-effectiveness standard" established by Assembly Bill 1890 (Section 308) and also reflected in the Commission's policy rules. ORA believes that the AEAP is the logical forum for the Commission to expect the utilities to demonstrate the cost-effectiveness of the prior-years energy efficiency activities, and to allow parties to verify the reasonableness of the reported (actual) costs and benefits, per the data provided in the AEAP reports.

In ORA's view, the Commission should not authorize the recovery of any earnings claims for PY1999-2001 or address the hold back/refund issue associated with PY2002 programs until the Commission and parties have a chance to consider the issues discussed above.

³ See June 5, 2003 Protest of ORA to the 2003 AEAP Application of PG&E and June 10, 2003 Protest of ORA to the 2003 AEAP Application of SCE. See also: April 1, 2003 Responses of the Office of Ratepayer Advocates to ALJ Gottstein's March 19 Ruling in the Consolidated AEAP.

⁴ PHC Statement of ORA in Response to the June 25 ALJ Ruling, July 18, 2003 (ORA PHC Statement), pp. 5-6; RT at 9-12.

⁵ SoCal does not, and never has had, an SPC program. Accordingly, our use of the term "the utilities" in reference to the SPC program excludes SoCal.

⁶ D.97-12-103, 78 CPUC2d 1, 11.

⁷ This report can be viewed at: http://www.ora.ca.gov/selfgendocs/Papers/2002%20)RA%20Report%20Trends%20EEPPP.pdf.

⁸ D.97-12-103, 78 CPUC2d 1, Attachment 3, p. 15.

⁹ RT at 53-54.

¹⁰ RT at 66.