Ordering Paragraphs 72 and 73: Third Party Initiatives (TPI)

Ordering Paragraph 72 provides:

"For PY 2001, the utilities shall jointly, with interested stakeholders, develop a standard to use for IMC in the cost-effectiveness calculations, such as a default ratio or a requirement that all TPI meet a minimum threshold of cost-effectiveness (e.g., SoCalGas' convention of requiring each TPI to show a cost/benefit ratio of 1 or greater and using 1 in the analysis). The utilities shall jointly, with interested stakeholders, develop protocols to govern the cost-effectiveness analyses conducted by TPI bidders. The utilities shall convene a public process and report the results of any agreement reached and any remaining areas of disagreement in the PY 2001 applications. The utilities shall also propose use of the jointly developed IMC standards in the PY 2001 applications."

Ordering Paragraph 73 provides:

"The utilities, for PY 2001 programs, shall convene a public process for purposes of developing, with interested stakeholders, reporting requirements, procedures and standards for post-program data collection of IMC and other cost data for TPI programs."

The utilities recommend that we adopt "Standards for Assessing Cost-Effectiveness of Third Party Initiative Programs" set forth in Appendix C4 to the Workshop Report. The proposed standards give the utilities two options for including the costs and benefits of TPI programs within the portfolio cost-effectiveness calculation:

1) Option A-Pilot Program Approach. If a utility uses the TPI Program as a way to solicit and test, on a limited, one-year basis, innovative new approaches to increasing energy efficiency, it will assign the program zero benefits, resulting in a low-cost, conservative way to assess overall portfolio cost-effectiveness; and

2) Option B-Substitute Program Approach. If a utility uses the TPI Program as a way to solicit alternative designs for program elements that it might otherwise have developed itself, it will assign the program a Public Purpose Test (PPT) ratio of one, in order to assess the cost-effectiveness of its program portfolio. In the ensuing TPI program solicitation, the utilities will require that accepted proposals be demonstrated to be cost-effective. Further if ex post cost-effectiveness analysis is required for the other programs in the utility's portfolio, the TPI Program will be subject to the same requirements as all other programs.

The utilities also propose to provide an overall assessment of the effectiveness of their TPI portfolios in meeting the goals in the annual energy efficiency reports and to report any ex post cost and benefit information provided by the TPI implementers.

ORA disagrees with the adoption of these standards and objects to the use of program funding for TPI programs in PY 2001 because it believes that these programs are risky to ratepayers in that they have costs and benefits that cannot be adequately reviewed in the program forecasting and program performance review processes.

D.00-07-017 and D.99-08-021 specifically provide for increased TPI activity and funding in PY 2000 and PY 2001; therefore, ORA's policy objection to TPI programs cannot be sustained. However, D.00-07-017 directs the utilities to develop protocols and standards to improve the cost-effectiveness of TPI programs to meet some of ORA's concerns. We are disappointed that ORA did not take this opportunity to contribute to the proposed protocols or to explain its rationale for objecting to specific protocols.

The proposed protocols have several deficiencies that should be addressed prior to filing the PY 2001 Applications.

First, it is not clear how the proposed Options A and B would work for program planning purposes. At the time the utilities' file the Applications, they have not necessarily issued an RFP or identified the specific TPI that might be selected for implementation in PY 2001. The utilities should clarify how these options will work for the ex ante cost-effectiveness analysis, e.g., will they set aside funds to be used under Option A and Option B?

Second, the proposal does not provide for IMC reporting requirements, procedures, and standards for TPI bidders, as required by OP 74.

Third, under Option A, the pilot program approach, the utilities do not propose to do an ex post cost-effectiveness analysis if the pilot program is not picked up the following year. Nor does there appear to be any provision for collection of any data on these pilot programs. Even if a pilot program is not continued, there should be some post-program data provided and analysis done to guide future energy efficiency program planning. We need to not only know where and how the funds were spent, but should evaluate where funds should be spent in the future.

Fourth, under Option B, the substitute program approach, the utilities should collect data and perform an ex post cost effectiveness analysis on all TPI regardless of whether it is required for other programs in the utilities' portfolio if they use a cost-effectiveness ratio of 1.0 in the ex ante calculations.

The utilities should submit and serve on the service list revised TPI protocols no later than November 8, 2000. The utilities should identify and use a consistent approach for all TPI in the PY 2001 Applications.

Dated October 25, 2000, at San Francisco, California.

CERTIFICATE OF SERVICE

I certify that I have by mail, and by electronic mail to parties to which an electronic address has been provided, this day served a true copy of the original attached Ruling On Cost Effectiveness Issues For PY 2001 Programs on all parties of record in this proceeding or their attorneys of record.

Dated October 25, 2000, at San Francisco, California.

NOTICE

Parties should notify the Process Office, Public Utilities Commission, 505 Van Ness Avenue, Room 2000, San Francisco, CA 94102, of any change of address to insure that they continue to receive documents. You must indicate the proceeding number on the service list on which your name appears.

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