4. Big Bold, Energy Efficiency Strategies (BBEES) /Programmatic Initiatives

In her April 13, 2007 scoping ruling, the assigned Commissioner directed parties to develop Big Bold Energy Efficiency Strategies (BBEES or programmatic initiatives) which are strategies " . . . to promote maximum energy savings through coordinated actions of utility programs, market transformation, and codes and standards." Commission staff held a workshop on May 14 to present expert panels on potential strategies and received oral comments. In a May 24, 2007 ruling, the assigned Commissioner identified four programmatic areas for further investigation: Residential New Construction, Commercial New Construction, Industrial Programs and HVAC. The ruling also posed a number of questions regarding feasibility, design and potential impact of strategies in these areas. Dozens of parties, many of whom normally do not participate in Commission proceedings, filed comments. The comments provided impressive evaluations of various major initiatives and generally supported the four strategies.

Commission staff held a series of intensive workshops, between June 5 and 12. National experts participated in these workshops to assist utilities and stakeholders in analyzing the four strategies selected for further review.³⁸ The assigned ALJ issued a ruling on June 21, 2007 requesting parties' responses to questions on these programmatic initiatives. Parties filed written comments on July 9, 2007.

We agree with SCE's comments that:

[BBEES] can ensure that California retains the nation's and the world's premiere energy-efficient economy, energy resource acquisition strategy, and energy-related environmental stewardship. To successfully internalize, institutionalize and sustain Big, Bold energy efficiency strategies into the long-term, California will replace business-as-usual with the Big, Bold paradigm from top to bottom and throughout the research-deployment programs-policy continuum; and harmonize and align actions from all participants in the energy marketplace and from all parties that set and/or implement California's energy policies, strategies and programs.³⁹

As explained by SCE, we expect the utility efforts on these programmatic initiatives to enhance rather than supplant other successful utility programs and to set the stage for the reengineering of the development and delivery of energy efficiency programs in California.

Table 1 shows illustrative energy savings for the four Big Bold strategies by the year 2016. The analysis was performed by Commission staff and the Energy Commission, and relied in part on baseline consumption data from the 2006 Itron Potential Study.⁴⁰

TABLE I

Estimates of 2016 Energy Savings from Big Bold Energy Efficiency Strategies⁴¹

We adopt today, as programmatic initiatives, three of the four proposed BBEES:

(1) All new residential construction in California will be zero net energy⁴² by 2020;

(2) All new commercial construction in California will be zero net energy by 2030; and

(3) The HVAC industry will be reshaped to assure optimal performance of HVAC equipment.

We discuss each of these initiatives in greater detail below.

We are extremely pleased that the draft 2007 IEPR contains a recommendation to incorporate the Zero Net Energy goals in the Energy Commission's building standards for commercial and residential buildings. As stated in section 3.1 above, we "reiterate the goal of using ratepayer-funded energy efficiency programs to transform the market and incorporate efficiency gains into codes and standards." We very much appreciate the Energy Commission's recommendation and agree that incorporating these programmatic initiatives into the building standards is critical to their success. In the 2009-2011 portfolios, we direct the utilities to address how the two Zero Net Energy programmatic initiatives will be integrated into the utilities' existing programs to support the development of the Energy Commission's codes and standards, as well as other types of measures.

The utilities shall include a section on each of these programmatic initiatives in the Strategic Plan and include specific programs in their individual 2009-2011 portfolio applications to implement these strategies.⁴³ Unlike the initial development of the Strategic Plan, the utilities (rather than our staff) shall be responsible for the development of a stakeholder forum to determine the right mix of programs, partnerships and incentives for each of these programmatic initiatives and for developing and implementing these initiatives. However, we direct our staff to participate in meetings and workshops as appropriate and to assist in obtaining the broad range of participation needed to move these initiatives forward.

We expect that the Strategic Plan will identify, to the extent possible, a "roadmap" of actions by the IOUs and other stakeholders needed to successfully implement the programmatic initiatives we adopt today and that they will be a part of a cost effective portfolio and comply with all policy rules. The 2009-2011 portfolio applications will then include the specific utility programs to achieve the IOU actions identified in that time-frame in the Plan. The utilities shall retain the 2009-2011 portfolio development role, including development of portfolio design and the identification of cost-effective programs and activities. However, we expect that the Strategic Plan and related 2009-2011 portfolio filings will strongly reflect stakeholder input and exhibit utility strength in convening, engaging and collaborating with stakeholders to develop effective programs and strategies, and in obtaining the commitment of other actors to play leadership roles. Therefore the 2009-2011 utility applications will identify on-going range of activities and steps that the utilities will undertake in 2009 and beyond to ensure that these initiatives develop in a continuing and collaborative fashion. Because our jurisdiction extends only to the IOUs, these programmatic initiatives are limited to the IOU service territories. However, we have had extensive participation by California POUs in this proceeding to date, and we commit at a leadership level to continue to work with the POUs - and the CEC - to develop these initiatives so as to include all of California. We direct the utilities to join us in this effort and authorize the assigned Commissioner to lead this Commission's efforts to facilitate this collaboration.

We recognize that some of the major programmatic initiatives adopted today might result in implementation strategies of higher first cost, or in expenditures that result in savings in future years after the preparatory costs are already incurred. To this concern we have three comments to the utilities: first, some of these expenditures likely will be "early investments" that produce longer term energy savings to meet out-year savings goals, and should be viewed as investing in a diversified portfolio for long-term returns; second, we expect that utilities will continue to select programs and compile their program portfolios in a manner that is cost-effective for ratepayers; and third, we remind all that the strategic plans' scope by definition extends beyond the specific role of utility programs to include actors from other sectors (e.g., other government agencies, private building owners and industries, colleges and universities, etc.) that also will be contributing to the direct or in-kind costs of carrying out a wide-ranging set of actions that will achieve California's energy and greenhouse gas reduction goals.

4.1. Residential New Construction

The assigned Commissioner's May 24 ruling described a potential residential new construction program as follows:

X% [to be determined] of residential new construction and major residential renovations (during 2009-2011) to exceed Title 24 by 35%, and these levels then would be incorporated into 2011 CEC Title 24 standards. Then plan for additional targets and subsequent building standards refinements for 2012+.

Parties' Positions: The parties agreed that this energy efficiency strategy was viable and that associated energy savings are likely to be high. PG&E suggests potential near term savings from this strategy could be about 67 gigawatt (GWh) and 52 megawatt (MW) per year.

The parties do not agree on whether a residential new construction program standing alone would be cost-effective.⁴⁴ The utilities raise concerns that the program may not be cost-effective. The Community Environmental Council (CE Council), DRA, City of Oakland (Oakland) Robert Mowris and Associates (RMA), and CCSF all believe the strategy would be cost-effective.

SDG&E/SoCalGas suggests the need to evaluate the market more carefully in order to specify better targets for single-family versus multi-family or "mixed use" construction.

SMUD comments that getting 50% of new homes to be at least 35% more energy efficient than Title 24 standards would be difficult but feasible.⁴⁵ The CE Council believes the timeline for meeting quantified goals for residential and commercial new construction should be 2020, rather than 2030, as the AIA now specifies. The CE Council comments that the short-term goal listed in the May 24 ruling is a good first step, but may not be aggressive enough, pointing to widespread support for more ambitious energy efficiency goals for new construction and the likelihood that this strategy will lead to significant cost savings for homeowners and ratepayers.

Many parties believe that the Energy Commission and local governments are the entities that are most likely to influence the success of this strategy. NEEA suggests the effectiveness of this strategy may depend partly on coordination with master developers, the national Urban Land Institute, the CBIA, and financing and insurance industries.

Several parties emphasize that this strategy likely requires a long-term commitment by the Commission because developers' and manufacturers' home building cycles usually extend beyond the utilities' three-year budget cycle. Members of the building industry explain that an estimated 70%-80% of new homes in Southern California are developed in master-planned communities by production builders. There, decisions are made five to six years pre-construction on subdivision layout, including street and home orientation that will later affect solar heating and natural cooling conditions, as well as rooftop suitability for solar photovoltaic (PV) systems. Actual design and planning of utility infrastructure requirements occurs three to four year pre-construction, long before most current utility incentive programs are applicable.

The utilities, CE Council, Schweitzer, TURN and SDG&E/SoCalGas advocate quantifying the "carbon footprint" of efficient new homes and using this information as another way for both motivating adoption and applying a metric that might have more universal understanding and support. The United Kingdom (UK) has adopted a very successful energy efficiency labeling program for new homes that provides a model for our efforts.⁴⁶

Discussion. A comprehensive, integrated long-term strategy to achieve maximum energy savings in residential new construction is both very promising and critically needed, and we hereby adopt this strategy. Table 1 shows that potential energy savings could be as high as 500 MW, 1,000 GWh, and 150 million therms. These savings are substantial and would provide long term, permanent energy savings and can lead to the development of new technologies and the training of design and construction professionals that will extend to the retrofit market.

Because California continues to build major developments in anticipation of population growth, there is a substantial opportunity for deploying this energy efficiency strategy. The parties generally believe that a committed collaboration among the community of home builders, this Commission, the Energy Commission, the utilities, and other key stakeholders could, by 2011, achieve energy savings that would exceed 2005 Title 24 standards by 35% in half of residential new construction. We adopt as a programmatic initiative that by 2020 all new housing in California IOU service territories⁴⁷ will be built to consume "zero net energy," using all cost-effective energy efficiency and other demand reduction/no or low carbon impact measures. This programmatic initiative is consistent with input we have received from the CEC collaborative staff and the CEC's draft IEPR.

We choose to use the "zero net energy" metric over "zero net carbon" as our expertise and jurisdiction more readily applies to energy. We also adopt an interim goal that 50% of new homes achieve energy savings that meet the Tier II standards of the Energy Commission's New Solar Homes Program by 2011.⁴⁸

Moving the industry in this direction will require an aggressive and creative action plan. We direct the utilities to seek the participation of and collaborate with Energy Commission staff responsible for building standards and the PIER program.

The process for moving ahead with this aggressive New Residential Construction programmatic initiative shall begin with IOU-initiated stakeholder meetings that emphasize several actions:

1. Collaborating with national and western regional organizations to work with building products and materials suppliers to develop new technologies and systems;

2. Sharing information and ideas about innovative and cost-effective approaches to achieving "zero net energy" new housing, including the definition of an interim milestone for 2015;

3. Leveraging the planning resources of local governments to develop accessible technical assistance and incentive programs to motivate efficient building design and construction early in the process of planning for new construction;

4. Identifying ways to leverage market players' activities and market, offerings, including providing information to buyers on expected home energy consumption; and

5. Identifying how to measure impacts and calculate cost-effectiveness of ratepayer expenditures for the EM&V process.

The utilities, in cooperation with Commission staff and the assigned Commissioner, shall solicit the involvement and commitment of home energy rating services, local government planning and building officials, Energy Commission staff, consumer groups, representatives of the Building Industry Association, and representatives of relevant trade associations, developers, buildings and labor groups. The utilities are charged with taking a leadership role, along with the Commission, to engage these stakeholders in an active process not only in the development of the strategy, but also in its successful implementation.⁴⁹

Finally, the UK has adopted a zero net energy goal for new residential construction by 2016 and we encourage the utilities to examine the UK program for innovative ideas and best practices.⁵⁰

4.2. Commercial New Construction

The May 24 Assigned Commissioner's ruling described a proposal to join the AIA Campaign to achieve Zero Net Energy Building Design by 2030 (AIA 2030 Challenge).⁵¹ This effort would include identifying the next 6-10 years of Energy Commission standards work,⁵² emerging technologies initiatives, utility incentive programs, and state or local initiatives targeting commercial building and property developers. The 2030 target has been adopted by the AIA, the American Society of Heating, Refrigerating and Air-Conditioning Engineers (ASHRAE) and the U. S. Green Building Council (USGBC).

Parties' Positions. The utilities, DRA, TURN, CCSF, CE Council and NEEA all agree that this strategy is feasible and should be considered a program priority. The utilities state that program impacts would vary depending on building types and that the Commission should adopt a clearer definition of the program. SCE recommends using the AIA interim milestones for moving in the direction of constructing commercial buildings that use zero net energy and are "carbon neutral" by 2030: 50% lower fossil energy use than the average building initially; 60% lower by 2010; 70% by 2015; 80% by 2020; 90% by 2025, and 100% by 2030.

Several parties identified opportunities to leverage utility programs with entities involved in designing, building, or managing new commercial buildings and with local governments. PG&E believes a relatively small number of large commercial property owners can influence broader market acceptance by showing leadership in building energy efficient and green commercial buildings. Heller Manus Architects (Heller Manus) concurs that peer and market pressure will result in demand for more efficient buildings and that end users will be willing to pay for added costs. Heller Manus recommends targeting building owners who control the largest amount of space, the teams that design and construct those spaces, and the municipalities where they are permitted and built.

Heller Manus emphasizes the need to increase the number of educated and trained building designers, building clients and users, contractors, and building/planning department officials. It also suggests engaging elementary and secondary schools, universities and colleges, and professional licensing and accreditation organizations to provide training and education on green buildings.

Discussion. We adopt a programmatic initiative to achieve "zero net energy" design and technologies in all new commercial construction in the IOU service territories by 2030, consistent with the goal adopted by the AIA. An aggressive program targeting new commercial construction offers substantial opportunities for energy savings. Commercial buildings today consume about one-third of all the electricity in California. Considerable growth is expected in the years ahead. An aggressive strategy could reduce energy demand by as much as 4,500 GWh and 950 MW. PG&E believes that the savings potential might be lower, but still significant, at 1,500 GWh/year.

We agree that a reasonable approach for achieving high market participation might commence by targeting a relatively small number of influential commercial builders, owners and designers, especially those who have large holdings nationally and may incorporate California design principles on a national scale. The national and regional nature of the commercial construction market may provide momentum for substantial energy savings that are cost-effective both within and outside California.

Moving the industry in this direction will require an aggressive and creative action plan. We direct the utilities to seek the participation of and collaborate with Energy Commission staff responsible for building standards and the PIER program; POUs such as SMUD and the Los Angeles Department of Water and Power (LADWP); major commercial real estate developers and building construction companies; and equivalent state and private sector building sector leaders from neighboring states in the West.

The utilities should place an emphasis on influencing decisions and policies at the earliest possible stage. For example, to target early decisions by builders and owners, the utilities should focus on training and educating building and design professionals and influencing decisions at the design stage of a building project. A continual source of new ideas and technologies can be cultivated via the CEC's PIER research program and the utilities' promotion of emerging technologies. We expect the utilities' plan for new commercial construction to leverage opportunities presented by actions identified in the Governor's Green Building Initiative and Action Plan, the work of the AIA on its 2030 Challenge , and related promotional and innovative actions by government agencies and businesses.⁵³ Knowledge transfer also must engage vocational education, college and university graduate preparation, and other workforce training across a wide range organizations. Finally, to ensure widespread market transformation, the utilities should continue their advocacy for more stringent building standards and codes at the state and local level.

The utilities shall use the following milestones:

2011: 30% of newly constructed buildings would incorporate energy efficiency measures so that the building specifications will exceed 2005 Title 24 requirements by 30% or more;

2015: 50% of newly constructed buildings would incorporate energy efficiency measures so that building specifications will exceed 2005 Title 24 requirements by 30% or more;

2020: 20% of newly constructed buildings would demand "zero net energy"; and

2030: 100% of newly constructed commercial buildings would demand zero net energy.

4.3. Residential and Small Commercial Heating Ventilation, and Air Conditioning (HVAC)

The assigned Commissioner's May 24 ruling described the following illustrative HVAC program:

Achieve X% participation of high-efficiency A/C systems in the retrofit/ replacement residential and small commercial market segments. Systems also should be optimally sized, with high-quality installations and low-leakage ductwork. This strategy might involve a national approach to climate-zone- efficiency standards (e.g., hot-dry, warm-humid, and temperate zones).

Parties' Positions. The utilities generally support a greater emphasis on improving the energy efficiency of HVAC systems, partly because of the potential for peak demand reductions. DRA emphasizes that residential air conditioning accounts for 20% of summer peak demand. SDG&E/SoCalGas state that the proposed goals may be too ambitious if the goals rely on overly optimistic assumptions regarding the number and level of high quality installations and associated energy savings levels. SCE suggests a target in the mid 30% range, while PG&E proposes increasing participation by 5% a year starting in 2010. The CE Council argues the utilities can accomplish a goal of 50% participation by 2011 with future adjustments depending on the success of the first couple of years.

Collectively, the parties agree that a major improvement in HVAC energy efficiency savings will require significant improvement in existing industry practices and major changes in utility programs. Because there are many entities involved in the HVAC industry, a major challenge will be designing and successfully implementing solutions that overcome the existing fragmentation in the industry. Parties identified the following specific issues that need to be addressed:

· Widespread disregard for Title 24 standards and permit requirements has resulted in poor quality installations and no performance verification. The quality of HVAC installations tends to be poor, with wide-spread non-compliance with Title 24 system sizing and duct treatment specifications. The statewide method of compliance is through the issuance of local building permits and post-installation inspections. However, the Energy Commission estimates that only 10% of installations are performed with local building permits and local governments do not have the resources to identify and pursue violations.

· Need for greater attention to climate-appropriate technologies and other new technology solutions. The national equipment efficiency standards for HVAC set by the U.S. Department of Energy (USDOE) are not crafted to address the needs of consumers in the hot, dry areas of California and other western states. Accordingly, manufacturers do not routinely develop products that are energy efficient in those climates. Large-scale introduction of new technologies presents difficult problems, including the need for large, up-front capital investments, a lack of demonstration projects, the limited availability of new technologies on the market, and an untrained workforce.

· Need for systems and whole building solutions. HVAC installations should be combined with a more comprehensive energy efficiency approach at the site, including cool roofs, building shell, ventilation, and other building technologies. PG&E estimates that a more holistic approach could produce energy savings exceeding 1400 MW in ten years.

Discussion. Residential and small commercial HVAC offers considerable opportunity for increased energy efficiency. Because small HVAC constitutes over 20% of California's peak demand, the potential energy savings are substantial: as high as 1,400 MW, 2,000 GWh, and 300 million therms.⁵⁴

A successful HVAC initiative must be structured to overcome the problems identified above. Basically, the full spectrum of air conditioning equipment sales, installation, and service business practices must change and the multitude of key stakeholders must engage in a collaborative effort to make the changes. A comprehensive approach will involve the cooperation of and coordination with manufacturers and distributors, consumer education, contractor training, verification of quality installations and maintenance, consequences for noncompliance with codes and standards, and making high quality installations profitable. The challenge is formidable but not impossible. Although the parties do not agree on specific strategies for implementing an aggressive HVAC strategy, they support undertaking such an effort.

The CEC is required under AB2021 (Section 4(b)(1)) to "investigate options and develop a plan to improve energy efficiency of, and to decrease the peak electricity demand of, air conditioners. The plan is to be submitted to the legislature by January 1, 2008. The Commission is fully committed to collaborating and coordinating the HVAC Programmatic Initiative with the CEC's AB2021 efforts.

We direct the utilities to work with our staff, to identify the necessary stakeholders, especially the CEC, and to seek to engage them in this HVAC initiative. We will use our leadership and that of other state agencies to bring parties together. We hope to engage a broad array of individuals and organizations with the knowledge and influence needed to promote real change in the HVAC industry. These entities include HVAC contractor associations such as the Air Conditioning Contractors of America, the Building Performance Contractors' Association, Home Energy Rating System providers, local governments, the Contractors State Licensing Board, the California Association of Local Building Officials, and national organizations such as the Institute of Heating and Air Conditioning Industries (IHACI), the Consortium for Energy Efficiency (CEE), the American Council for an Energy Efficient Economy (ACEEE), USDOE and the United States Environmental Protection Agency (USEPA), and the National Electrical Manufacturers Association. Planning also must engage educational, vocational, and training professionals who can address workforce development issues. The utilities shall convene working sessions with key stakeholders to develop a proposed HVAC course of action to promote efficient design, marketing and installation of HVAC systems and shall develop short-term, mid-term and year 2020 savings targets for the HVAC Programmatic Initiative.

We recognize the challenges presented by an initiative to promote HVAC programs require more advanced planning and more complex activities than the other programmatic initiatives we adopt today. For that reason, we expect the work on this strategy may require more time and study than other adopted initiatives. Accordingly, the utilities' Strategic Plan should provide an initial assessment of relevant issues and associated actions, which will be supplemented and refined over time. We expect the utilities' 2009-2011 portfolios to include the HVAC initiative to the extent practical under the circumstances, but with a more comprehensive program than has been implemented in past years.

4.4. Industrial Sector Programs

The assigned Commissioner's May 24 ruling asked the parties to comment on an illustrative industrial sector program that would "achieve 100% of electricity economic potential in the industrial sector by 2015 through voluntary action."

Parties' Positions. Several parties commented that an industrial sector energy efficiency strategy would reduce greenhouse gas emissions and water use and make California companies more competitive. In spite of these benefits, the parties were generally not optimistic about the prospects for a major energy efficiency initiative in the industrial sector in the near term. Some, including PG&E, raise concerns that cost-effectiveness requires a payback period of at least four years, while many industrial customers will not invest in measures unless the payback period is less than two years.

Parties also stated that uncertainties associated with future AB 32 regulations for industrial sector greenhouse gas (GHG) reduction are likely to dampen interest in energy efficiency investments in the industrial sector because customers and investors do not know if they will receive credit under AB 32 for GHG emission reductions due to energy efficiency. DRA does not find a voluntary approach sufficient and observes there is a lack of efficiency standards in the industrial sector.

Only SCE strongly endorsed moving ahead with an aggressive industrial sector energy efficiency strategy, suggesting it may provide significant energy savings, although SCE does not believe it could realize 100% of the sector's energy savings potential by 2015. SCE proposes to combine market demand response and cogeneration programs with energy efficiency offerings in the industrial sector. SDG&E/SoCalGas agrees that the industrial sector presents huge opportunities for energy efficiency, but argues for a focus on higher incentive payments and liberalized Commission policies on free-ridership, along with efficiency gains from combined heat and power.

While most parties did not recommend a major initiative in the industrial sector, they suggested many ways to improve existing industrial efficiency programs, for example, by assuring the availability of incentives for projects with longer lead times, removing incentive payment limits, and marketing the programs to high level decision-makers rather than plant engineers.

PG&E states that the AB 32 action plan to be developed by the California Air Resources Board (CARB) may provide the best opportunity to leverage an industrial sector energy efficiency effort. PG&E, NAESCO and DRA recommend close coordination with CARB in its development of a plan for reducing greenhouse gasses with a program design that would promote energy efficiency.

Discussion. California's industrial energy customers use nearly a third of the state's energy, and the estimated potential energy savings associated with industrial energy efficiency programs are as high as 650 MW, 5,000 GWh, and 500 million therms. A major initiative in this sector of the economy, however, is premature. Most industrial customers are unlikely to invest significantly in energy efficiency measures before they know the responsibilities they will have to reduce greenhouse gas emissions under AB 32, and how the CARB will count GHG reductions from energy efficiency. The implementation of AB 32 is underway but this uncertainty may not be eliminated for a year or more.

The industrial sector continues to be an important target for the utilities' energy efficiency programs, and must be included in the Strategic Plan and the 2009-2011 portfolios. While we do not adopt a specific programmatic initiative for the industrial sector in this Decision, this should not be interpreted as diminishing the importance of energy efficiency measures designed for California's industries. As California Large Energy Consumers (CLECA) points out in its Opening Comments, there are real opportunities in the industrial sector in 2009-2011 program cycle and we expect the utilities to include robust industrial sector programs in their April 2008 portfolio applications that are responsive to the specific needs and concerns raised by parties such as CLECA and the California Manufacturers & Technology Association (CMTA).

In addition, the utilities and Commission staff shall monitor developments as CARB moves forward on implementing AB 32. To the extent CARB identifies energy efficiency opportunities as a mitigation strategy we stand ready to work with CARB. For example, CARB is in the initial stages of considering an early action measure involving energy efficiency improvements at California cement facilities. See CARB website for report, "Expanded List of Early Action Measures to Reduce Greenhouse Gas Emissions in California Recommended for Board Consideration," available at http://www.arb.ca.gov/cc/ccea/meetings/091707workshop/ea_ii_report.pdf. As CARB adopts early action measures to promote energy efficiency in the industrial sector we will convene a workshop to identify opportunities for utility programs to support such early actions. In addition, we will work with CARB to clarify GHG reduction accounting procedures for the industrial sector as early as feasible.

We will revisit industrial sector energy efficiency strategies as more information becomes available that would affect industrial customer decisions to install energy efficiency measures.

³⁸ We hereby recognize and commend the efforts of our senior Clean Energy Adviser Jeanne Clinton who has overseen this strategic initiative of the BBEES and the efforts of our staff and CEC collaborative staff. Collectively, they have successfully undertaken an unprecedented workshop and comment process and have provided a model of leadership, outreach, analysis, and collaboration well worth following in other substantive areas this Commission addresses.

³⁹ July 10, 2007, SCE Comments, pp. 47-48.

⁴⁰ Assigned Commissioner Ruling, May 24, 2007, Attachment A, p. 3. These numbers were developed for illustrative purposes only and more detailed study is required to establish more definitive potential savings.

⁴¹ New Commercial Buildings: The target is 50% savings and 100% participation. The remainder of zero net energy will be supplied by renewables.

New Residential Construction: The savings potential was estimated by Itron for electricity and natural gas. The peak savings potential was assumed to be the same percentage as the electricity savings.

HVAC Residential and Small Commercial: Includes residential air conditioning and space heating and one third of commercial air conditioning, space heating and ventilation. The savings potential is based on a 10% increase in efficiency based on improvements made at turnover taken out to 2016 at the rate of 1/15th of the existing base per year. In addition, for the entire stock, an additional 10-15% was assumed.

Industrial: The savings potential was estimated by LBNL and Itron.

⁴² Zero Net Energy is herein defined as the implementation of a combination of building energy efficiency design features and on-site clean distributed generation that result in no net purchases from the electricity or gas grid, at the level of a single "project" seeking development entitlements and building code permits. Definition of zero net energy at this scale enables a wider range of technologies to be considered and deployed, including district heating and cooling systems and/or small-scale renewable energy projects that serve more than one home or business.

⁴³ We do not set a specific budget amount for these initiatives for the 2009-2011 portfolios. We do expect that utilities will clearly disclose in their April 2008 applications the entire proposed budget and additional funds from non-EE programs they seek to collect and spend for these programmatic initiatives. We are confident that the utilities, as managers of their portfolios, can include, after collaboration with key stakeholders, well-designed programs for the next portfolio cycle that will strongly support these critical initiatives.

⁴⁴ As noted earlier, our Policy Rules do not require individual utility programs to be cost-effective. Rather, we require that the entire utility portfolio be cost-effective over a three-year period.

⁴⁵ The Energy Commission administers energy efficiency standards for building construction (Title 24 of the California Code of Regulations (CCR)) and for new equipment such as air conditioning and lighting sold and installed in buildings (Title 20, CCR). Both standards are updated periodically to incorporate new energy efficiency technologies and methods. The Federal Government also sets minimum national standards for some appliances and equipment. The national standards are incorporated into the California standards.

⁴⁶ See, UK Energy Efficiency Action Plan 2007, http://www.defra.gov.uk/environment/climatechange/uk/energy/pdf/action-plan-2007.pdf.

⁴⁷ As noted earlier, while these programmatic initiatives apply only to the IOU service areas, our commitment, at both a leadership and staff level, is to work with the California POUs and the CEC to extend these initiatives statewide.

⁴⁸ The New Solar Homes Partnership Tier II Energy Efficiency Requirements are:

· 35% Total Energy Savings Compared to 2005 Title 24

· 40% Cooling Energy Savings Compared to 2005 Title 24

· Energy Star for Builder Provided Appliances

· Full Compliance with Title 24 Lighting Requirements

The 2011 interim goal will remain tied to the 2005 Title 24 standard regardless of the expected 2008 code update.

⁴⁹ The Commission recognizes that what the IOUs are charged with and will be evaluated upon is effort toward a market transformational process and that neither the Commission nor the utilities can control the actions of stakeholders.

⁵⁰ UK Energy Action Plan 2007, pp. 20-27. http://www.defra.gov.uk/environment/climatechange/uk/energy/pdf/action-plan-2007.pdf.

⁵¹ The 2030 Challenge is described at: http://www.usgbc.org/News/PressReleaseDetails.aspx?ID=2779.

The AIA web site has guidelines for achieving carbon neutral buildings at: http://www.aia.org/static/state_local_resources/adv_sustainability and also offers principles for a 50% reduction in fossil fuel consumption: http://www.aia.org/fiftytofifty.

⁵² As discussed above, the CEC's draft IEPR recommends an increase in the efficiency levels of the state building standards to match the programmatic goal we adopt today.

⁵³ See, e.g., the initiative of the World Business Council for Sustainable Development (WBCSD) to achieve buildings with zero net energy from external power supplies and zero net carbon dioxide emissions, while being economically viable to construct and operate at: http://www.wbcsd.org/templates/TemplateWBCSD5/layout.asp?type=p&MenuId=MTA5NQ&doOpen=1&ClickMenu=LeftMenu.

⁵⁴ July 10, 2007, SCE Comments, p. 12, indicates that air conditioning contributes about 35% of California's peak electric load (14% commercial and 21% residential).