V. Energy Efficiency Programs that Are Integral to Utility Procurement Portfolios

As part of a broader effort set forth in the Energy Action Plan to maximize resources by integrating resource planning and improve energy efficiency, the Commission has been developing guidelines for utility procurement portfolios in R.01-10-024, D.02-10-062. In that decision, the Commission articulated the importance of integrating energy efficiency programs as part of the utilities' long term energy supply strategies and ordered the utilities to include energy efficiency resources in their procurement plans. Subsequently, the assigned administrative law judge directed SCE, SDG&E and PG&E to propose up to $245 million worth of energy efficiency programs for evaluation and adoption in this proceeding. In a companion order issued today in R.01-10-024, we establish funding levels and the accounting for these programs, set forth the criteria for program evaluation, address financial incentives for them, and discuss other related procedural matters.

In this proceeding, the utilities proposed several types of programs to be funded at a two-year funding level of $244.6 million as follows:

PG&E $75 million

SDG&E $49.6 million

SCE $120 million

Criteria for Evaluating Proposals. The Commission has adopted existing criteria for evaluating the merits of energy efficiency programs that are currently funded by the PGC, which are described above. We have not considered, in this proceeding, the development of new criteria for additional resources available for energy efficiency through procurement funding.

In a companion order today issued in R.01-10-024, we find that, until such time as the Commission adopts new measurement and evaluation criteria for all energy efficiency programs as part of the goals set forth in the Energy Action Plan, the utilities procurement-funded programs should be subject to the same criteria as those the Commission has adopted for PGC-funded programs. We apply those standards to the programs for which we adopt funding in this order.

Adopted Procurement Programs. The utilities' proposals for procurement-funded energy efficiency programs anticipate additional spending on existing statewide programs. However, their submittals do not demonstrate that additional spending in the statewide programs would be possible or cost-effective in all cases, primarily because they do not provide analysis of demand. We recognize that time constraints may have made such market analysis difficult or impossible. In order to provide some measure of accountability toward maximizing cost-effective energy savings with procurement resources, the utilities will be expected to meet, at a minimum, the overall energy-savings goals outlined in their procurement program proposals. Future program funding and administration decisions will be based upon the utilities' success in meeting or exceeding these goals in the most cost-effective manner. The utilities may shift 100% of their procurement-funded programs across their authorized programs, keeping in mind that the purpose of this flexibility is to meet or exceed their proposed target savings. This discretion will permit the utilities to use their knowledge of evolving market conditions and technologies to maximize energy savings. As part of the long-term energy efficiency goals and program structure, we will consider establishing an incentive-based system and the most effective evaluation criteria for all utility energy efficiency programs, including procurement-funded programs.

Utility	Total kWh Savings Target	Total Peak kWh Savings Target	Total Therm Savings Target
SDG&E	251,968,377	43,943	1,339,551
SCE	956,994,404	168,206	N/A
PG&E	466,883,057	124,400	250,893

Finally, we recognize that, over a two-year period, market conditions may change, and this Commission has placed an emphasis on innovation and partnerships between utilities, local government and other entities. For this reason, we will allow the utilities to file, through an advice letter, for authority to initiate a new energy efficiency program to be funded out of procurement funds authorized in R.01-10-024. In doing so, we recognize that during that time circumstances may change and new ideas may arise, therefore, a process for authorizing new programs is reasonable through the advice letter process.