VII. Energy Efficiency Program Administration

A. Measurement and Verification of Programs and Other Projects

The Commission is currently conducting a comprehensive review of EM&V efforts in the broader context of policy development in this proceeding. Pending the outcome of that review, we will use the same procedures we have used in the recent past to conduct EM&V.

D.03-08-067 anticipated spending about $22 million over the course of two years for EM&V activities for the 2004-05 utility programs and related studies. It stated an intent to have the utilities continue managing most EM&V efforts.⁷ This decision allocates $17 million for these activities.

1. Utilities Statewide EM&V and Overarching Studies

The utilities submitted to the Energy Division on September 23, 2003, their joint plans for utilizing the $22 million allocated in D.03-08-067 for EM&V and other studies. The utilities proposed to allocate $11.9 million out of the $22 million for the EM&V of their statewide programs and $10.1 million for overarching projects, including funds for CPUC consultant services and Energy Division operating costs. In addition, the utilities have proposed $8.2 million in EM&V funds for energy efficiency programs funded in the procurement portfolio. Where the utilities supplement statewide programs with procurement funds, we expect them to leverage their EM&V funds set aside for the procurement programs to rigorously sample and measure energy savings for those programs. Where utilities are funding stand-alone procurement programs, we would still expect them to perform rigorous sampling and measurement in their EM&V, but also allow for additional process evaluation if necessary. We reduce the total PGC amount authorized for statewide program EM&V and other projects to $17 million for two years in order to accommodate funding for other programs in the portfolio. The utilities should reallocate the approved budget for statewide program EM&V and submit revised plans as discussed below.

The utilities' EM&V studies for statewide programs should evaluate program effectiveness as well as verify savings claims/measure installations, marketing and outreach activities, and hard-to-reach targets included in their 2004-05 program reports. The studies should also measure energy savings and demand reductions that result from these programs unless a clear demonstration or justification for not doing so is provided. The utilities should make demonstrable efforts to expand and vary the entities with which they contract to perform these duties.

For utility statewide EM&V and other overarching studies, the assigned ALJ will work with Energy Division staff to oversee the plans and contractors for these studies. The utilities EM&V plans filed with their statewide program proposals are not complete. CALMAC and the utilities should coordinate the funding allocation for the overarching studies. We will direct the utilities to submit to Energy Division staff more detailed plans for EM&V studies for both statewide programs and overarching studies. The ALJ will have the authority to approve final plans and selected contractors or direct changes to them.

2. EM&V for Non-Utility, Partnership, and Local Utility Programs

The respective program budgets we approve in this decision for the utilities' local and partnership programs, and for the non-utility programs include amounts reserved for EM&V contractors. EM&V for entities other than the utilities and for local utility programs and utility partnership programs will be coordinated through Energy Division staff and its contractor. Energy Division staff will oversee and approve each program's EM&V cost amount. Once the EM&V budget for a program has been approved, program implementers should set aside funds for that expense to ensure EM&V sub-contractors are paid in a timely manner. Payments to EM&V contractors must not be treated as contingent on program performance. The administering utility shall ensure that program implementers reserve that amount for EM&V invoices. The ALJ, in consultation with Energy Division staff will have authority to approve or reject program implementers' proposed EM&V contractors to assure the contractors' independence and skill. The ALJ will issue a ruling within 45 days of this Decision approving or rejecting the EM&V contractors for each partnership, non-IOU, and local IOU programs. If the ALJ approves more than one contractor, each program implementer should conduct a bid process to select from the approved EM&V contractors. After the implementer has selected an EM&V contractor, the implementer should inform the ALJ and Energy Division of the selection in writing, no later than 30 days following the ALJ Ruling approving EM&V contractors. Once the selection letter has been filed with the Energy Division, program implementers will have 30 days to file a proposed EM&V plan. The Energy Division and their contractor will then review the proposed plans and recommend changes. Energy Division's approval of the EM&V plan is required prior to initiation of EM&V activities.

B. Utility Contracts with Third Parties and Costs for Administration of Non-Utility Contracts

Each non-utility program implementer has been assigned to a single utility that will administer their contract(s). The assigned utility is identified in Attachment 1, along with the list of approved programs. The Energy Division has revised the Standard Contract template that was used for the non-utility programs funded for 2002-2003 with input from various parties. This revised contract template has been posted on the CPUC website at:

http://www.cpuc.ca.gov/static/industry/electric/energy+efficiency/rulemaking/resource6.pdf

We instruct the utilities to adopt this contract template and ensure that contracts are signed within 10 calendar days of having received written notice, via e-mail, from assigned Energy Division staff that the non-utilities' program implementation plans have been approved. (See Section F below.) For those programs not requiring revised plans, contracts shall be signed within 20 calendar days of the approval of this Order.

As in past years, we authorize utilities to charge to the PGC fund up to 5% of the total amount awarded to non-utility programs for utility costs associated with contract administration. These charges are to be made only for actual costs (i.e., no allocated overhead is to be added). Non-utility contract administration costs are to be tracked separately, by program implementer, and are to be reported as part of the monthly PGC accounting report that is currently submitted to Energy Division. Energy Division will work with the utilities to revise the format of that report to accommodate this addition.

C. Program Reports

Consistent with past practice, all program implementers must submit monthly and final reports documenting their work progress and expenditures. The format and submittal requirements for the reports will be available at the Commission's energy efficiency website. The standard contracts will incorporate our decision on the timing of reports and may include additional reporting requirements for non-utility implementers.

D. Utility Provision of Information Regarding Non-Utility Programs

We have required the utility administering a non-utility program by way of a Standard Contract to provide information provided by non-utility program implementers to all program implementers with whom it holds contracts. This information has apparently not been available to statewide marketing implementers or has not been used by them in a way that promotes customer participation. (In contrast, adequate information about utility programs appears to be widely available and accessible on the statewide marketing websites.)

To assure that all Californians have access to information about non-utility programs, we herein direct the utilities to provide non-utility program summaries (as provided by the program implementers to their utility contract administrator) to the statewide marketing contractor and ensure that the summaries, along with programs' contact information, are prominently posted on the statewide marketing website. We will direct the utilities that hold contracts with marketing program implementers to ensure that those implementers to educate their customer representatives about non-utility programs so that they can provide related information to the public. We will also direct the utilities to provide a prominent link from the energy efficiency sections of their websites to the location on the statewide marketing website that hosts information on non-utility programs.

We direct the utilities to train their customer service representatives about the non-utility programs offered in their respective service territories, and provide information and contacts for those programs to customers who inquire about energy efficiency programs.

E. Performance Award for Non-Utility Program Implementers

Non-utility program implementers will continue to be eligible for a performance award for up to 7% of a program's approved budget. Awards are at the discretion of the Commission and its designees. The amount of the award will depend on program success as measured by Commission approved program goals. We note that the total budgets approved for each non-utility program, as shown in Attachments 1, 7 and 8, include the 7% performance award. This amount should be set aside and only awarded pending review of program performance as provided for in the contract.

F. Program Implementation Plans and Revision of Program Plans and Budgets

As in past years, parties awarded program funding will need to present detailed revised program implementation plans (PIP) to Commission staff for their final approval in cases where we approve a program with modifications or at funding levels that are below those originally requested. We are requiring a shorter turnaround time for initial submissions by non-utilities for two reasons: (1) to ensure that contracts can be signed in time for programs to commence as close to the beginning of 2004 as possible, and (2) to provide the utilities with the ability to first finalize non-utility program contracts and then concentrate on finalizing their own program plans.

Parties receiving funding who must submit revised PIP should do so as follows:

· Utility programs -Revised PIP must include required modifications or revised measure goals to reflect reduced budgets. Revisions must be made to the proposal narrative and workbook that were originally submitted, and shall not include any changes not expressly set forth in this decision. The revised PIP should be submitted to the Energy Division within 45 calendar days of the effective date of this decision.

· Non-utility programs - Revised PIP shall be submitted first to the utility contract administrator and then to Commission staff; revisions must be made to the proposal narrative and workbook that were originally submitted, and shall not include, any changes not expressly set forth in this decision. Non-utilities must submit revised PIP to the utilities within 15 calendar days of the effective date of this Decision. The utilities have 10 calendar days from receipt of the revised plan to review and resolve questions with program implementers. The utilities and program implementers will then submit the revised PIP to Energy Division staff indicating any unresolved issues, if any. The utility shall execute its contract with the implementer within 10 calendar days of receipt of Energy Division staff approval of the revised PIP.

We strongly encourage the utilities and non-utility program implementers to coordinate and resolve any areas of duplication and overlap among their respective programs during the course of PIP revision and initial program implementation to reduce potential for customer confusion and double dipping. Furthermore, we expect that the three companies awarded funding for marketing and outreach efforts will consult with utility and non-utility program managers and each other to coordinate the timing of their energy efficiency advertising and/or outreach campaigns with program activities.

G. Shifting Funds Between Utility Programs Funded with PGC Revenues

As in previous years, utilities may shift PGC program funds across statewide program categories as prescribed herein. For certain program categories, the utilities may shift up to 25% of one program's funds into another program in the same category. Specifically, the utilities may shift funds approved for Statewide programs without our prior approval between the following program categories:

1. Statewide Residential Retrofit

2. Statewide Residential New Construction

3. Statewide Nonresidential Retrofit

4. Statewide Nonresidential New Construction

5. Statewide Cross-Cutting (except Codes and Standards Advocacy)

The utilities shall prominently disclose any such program fund shifting in their quarterly reports. If a utility can demonstrate that it must shift more than 25% of funds between programs in order to pursue cost-effective programs or if a utility determines that the public interest would be best served by shifting funds from a program in one of the five categories to a program in another category, and given that the utility request is consistent with the purposes of applicable statutes and this decision, it may seek additional authority by way of motion to the assigned ALJ. The assigned ALJ will have authority to approve shifts of funds in excess of 25% within a program category, and any shifts of funds across program categories, where necessary to promote program success or avoid program failure. As we discussed previously, the utilities may shift up to 100% of funds between programs that are authorized as elements of energy procurement portfolios.

H. Differences Between Utility Program Budgets and Expenditures

The Commission intends to hold the utilities to the same requirements as non-utilities (consistent with the Standard Contract) regarding increasing expenditures across budget categories at levels that differ from those in the approved budget. Although funds may be shifted across Statewide program categories, as set out in the previous section, the overall amount spent by the utilities on costs and activities other than direct implementation (e.g., administrative/overhead and marketing) will not exceed the amounts approved by this order.

For a given program, a utility's expenditures for administration, marketing and outreach and EM&V may not exceed the total amount for each of those categories, as approved by the Commission in the approved budget worksheet, without approval of the assigned ALJ. The following are the only exceptions to this requirement: The utility may (1) increase direct implementation expenditures for work within the scope of the approved plan; and (2) shift up to 5% of the approved budget for the affected category (e.g., 5% of the amount approved for administration and overhead) for administration/ overhead and marketing to increase expenditures on either of those two categories. Any other exceptions to this requirement will need to be requested through a motion to the assigned ALJ that explains the reason for the request, provides a proposed revised budget worksheet, and documents how the change in expenditures will affect program results and goals.

I. Commission Cost Reimbursement

Consistent with the State Budget Act, the utilities shall reimburse the Commission $600,000 for two years for its energy efficiency operating allocated as shown in the relevant table above.