STATE OF CALIFORNIA GRAY DAVIS, Governor

PUBLIC UTILITIES COMMISSION

505 VAN NESS AVENUE

SAN FRANCISCO, CA 94102-3298

October 10, 2003 Agenda ID #2868

TO: PARTIES OF RECORD IN RULEMAKING 01-08-027

RE: NOTICE OF AVAILABILITY OF DRAFT DECISION ON PHASE 4 STANDARDIZATION RESULTS FOR LOW-INCOME ENERGY EFFICIENCY MEASURE COST-EFFECTIVENESS AND NATURAL GAS APPLIANCE TESTING

Consistent with Rule 2.3(b) of the Commission's Rules of Practice and Procedure, I am issuing this Notice of Availability of the above-referenced draft decision. The draft decision was issued by Administrative Law Judge (ALJ) Gottstein on October 10, 2003. An Internet link to this document was sent via e-mail to all the parties on the service list who provided an e-mail address to the Commission. An electronic copy of this document can be viewed and downloaded at the Commission's Website ( www.cpuc.ca.gov). A hard copy of this document can be obtained by contacting the Commission's Central Files Office [(415) 703-2045].

When the Commission acts on the draft decision, it may adopt all or part of it as written, amend or modify it, or set it aside and prepare its own decision. Only when the Commission acts does the decision become binding on the parties.

Parties to the proceeding may file comments on the draft decision as provided in Article 19 of the Commission's "Rules of Practice and Procedure." These rules are accessible on the Commission's website at http://www.cpuc.ca.gov. Pursuant to Rule 77.3 opening comments shall not exceed 15 pages.

Consistent with the service procedures in this proceeding, parties should send comments in electronic form to those appearances and the state service list that provided an electronic mail address to the Commission, including ALJ Meg Gottstein at meg@cpuc.ca.gov. Service by U.S. mail is optional, except that hard copies should be served separately on ALJ Gottstein, and for that purpose I suggest hand delivery, overnight mail or other expeditious methods of service. In addition, if there is no electronic address available, the electronic mail is returned to the sender, or the recipient informs the sender of an inability to open the document, the sender shall

immediately arrange for alternate service (regular U.S. mail shall be the default, unless another means - such as overnight delivery is mutually agreed upon). The current service list for this proceeding is available on the Commission's Web page, www.cpuc.ca.gov.

/s/ ANGELA K. MINKIN

Angela K. Minkin, Chief

Administrative Law Judge

ANG:tcg

Attachment

ALJ/MEG/tcg DRAFT Agenda ID #2868

Quasi-legislative

Decision DRAFT DECISION OF ALJ GOTTSTEIN (Mailed 10/10/2003)

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Order Instituting Rulemaking on the Commission's Proposed Policies and Programs Governing Low-Income Assistance Programs.

Rulemaking 01-08-027 (Issued August 23, 2001)

INTERIM OPINION: PHASE 4 STANDARDIZATION RESULTS FOR
LOW-INCOME ENERGY EFFICIENCY MEASURE COST-EFFECTIVENESS
AND NATURAL GAS APPLIANCE TESTING

TABLE OF CONTENTS

Title Page

INTERIM OPINION: PHASE 4 STANDARDIZATION RESULTS FOR
LOW-INCOME ENERGY EFFICIENCY MEASURE COST-EFFECTIVENESS
AND NATURAL GAS APPLIANCE TESTING 1

1. Summary 2

2. Background 8

2.1. LIEE Cost-Effectiveness Testing 11

2.2. Natural Gas Appliance Testing 14

3. LIEE Cost-Effectiveness Results 16

3.1. Overview of Methodology 16

3.2. Team Recommendations 19

3.2.1. Non-Weather Sensitive Measures 20

3.2.2. Weather-Sensitive Measures 21

3.2.2.1. Infiltration-Reduction Measures 22

3.2.2.2. Non-Infiltration Reduction Measures 24

3.2.3. Summary 27

4. NGAT Study Results 28

4.1. CO Effects on Health and Related Issues 29

4.2. Standards on Threshold Levels of CO 32

4.3. Pre-Weatherization CO Levels and Sources 34

4.4. Impact of Infiltration Reduction Measures on Ambient CO Levels 36

4.5. Adequacy of Minimum NGAT Standard 39

4.6. Relationship Between Flue Tests and Ambient CO Levels 41

4.7. CO Alarm Study 42

4.8. Team Recommendations 43

4.8.1. CO Testing Procedures 43

4.8.2. Actions When Appliances Fail Test(s) 45

4.8.3. Application of NGAT to Non-IOU Fueled Combustion Appliances and Related Issues 46

5. Discussion 48

5.1. LIEE Measure Cost-Effectiveness 49

5.2. Natural Gas Appliance Testing 51

6. Comments on Draft Decision 65

7. Assignment of Proceeding 65

Findings of Fact 65

Conclusions of Law 75

INTERIM ORDER 76

LIST OF ATTACHMENTS

Attachment 1 - List of Abbreviations and Acronyms

Attachment 2 - Cost Effectiveness Results

Attachment 3 - Current Minimum Standard for Gas Appliance

Testing

Attachment 4 - Synopsis of NGAT Minimum Standard

and Team Recommendations

On-Site NGAT Sequence Per Team Recommendation

Attachment 5 - PY2001 LIEE Impact Evaluation

Attachment 6 - Supplemental Information on Team NGAT

Recommendations

Attachment 7 - Synopsis of Adopted Natural Gas Appliance Testing

Procedures

INTERIM OPINION: PHASE 4 STANDARDIZATION RESULTS FOR
LOW-INCOME ENERGY EFFICIENCY MEASURE COST-EFFECTIVENESS
AND NATURAL GAS APPLIANCE TESTING

1. Summary¹

By today's decision we address the recommendations contained in two Phase 4 Standardization Reports on the Low-Income Energy Efficiency (LIEE) program submitted in this proceeding.² One report addresses the issue of which measures should continue to be offered under the program, based on the results of cost-effectiveness evaluations that include consideration of non-energy benefits. The other addresses carbon monoxide (CO) testing under the program, based on the results of an extensive study of CO levels present in low-income homes in California. The report recommendations apply to the LIEE programs administered by Pacific Gas and Electric Company (PG&E), San Diego Gas & Electric Company (SDG&E), Southern California Edison Company (SCE) and Southern California Gas Company (SoCalGas), collectively referred to as "the utilities," "Joint Utilities," or "investor-owned utilities" (IOUs) in this decision.

The reports were prepared by the Standardization Team (also referred to as "the Team"), at the Commission's direction. The Team is comprised of the utilities and project consultants, with coordination assistance from the Commission's Energy Division. Public workshops were held during the development of both reports. No comments or protests were filed in response to the Team's final recommendations.

We find that the Standardization Team has applied the cost-effectiveness guidelines adopted by the Commission in Decision (D.) 02-08-034 consistently, and reasonably. In those instances where the Standardization Team recommends retaining measures that do not meet the specific cost-effectiveness thresholds established by those guidelines, the Team has offered persuasive reasons for doing so based on policy or program considerations. We adopt the Standardization Team's recommendations as summarized below. These changes will be in effect for PY2004 and beyond, until further order by the Commission.

TABLE A: Measures to Retain/Drop for PY2004 LIEE Program

Measure
Non-Weather-Sensitive Measures
Hard-wired CFL porch lights	Retain in all climate zones for single family homes, but drop for multi-family and mobile homes
Compact fluorescent lamps	Retain in all climate zones and residence types
Faucet aerators,	Retain in all climate zones and residence types
Low-flow showerheads,	Retain in all climate zones and residence types
High efficiency refrigerators	Retain in all climate zones and residence types
Water heater blankets	Retain in all climate zones and residence types
Water heater pipe wrap	Retain in all climate zones and residence types
High-efficiency water heaters	Drop from Program
Weather-Sensitive Measures
Outlet gaskets	Retain in all climate zones and residence types
High efficiency central Acs	Drop in all climate zones and residence types
High efficiency room Acs	Retain in Climate Zones 11, 12, 13, 14, and 15
Caulking	Retain in all climate zones and residence types
Ceiling Insulation	Retain in all climate zones and residence types
Duct testing and sealing	Drop in all climate zones and residence types
Evaporative cooler covers	Retain in all climate zones and residence types
Evaporative cooler maintenance	Drop in all climate zones and residence types
Evaporative coolers	Retain in Climate Zones 11 - 16 for single family and mobile homes; drop from Program for multi-family homes and in Climate Zones other than 11 - 16.
Furnace filters	Retain, but only as part of furnace repair or replacement
Gas furnace repairs	Retain in all climate zones and residence types
Gas furnace replacements	Retain in all climate zones and residence types
Minor home repairs	Retain in all climate zones and residence types
Setback Thermostats	Drop from Program except where required by code in conjunction with furnace repair or replacement
Weatherstripping attic doors	Retain in all climate zones and residence types
Weatherstripping doors	Retain in all climate zones and residence types
Whole house fans	Drop from Program

As we stated in D.02-08-024, LIEE program measurement issues should be revisited periodically as time and resources permit. To this end, we request the utilities to submit additional information to explain the causes for the variability observed in some of their per measure cost data.

With regard to CO testing, we concur with all but two of the Standardization Team's recommendations. In particular, we agree that some type of CO testing is warranted for the LIEE program, even though the empirical data does not conclusively indicate that installing infiltration-reduction measures will increase CO levels in the home. In terms of timing, we also agree with the Team's recommendation that CO testing be conducted only after weatherization. We concur with other recommendations made by the Team to improve CO testing based on the results of their study, including enhancements to visual inspections, the use of smoke tests as the standard procedure for draft testing, and changes to room ambient CO testing to include the operation of water heaters and kitchen appliances during the test, among others.

However, we do not adopt the recommendation that the decision to conduct flue tests or room ambient tests be left to the utility's discretion, as proposed by the Standardization Team for space and water heating.³ As discussed in this decision, we find nothing in the study results to warrant the use of these tests in place of room ambient CO testing. Moreover, for the utility that elects to conduct flue tests, many of the customers' appliances will be "red-tagged" (disconnected) pending repair or replacement, even when CO levels in the room are well within safety thresholds and the appliance passes tests for adequate drafting. This is because there are far more test "fails" at the flue level, than in the room ambient air. Yet, the Standardization Team presents no empirical evidence or research to indicate whether, or to what degree, CO levels in the flue that exceed certain thresholds may present health problems in the future.

Instead, we direct all utilities to conduct room ambient CO tests as the standard procedure. If CO levels in a particular room (or rooms) are at or above the 10 pounds per minute (ppm) action level, then the utility may (but is not required to) conduct flue tests as a diagnostic tool to identify the source(s) of the problem, as appropriate. This is the current manner in which SDG&E and SoCalGas utilize flue tests in combination with ambient tests in their CO testing procedures, and we adopt this approach for PG&E as well.

We also take issue with the Team's recommendation regarding the treatment of homes that contain a non-IOU fueled combustion appliance. Under this recommendation, the utility would no longer provide infiltration-reduction measures (such as caulking or weatherstripping) to low-income homes that use an IOU-fuel for space heating if the home also uses a non-IOU combustion fuel for one or more other end-use, such as water heating or cooking. For example, a home with electric space heat and electric cooking appliances would not receive infiltration-reduction measures under the LIEE program if it also uses a propane water heater.⁴ At least for PG&E, the data available to date indicates that the impact of this policy would be significant in rural areas, where many electric customers do not have natural gas available for space heating. While we concur with the Team that the IOU ratepayers should not be responsible for conducting safety tests on non-IOU fueled appliances, or bear the costs of replacing or repairing those appliances if they do not pass the tests, we are not persuaded that the Team's recommendation on this issue is the best option.

Accordingly, we direct the Standardization Team to further explore alternatives, some of which are discussed in today's decision, with input from the Low Income Oversight Board (LIOB), community-based organizations and other interested parties. We also direct the utilities to provide additional data for our consideration of alternatives. We augment Phase 4 of the Standardization Project for this purpose, and direct the Standardization Team to file its report and recommendations within 120 days from the effective date of this decision.

In sum, we adopt the Team's recommendations for CO testing procedures, with two exceptions. First, as discussed above, we do not adopt flue testing as a standard procedure (or utility option) for space and water heating, as proposed by the Team. Second, we defer consideration of a final policy on the treatment of homes using non-IOU fuels until further data is available, and until we explore additional alternatives. In the interim, we authorize the utilities to continue their current CO testing procedures to qualify these homes for infiltration-reduction measures until we finalize our policy in the coming months. For low-income homes that use IOU-fuel for space heating and for all other combustion appliances in the homes, we adopt the CO testing procedures presented in Attachment 7.

We also adopt the Team's recommendations for actions to take when appliances fail one or more of the CO tests. Those actions are described in Section 4.8.2, and include the repair or replacement of natural gas space heaters and water heaters. Adding the replacement of natural gas water heaters to current procedures will increase program expenditures by an estimated $1.9 million in 2004 for the three natural gas utilities combined. However, this change will not require any rate increases for 2004. The increased costs for repairs and maintenance will be offset by the elimination of certain measures from the program. (See Table A above.)

To implement today's adopted policies and procedures, the Standardization Team will need to develop specific instructions and protocols, and make additional revisions to the Policy and Procedures Manual. We direct the Standardization Team to submit this documentation as a compliance filing within 20 days from the effective date of this decision. Protests or comments will be due 10 days thereafter, and the Standardization Team may respond within 5 days. If there are no protests to the Standardization Team's compliance filing, then the Assigned Commissioner (in consultation with Energy Division) may issue a ruling approving the filing without further action by the Commission.

Today's decision completes a major effort to standardize policies and procedures related to the LIEE program. However, as noted by the Standardization Team in its report, other aspects of program procedures--such as pre-approvals of the installation of LIEE program measures--still vary considerably among the utilities. We solicit comment from the utilities and interested parties on what additional areas of the LIEE program should be standardized, if any. In consultation with Energy Division, the Assigned Commissioner should develop a scoping memo for future phases of the Standardization Project, as appropriate, taking parties' comments and the availability of Commission resources into consideration.