STATE OF CALIFORNIA GRAY DAVIS, Governor

PUBLIC UTILITIES COMMISSION

505 VAN NESS AVENUE

SAN FRANCISCO, CA 94102-3298

April 24, 2001

TO: PARTIES OF RECORD IN APPLICATION 00-11-009 ET AL.

This is the draft decision of Administrative Law Judge (ALJ) Gottstein. It will be on the Commission's agenda at the next regular meeting 9 days after the above date. The Commission may act then, or it may postpone action until later.

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.

Rule 77.7(f)(9) provides for reduction or waiver of the 30-day period for public review and comment when public necessity requires such reduction. We must balance whether the public necessity of adopting an order outweighs the public interest in having the full 30-day review and comment period. We are convinced that this draft decision falls under Rule 77.7(f)(9), and for that reason, we established a shortened period for comments on the draft decision.

Comments on the draft decision must be filed within five days of its mailing and no reply comments will be accepted.

In addition to service by mail, parties should send comments in electronic form to those appearances and the state service list that provided an electronic mail address to the Commission. Finally, comments must be served separately on the ALJ and the Assigned Commissioner, and for that purpose I suggest hand delivery, overnight mail, or other expeditious methods of service.

/s/ LYNN T. CAREW

Lynn T. Carew, Chief

Administrative Law Judge

LTC:k47

Attachments

ALJ/MEG/k47 DRAFT Item 8

5/3/2001

Decision DRAFT DECISION OF ALJ GOTTSTEIN (Mailed 4/24/2001)

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Compliance Application of Pacific Gas and Electric Company for Approval of Year 2001 Low Income Programs, in Compliance with Ordering Paragraph 4 of Decision 00-09-036. (U 39 M)	Application 00-11-009 (Filed November 6, 2000)
Application of Southern California Gas Company (U 904-G) For Authority to Continue Low Income Assistance Programs and Funding Through 2001	Application 00-11-011 (Filed November 6, 2000)
Application of San Diego Gas & Electric Company (U 902-E) For Authority to Continue Low Income Assistance Programs and Funding Through 2001	Application 00-11-012 (Filed November 6, 2000)
Southern California Edison Company Compliance Application for Approval of Year 2001 Low Income Program Plans	Application 00-11-020 (Filed November 6, 2000)

INTERIM OPINION:

RAPID DEPLOYMENT OF LOW-INCOME ASSISTANCE PROGRAMS

DURING THE ENERGY CRISIS

1. Introduction and Summary¹

By today's decision, we address issues related to the rapid deployment of low-income assistance programs during the energy crisis. We also allocate unspent carry-over and additional funding authorized by the Legislature for low-income energy efficiency programs across the utility program administrators.

Low-income assistance programs consist of rate assistance under California Alternate Rates For Energy (CARE) and direct weatherization and energy efficiency services under the Low-Income Energy Efficiency (LIEE) program. By statute, the investor-owned utilities under our jurisdiction administer both of these programs.² Through the public purpose surcharge, Pacific Gas and Electric Company (PG&E), San Diego Gas & Electric Company (SDG&E), Southern California Edison Company (SCE) and Southern California Gas Company (SoCal) collect approximately $135 million per year to fund the CARE program, and $60 million per year for LIEE services.³

This funding has been substantially augmented with the passage of Senate Bill (SB) X1 5 and Assembly Bill (AB) X1 29, both passed by the Legislature on April 5 and signed by the Governor on April 11, 2001, SBX1 5 provides a one-time increase to the LIEE program of $20 million. The bill also authorizes another $50 million for appliance replacement and other energy efficiency measures, of which we allocate $25 million to further supplement LIEE funding during the energy crisis. These funds will revert to the General Fund unless they are encumbered by March 31, 2002. In addition, SBX1 5 provides a one-time appropriation of $100 million to supplement the funding collected in rates for CARE discounts and outreach efforts.

SBX1 5 also appropriates an additional $140 million to the Department of Community Services and Development (CSD) to augment its state low-income energy assistance programs, including weatherization services. These programs are referred to as the Low-Income Home Energy Assistance Program (LIHEAP), and are delivered through a network of community based organization, or "LIHEAP providers." ABX1 29 directs the California Conservation Corps to work in coordination with CSD to deploy a "Mobile Efficiency Brigade" that will purchase and mobilize crews to deliver high efficiency lighting to low-income residences throughout the state. This effort is funded at $20 million. In adopting this program, the Legislature specifically acknowledged that:

· "Conservation programs require a large mobilization effort across the state, within a short timeframe, in order to affect peak demand anticipated for the summer of 2001 and the subsequent winter", and

· "Current state programs can work in conjunction with community-based organizations to significantly penetrate communities and rapidly implement programs aimed at conservation and demand reduction", and

· "The state currently has programs operated and administered by the Department of Community Services and Development and the California Conservation Corps, working in conjunction with and through community-based organizations, that can be expanded to assist in the statewide conservation effort initiated through pending programs." ⁴

It is within this context that we consider how best to rapidly deploy the LIEE and CARE services administered by the utilities. As discussed in this decision, we do not believe that "business as usual" will be adequate to address the needs of low-income customers during this energy crisis. Approximately 1 household out of 5 is eligible for these programs. However, the utilities are currently reaching only about 60% of eligible customers with CARE assistance in the combined service territories, and only a small subset of that amount with comprehensive weatherization services under LIEE. Although there are LIHEAP referral systems in place, the utilities do not currently take other steps to optimize the delivery of weatherization services to low-income customers through leveraging LIHEAP programs. Inadequate coordination between LIEE and LIHEAP also makes it difficult and confusing for the low-income customer to obtain the full range of weatherization services that are collectively offered under these programs. The status quo simply will not serve a rapid deployment strategy. To mobilize resources most effectively, the provision of weatherization and energy efficiency services should appear as seamless as possible to the client, and be readily coordinated withthe extensive low-income assistance programs administered by CSD. Therefore, we direct utility program administrators to use the funding authorized for LIEE and appliance replacements to leverage the programs provided through CSD's network of community-based organizations to customers within their service territories.

As explained in this decision, the utilities can do this in several ways. The utility can purchase equipment and appliances in bulk and have a LIHEAP provider install them in eligible low-income homes within the utility service territory, along with additional weatherization measures provided by LIHEAP. The utility can contract directly with a LIHEAP provider to deliver the LIEE program, so that LIHEAP provider can use funds from both LIEE and LIHEAP to provide a comprehensive set of services. In addition, the utility can enter into a memorandum of understanding (`MOU") with LIHEAP providers to complete units in a coordinated manner, using LIEE contractors to install measures not provided under LIHEAP, for example. We provide the utilities considerable flexibility in deciding which of the three approaches, and in what combination, to employ. In this way, a utility can develop the leveraging strategy that is most compatible with its existing delivery system.

The leveraging approach we adopt today will require a shift in thinking within the utility program infrastructure. Instead of considering the LIEE program as a stand-alone activity that provides referrals to CSD programs, utility administrators and their contractors also need to view the LIEE program as a leveraging vehicle to rapidly expand and enhance the delivery system in place through CSD's network of LIHEAP providers. We believe that this shift in thinking is warranted by the dire situation facing low-income customers during the energy crisis, and needed to ensure the efficient and effective deployment of all of the State's resources appropriated for this purpose.

In order to maximize both peak load reductions and bill savings during the coming months, we also authorize the utilities to offer the following new measures under the LIEE program, on a pilot basis: high efficiency air conditioners, duct sealing and repair, whole house fans, high efficiency water heaters, the installation of set-back thermostats and evaporative cooler maintenance. In addition, we authorize the utilities to install LIEE equipment measures (e.g., refrigerators, air conditioners, evaporative coolers and hard-wired fixtures) in rental units, on an interim basis. However, landlord co-payments are required under certain circumstances.On the CARE side, one of the most effective ways to increase enrollment is to ensure that eligible low-income customers fill out CARE applications when they obtain other types of low-income assistance through community-based organizations or other agencies. All parties acknowledge that many of these organizations operate under restrictive reimbursement rules that do not allow them to recover the costs of providing such a service, without funding specifically targeted for that purpose.

To ensure that these organizations are adequately compensated for the time they spend helping their clients fill out CARE applications, we initiate a "capitation" fee of up to $12 per eligible, CARE enrollment. Utilities are given the latitude to contract with different entities at varying levels of capitation fee (ranging from $0 to $12) in a manner that appropriately addresses the specific circumstance of that service provider. As discussed in this decision, this latitude also permits the utility the discretion not offer capitation fees when, for example, new enrollments result from separately-funded CARE outreach activities.

Of the $100 million authorized by the Legislature for CARE, we allocate $10 million to cover the cost of capitation fees and to expand targeted outreach efforts. The $10 million is allocated to the utilities using the allocation factors approved by the Commission in Resolution E-3585, which results in the following:

SoCal: $2.5 million




PG&E: $3.0 million




SCE: $3.0 million




SDG&E: $1.5 million

The utilities are directed to use a portion of these funds to leverage and coordinate with the outreach efforts funded under CSD's LIHEAP program, and may spend up to $2 million in non-English radio and print advertising for CARE in coordination with CSD. The remaining $90 million will be allocated to the utilities to cover the increased costs of CARE rate subsidies on an "as needed" basis. Within 60 days, the utilities are required to file Advice Letters that include the following information:

(1) authorized CARE funding currently in rates.

(2) actual expenses to date for CARE administrative costs (including outreach), and subsidies/credits.

(3) projections of CARE rate subsidy costs over the next 12 months, including projections of new enrollments.

(4) a proposed allocation of the $90 million to cover those costs, based on need that cannot be covered with surcharge-generated revenues.

As described in today's decision, we allocate the new funds for LIEE and CARE based on the allocation factors adopted by the Commission in Res. E-3585, taking into account the disproportionate availability of LIEE carryover funding among utilities. This approach puts proportionately more new money in geographic regions where all available funding has been utilized in prior program years.

We also set aside $5 million of the new LIEE funding for a second round allocation to the smaller jurisdictional utilities. The allocation of these funds among these utilities, as well as the allocation of new funding for CARE, will be addressed in a subsequent Commission decision. Energy Division will hold workshops and develop recommendations on these issues for our consideration.

Our adopted allocation of LIEE carryover and new funding, by utility, is summarized below. We also present the current annual authorization for LIEE funding that is recovered in rates, in order to present the full amount of funding available for rapid deployment of LIEE programs:

	PY2001 LIEE AUTHORIZED (ANNUAL IN RATES)	CARRYOVER FUNDING WITH INTEREST (ONE TIME)	ALLOCATION OF NEW FUNDING (ONE-TIME)	TOTAL AVAILABLE FOR RAPID DEPLOYMENT
SoCal	$17,999,796	$14,786,894	$4,779,330	$37,566,020
PG&E	$29,109,000	$31,043,794	$0	$60,152,794
SDG&E	$6,423,292	$232,743	$11,506,911	$18,162,946
SCE	$7,174,000	-$234,211	$23,713,679	$30,643,468
	$60,706,088	$46,806,662	$40,000,000	$146,535,228

We also eliminate existing restrictions in fund-shifting among the various weatherization and energy efficiency measures. However, we continue to require that PG&E and SDG&E obtain prior Commission approval (via Advice Letter) before shifting LIEE funds between their gas and electric departments. The utilities expenditure of SBX1 5 funds must also comply with the requirement that not less than 85% of the new LIEE funding be spent for direct purchases and installations.

Consistent with the direction in SBX1 5, we require utility administrators to segregate all CARE and LIEE funding authorized today, including those funds collected through the public purpose surcharge, from all other utility funds. The utilities shall hold these LIEE and CARE program funds in trust for the benefit of the Commission until they are expended.

Today's adopted rapid deployment strategy should continue until further Commission order. We anticipate the need to continue these efforts through the end of 2001, and perhaps well into 2002. The Assigned Commissioner, Administrative Law Judge or Energy Division may initiate checkpoint meetings, workshops or other forums, as appropriate, to monitor utility activities during this period.

In the meantime, the utilities are expected to comply with all of the reporting and program evaluation requirements we have established for the CARE and LIEE program to date. In addition, we require utility administrators to file regular status reports on the results of their rapid deployment efforts. The initial status report will be due 60 days from the effective date of this decision. Status updates will be due every 45 days thereafter, until further order by the Commission or Assigned Commissioner. These reports should include:

(1) a description of the leveraging and outreach activities for both LIEE and CARE programs, including bulk purchases.

(2) the number of CARE enrollments and LIEE measure installations completed (by type of measure), as well as the number initiated but not completed (by type of measure) to date.

(3) estimated energy savings, including peak electric load reductions for the LIEE program.

(4) estimated customer bill savings and

(5) authorized funding versus actual expenditures by budget category. Expenditures on capitation fees should be tracked as a separate line item.

The energy crisis has overshadowed our "business as usual" program planning process. Until further notice, we suspend the PY2002 planning cycle as contemplated in D.00-07-020, including further consideration of pay-for-measured savings pilots and competitive bid outsourcing. Efforts to further standardize program procedures and reporting should continue, however. These efforts will improve service delivery and our ability to effectively evaluate program results.

Today's decision represents a major "call to arms" to protect the interests of low-income customers during this energy crisis. The utilities should implement the rapid deployment strategy described herein, without further delay.