5. Comments on Proposed Decision

The proposed decision of ALJ Gamson in this matter was mailed to the parties in accordance with Pub. Util. Code § 311 and comments were allowed under Rule 14.3 of the Commission's Rules of Practice and Procedure. Comments were filed by the Joint Petitioners on March 29, 2010, and reply comments were filed by DRA on April 5, 2010.

Findings of Fact

1. The proposed modifications to OEEP pilots approved in D.08-11-057 are consistent with the Commission's energy efficiency objectives, and are worthwhile to help understand embedded energy in the use of water. The proposal is consistent with the Commission's strategic objective of improving the efficiency of water delivery and treatment systems.

2. When the pilots are completed, it will be possible to evaluate whether less energy-intensive water measures should become an ongoing part of energy utilities' energy efficiency portfolios.

3. The Commission has not previously allowed savings from pilot programs to be counted toward energy utilities' energy efficiency savings goals.

4. The Commission rules for the relationship between utilities and Commission staff regarding EM&V for energy efficiency programs will be determined in a decision in A.08-07-021 et al.

5. The Commission approved fund-shifting rules in D.09-09-047 limiting fund-shifting among energy efficiency programs in most cases to 15 percent.

6. The water utilities have not implemented OEEP projects on the time schedule anticipated in D.08-11-057, but are now in the process of implementing the projects. Some projects authorized in D.08-11-057 were started between the date of the Joint Petition and the date of this decision.

7. The additional OEEP pilots in the Joint Petition should be completed by June 1, 2011 in order to allow EM&V to be reported to the Commission by September 1, 2011.

8. The pilot nature of OEEP projects is intended to determine if the projects can improve efficiency and are cost-effective; if they are cost-effective, ratepayers will benefit from these projects and possible expansions of these projects.

Conclusions of Law

1. The proposed modifications to OEEP pilots approved in D.08-11-057 are reasonable, subject to modifications to specific requests in the Joint Petition.

2. Savings from pilot programs should not be counted toward energy utilities' energy efficiency savings goals.

3. The Commission rules for the relationship between utilities and Commission staff regarding EM&V for energy efficiency programs which will be determined in a decision in A.08-07-021 et al. should be applied to OEEP pilots to the extent possible without changes to the scope, cost and schedule of this decision, except that Commission EM&V efforts should be led by DWA.

4. The deadline for implementation of OEEP projects approved in D.08-11-057 should be changed.

5. The Water Utilities should be authorized to file Tier 2 advice letters within 30 days from the effective date of this Decision to establish Operational Energy Efficiency Program Memorandum Accounts.

6. To the extent that the Water Utilities seek recovery of any net costs recorded in their Operational Energy Efficiency Program Memorandum Accounts, the utility is not entitled to a presumption that its OEEP costs are appropriate types of costs to recover in addition to rates that have been otherwise authorized, or that the costs are reasonable or prudently incurred. The utility should bear the burden of proving the prudence and reasonableness of the costs and the appropriateness of separate recovery of these costs.

ORDER

IT IS ORDERED that:

1. The Petition of the California Water Association, Pacific Gas and Electric Company, and Southern California Edison Company for Modification of Decision 08-11-057, as supplemented by the responses to data requests in Attachment 1, regarding Operational Energy Efficiency Programs for regulated water utilities, is approved with the following modifications:

· Pacific Gas and Electric Company and Southern California Edison Company must not count Operational Energy Efficiency Programs pilot energy savings toward energy efficiency savings goals.

· The Commission's Division of Water and Audits is authorized to approve Operational Energy Efficiency Programs pilot budget changes up to 15 percent above or below levels requested by each water utility in the Petition of the California Water Association, Pacific Gas and Electric Company, and Southern California Edison Company for Modification of Decision 08-11-057.

· Evaluation, measurement and verification of Operational Energy Efficiency Programs pilots shall be performed by the Commission's Division of Water and Audits, consistent with Commission direction in decisions in Application 08-07-021 et al.

2. All Operational Energy Efficiency Programs authorized in Decision 08-11-057 or in this Decision (except for the cancelled Del Oro Water Company project authorized in Decision 08-11-057) shall be implemented by May 1, 2010 and shall be completed by June 1, 2011.

3. Evaluation, Measurement and Verification of the Operational Energy Efficiency Programs shall be managed by the Commission's Division of Water and Audits and completed by September 1, 2011.

4. Pacific Gas and Electric Company is authorized to use up to $41,500 from energy efficiency portfolio funds for incremental costs of Operational Energy Efficiency Programs.

5. Alco Water Service Company, California-American Water Company, California Water Service Company, Golden State Water Company, San Jose Water Company, and East Pasadena Water Company are each authorized to establish an Operational Energy Efficiency Program Memorandum Account to track its costs and payments from Southern California Edison Company and Pacific Gas and Electric Company associated with Operational Energy Efficiency Programs approved in this Decision and Decision 08-11-057.

6. Alco Water Service Company, California-American Water Company, California Water Service Company, Golden State Water Company, San Jose Water Company, and East Pasadena Water Company shall each file an advice letter within 30 days from the effective date of this Decision under Tier 2 of General Order 96-B to establish an Operational Energy Efficiency Program Memorandum Account. Any interested party may protest an advice letter filing, as provided for in General Order 96-B. If a substantially similar Memorandum Account has already been authorized by Division of Water and Audits, the advice letter shall request that such Memorandum Account be renamed the Operational Energy Efficiency Program Memorandum Account, and such modification shall not alter the effective date of the renamed Memorandum Account.

7. Each of Alco Water Service Company, California-American Water Company, California Water Service Company, Golden State Water Company, San Jose Water Company, and East Pasadena Water Company, in its Operational Energy Efficiency Program Memorandum Account, may record its Operational Energy Efficiency Program costs incurred and shall record all Operational Energy Efficiency Program payments received from Southern California Edison Company and Pacific Gas and Electric Company on or after the effective date of this Decision or the effective date of its Operational Energy Efficiency Program Memorandum Account, whichever is earlier.

8. Alco Water Service Company, California-American Water Company, California Water Service Company, Golden State Water Company, San Jose Water Company, and East Pasadena Water Company may each seek recovery of its Operational Energy Efficiency Program Memorandum Account balance in its next general rate case or, if it does not have general rate cases, through a Tier 3 advice letter filing.

9. To the extent that Alco Water Service Company, California-American Water Company, California Water Service Company, Golden State Water Company, San Jose Water Company, or East Pasadena Water Company subsequently seeks recovery of any costs associated with its Operational Energy Efficiency Program Memorandum Account, such utility is not entitled to a presumption that the costs of the Operational Energy Efficiency Program are appropriate types of costs to recover or that they are reasonable or prudently incurred. The utility shall bear the burden of proving the prudence and reasonableness of the costs of the Operational Energy Efficiency Program and the appropriateness of separate recovery of these costs.

10. Application (A.) 07-01-024, A.07-01-026, A.07-01-029, and A.07-01-030 are closed.

This order is effective today.

Dated April 8, 2010, at San Francisco, California.

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