6. Energy Division Review of Utility Claims for 2009

As directed, Energy Division reviewed the utilities calculations of 2009 incentive claims, including the supporting files submitted with each application and the calculation of Net Benefits in the Risk Reward Spreadsheet. To ensure that the values in the risk reward spreadsheet were not altered, the Energy Division compared the Risk Reward Template to the Risk Reward spreadsheets submitted with each utility's application. The comparison test showed that the utility spreadsheet matched the Energy Division template. In its preparation of the report Energy Division, however, was unable to duplicate the 2009 energy savings and net benefit numbers used in each utility's Risk Reward spreadsheets, implying that the ERT was not properly used, as ordered by the Commission in D.10-12-049.

Energy Division found the utilities complied with the general requirements of D.10-12-049 by providing the ERT tool, input sheets, the Risk Reward spreadsheet, and documentation describing any changes made. Energy Division made the following assessments of the utilities' modifications and adjustments:

--PG&E's modifications to the ERT to create ex ante savings are appropriate. PG&E's 2009 GWh and MW numbers from the ERT are very close to the Risk Reward numbers, but the therms, Total Resource Cost (TRC) Net Benefits and Program Administrator Cost (PAC) Net Benefits have a variance of more than 15%:

--SCE's modifications to the ERT to properly calculate the ex ante savings and to the Residential Lighting input sheet to allow for proper mapping are appropriate. SCE made additional adjustments to their TRC and PAC Net Benefits to properly include additional program costs that SCE believed were missing from the ERT.

--SCE's 2009 GWh and MW numbers from the ERT vary by more than 30% when compared to the Risk Reward spreadsheet, but the TRC Net Benefits and PAC Net Benefits match almost exactly (.5% variance).

--SDG&E's 2009 GWh, MW, Therm, TRC Net Benefits and PAC Net Benefits vary between 22% and 67% when comparing the ERT values to the Risk Reward spreadsheet.

-- SoCalGas' 2009 Therm values from the ERT differ by more than 12% when compared to the Risk Reward spreadsheet while the TRC Net Benefits differ by 61% and the PAC Net Benefits differ by 8%.

For purposes of its compliance report, Energy Division was not able to duplicate all of the 2009 energy savings and net benefits numbers used in each utility's Risk Reward Spreadsheet based on follow up meetings with the utilities and review of utilities' responses to the report, however, Energy Division was able to reconcile these variances and to ensure that the 2009 energy savings and net benefits numbers were properly calculated with the exception of several programs that SoCalGas added to the ERT tool, some potential inconsistencies in the C&S parameters used by the Utilities (the Report noted that there remained some uncertainty in the C&S input parameters used, but that Energy Division did not anticipate that these discrepancies would have a significant impact - more than a few percent in either direction - on the earnings calculations), and the savings attributable to CFL bulbs, as discussed below.

6.1. Energy Division Review of Ex Ante Savings Calculations from CFL Bulb Installations

According to Energy Division's CFL installation model, over 30 million 2006-2008 and 2009 program CFLs were installed by utility customers in 2009. According to the Energy Division's analysis, based on ex ante assumptions, those CFLs would be predicted to save customers over $200 million in lower utility bills

According to the Energy Division, in calculating their energy efficiency savings to attribute to 2009 RRIM awards, the utilities counted savings from CFL bulbs that were incented in the 2006-2008 portfolio period, but that were actually installed by customers during 2009. In addition, the utilities increased their 2009 savings total by also counting CFL bulbs that were both incented for the 2009 bridge year and actually installed during that year.

In D.10-12-049, the Commission gave guidance on how to attribute credit for CFLs purchased during the 2006-2008 cycle but not installed until 2009 and stated: "8...nothing in this decision precludes the utilities from seeking credit for energy savings based on the installation of CFLs that were procured and rebated over the 2006-2008 cycle but which were not installed in that period, provided an incentive mechanism is adopted on a going forward basis." The Energy Division interprets this language to allow the claims of savings from the inclusion of CFLs purchased in 2006-2008 but installed in 2009, though the Report noted that an alternative, more literal interpretation of the Commission's guidance would be that a new incentive mechanism (not the 2006-2008 RRIM) would need to be adopted to provide shareholder incentives for the stored bulbs. The Energy Division Report also identified three areas of potential overestimation of 2009 savings that could result from using the CFL bulb installation model, which was not originally designed to address bulbs from prior years coming out of storage:

· The 50% CFL decay might need to be removed or modified such that the CFLs installed from storage or new purchases are not duplicated in order to avoid a double count of this decay offset;

· The 2009 CFL installation rates used need to be updated to utilize the same installation rate model used to calculate the installations from stored CFL to ensure there is no double counting of installed CFLs; and

· The 2006-2008 CFL quantities used to estimate the number of bulbs installed in 2009 needs to be re‐calculated to ensure they are consistent with the decay and 2009 installation rates mentioned above to ensure there is no double or triple counting due to the three combined interacting components of CFL savings credits.

At the time that the Energy Division Compliance Report was issued, staff had not yet calculated the 2009 RRIM award adjustment necessary to correct for any over counting of CFL bulb installations. (Energy Division has now calculated the adjustment necessary to correct for the second and third errors, but elected not to make any adjustments for the first, as staff believes that no significant double count results from decay assumptions embedded in the model when bulbs coming out of storage are factored in.) If we were to make the proposed adjustments, the resulting impact on the incentives would be as follows:

There are a number of steps in calculating these adjustments. For clarity, a detailed explanation of the calculations supporting the adjusted RRIM awards for 2009 is set forth in the Appendix to this decision with additional explanation in discussing comments to the Proposed Decision in Section 10.

8 See page 59 of D.10-12-049.

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