7. Responses to the Energy Division Compliance Report

7.1. Response of PG&E

PG&E states that since Energy Division released its Report, PG&E has worked closely with Energy Division to identify the reasons for the discrepancy between the Energy Division and PG&E savings calculations for the 2009 program year. PG&E states that Energy Division and PG&E identified two inputs to the ERT that were responsible for the discrepancy. PG&E claims that the Energy Division inadvertently included incorrect inputs for these two parameters, which led to the discrepancy.

According to PG&E, the Energy Division inadvertently used net savings, as opposed to gross savings, in its ERT analysis. When gross savings are applied, PG&E satisfies the MPS such that it qualifies for incentives. Attachment 1 of PG&E's comments shows that the correct calculation of gross savings for MPS purposes should incorporate the gross savings from lines 7 (gross savings from pass through programs) and 8 (gross savings from evaluated programs). Because this metric only relates to the MPS, and not to the calculation of total net benefits, it has no effect on the actual earnings claim presented in PG&E's application.

Regarding the second discrepancy, PG&E states that the Energy Division inadvertently included additional energy savings and costs that should not have been included in the analysis for 2009. This resulted in an overestimation of total savings and net benefits in Energy Division's analysis. Specifically, in June, 2010, PG&E updated its March 1, 2010 quarterly report to reflect the Commission's updated avoided costs in the E3 calculator. The updated savings in the June report should be used in performing the savings calculations for 2009. However, rather than using these June update savings, Energy Division inadvertently included program savings and costs from the March 1 report in addition to savings from the updated June 1 report and used that combined total for its ERT analysis.

PG&E defends its calculation of CFL-related savings for 2009, stating that the Commission authorized the utilities to include savings from CFLs procured and rebated in 2006-2008 and installed in 2009 (carryover CFLs). PG&E believes that such authority is consistent with Commission policy that the utilities should claim savings beginning in the year a measure is installed. PG&E finds no discussion or other explanation in D.10-12-049 to support the notion that the Commission intended to make a special exception to this policy to apply solely to carryover CFLs at issue in this particular application or to require the utilities to wait for some unspecified point in time to claim savings from measures which were installed and generated energy savings in 2009.

7.2. Response of SCE

SCE states that it communicated with the Energy Division regarding factual errors contained in the Energy Division Report. SCE documented required corrective actions in its comments. After consulations with SCE, Energy Division agreed with SCE's observations concerning these errors.

SCE claims that the ERT software tool only contains ex post savings estimates for CFLs which SCE claims does not adhere to Commission policy for 2009 RRIM earnings. SCE modified the ERT software tool (see Section V-F and Exhibit SCE-6) for the purpose of calculating ex ante assumptions associated with the CFLs.

Similar to Energy Division's evaluation of the 2006-2008 Residential Lighting Program, SCE determined the average wattage of the 2006-2008 CFLs, and applied this average wattage to the 2009 ex ante input parameters, based on the Database of Energy Efficient Resouces for 2008. SCE incorporated these ex ante parameters into the ERT software tool to calculate savings and net benefits (see Exhibit SCE-5).

SCE disputes the Energy Division claim that savings from CFL installations are overstated. SCE argues that the Energy Division Report incorrectly interprets Commission policy in questioning the validity of CFLs installed in 2009 and incented as part of the 2006-2008 program cycle. SCE claims that the Commission, in D.10-12-049, explicitly authorized SCE to include such results in its 2009 Earnings Application.

7.3. Response of SDG&E and SoCalGas (The Joint Utilities)

SDG&E and SoCalGas provided Energy Division with supporting documentation of their claims. Due to time considerations, Energy Division did not formally update the Energy Division Report, but generally agreed with the explanations subsequently provided by the two utilities.

The joint utilities state that upon receiving the Energy Division's back-up documentation, they analyzed the results and were able to identify the source of error in Energy Division's ERT runs. According to the joint utilities, this error is identical for both SDG&E and SoCalGas. The Joint Utilities replicated the same results for programs with results that were updated with 2006-2008 Evaluation, Measurement and Verification (EM&V) installation rates. The error was isolated to a group of programs not subjected to the 2006-2008 EM&V results pursuant to D.10-12-049, and thus not adjusted with EM&V results. As a result, the joint utilities assert that the Energy Division's ERT runs were double counting the net benefits of these programs. Since these programs tended to either be non-resource programs (i.e., no savings benefits but with program costs) or resource programs that did not report significant savings, the costs outweighed the benefits. Therefore the Joint Utilities argue that the Energy Division ERT model erroneously reported excess costs, which would result in reduced net benefits and, in turn, earnings.

7.4. Response of NRDC

NRDC generally agrees that discrepancies between Energy Division's calculations and the utility applications should be reconciled prior to resolution by the Commission (the Energy Division Review, at 6-7). However, rather than attempt to resolve every single issue, NRDC recommends that the Commission focus on resolving material discrepancies to allow for a timely decision.

NRDC agrees that the 2009 earnings claims should include savings from 2006-08 CFLs installed in 2009, consistent with Commission direction that program savings should be accounted for in the program cycle in which measures are installed.⁹ Accounting for the savings from these lamps should be straightforward since the costs were accounted for in the 2006-08 RRIM applications and awards and Energy Division has already filed an analysis estimating the total number of CFLs installed in 2009 due to the 2006-2008 programs.¹⁰

NRDC disagrees with any alternative interpretation of D.10-12-049 that would preclude the utilities from receiving credit for 2009 energy savings based on the installation of CFLs procured and rebated during the 2006-2008 cycle but not installed until 2009.¹¹ NRDC believes that such an interpretation requires the assumption that the incentive mechanism excludes extension of the 2006-2008 mechanism into 2009, which was in fact what the Commission explicitly decided to do in the same decision.

More generally, NRDC believes that such an interpretation would conflict with basic accounting principles as it would result in the incorporation of program costs associated with CFLs included in the 2006-08 evaluation report while excluding the corresponding benefits (by not counting savings from these bulbs in 2006-2008 or in 2009).

NRDC disagrees with the Energy Division's claim that 2009 RRIM earnings are overstated due to improper application of the decay rate. NRDC notes that a spreadsheet was distributed by Energy Division to stakeholders for a conference call to discuss this issue, including the calculations needed for an updated analysis.¹² This spreadsheet provided a calculation of total 2009 installations using the same installation rate model previously used to calculate the installations from stored CFLs, and included relevant updated data. NRDC recommends the Commission use this spreadsheet to calculate total 2009 installations.

⁹ D.04-09-060, at 33.

¹⁰ KEMA. Energy Efficiency Evaluation Report for 2009 Bridge Funding Period, Appendix R: CFL Memo. January 13, 2011 http://www.cpuc.ca.gov/NR/rdonlyres/21FA8895-A754-4A6F-BEE8-0F776D10D7D7/0/AppendixR_CFLMemo.pdf [hereinafter KEMA CFL Analysis].

¹¹ D.10-12-049 at 60.

¹² Spreadsheet titled: "110207 high level installation analyses using 09 pgm recalc.xls" Distributed by e-mail from Peter Lai to the service list of A.11-06-027. Dated: 10/13/11 9:21 A.M.