D0409060 Energy Savings Goals for Program Year 2006 and Beyond

7. Comments on Draft Decision

The draft decision of ALJ Gottstein in this matter was mailed to the parties in accordance with Pub. Util. Code § 311(g)(1) and Rule 77.7 of the Commission's Rules of Practice and Procedure. Opening comments were filed on August 23, 2004 by NRDC, ORA, PG&E, SCE, jointly by SDG&E and SoCalGas, SESCO, TURN, WEM, jointly by Center for Small Business and the Environment and the San Francisco Based Small Business Network (CSBE/SBN), and jointly by Chevron USA Inc., Conoco Phillips Company and Shell Oil Products U.S. (Indicated Producers).³⁴ Reply comments were filed on August 30, 2004 by NRDC, ORA, PG&E, SCE, jointly by SDG&E and SoCalGas, SESCO, TURN, CSBE/SBN and a coalition of oil companies that refer to themselves as the Energy Producers and Users Coalition (EPUC).

We have carefully reviewed the comments on the draft decision, and make changes and clarifications throughout the decision in response to many of them. In addition to modifying the decision text and tables to reflect needed clarifications and corrections, we adjust the savings goals presented in the draft decision for the reasons discussed at length in Section 6 above.

Although we have considered parties' arguments for modifying other aspects of the draft decision, we do not find them persuasive. In particular, we do not reduce the Joint Staff recommendations for natural gas savings goals to reflect the use of natural gas as a hydrogen feedstock (rather than for combustion) in refinery operations, as SDG&E/SoCalGas, EPUC and Indicated Producers recommend. Joint Staff has confirmed with the Xenergy study authors that their evaluations of the technical and economic potential to reduce natural gas use do not include savings based on the usage of natural gas as a feedstock from petroleum refineries. We also do not adjust the natural gas savings goals downwards to reflect those customers that choose cogeneration over traditional energy efficiency, as SDG&E/SoCalGas proposes. As indicated in Attachment 4, removing gas sales to cogeneration customers has no appreciable impact on the Joint Staff recommendations.

The natural gas savings goals we adopt today clearly take into account these and other concerns about the ability of program administrator(s) to reach the non-core market with energy efficiency programs, including concerns expressed by SDG&E/SoCalGas about Xenergy's estimates of savings potential from boiler maintenance and other measures in the industrial non-core sector. As discussed in this decision, our adopted natural savings goals reflect less than half of the total maximum achievable potential projected by Xenergy for the core and non-core markets combined. Moreover, Joint Staff's sensitivity analysis indicates that program administrator(s) should be able to meet our adopted goals even if they reach only 10% to 25% of the maximum achievable potential in the non-core industrial natural gas market. (See Attachment 5, Table 1.) Therefore, we do not believe that any further adjustments to the goals proposed in the draft decision are justified.

We also reject the recommendation of SCE and SDG&E that we adopt the electric savings forecasts presented in their LTRP filings in R.04-04-003 in lieu of the Joint Staff recommendations. We note that the savings values presented in SCE's and SDG&E's LTRP filings are considerably less than the economic and maximum achievable savings potential estimates developed in the disaggregated study, especially for SDG&E. In particular, the 2004-2013 cumulative savings numbers presented by SDG&E and SCE in R.04-04-003 are on the order of 1,800 GWh and 9,000 GWh, respectively.³⁵ The maximum achievable potential over that period is estimated at 2,231 GWh for SDG&E and 11,939 GWh for SCE, based on the disaggregated Secret Surplus Energy Study. (See Attachment 8.) Moreover, we note that SDG&E did not update its energy efficiency plan as part of its LTRP in anticipation of this decision adopting updated forecasts of savings.³⁶ We believe that the higher GWh savings goals we adopt today more appropriately reflect the need to accelerate energy efficiency deployment in resource procurement, while at the same time give appropriate consideration of the practical limits to capturing the full economic potential of energy efficiency at this time.

PG&E requests that we find that the measures that underlie the calculation of savings goals are cost-effective and reasonable. We believe that such a finding is premature. The forum and process for considering what program offerings are cost-effective and reasonable will be dictated in large part by the administrative structure we adopt in a separate phase of this proceeding. Moreover, even though specific measures have been found to be cost-effective in the most recent savings potential studies, we will need to reevaluate these findings over time as additional cost and savings information is made available based on actual installations.

In their comments on the draft decision, several parties take issue with our decision to extend the current program cycle from two to three years, albeit for somewhat different reasons. WEM contends that the adoption of a three-year program cycle in today's decision prejudges our consideration of administrative structure for energy efficiency in a separate phase of this proceeding. According to WEM, this is because the administrative structure proposal that it supports calls for a "rolling" or "continuous" solicitation of direct energy savings programs. ³⁷ We note, however, that the administrative structure supported by WEM also involves allocating a percentage of energy efficiency funding to non-direct energy savings programs (e.g., statewide information programs) that would be administered by a Commission-chosen "special administrator". Therefore, the Commission would need to establish a program cycle for review of the special administrator's proposed program plans and funding levels. Moreover, the Commission would need to authorize overall funding levels for the direct energy savings programs, regardless of whether they were subject to a rolling solicitation or not. While we recognize that the specific application of a program cycle may vary depending on the administrative structure we ultimately adopt, we believe that establishing a timeframe for the program cycle does not prejudge the outcome of our decision on administrative issues.

Although ORA endorses the concept of a three-year program cycle, it recommends that program administrator(s) also submit budget plans on an annual basis, with the opportunity for parties to comment prior to final budget approval for the following program year. We believe that the flexibility ORA seeks through this recommendation is more appropriately addressed through guidelines and rules governing program administration, rather than by requiring an annual Commission budget approval process. As SCE points out in its reply comments, there are alternatives to annual program budget review and approval that will provide regulatory oversight and control while maintaining the benefits of a multi-year funding cycle.

NRDC supports moving from a two-year to a three-year time period for establishing how many years programs will be authorized for implementation, but urges the Commission to consider a longer timeframe for authorizing overall funding levels for energy efficiency. At this time, we prefer that the program implementation and funding cycles move in concert with the savings goals updating process described in this decision. In this way, we can calibrate the funding levels during each program cycle with our adopted longer-term savings goals. We believe that this approach is preferable to authorizing specific funding levels now that are longer than the timeframe over which we will review program plans and update our long-term savings goals.

SCE argues that the program cycle should be extended to four years in order to effectively coordinate energy efficiency planning and funding with the two-year updating process for the IOUs long-term procurement plans. We acknowledge that workshops are currently underway to consider various options on how best to coordinate these two planning processes, including the one that SCE proposes in its comments. We may reconsider today's preference for a three-year cycle if the workshop discussion on the integration of supply-side and demand-side resource planning suggests to us that such reconsideration is warranted. Nonetheless, we are persuaded by the record to date in this proceeding that a three-year cycle is preferable to the two-year cycle that is currently in place.

As ORA and others point out, the length of the program cycle does not dictate the frequency of reporting requirements for energy efficiency administrator(s) and implementers. Through workshops, Commission decisions, Assigned Commissioner rulings and other means, as appropriate, we will make clear what those reporting requirements will be under our adopted energy efficiency administrative structure.

³⁴ Indicated Producers submitted a Petition to Intervene with its August 23, 2004 comments. CSBE/SBN filed a Petition to Intervene on September 1, 2004. We find that these organizations have demonstrated an interest in the issues addressed in this proceeding, and grant their Petitions to Intervene. ³⁵ These cumulative totals were confirmed by SCE and SDG&E via electronic correspondence with Judge Gottstein. ³⁶ See July 9, 2004 Direct Testimony of Athena M. Besa, SDG&E in R.04-04-003, Section IV. ³⁷ WEM Opening Comments, p. 1.