Table 7: Joint Staff Projection of Gross Revenue Requirement
and Levelized Cost of Recommended Program Goals for 2006

			Program	First Year
Program	Total	Revenue	Levelized	Savings
Funding	Savings	Requirement	Cost	Value
($ millions)	(GWh)	(cents/kWh)	(cents/kWh)	($millions)
421.2	1963	0.00172	3.51	110
Notes: Revenue requirement=total program costs/total GWh sales in 2006
Levelized cost=program cost*1.5*cap.recovery factor/kwh saved
Cap recovery factor=.109 assumes 12 year measure life and 4%
real discount rate.
1.5 multiplier adds in estimate of incremental costs paid by customers
Simple payback = 4 years if elect. savings are valued at 5.6 cents/kwh

Figure 1: Natural Gas Savings Potential¹



___________________

¹From: "California Natural Gas Energy Savings Goals Report," March 26, 2004 submitted in this proceeding by Joint Staff, p. 9.

ATTACHMENT 1

LIST OF ACRONYMS AND ABBREVIATIONS

BCAP Biennial Cost Allocation Proceeding

CEC California Energy Commission

CPA California Consumer Power and Conservation
Financing Authority

GWh gigawatt hour

Intergy Intergy Corporation

IOUs investor-owned utilities

"Joint Staff" Energy Division and CEC staff

kWh kilowatt hour

LIEE low-income energy efficiency

LTRP long-term resource plan

Mth or MMth million therms

MW megawatt

NRDC Natural Resources Defense Council

ORA Office of Ratepayer Advocates

PGC public goods charge

PG&E Pacific Gas and Electric Company

"program cycle" program planning and funding cycle for
energy efficiency

PY program year

R. Rulemaking

SCE Southern California Edison Company

SDG&E San Diego Gas & Electric Company

SESCO SESCO, Inc.

SoCalGas Southern California Gas Company

"statewide goals study" statewide goals developed by CEC staff for the
2003 Integrated Energy Policy Report

TRC total resource cost

TURN The Utility Reform Network

WEM Women's Energy Matters

(END OF ATTACHMENT 1)

ATTACHMENT 2

Impact of Removing Self Generation Production (kWh) and Sales to Resale Cities from the CEC Consumption Forecast for PG&E

Table 1 illustrates the impact of removing self generation and sales to resale cities from the CEC's electricity consumption forecast and the resulting change in per capita end use trends. Columns 1 and 2 show the original forecast and then the revised forecast less self gen and resale cities while columns 3 and 4 show the original and revised population forecasts. The resulting trends in per capita demand for the original and revised forecast are shown in columns 5 and 6.



As expected removing the sales to resale cities and the reported estimates of self generation and cogeneration production decrease the 2013 forecast by roughly 14.2% but have minimal impacts on the underlying trend in per capita usage shown in the last two columns. Use of the revised population and per capita trends will result in a slight change to the reported impact of achieving program goals on the per capita trend. For example use of the original forecast of sales and staff's recommended savings goal resulted in a savings per capita reduction of .30% per year. Use of the revised per capita trends and the same program savings goals results in a change in per capita energy use of 0.34% per year from 2004 to 2013. In any event none of these changes impact staff's development of savings targets for utility programs, these per capita trend exercises are all about how to describe the impact of a given aggregate savings target on the underlying trends in per capita energy use.

(END OF ATTACHMENT 2)

ATTACHMENT 3

Impact of Removing Self Generation Production and Sales to Resale Cities from the CEC Consumption Forecast for SCE on Per Capita Electricity Use Rates

Table 1 illustrates the impact of removing self generation production figures and sales to resale cities from the CEC's electricity consumption forecast and the resulting change in per capita end use trends. Columns 1 and 2 show the original forecast and then the revised forecast less self gen and resale cities while columns 3 and 4 show the original and revised population forecasts. The resulting trends in per capita demand for the original and revised forecast are shown in columns 5 and 6.

Table 1

Adjustments to SCE consumption forecast at the service territory level to remove sales to resale cities and production from self generation

and cogeneration facilities



As expected removing the sales to resale cities and the reported estimates of self generation and cogeneration production decreases the 2013 SCE consumption forecast by roughly 10% but has minimal impacts on the underlying trend in per capita usage shown in the last two columns. This reduction has no impact on the estimates of technical potential because the Xenergy study started with estimates of SCE customer only sales and excluded self generations. It does however have an impact on how one describes the impact of achieving a given level of program savings.

Use of the revised population and per capita trends will result in a slight change to the reported impact of achieving program goals on the per capita electricity usage trend. For example use of the original forecast of consumption and staff's recommended savings goal resulted in a per capita reduction trend of .30% per year between 2004 and 2013. Use of the revised and lower sales forecasts and the same program savings goals results in a change in per capita energy use in the SCE area of 0.47% per year from 2004 to 2013. In any event none of these changes/adjustments impact staff's development of savings targets for utility programs. These per capita trend exercises are all about how to describe the impact of a given aggregate savings target on the underlying trends in per capita energy use.

The impact of these changes in sales forecasts on the resulting growth rates in per capita electricity use is shown in Table 2 below. This table and the proceeding chart shows that changing the underlying forecasts and producing a revised per capita trends in electricity usage gives slightly different absolute values in per capita usage but the trend and growth rates are roughly comparable (as shown below).

Table 2- SCE Growth Rates in Per capita Electricity Usage

Comparison of Base consumption forecast vs Revised Forecast

(END OF ATTACHMENT 3)

ATTACHMENT 4

Impact of Removing Cogeneration and Resale Cities from CEC Forecasts of Natural Gas Consumption



(END OF ATTACHMENT 4)

ATTACHMENT 5

Joint Staff Response to Parties' May 2004 Comments
and Revised Natural Gas Savings Goals

On April 20^th, the CEC and CPUC staff ("Joint Staff") held a workshop on Electricity and Natural Gas Efficiency to discuss both natural gas savings goals and the methodology used to derive these goals. The following is a discussion on the natural gas portion of the savings goals.

During the workshop, Joint Staff invited interested parties to make comments on the proposed goals and methodologies. PG&E, SoCal Gas, and SDG&E, and well as the NRDC, made specific comments. The IOUs were generally willing to accept the proposed natural gas goals but expressed concerns about the possible rate impacts. An additional commenter questioned the rationale behind using different ramp-up percentages for electricity and natural gas. The NRDC stated their belief that the staff proposal did not go far enough and made a counter proposal of 750 million therms over ten years as a new goal. The NRDC new goal would achieve approximately 71% of a possible 1,057 Mth estimated maximum achievable.

The NRDC proposal is definitely a laudable goal but Joint Staff believes the proposal is too ambitious for two reasons.

1. The goal relies on the IOU's achieving 50% of the identified savings potential for Industrial non-core customers. Staff believes this is too aggressive a figure given the historic inability of some IOU's to recruit large non-core Industrial customers.

2. The required ramp-up in funding to levels 5 or 6 times current funding would be unprecedented and, more than likely, unsustainable. History has shown that there are definite limits when it comes to effectively increasing funding for efficiency programs.

However, staff felt it was reasonable to re-estimate a modified natural savings goal using the level of funding increases recommended for electricity programs. In response to comments from affected parties, staff has made revisions to the initial proposed goal of 290 Mth of savings by 2014 to simulate the higher levels of funding increase recommended for electricity efficiency programs. The following is a description of the steps staff used to revise its proposed therm savings goals and funding.

1. A sensitivity analysis was performed to gauge the effects of varying the levels of efficiency program effectiveness. Table 1 shows the projected level of savings if the IOU's could reach 60 - 80% of the residential, commercial, and non-core industrial maximum achievable potential while simultaneously reaching 10 - 40% of the non-core market. This analysis was used as a boundary setting exercise to help set potential goals.

2. The funding level increases taken from Joint Staff's original proposal of $750 million over 10 years were adjusted to mimic the funding % increases assumed in the electricity goal setting process. A 1% degradation factor was introduced into the therms saved per dollar spent assumption in an attempt to mimic market realities that savings efficiencies will most likely decline over time. The annual therm savings were then calculated as a product of funding levels and the new effectiveness calculations. See Table 2 for the projections. Net savings from programs increases from 290 MM therms from the original Joint Staff recommendation to 470 MM therms in 2014 for its revised recommendation.

3. Finally, the IOU's were assigned individual funding levels and therm savings goals in the same manner as in the original paper. See Table 3 for the projections.

Table 4 shows the revised cumulative natural gas savings impact for the individual IOUs. These values can be used to set the minimum threshold of savings to be achieved in the next program cycle by investor owned gas utilities. For example, the 2007 cumulative goal for SCGas is 53.8 MM therms. To meet this goal SCG would have to show in its filing for 2006 and 2007 programs that the cumulative effects of its 2005, 2006 and 2007 programs would save at least 53.8 MM therms by the end of 2007.

Table 1: Sensitivity Analysis-Natural Gas Savings (in MM therms/yr in 2014) Achieved as a Function of the Fraction of the Non-Core Potential reached
by Natural Gas Programs and the Fraction of Maximum Achievable
Level Reached for Core Customers

	% of Non-Core Industrial Maximum Achievable
% of Residential, Commercial, and Core Maximum Savings Achieved	10%	15%	20%	25%	30%	40%
60% of Residential, Commercial, and Core	353	380	406	433	460	513
70% of Residential, Commercial, and Core	403	430	456	483	510	563
80% of Residential, Commercial, and Core	453	479	506	533	560	613

Source: CEC

Table 2: Revised Projection of Total IOU (PGE, SCG, and SDG&E) Funding, Program Effectiveness, and Therm Savings Projections

Year	Funding $ Millions	Effectiveness Therms/ $ Million		Annual Mth Therm Savings
2005	$ 75	383,130	28.7
2006	$ 84	379,299	31.8
2007	$ 96	375,506	36.1
2008	$ 113	371,751	42.0
2009	$ 133	368,033	49.0
2010	$ 139	364,353	50.7
2011	$ 140	360,709	50.5
2012	$ 159	357,102	56.8
2013	$ 173	353,531	61.0
2014	$ 188	349,996	65.7
Total	$ 1,299		472

Source: CEC

Summary-Joint Staff's revised savings levels for the ten-year period from 2005 to 2014 is equivalent to achieving 472 million therms. This is roughly 40% of the maximum achievable savings levels estimated from the Xenergy Potential studies. Joint Staff's recommended increase in program funding and savings over the ten-year period increases the per capita reduction trend from .7% per year in the baseline forecast to a 1.2% reduction per capita per year. This is a significant level of increased conservation activity that will generate savings to society (valued at weighted average cost of gas only) equivalent to 472 million therms * $5.69/therm= $2.6 billion in comparison to the cumulative program cost of 1.3 billion dollars.

Table 3: Individual IOU Funding Levels and Therm Savings

	SoCal Gas		PG&E		SDG&E
Year	Funding $ Millions	Annual Mth Therm Savings	Funding $ Millions	Annual Mth Therm Savings	Funding $ Millions	Annual Mth Therm Savings
2005	$ 40.2	15.4	$ 28.4	11.3	$ 6.40	2.5
2006	$ 44.9	17.0	$ 31.7	12.5	$ 7.20	2.7
2007	$ 51.6	19.4	$ 36.5	14.3	$ 8.20	3.1
2008	$ 60.6	22.5	$ 42.8	15.6	$ 9.70	3.6
2009	$ 71.4	26.3	$ 50.4	19.3	$ 11.40	4.2
2010	$ 74.6	27.2	$ 52.7	20.0	$ 11.90	4.3
2011	$ 75.1	27.1	$ 53.1	19.9	$ 12.00	4.3
2012	$ 85.3	30.4	$ 60.3	22.4	$ 13.60	4.9
2013	$ 92.5	32.7	$ 65.4	24.1	$ 14.80	5.2
2014	$ 100.7	35.3	$ 71.2	25.9	$ 16.10	5.6
Totals	$ 695.6	252.7	$ 492.5	178.9	$111.3	40.45

Source: CEC

(END OF ATTACHMENT 5)

ATTACHMENT 6

Joint Staff's Analysis of Rate Impacts

Associated with Proposed Natural Gas Program Savings Goals

Some parties at the workshop requested that Joint Staff perform a rate impact analysis of its proposed increased in program savings and funding. There are really three types of information requested:

· The rate increase required to fund the programs= Funding/ Total retail gas sales in year x

· The gross rate impact= Gas saved (therms) * Weighted Average Cost/ therm (retail) in year x / Total retail sales in year x

· The net rate impact= Gas saved * ( rate increase for program cost- rate decrease from gas saved @commodity prices) / total retail sales in year x.

Table 1 presents all three calculations for the Joint Staff's original case and its revised case. The results suggest that the rate increase to fund the program of .0.6 cents/therm is counteracted by accumulated commodity savings by 2006. The net rate impact is calculated to be a negative 2.6 cents/ therm on average, e.g., extra savings valued at commodity price of gas are higher than the accumulated program costs. These values are all shown in Table 1.

We note that the relative rate impact of pursuing more efficiency programs will always be positive as long as the cost of conserved gas in $/therm is less than the additional gas that would have to be purchased at the margin if the savings did not occur. Joint Staff estimates the cost of conserved natural gas will range from 29 cents/therm to 38 cents/ therm over the next ten years. This compares to the weighted average cost of gas of 60 cents per therm over the last two years or the average retail price in 2003 of 70 cents per therm. This cost of conserved energy from 30 to 40cents/ therm is also much cheaper than the forecasted cost of purchasing gas for residential customers, which is forecast for the PG&E and So Cal Gas areas to increase from 67 cents per therm in 2003 to 74 cents/ therm in 2014 (real 2002 dollars). Thus, Joint Staff is very confident that the program savings and cost of conserved energy they represent are likely to have a positive rate impact in the short and long term.

Joint Staff suggests that the Commission order each utility to provide its own estimate of both the rate increase needed to fund the programs and the net rate impacts of the programs as part of its program planning filing in mid 2005 for 2006 to 2008 programs.

Table 1



(END OF ATTACHMENT 6)

ATTACHMENT 7

*Program targets as detailed in Decision 03-12-060 dated December 18, 2003 and Decision 04-02-059 dated February 26, 2004.

ATTACHMENT 8

COMPARISON OF DISAGGREGATED SECRET ENERGY SURPLUS STUDY RESULTS AND JOINT STAFF RECOMMENDATIONS

FOR GWH AND MW GOALS*

Table 1: Comparison of Secret Surplus Potential Estimates with Joint Staff Recommended Goals, 10-Year Planning Horizon

	Energy - GWh				Peak Demand - MW
	Secret Surplus Study			Joint	Secret Surplus Study			Joint
	Technical	Economic	Max Ach	Staff	Technical	Economic	Max Ach	Staff
Utility	Potential	Potential	Potential	Goals	Potential	Potential	Potential	Goals
SCE	22,046	15,837	11,939	12,593	5,698	3,617	2,249	3,274
SDG&E	4,306	3,164	2,231	3,996	1,175	776	426	1,039
PG&E	20,662	14,813	11,320	9,922	5,434	3,626	2,284	2,579
IOU Total	47,014	33,814	25,490	26,511	12,307	8,019	4,959	6,892
Other	8,823	6,332	4,600		2,457	1,547	943
State Total	55,837	40,146	30,090		14,763	9,566	5,902

^* Source: Attachment 1, SDG&E/SoCalGas Opening Comments dated August 23, 2004 and supplement dated August 25, 2004.

Figure 1: Comparison of Cumulative Energy Savings Projections



Comparison of the Secret Surplus Potential Forecasts with Joint Staff Goals Electricity

Table 2: Comparison Between Max Achievable Potential and Joint Staff Goals for SCE

	SCE
	Tech	Econ	Cumulative GWh/Yr		Tech	Econ	Cumulative MW
Year	GWh	GWh	Max Ach	J-S Goals	MW	MW	Max Ach	J-S Goals
1			468	726			76	189
2			1,494	1,537			245	400
3			2,878	2,470			476	642
4			4,612	3,564			769	927
5			6,480	4,854			1,099	1,262
6			8,305	6,202			1,444	1,612
7			9,830	7,560			1,749	1,965
8			10,873	9,101			1,980	2,366
9			11,526	10,773			2,142	2,801
10	22,046	15,837	11,939	12,593	5,698	3,617	2,249	3,274

Figure 2: Graph Comparison for SCE



Table 3: Comparison Between Max Achievable Potential and
Joint Staff Goals for SDG&E

	SDG&E
	Tech	Econ	Cumulative GWh/Yr		Tech	Econ	Cumulative MW
Year	GWh	GWh	Max Ach	J-S Goals	MW	MW	Max Ach	J-S Goals
1			95	230			16	60
2			306	487			49	127
3			591	783			94	204
4			946	1,130			150	294
5			1,306	1,539			209	401
6			1,629	1,967			269	512
7			1,870	2,398			318	624
8			2,042	2,887			364	751
9			2,156	3,418			402	889
10	4,306	3,164	2,231	3,996	1,175	776	426	1,039

Figure 3: Graph Comparison for SDG&E



Table 4: Comparison Between Max Achievable Potential and
Joint Staff Goals for PG&E

	PG&E
	Tech	Econ	Cumulative GWh/Yr		Tech	Econ	Cumulative MW
Year	GWh	GWh	Max Ach	J-S Goals	MW	MW	Max Ach	J-S Goals
1			435	572			80	149
2			1,392	1,211			256	335
3			2,698	1,946			495	506
4			4,357	2,808			798	730
5			6,139	3,824			1,133	994
6			7,874	4,886			1,477	1,270
7			9,318	5,956			1,778	1,548
8			10,309	7,170			2,009	1,864
9			10,929	8,488			2,175	2,207
10	20,662	14,813	11,320	9,922	5,434	3,626	2,284	2,579

Figure 4: Graph Comparison for PG&E



(END OF ATTACHMENT 8)