5. Budget and Program Timeline

The Staff Proposal suggests a $108.34 million program budget, allocated between the three large utilities by the same formula used in the general market CSI program. The proposed budget, by utility, is as follows:

Table 2: Proposed MASH Budget by Utility Territory

Staff proposes that the program budget will be available until all funds are exhausted or until December 31, 2015, whichever occurs first. Any program funds that are unspent as of January 1, 2016 shall be used for Low-Income Energy Efficiency (LIEE)¹³ programs as set forth in § 2852(c)(3). Staff does not propose an annual allocation of funds or annual megawatt (MW) goals for this program. Rather, if funds are exhausted before the end of the general market CSI program, multifamily affordable housing properties may apply for funding through the general market CSI program.

We adopt the $108.34 million program budget, with the allocation suggested by Staff, as shown in Table 2 above. We will continually monitor participation in both the MASH program and the LISF incentive program adopted in D.07-11-045. If participation rates warrant a different budget allocation, we can adjust either program budget accordingly. In D.07-11-045, we established a process to facilitate program adjustments such as this. Specifically, we said that at any time, Energy Division may recommend program adjustments to the assigned Commissioner or ALJ of this or any successor proceeding. The assigned Commissioner and/or ALJ will determine if suggested program changes require modification of a Commission order, and if so, the change would be considered by the full Commission, following notice to parties and an opportunity to comment. We adopt the same process here for adjustments to the MASH budget or any elements of MASH program design.

SCE recommends the Commission consider an annual cap on program incentive payments, to avoid a "first-come, first served" program where funds could be exhausted before the solar technology experiences significant cost reductions. We reject SCE's proposal for an annual budget cap. We want to provide maximum flexibility for innovative proposals to receive funding without regard to annual program limits. If the program funds are exhausted early and many MWs of solar on affordable housing are installed before 2015, we will consider this a success. Moreover, annual budget limits could impede the ability of affordable housing developments to take advantage of solar incentives during their refinancing windows. We prefer to avoid an arbitrary annual budget cap from preventing a housing development from taking advantage of this program.

5.1. Administrative Budget

With regard to the administrative budget for the MASH program, the Staff Proposal recommends that 88% of each Program Administrator's budget be reserved for incentives, and 12% of funds go toward administrative purposes. Staff further suggests that the 12 % reserved for administration be further allocated as follows: 4% for marketing and outreach, 2% for evaluation, and 6% for other administration. The Program Administrators would track administrative funds for the MASH program separately from general market CSI administrative expenses, and track the subcategories identified above.

PG&E and SCE both comment that the administrative portion of the budget should be increased. SCE suggests a 15% total administrative budget, consistent with the 15% administrative budget allowed in the LISF program. This 15% budget would allow 9% for administration, 5% for marketing and outreach, and 1% for evaluation. SCE maintains the complexity of administering Track 2 incentives warrants additional administrative funds. A WISH opposes SCE's administrative budget request, claiming that the administrators have not made a showing that an increase is needed over the general market program. CCSE requests flexibility in how it spends the total administrative budget between the marketing, evaluation and general administrative categories.

We will allow an administrative budget of 12% of program funds, as proposed by Staff. We reject suggestions by SCE and PG&E to allow 15% of funds for administration. We allowed a higher administrative budget for the LISF program because of unique characteristics of that program, mainly the necessity for outreach to individual homeowners and complex financing needs. In the MASH program, applicants are not typically the affordable housing tenants, but building owners and/or operators. The general market CSI has a 10% administration budget cap. In our opinion, it is sufficient to allow 12% for this program, which bears more resemblance to the general market CSI than the LISF program.

Furthermore, we will allow some flexibility to each Program Administrator in how they spend their 12% administrative budget, as suggested by CCSE. Program administrators must spend 2% on evaluation, but they can choose how to split the remaining 10% between general administration and marketing and outreach. We clarify, based on comments by PG&E, that administrative costs to inspect and verify systems should be considered part of evaluation activities.

As suggested by Staff, we will require semi-annual administrative expense reports detailing administrative expenditures incurred by category (i.e., marketing and outreach, evaluation, and other administration), with separate accounting from the general market CSI program. The Program Administrators should submit this report as part of their semi-annual administrative expense report under the general market CSI program. (See D.07-05-047, Appendix A, p. 4.) All MASH program expenditures should be separately delineated from general market CSI expense reporting.

5.2. Incentive Budget

A final budget issue involves whether to dictate an allocation of program funds between Track 1 and Track 2 incentives, and an allocation between Track 1A and 1B. Staff proposes that of the 88% of total program funds apportioned for incentives, the Commission reserve $20 million for Track 2 grants. Staff does not propose an allocation between Track 1A and 1B, but suggests that the Program Administrators not allow either Track 1A or 1B to consume more than 90% of the budget for Track 1.

DRA recommends the Commission allocate more of the MASH funds to incentives that provide tenant benefits. Therefore, it suggests 50% of the budget go to Track 1B incentives. A WISH supports this idea. Similarly, CCSE suggests we limit Track 1A incentives to only 30% of budget, or in the alternative, make common areas apply for incentives from the general market program. Global Green suggests a different budget split, with 50% for Track 1A, 25% for Track 1B and 25% for Track 2 incentives.

We understand parties' concerns that a larger portion of the budget be reserved for projects that provide direct tenant benefits. At the same time, we consider Staff's suggestion to reserve $20 million for Track 2 a good starting point. Budget adjustments can always be made at a later date, after we have some program experience, and after we can assess participation rates for the various Tracks. We will not increase Track 2 over $20 million at this time because we prefer to allocate a larger portion of the incentive budget to Track 1 to maximize the MWs that will be installed with CSI funds. Similar to the minor incentive adjustment process we have already described in the section above on Track 1 incentives, the ALJ can adjust the Track 2 allocation by ruling, following a recommendation from Energy Division and notice to parties and an opportunity for them to comment, with the restriction that total Track 2 incentives cannot exceed $30 million. If the Track 2 allocation is increased above $20 million, any increase will correspondingly reduce Track 1 incentives as the total MASH budget is fixed at $108.34 million.

We conclude it is reasonable to take the remaining Track 1 budget, and allow the Program Administrators a high degree of flexibility in awarding incentives to either common area or tenant area systems, or systems that serve both. Staff proposed such flexibility, with no budget parameters for Track 1 other than the limitation that no more than 90% of funds be used for Track 1A or 1B. We modify this suggestion only slightly. We will direct the Program Administrators to ensure that awards for either Track 1A or Track 1B do not consume more than 80% of the Track 1 budget. This reserves at least 20% of the Track 1 budget for projects that generate direct tenant benefits, in response to the parties' concerns, while at the same time preserving program flexibility.

In summary, we adopt the following the MASH budget for Tracks 1, 2 and administration:

Table 3: Adopted MASH Budget

¹³ LIEE programs are offered by the jurisdictional energy utilities to low-income customers that meet certain income guidelines. LIEE programs provide for the installation of energy efficiency measures in customer residences. Energy efficiency measures may include weatherization, lighting, and heating/air conditioning repair or replacement, all offered at no cost to the participating customer. The program also provides customer education about energy use.