ALJ/DMG/jyc Date of Issuance 5/26/2009

Decision 09-05-037 May 21, 2009

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Application of Southern California Edison Company (U338E) for Approval of its 2009-2011 Energy Efficiency Program Plans and Associated Public Goods Charge (PGC) and Procurement Funding Requests.	Application 08-07-021 (Filed July 21, 2008)
And Related Matters.	Application 08-07-022 Application 08-07-023 Application 08-07-031 (Filed July 21, 2008)

INTERIM DECISION DETERMINING POLICY AND COUNTING ISSUES

FOR 2009 TO 2011 ENERGY EFFICIENCY PROGRAMS

TABLE OF CONTENTS

Title Page

INTERIM DECISION DETERMINING POLICY AND COUNTING ISSUES

FOR 2009 TO 2011 ENERGY EFFICIENCY PROGRAMS 2

1. Summary 2

2. Procedural Background 4

3. Issues and Discussion 9

3.1. Cumulative Savings 11

3.1.1. Parties' Positions 11

3.1.2. Discussion 13

3.2. Interactive Effects 18

3.2.1. Parties' Positions 19

3.2.2. Discussion 21

3.3. Energy Savings Credit for Actions Taken by Customers
With External Motivations 24

3.3.1. Parties' Positions 24

3.3.2. Discussion 26

3.4. Extension of EUL Up to 30 Years 30

3.4.1. Parties' Positions 30

3.4.2. Discussion 31

3.5. Use of Post-Tax Discount Rate to Calculate Performance
Earnings Basis Energy Savings 34

3.5.1. Parties' Positions 34

3.5.2. Discussion 38

3.6. Modification of the Mid-Cycle Funding Augmentation Rule 40

3.6.1. Parties' Positions 41

3.6.2. Discussion 42

3.7. Proposed Changes to the RRIM 43

3.7.1. Excluding (Ring-Fencing) Strategic Plan (and Advanced Codes and Standards) Activity Costs from RRIM 44

3.7.1.1. Parties' Positions 44

3.7.1.2. Discussion 45

3.7.2. Use of gross metrics as the basis of
the Performance Earnings Basis 47

3.7.2.1. Parties' Positions 47

3.7.2.2. Discussion 50

4. Next Steps 52

5. Categorization and Assignment of Proceeding 52

TABLE OF CONTENTS (cont.)

Title Page

6. Comments on Proposed Decision 52

Findings of Fact 53

Conclusions of Law 57

INTERIM ORDER 59

INTERIM DECISION DETERMINING POLICY AND COUNTING ISSUES

FOR 2009 TO 2011 ENERGY EFFICIENCY PROGRAMS

1. Summary

This decision adopts changes in existing rules on the calculation of energy savings and portfolio cost-effectiveness for the 2009-2011 energy efficiency portfolio applications of Pacific Gas and Electric Company (PG&E), Southern California Edison Company, Southern California Gas Company (SoCalGas), and San Diego Gas & Electric Company (SDG&E) (collectively, the Utilities). The adopted changes will enable the state's investor-owned utilities (IOUs or Utilities) to build portfolios of energy efficiency programs that are consistent with the strategic direction for energy efficiency investment set forth in the California Energy Efficiency Long-Term Strategic Plan (Strategic plan) and our policy decisions.

Today's decision addresses eight specific issues. Our determinations on these issues are summarized as follows:

· Cumulative savings will be counted for the years 2006-2011 for this program cycle. Energy Division will study specific assumptions around decay in advance of the 2012-2015 applications.

· Therm goals are adjusted by 22% for SDG&E and 26% for PG&E to take into account updated information on interactive effects. In the final decision in this proceeding we will again review the data and consider whether a different therm goal adjustment should be made to take into account interactive effects for the adopted portfolios.

· The Utilities' proposal to change attribution rules regarding savings credit for actions taken by customers supported by Utility programs, but who may also be motivated by external factors, is denied. However, incentives and savings in communities with "reach" building codes or similar efficiency requirements will be no different from those in other communities, and will not be treated as free riders.

· The Utilities' proposal to allow the maximum effective useful lives of measures to increase to 30 years is denied. Energy Division is directed to conduct a study on the issue of increasing the maximum expected useful lives of measures and report back to the assigned Administrative Law Judge and Commissioner in the relevant docket no later than December 1, 2010.

· The Utilities' proposal to allow Strategic Plan-related costs to be excluded from the risk/reward incentive mechanism is deferred to Rulemaking 09-01-019.

· The Utilities' request to use the individual utility weighted cost of capital adjusted for taxes (the post-tax discount rate) for the
2009-2011 energy efficiency portfolios is denied.

· The Utilities' request to revise our rule to allow mid-cycle funding augmentation to count towards the minimum performance standard is approved.

· The Utilities' request to use gross saving in the performance earnings benchmark is deferred to Rulemaking 09-01-019.

Today's decision will affect our calculation of cost-effectiveness of the Utilities' portfolios, and the ability of the Utilities' portfolios to achieve annual and cumulative goals. The disposition of these eight policy issues may also impact the Utilities' recommendations for the mix of programs in their 2009-2011 portfolios. We will require a supplemental filing by the Utilities to take into account this interim decision, and provide for comments by parties.