III. Reporting LIEE Bill Savings and Program Costs

The March 12, 2001 report on standardized bill savings and expenditures presents common definitions for LIEE administrative and implementation costs, internal and outsourced costs and other cost categories. (See Attachment 2.) Using these definitions, the report presents LIEE program costs for PY1997, PY1998, PY1999 and PY2000, through June 2000, for each utility by program element.

These efforts are very useful because the common definitions improve consistency in reporting and evaluating program costs across utilities. We adopt the proposed definitions and reporting format presented in the March 12, 2001 report. They should be used by the utilities in developing all future filings on LIEE program costs until further Commission order. The RRM should be modified accordingly.

The bill savings presented in the report are the lifecycle net present value savings by the dwelling due to the measures installed under the LIEE program. The report utilizes the results of the most recent utility-specific studies performed under the Annual Earnings Assessment Proceeding (AEAP) measurement protocols to determine these savings at the measure level, where possible.¹⁴

The report describes in detail the specific calculations and variables used to perform the bill savings analysis, including inflation and discount rates, energy rate escalation factors, estimation of the average annual rate, and effective useful life of the measures. As explained in the report, these calculations and variables are consistent with those used in the AEAP, except that here rate projections are used (rather than avoided costs) to develop bill savings.¹⁵

The utilities calculate average annual energy rates for LIEE customers based on their customer information and accounting systems. SCE and SoCal calculate an average annual rate by weighting the four annual rates (Tier 1, Tier 2, Tier 1 CARE, Tier 2 CARE) by the percent of customers on the CARE rate and the kWh or therms consumed in each tier. PG&E uses the Tier 1 residential rate. SDG&E determines an average rate for their LIEE participants by summing the total bills for all LIEE participants and dividing by the total consumption of all participants. The energy rates used by each utility for bill savings calculations are presented in Table 1 below:

Table 1: Energy Rates Used for Bill Savings Calculations

The bill savings results are presented in two formats: 1) per home lifecycle savings and 2) the ratio of bill savings to program costs. The report also presents graphs showing the variation in results using different escalation rates (0% to 6%) for average annual energy rates. Below, we present the results based on a 3% escalation rate.

Table 2: Summary of Bill Savings to Cost Ratios by Service Area

The report discusses these results and presents explanations for the variation in values across utilities.¹⁶ As described in the report, the vast majority of the variation in bill savings to cost ratios across utilities can be accounted for by differences in: 1) savings impacts due to weather variations, 2) program measure mix, 3) the amount of savings by fuel-type, 4) reported program costs, including "lagging" costs, 5) the deployment of refrigerator replacements, 6) the degree to which weatherization measures are bundled in the savings impact analysis, and 8) service area definitions. When these differences are accounted for, the LIEE programs appear to offer comparable savings to customers in PG&E and the overlapping SCE/SoCal service territories. Due to milder weather, SDG&E's service territory receives lower per home savings.

As discussed in the report, there are many variables that are used to derive the bill savings to cost ratio.¹⁷ Some of these will be updated in the AEAP with the completion of additional measurement studies. Assumptions concerning the average rate for LIEE customers, and associated escalation rate will also need to be updated over time. In addition to the formats presented in the April 9, 2001 Working Group report (Tables TA 7.7 and TA 7.8), the utilities should report standardized data on program lifecycle bill savings and bill savings to cost ratios, as presented in Exhibits 4.2 and 4.3 of the March 12, 2001 bill savings report. We direct the utilities to file and serve this information as part of their Annual Report on LIEE activities, due on May 1 of each year. The report due on May 1, 2002 should report this information for PY1999, PY2000 and PY2001. Updates to the variables and calculations used to derive these data should be considered and explained in each annual report, after obtaining public input. The report should also discuss how these variables and calculations continue to be consistent with the measurement studies and other assumptions used to calculate program and measure savings in the AEAP. In addition, the report should discuss and explain variations across utilities. This effort should be conducted jointly by the utilities, so that we retain a standardized approach in reporting bill savings and expenditure information. The utilities should confer with Energy Division with regard to the format and content of the report, prior to filing.