3. Ex Ante Values

The Commission and utilities use ex ante values for energy efficiency measures to determine whether a utility's forecasted energy efficiency portfolio is cost-effective. These values are also used to determine the ex ante savings from verified installed energy efficiency measures, and may be used as part of determining the level of rewards utilities can receive for successful energy efficiency efforts.

DEER1 values are typical energy efficiency measures' net-to-gross ratios, effective useful life, unit energy savings, and load shapes values. These values are part of the input parameters used to calculate program/portfolio savings and cost-effectiveness. When a measure is not in the DEER dataset, it is called a non-DEER measure. A utility provides a non-DEER measure workpaper to estimate and justify the net-to-gross ratios, effective useful life, unit energy savings, and load shapes values.

D.09-09-047 stated (pp.42-44):

We agree with SCE's and PG&E's comments that measure
ex ante values established for use in planning and reporting accomplishments for 2010-2012 should be frozen. However, we do not agree with PG&E or SCE that those ex ante measure values should be frozen using the values found in the E3 calculators submitted with their July 2, 2009 applications. We agree with TURN's comment that frozen values must be based upon the best available information at the time the 2010-2012 activity is starting and that delaying the date of that freeze until early 2010 is a reasonable approach to better ensure that the maximum amount of updates is captured before the freeze takes effect.

The utilities' portfolio measure mix contains both DEER measures and non-DEER measures. As discussed in this decision (e.g., Sections 4.2 and 4.5), the Utilities have not always properly utilized current DEER measure values and assumptions in their submitted cost-effectiveness calculations. We note that the Utilities have commented that the documentation on the use of DEER is insufficient and that the Commission should be more specific about the version of DEER to be utilized. We clarify that the DEER 2008 values referred to by this decision are the complete set of data denoted as 2008 DEER version 2008.2.05, dated December 16, 2008, as currently posted at the DEER website ( http://www.deeresources.com) maintained by Energy Division.

Energy Division must provide the utilities with further detail and clarifications on the proper application of DEER so that the utilities are able to correct these problems. Additionally, as of this decision, Energy Division has not performed a review and approval of non-DEER measure ex ante estimates provided by the utilities. Energy Division must complete that review in a timely manner before those measure assumptions are frozen. It is therefore essential that the utilities work with Energy Division in its review and approval of their

non-DEER measures ex ante values so that this activity can be completed as soon as possible. However, Energy Division must implement a review and approval process that balances the need for measure review with the utilities need to rapidly implement the portfolios approved by this Decision. We also recognize that the Energy Division or utilities may identify new measures appropriate for inclusion in the 2010-2012 portfolios that are not yet included in current DEER measure datasets. We also recognize that errors may be identified in frozen measure ex ante values. Energy Division, in consultation with the utilities, should develop a process by which new measures values can be added to the frozen measure datasets and mutually agreed errors in the frozen values can be corrected.

Therefore, in measuring portfolio performance against goals over the program cycle, we will freeze both DEER and non-DEER ex ante measure values as the 2010-2012 portfolio implementation begins. We concur with NRDC's comments that the use of these frozen ex ante values is only for this portfolio planning proceeding and implementation management. These frozen ex ante values may or may not be used for purposes of the incentive mechanism that is subject of another proceeding. Furthermore, the decision here to hold constant measure ex ante values for the purpose of measuring performance against goals, does not imply that we will cease from updating DEER and non-DEER measures for other purposes, and in particular for striving for the best estimates of actual load impacts resulting from the program cycle. Our EM&V activity will continue to develop ex post verified measure, program and portfolio impacts to inform future energy efficiency and procurement planning activities. The frequency and scope of DEER updates going forward is discussed further in the EM&V section below. As for non-DEER ex ante measure review and approval, we direct Energy Division to develop that review and approval process within 30 days from the date of this decision, to be issued in an ALJ ruling.

Joint Utilities contend that in March 2010 Energy Division informed the utilities of its intent to modify 2008 DEER version 2.05 as frozen by the Commission. Joint Utilities claim they agreed to correct certain errors identified by the Energy Division, but did not agree to implement other proposed updates that Joint Utilities considered as methodological changes.

Joint Utilities seek to modify D.09-09-047 to adopt 2008 DEER version 2.05, with corrections for the significant errors that were mutually agreed upon by the Energy Division and the utilities. Joint Utilities would limit corrections to the following:

· Correct the large office lighting schedule for linear fluorescent technologies;

· Account for HVAC package unit updates for 2008 Title 24/2010 Title 20; and

· Correct for general 2008 Title 24 updates (primarily HVAC).

DRA/TURN would not limit updates to 2008 DEER version 2.05 solely to mutually agreed upon errors, but would allow Energy Division to follow the language on pp. 42-43 of D.09-09-047, which directed Energy Division to consult with the utilities to "develop a process by which new measures are added to the frozen measure database" along with correcting mutually agreed upon errors. Thus, DRA/TURN would have Energy Division take the lead in the process based on best available information, and not grant "veto power" to the utilities.

Energy Division has not implemented the changes it suggested to the utilities in March 2010. At the October 22, 2010 PHC, Energy Division staff member Peter Lai described a process where staff discovered "some errors or bugs" in the DEER version 2.05 data. RT 252-253. He also described a variety of other specific changes to the database, including in the area of fluorescent lighting schedules, which Energy Division has considered updating to the 2008 DEER version 2.05. RT 253. Lai stated that the utilities did not agree to make certain changes recommended by Energy Division, because it would be very resource intensive to do so. RT 271-272. According to Lai, Energy Division now considers the DEER version 2.05 ex ante values to be frozen. RT 251. Thus, Energy Division recommends not to make any specific changes to 2008 DEER version 2.05, and to leave it as-is for this program cycle. RT 253, 270.

Our expectation in D.09-09-047 was that Energy Division would use the best available information to update 2008 DEER version 2.05, including consulting with the utilities on possible updates (including errors). The decision did not contemplate giving the utilities veto power over Energy Division updates. The language Joint Utilities cite concerning "mutually agreed upon errors" is found in the dicta of D.09-09-047, but not in any Conclusion of Law or Ordering Paragraph (OP).

At the same time, there was no specified method (e.g., Ruling, Decision, Resolution, informal document posting) for Energy Division to finalize modifications to 2008 DEER version 2.05. Thus, what might be considered a "stalemate" is now in effect. To resolve this impasse, Energy Division does not now support making the changes Joint Utilities recommend in their Petition (casting doubt on the applicability of the term "mutually agreed upon errors" in this circumstance) but instead recommends simply freezing 2008 DEER
version 2.05 in its current state.

We will deny the Joint Utilities' Petition on this point; instead, we will freeze ex ante values as they exist in 2008 DEER version 2.05.2 We would have preferred to use the best available information to improve the database, as anticipated by D.09-09-047. However, while there is no doubt that the current DEER values are imperfect, there is a need to move on so as to provide certainty to utilities and their customers. While correction of errors is an appropriate part of determining the best available information, it would be inappropriate to take Joint Utilities' recommendation to make these changes, and not the many others which Energy Division appropriately identified as needing updates.3 Further, we accept Energy Division's suggestion that only correcting certain errors without correcting the bugs in the underlying model would not effectively and substantially improve the database.

It is our expectation that DEER values be updated and set using the best available information for the next energy efficiency portfolio cycle (starting in 2013), and that these values be determined and frozen before the upcoming cycle begins.

D.09-09-047 at 43 allowed the Energy Division to conduct a non-DEER workpaper review process in order to finalize the non-DEER ex ante estimates, stating: "Energy Division must implement a review and approval process that balances the need for measure review with the utilities' need to rapidly implement the portfolios approved by this Decision."

A November 18, 2009 ALJ Ruling (Ruling) established a deadline of
March 31, 2010 as the date by which the entire spectrum of ex ante estimates for 2010-2012 must be frozen.4 According to the process established by the Ruling and subsequent Energy Division direction, the utilities submitted all required non-DEER measure workpapers in advance of the March 31, 2010 deadline. Energy Division rejected or required major changes to all reviewed workpapers. At this time, there is not yet a final set of frozen ex ante measure values.

Joint IOUs urge the Commission to clarify that the non-DEER workpapers that have been submitted, and for which Energy Division has not concluded its review, will be dealt with in the following manner:

(a) The ex ante values in IOU workpapers submitted by March 31, 2010 would be frozen for the duration of the program cycle.

(b) Those workpapers which are impacted by the corrections to DEER accepted by the Joint Utilities would be updated accordingly immediately after the release of the corrected DEER data. The workpapers would then be frozen for the duration of the program cycle.

(c) Corrections of errors would be made to workpapers during the program cycle if they are mutually agreed upon by the Energy Division and the IOUs.

During the course of a program cycle, Joint IOUs expect they will implement new measures and/or modify existing program strategies that will require additional workpapers beyond the frozen DEER or non-DEER datasets. The November 18, 2009 Ruling outlines a process that gives Energy Division a 15-day review period in which to provide comments on these additional workpapers. Joint IOUs submitted workpapers pursuant to this process since the post-March 31, 2010, deadline, but claim they did not receive a response from Energy Division. Joint IOUs request that the Commission modify the Decision to clarify the process for new workpapers the utilities have submitted
post-March 31, 2010 for which no response has been received, as well as for new workpapers that will be submitted on a going forward basis.

Joint IOUs propose the following:

· The ex ante values in IOU workpapers submitted after March 31, 2010, and before the Commission rules on this Petition will be frozen for the duration of the program cycle.

· During the program cycle, Energy Division can make recommendations to the Joint IOUs to correct any significant errors in these workpapers.

· Only new measures that utilize different technologies and calculation approaches not already reviewed would require a workpaper submission as a new measure.

· The Joint IOUs will provide Energy Division a copy of newly developed or significantly modified workpapers for their review. As set forth in the Ruling, Energy Division will have 15 days to review and provide comments. If the Energy Division does not provide any comments within 15 days, the ex ante values as set forth in the workpapers will be frozen, pending any changes that the IOUs agree to revise.

DRA/TURN oppose the Joint Utilities' request because freezing ex ante values strictly based on what the utilities filed on March 31, 2010 would eliminate the meaningful review role for Energy Division as envisioned by
D.09-09-047. The result of this would be to ignore the concerns expressed in D.09-09-047 about utility data, and simply adopt whatever the utilities proposed without regard to the quality of the underlying data.

At the October 22, 2010 PHC, Peter Lai of Energy Division described its process of review for the Joint Utilities non-DEER workpapers submitted
March 31, 2010. He described separate processes for review of high-impact measure (HIM)5 workpapers and non-high-impact measure (non-HIM) workpapers. For non-HIM workpapers, Lai stated that Energy Division and the utilities agreed that these workpapers would be frozen for the 2010-2012 program cycle without review. RT 283-284. However, if any non-HIM measures became an HIM measure during the program cycle, then it would be subject to the HIM Phase 2 Retrospective Review process for the submission, review, and acceptance/approval of new non-DEER measures workpapers, which was outlined in the November 18, 2009 Ruling. Therefore, for non-HIM workpapers, Energy Division and Joint Utilities are in agreement.

For HIM workpapers, Lai described an interactive process of Energy Division and utility discussion and review of the March 31, 2010 utility submission which lasted until July 12, 2010. RT 284-285. On July 12, 2010, Energy Division mailed to the utilities its position on which workpapers would be approved, which would be approved with recommendations, and which would not be approved. RT 285. The utilities' response to the Energy Division position is the Petition we consider here.

In the October 29, 2010 Ruling, Attachment 1 summarized Energy Division's proposed disposition of non-DEER HIM workpaper review. Attachment 2 provided a detailed listing of the non-DEER workpapers reviewed by Energy Division and Energy Division's proposed disposition of the specific workpapers. Attachment 2 lists the non-DEER workpapers reviewed by Energy Division and its proposed disposition of those workpapers, into the following three categories:

· Approved - Energy Division recommends approval of workpapers at this time.

· No Approval at this time - Energy Division recommends that the measure or group of measures workpapers not be approved at this time and provides documentation supporting its finding. This means the workpaper is not acceptable, and thus measure ex ante value cannot be frozen. The workpaper would need to be corrected per Energy Division's recommendation and resubmitted for review.

· Approval Upon Inclusion of Revisions - Energy Division recommends approval of measure workpapers after the revisions listed are incorporated into the workpaper and provides documentation supporting its finding. This means the workpaper is in general acceptable to Energy Division except for some minor issues. Once these issues are revised per Energy Division's suggestion, the workpaper will be completely acceptable and the ex ante value can be frozen.

In comments filed November 5, 2010, DRA/TURN recommend considering two general points in our review of the Petition and the related Energy Division materials. First, DRA/TURN contend D.09-09-047 was very clear that ex ante values for 2010-2012 should be frozen, based upon the best available information at the time the 2010-2012 activity is starting. Second, DRA/TURN note that when D.09-09-047 was issued, the 2006-08 evaluation, measurement and verification (EM&V) process was approaching its conclusion, with the final results likely to be available in late 2009 or early 2010. Therefore, DRA/TURN contend that all parties should have understood that the 2006-08 EM&V process would have substantial impacts on the ex ante values for use in planning and reporting accomplishments.

In November 15, 2010 reply comments, SCE stated that the Joint Utilities agree with some of the Energy Division's recommended non-DEER HIM revisions. However, SCE contends the Joint Utilities were unclear how to respond to some of Energy Division's recommendations, as SCE claims many of the requests were contradictory to previous Commission directives, or were otherwise unclear. For example, SCE contends that many of the requests contained direction to implement changes when fundamental disagreements still existed between Energy Division and the IOUs, or provided unclear recommendations that were based on review of one IOU's workpapers, but implied changes to all IOU workpapers for the measure.

D.09-09-047 at 22 stated: "As for non-DEER ex ante measure review and approval, we direct Energy Division to develop that review and approval process within 30 days from the date of this decision, to be issued in an
ALJ ruling." Energy Division did begin its review within the anticipated timeframe. There has been a dialogue on non-DEER HIM workpapers between the utilities and Energy Division, which has not been resolved to date. Put another way, the utilities do not accept the outcomes determined by Energy Division.

At this time, we will defer making a determination on this issue to allow an opportunity for further consideration. This issue will be addressed in a forthcoming decision on the Petition.

Customized projects, by their nature, require unique calculations for each project, as they do not rely on fixed DEER or workpaper values. While the values themselves cannot be "frozen," Joint IOUs believe it is reasonable and consistent with Commission policy to freeze the approach (or methodology) to calculating customized projects for the 2010-2012 program cycle. Further, Joint IOUs propose that the values determined at the time of installation of a customized project be frozen for purposes of determining whether the utilities have met their goals. They claim this enables the same predictable and consistent process for customized projects.

Joint IOUs claim Energy Division has greatly expanded data requirements related to customized projects. For example, they claim Energy Division has asked the utilities to aggregate savings in real time from all measures from all programs at a given customer site during a three-year period and notify Energy Division within one business day when the project savings reaches a certain trigger level. Energy Division has also asked the utilities to provide a detailed archive and non-industry standard analysis of engineering tools that Joint IOUs claim they may not be legally able to perform and that would also require numerous project specific details that may not be universally applicable.

In order to ensure a fixed process for customized projects and to avoid significant additional administrative and systems-related expenses, the Joint IOUs request the Commission adopt a customized project approach (outlined detail in Appendix C of their Petition). This approach includes:

· Custom measure/project calculation methodologies based upon DEER methodologies as frozen for 2008 DEER version 2.05 when possible or practical.

· The utilities would provide Energy Division with a list of the common preferred engineering tools used for customized projects on a quarterly basis. The list will indicate the source of the tool, source of the documentation (where available), and the general applications of the tool.

· The utilities would keep an electronic archive of the customized Project application data that will be available for subsequent Energy Division data requests.

· For applications that meet or exceed specified trigger points, the utilities would provide custom project applications and ex ante and incentive estimate supporting documentation in electronic format to Energy Division.

Joint Utilities claim this approach to customized projects strikes an appropriate balance between the Energy Division's oversight role and the Commission's intent to reduce the regulatory administrative burden on the utilities and ensure a predictable process.

DRA/TURN sought to have Energy Division's input on the customized energy efficiency project review process placed in the record. This was done at the October 22, 2010 PHC and through the October 29, 2010 Ruling. At the PHC, Energy Division staff Peter Lai discussed Energy Division's interactions with the utilities, including the production of a document outlining Energy Division's approach to reviewing customized projects. RT 309-312. This document was included as Attachment 3 of the October 29, 2010 Ruling. Further, Energy Division has also provided its proposed revisions to the Joint IOU proposal in the Petition. This document was included as Attachment 4 of the October 29, 2010 Ruling.

EnerNOC is interested in resolution of ambiguity in determination of values for customized projects, so that it can move forward in working with the utilities to provide customized energy efficiency services to commercial, institutional and industrial customers. To this end, EnerNOC seeks clarity in the working relationship between the utilities and Energy Division. EnerNOC also seeks certainty about what the trigger point should be to review non-DEER customized projects, with the objective of eliminating delay to customer implementation and payments.

In its comments on the Ruling, EnerNOC states that it reviewed Attachment 4 to the Ruling concerning Energy Division's review process for customized projects. EnerNOC recommends that, before approving any process for reviewing "customized projects," the Commission should:

· Direct the utilities and/or Energy Division to explain how the determination was made that Customized Projects that meet or exceed certain trigger points require additional Energy Division review;

· Determine that it is necessary and important to review Non-DEER Customized Projects above a certain trigger point;

· Direct the utilities to modify the Joint IOUs' Petition to include timelines for the Non-DEER Customized Project review, with the objective of eliminating delay to customer implementation and payments; and

· Adopt a process for communicating the impacts of any new review process to customers and program implementers.

In comments on the Ruling, DRA/TURN generally support the process proposed by the Energy Division.

D.09-09-047 did not speak directly to ex ante values for customized projects, rather including this issue under the overall non-DEER discussion. As with DEER values and non-DEER HIM workpapers, D.09-09-047 called for making determinations based on best available information. Energy Division has proposed a detailed custom measure and project review process that we believe ensures that the ex ante values for a full range of types and sizes of custom measures and projects will be reviewed. Energy Division plans that this review will take place based upon utility submitted customer, measure and site specific data along with the utility proposed calculation methodology as submitted. In particular Energy Division has proposed to review the customer specific data, the measure and site specific data, and the calculation methodology, including how codes and standards or industry standard practice baselines are utilized in the calculation process.

At this time, we will defer making a determination on this issue to allow an opportunity for further consideration. This issue will be addressed in a forthcoming decision on the Petition.

1 DEER stands for Database for Energy Efficient Resources.

2 In November 15, 2010 reply comments, SCE stated that the Joint Utilities are amenable to this option as a solution to freezing the DEER data for the 2010-2012 program cycle and note the criticality of ensuring the DEER data is in fact frozen immediately, and remains frozen through the end of the program cycle.

3 Because Energy Division formally recommended freezing DEER values at the 2008 DEER version 2.05 levels, Energy Division's specific recommendations for other DEER updates were not sent out for comment in the October 27, 2010 Ruling.

4 Administrative Law Judge's Ruling Regarding Non-DEER Measure Ex Ante Values, dated November 18, 2009, p.4.

5 High-impact measures are defined as those which contribute to more than 1 percent of portfolio energy efficiency savings.

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