5. Discussion

The utilities have provided their concerns and critique of the Impact and Process Evaluations. We have reviewed their comments, which point out certain imperfections in the reports (some of which were acknowledged and corrected by Energy Division) and raise a number of methodological questions. Nevertheless, we perceive no biases and have no reason to question the basic findings of these reports. As we said we would do in previous decisions, we rely to a large degree on these evaluations to determine the future of the Partnership. Based on the evaluations, DRA and TURN take as their main position that the Partnership should end now, based on less than hoped-for results, high total costs relative to other local governmental partnerships, and poor data collection efforts. SCE and SoCalGas take as their main positions that the Partnership should continue with minor changes through a total of five years (as originally proposed in 2006), based on some positive findings and despite some negative findings in the evaluations.

We understand the DRA/TURN view; the Partnership has been flawed and imperfect in many ways. We do not agree with the utilities that the Partnership was envisioned by the Commission to last five years. In fact, D.06-12-013 provided funding only through 2008, anticipating a further review in the next energy efficiency portfolio application. Still, we are not convinced that a conclusive determination of the success or failure of the Partnership is possible at this time. The Partnership has shown some value to the Palm Desert community, and the energy efficiency community in California as a whole. As a pilot program, the Partnership was not expected to be cost-effective (although such an outcome would be desirable), but could provide value in other ways. SCE appears to have made significant strides (about 70%) towards energy savings and demand reduction goals set in 2006, although the savings are not verified. SCE claims to have made less progress (about 39%) toward Palm Desert's 30% savings goals. While it is unclear that the efforts of the Partnership are replicable in other areas of California, further efforts may provide a basis for replication.

The costs for the Partnership have been much higher than for other local governmental partnerships, and clear benefits from innovation have been elusive. At the same time, there has been significant enough progress made, and significant enough potential exists, to merit the continuation of the portion of the Partnership involving SCE for two more years as long as certain improvements are made at this point to assist our understanding of the Partnership's results. We discuss funding levels and implementation below.

We will deny SoCalGas' request to continue its role in the Partnership. For SoCalGas, the evidence of progress is very minimal. The natural gas efforts in the Partnership have been administratively-heavy, producing few energy savings, and providing little useful data for evaluations. SoCalGas should focus its energy efficiency efforts on its main programs authorized for 2010 - 2012 in D.09-09-047.

SoCalGas claims in comments on the proposed decision that it has in fact shown significant savings in the partnership. SoCalGas claims that, while it admittedly did not provide timely data to Energy Division for evaluation, such data exists. SoCalGas points to a draft Energy Division report from November 2010 as support for this claim.

We will not revise the proposed decision based on these unsupported claims. SoCalGas has made no effort to place updated data into the record, and DRA has had no opportunity to review SoCalGas' claims. Even if such updated data were part of the record, SoCalGas itself claims a very low cost-effectiveness ratio of 0.5. Therefore, there is a reasonable likelihood that, had SoCalGas' claims been in the record, the outcome would have been the same.

DRA recommends that, if the Commission authorizes further funding for the Partnership, it should do so only after the Energy Division has reviewed and revised the Program Implementation Plan (PIP) to ensure that all the finding and recommendations of the two EM&V studies have been incorporated into the program design. We agree with DRA that elements of the Partnership should be updated to reflect the evaluations. In addition, we note that D.09-09-047 at 285, prohibited the investor-owned utilities (IOUs) from any "direct involvement of the utilities in community financing program development" including AB 811 programs, with certain exceptions. We will require SCE to file an Advice Letter to update the Partnership PIP, reflecting the finding of the evaluations and conformance with D.09-09-047 prohibitions against AB 811 support activities. The Advice Letter must be filed within 45 days of the effective date of this decision.

SCE's proposed Partnership funding is taken from other energy efficiency programs approved in D.09-09-047. We agree with DRA and TURN that shifting funds from successful non-Partnership programs to unproven Partnership programs may not be the best use of energy efficiency funds. However, the alternative funding mechanism - increasing rates - is not satisfactory. By continuing the Partnership, it is our hope that value for ratepayers will emerge through improvements in the Partnership programs and future replication. We will approve SCE's request to shift funds from other programs, at levels consistent with funding levels approved in D.10-06-039, or $289,000/month. This is approximately a 12% reduction from SCE's request of $329,000 per month (based on SCE's request of $7.90 million for 24 months). This small reduction is warranted because concerns remain about the value of the pilot program. While we hope further evaluation will determine that the pilot has shown more success than has been shown to date, it is prudent to limit ratepayer funding in the event that this is not so.