ALJ/TRP/k47/jt2 Date of Issuance 1/19/2012

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Order Instituting Rulemaking to Reform the Commission's Energy Efficiency Risk/Reward Incentive Mechanism.

FILED PUBLIC UTILITIES COMMISSION JANUARY 12, 2012 SAN FRANCISCO, CALIFORNIA RULEMAKING 12-01-005

ORDER INSTITUTING RULEMAKING TO REFORM THE COMMISSION'S

ENERGY EFFICIENCY RISK/REWARD INCENTIVE MECHANISM

1. Introduction

This rulemaking continues implementation of reforms to the Commission's existing energy efficiency risk/reward incentive mechanism (RRIM) as a successor docket to Rulemaking (R.) 09-01-019. Although the Commission has resolved certain issues in R.09-01-019, the Commission has not yet addressed all prospective reforms for an effective Energy Efficiency RRIM.

R.09-01-019 is closed for purposes of Public Utilities Code Section 1701.5, and remains open only to consider existing petitions for modification, applications for rehearing, and requests for intervenor compensation.

This new rulemaking will thus examine the RRIM reform issues carried forward from R.09-01-019. These issues involve the design and administration of incentives for Energy Efficiency activities administered by Pacific Gas and Electric Company, Southern California Edison Company, San Diego Gas & Electric Company, and Southern California Gas Company (the utilities, or IOUs).

This Order Instituting Rulemaking will thus consider reforms to the existing RRIM in a way that best provides the utilities with meaningful incentives to achieve the maximum socially-desirable level of Energy Efficiency programs and services, while protecting ratepayers' interests through appropriate accountability safeguards. Also, as part of this review, we consider whether to offer RRIM earnings, or other forms of incentives to the IOUs, at all. We consider whether there may be other, or better, ways to encourage maximum energy efficiency.