4. Scope of the Decision

Today's decision addresses whether the shared-savings incentive mechanism adopted in D.94-10-059 should be modified. At issue are the outstanding profits (earnings claims) for 1994-1997 energy efficiency programs requested by the utilities in this consolidated proceeding, as well as those that would be filed in future years. These include the profits associated with the shared-savings mechanisms in place during the 1994 transition year, since the payout and ex post measurement features are identical to those adopted in D.94-10-059 and, in fact, the utilities' requests for profits associated with PY1994 are still pending in this and future AEAPs.¹¹ Therefore, throughout this decision we use the term "pre-1998" to refer to PY1994-PY1997.

The utilities estimate that the claims in this consolidated proceeding and in future AEAPs for pre-1998 shared-savings programs will total $191 million, in addition to the approximately $155 million in earnings that they have already been authorized. Attachment 4 presents this and other current data associated with pre-1998 shared savings programs, including program budgets, forecasted and actual program performance, and other information referred to in the March 13, 2002 ruling or subsequently requested by the assigned ALJ.

In 1998, the Commission changed the measurement of success for energy efficiency programs and the basis for utility profits by generally de-linking those profits from the measurement of savings. In the place of the shared-savings mechanism adopted in D.94-10-059, the Commission introduced performance milestones showing the programs' market transformation effects (e.g., increased stocking of energy efficiency appliances by retailers, better training of architects and builders, etc.). In 2001, the Commission reduced the utility's earnings potential under milestone-based incentives significantly, and as of PY2002, the Commission eliminated shareholder incentives for energy efficiency programs altogether.¹²

The earnings claims filed by the utilities in this proceeding for post-1997 energy efficiency activities will be the subject of separate Commission decisions. In addition, per the Assigned Commissioner's Ruling dated May 6, 2003, we will be consider whether to continue shareholder incentives for LIEE programs in a subsequent decision. Our ongoing energy efficiency rulemaking, R.01-08-028, continues to be the forum for considering prospective changes to energy efficiency policies, administration and programs.