8. Assignment of Proceeding
Susan P. Kennedy is the Assigned Commissioner and Julie Halligan is the assigned ALJ in this proceeding.
1. The Commission's existing forecasts of avoided energy costs and associated methodology are set forth in the Energy Efficiency Policy Manual (Policy Manual). These forecasts of avoided energy costs are outdated and require updating prior to their use in various Standard Practice Manual (SPM) cost-effectiveness tests used to value energy efficiency proposals for the 2006-2008 program cycle.36
2. It is reasonable to adopt the Methodology and Forecast of Long-Term Avoided Cost(s) for the Evaluation of California Energy Efficiency Programs, E3 Research Report submitted to the CPUC Energy Division, October 25, 2004, modified as discussed herein, in order to update the current avoided cost forecasts used in the SPM tests to evaluate energy efficiency programs.
3. It is reasonable to require the utilities to update the electric and gas price forecasts utilized in the Methodology and Forecast of Long-Term Avoided Cost(s) for the Evaluation of California Energy Efficiency Programs, E3 Research Report Submitted to the CPUC Energy Division, October 25, 2004 to reflect current forecasts.
4. It is reasonable for the utilities to use the E3 avoided cost methodology and forecast, without modification to separate energy and capacity costs, for purposes of evaluating energy efficiency programs for program year 2006.
5. Adopting the E3 forecast CO2 value of $8/ton (annual levelized) as an adder in the avoided cost calculation and forecast is a reasonable estimate of the avoided cost to California of carbon dioxide emissions.
6. For the evaluation of Program Year (PY) 2006-2008 energy efficiency proposals, it is reasonable to require the utilities to update the E3 methodology with the applicable Combined Cycle Generation Turbine (CCGT) capital cost input assumptions approved for use in calculating the MPR in R.04-04-026, consistent with our stated goal of developing consistency in methodology and input assumptions across Commission applications of avoided cost.
7. It is reasonable to require the utilities to prepare and file compliance Advice Letters describing the steps taken to update the E3 methodology within 14 days of the effective date of this decision.
8. Delay in the adoption of updated avoided cost values would compromise the Commission's efforts in reducing per capita energy use and peak demand through cost-effective energy efficiency programs, adversely affecting public health, safety and welfare.
1. Because of the time and location dimensions in the E3 methodology, adopting the E3 methodology for purposes of evaluating potential energy efficiency proposals will best reflect the savings associated with candidate energy efficiency programs.
2. With the methodology adopted in this decision, the avoided costs associated with selected energy efficiency programs will more accurately reflect the utilities' actual avoided costs.
3. As discussed in this decision, the avoided cost energy forecasts for evaluation of PY 2006 Energy Efficiency programs should be updated as soon as practicable.
4. The Methodology and Forecast of Long-Term Avoided Cost(s) for the Evaluation of California Energy Efficiency Programs, E3 Research Report submitted to the CPUC Energy Division, October 25, 2004 should be adopted on an interim basis for use in evaluating energy efficiency programs, with the further guidance provided in this order.
5. The public interest in the timely adoption of updated avoided cost values for use in evaluating program year 2006 energy efficiency programs outweighs the public interest in having a full 30-day comment cycle on the proposed values.
6. In order to proceed expeditiously with the evaluation of potential energy efficiency programs for the program year 2006, this decision should be effective today.
7. The utilities should use the avoided cost values for CO2 adopted herein as the "greenhouse gas adder" pursuant to D.04-12-048 in long-term resource procurement and planning.
IT IS ORDERED that:
1. We adopt the Methodology and Forecast of Long-Term Avoided Cost(s) for the Evaluation of California Energy Efficiency Programs, E3 Research Report submitted on October 25, 2004, updated as discussed herein, for purposes of evaluating energy efficiency programs in Rulemaking 01-08-028 and related energy efficiency proceedings.
2. Until further order by the Commission, Pacific Gas and Electric Company (PG&E), Southern California Edison Company (SCE), Southern California Gas Company (SoCalGas), and San Diego Gas and Electric Company (SDG&E) shall each undertake its Energy Efficiency program evaluation for program year 2006 and beyond using avoided cost forecasts in conformance with the adopted methodology.
3. PG&E, SCE, SDG&E, and SoCalGas shall prepare and file compliance Advice Letters updating the Methodology and Forecast of Long-Term Avoided Cost(s) for the Evaluation of California Energy Efficiency Programs, E3 Research Report submitted to the CPUC Energy Division, October 25, 2004, as directed in this decision, within 14 days of the effective date of this order.
4. This proceeding remains open to address ongoing issues in Rulemaking 04-04-025.
This order is effective today.
Dated April 7, 2005, at San Francisco, California.
MICHAEL R. PEEVEY
President
GEOFFREY F. BROWN
SUSAN P. KENNEDY
Commissioners
Comr. Grueneich recused herself
from this agenda item and was not
part of the quorum in its consideration.
ATTACHMENT 1
List of Acronyms
ACM |
Alternative Calculation Methodology | |
ALJ |
Administrative Law Judge | |
AS |
Ancillary Services | |
CAC |
Cogeneration Association of California | |
CBEA |
California Biomass Energy Alliance | |
CCC |
California Cogeneration Council | |
CCEA |
California Consumer Empowerment Alliance | |
CLECA |
California Large Energy Consumers Alliance | |
CalWEA |
California Wind Energy Associations | |
CCGT |
Combined Cycle Gas Turbine | |
CEC |
California Energy Commission | |
D. |
Decision | |
DG |
Distributed Generation | |
DR |
Demand Response | |
E3 |
Energy and Environmental Economics, Inc. | |
EE |
Energy Efficiency | |
IEP |
Independent Energy Producers | |
ISO |
Independent System Operator | |
IOUs |
Investor-Owned Utilities | |
LRMC |
Long Run Marginal Cost | |
MCP |
Market Clearing Prices | |
MPR |
Market Price Referent |
|
MID |
Modesto Irrigation District | |
MTDCC |
Marginal Transmission and Distribution Avoided Capacity Costs | |
NRDC |
Natural Resources Defense Council | |
ORA |
Office of Ratepayer Advocates | |
PG&E |
Pacific Gas and Electric Company | |
PHC |
Prehearing Conference | |
PW |
Present Worth | |
QFs |
Qualifying Facilities | |
R. |
Rulemaking | |
RFP |
Request For Proposal | |
RNS |
Residual Net Short | |
SCE |
Southern California Edison Company | |
SDG&E |
San Diego Gas & Electric Company | |
SoCalGas |
Southern California Gas Company | |
T&D |
Transmission and Distribution | |
TDV |
Time Dependent Valuation | |
TOU |
Time of Use | |
TRCSV |
The Total Resource Cost Test: Social Version | |
TURN |
The Utility Reform Network | |
UCS |
Union of Concerned Scientists | |
UDC |
Utility Distribution Company | |
(END OF ATTACHMENT 1)
36 Energy Efficiency Policy Manual, Version 1, October 2001, D.01-11-066, Attachment 1, adopted in Ordering Paragraph 1. The Commission also employs separate avoided cost methodologies which are used to price power from QFs. QF avoided cost methodologies are not part of the Energy Efficiency Policy Manual.
