10. SCE's Request for Approval to Increase its Budget
by $22 million to Distribute CFLs

On May 10, 2007, SCE filed an application for approval of a program to distribute CFLs in up to 924,000 low-income households in its territory. SCE seeks approval to spend an additional $22 million to fund this program. DRA and TURN (DRA/TURN) jointly filed a protest to the application. Greenlining also filed a response.

SCE's Application. SCE's proposal anticipates door-to-door distribution of up to six CFLs for each participating household, targeting low-income neighborhoods. However, non-LIEE customers could participate since the distribution would be based on residence in specified neighborhoods, not eligibility for LIEE programs. The CFLs would be offered at no cost, only requiring participating customers to pledge to replace existing incandescent bulbs with the CFLs. SCE would engage CBOs to provide outreach and distribution and pay each a fee of $10 per household. SCE does not provide an estimate of the cost of the CFLs because it would purchase them following a competitive bidding process. About $1.4 million of the funds would go toward administrative costs, while the remainder would be for the CFLs and CBO costs. SCE proposes program costs be reimbursed with LIEE funds, although the program would not be subject to LIEE rules or standards. SCE would target low-income neighborhoods, but would not require participants to prove income status or LIEE eligibility. SCE estimates this program would save up to 280 million kilowatt hours of energy and 23.7 megawatts of demand. Currently, SCE's LIEE budget includes funding for installations of two CFLs in each of 74,000 residences.

Responses of DRA/TURN and Greenlining. DRA/TURN protest the proposal as follows:

· SCE's outreach should be more expansive and have greater flexibility;

· CBO compensation is excessive and should be reconsidered;

· SCE's proposed marketing budget seems high;

· SCE's measurement and evaluation method requires additional detail;

· The specific use of SCE's budgeted funds should be subject to Commission and public oversight; and

· The Commission should reserve judgment on whether savings from the program would count toward adopted energy savings goals.

Overall, DRA/TURN raise concerns that SCE's proposal may represent a lost opportunity to the extent contact with interested customers would be limited to distributing CFLs rather than providing a broader array of energy efficiency measures and information.

Greenlining also raises concerns about whether the program would employ the most effective means of CFL distribution. Greenlining suggests a statewide program may be a better strategy and recommends recruiting a diverse array of CBOs. Greenlining also raises concerns about the health effects of CFL disposal in low-income communities because of the risk of exposure to mercury.

Discussion. SCE's proposal is interesting and we appreciate the initiative it has taken to propose a more aggressive energy efficiency program targeted in low-income neighborhoods. At this time, however, the proposal raises many questions that require additional inquiry. Rather than try to resolve them now, a better option is to consider this type of program in the context of broader and more comprehensive LIEE and energy efficiency program delivery strategies as part of the statewide strategic plan and the 2009-2011 portfolio applications.⁶⁶

We are concerned that SCE's proposal to use additional ratepayer funds on a CFL give-away program covering no other measures and not requiring actual installations is inconsistent with the direction we have specified in our energy efficiency policy rules and those we recently rearticulated in D.07-10-032 for energy efficiency programs namely, that utility energy efficiency programs should emphasize comprehensive, integrative strategies and energy efficiency measures that provide long term, enduring energy savings, particularly in light of the AB 32 target. Increasing our reliance on CFL give-aways as a stand-alone program does not accomplish those objectives. At the very least, a program such as the one SCE proposes should be integrated with other program elements in order to make the most of cost-effective program delivery.

We agree with DRA/TURN that SCE's cost estimates seem excessive. SCE assumes each CFL would cost almost $4.00 each, more than twice the price of CFLs currently sold in some retail outlets.⁶⁷ Apparently about half of the cost is attributable to estimated fees for participating CBOs. Given that SCE does not plan to install the CFLs, we wonder whether a more cost-effective approach would be to distribute the light bulbs at existing retail outlets. Moreover, we agree with DRA/TURN that SCE should not have unconstrained discretion in the expenditure of over $22 million. If SCE seeks expedited treatment of an application for such funding and flexibility to move funds around, it should provide more detail about program costs than it presents here.⁶⁸

We are also concerned that SCE's estimates of energy savings may be overstated. SCE assumes that 90% of the CFLs it hands out to customers will be installed immediately. This estimate is probably unrealistic considering that its distribution agents will not install CFLs, verify installations or test for persistence of energy savings.

The California State Legislature recently enacted AB 1109, which requires the state to implement a strategy for phasing out the use of traditional lighting in California and promoting widespread use of more efficient lighting products.⁶⁹ The bill requires, among other things, the creation of a task force that would recommend ways to recycle traditional lighting products and to educate customers about lighting. At this time, it is unclear how this legislation may affect utility lighting programs; however, it may deserve consideration as part of our review of utility CFL programs.

At this time, we will not issue any decision on SCE's application for approval to spend an additional $22 million on CFL distribution pending modification of the proposal as part of the statewide strategic plan and LIEE portfolio applications.

Overall, the questions raised by SCE's application would require a significant effort to resolve. Rather than address them here, we wish to use the LIEE strategic planning process as the next step in our consideration of SCE's proposal. We want to encourage utility innovation in energy efficiency programs, particularly with regard to proposed distribution mechanisms, such as community-based and faith-based organizations, and we are also interested in increasing energy savings attributable to LIEE programs before the 2009-2011 portfolio cycle.

We therefore direct the utilities and staff to address the SCE proposal as a first item in the LIEE strategic planning process. We direct the utilities to work with TURN, DRA, and Greenlining to address their concerns and to work with our staff on the areas noted in this decision. These discussions should also address whether additional funding is needed and, if so, the appropriate funding level.

Based on these discussions, SCE may file an amended application within 90 days to implement a pilot program in 2008 that could expand in 2009 and be part of a larger, more comprehensive effort set forth in the strategic plan, if supported by the collaborative LIEE strategic planning process. We also permit the utilities to propose a statewide pilot in a separate application, if supported by the collaborative strategic planning process and part of a coordinated statewide program. We will commit to review the statewide application or SCE's amended application on an expedited basis. The parties should also consider whether a pilot program can begin in 2008 using existing funding and a larger program should be presented as part of the overall 2009-2011 program portfolio application or that a more comprehensive program begin in 2009, again as part of the larger strategic plan.

We also direct the utilities to include in their 2009-2011 LIEE portfolio applications analysis of how AB 1109 may affect their programs and the deployment of CFLs in California.

⁶⁶ D.07-10-032, issued after SCE filed its application, resolved how energy efficiency program augmentations between budget cycles will be treated for purposes of determining whether the utility has achieved energy savings goals and the extent to which energy savings from program augmentations contribute to calculations of incentive awards as follows: "......energy savings from mid-cycle program funding augmentations will be counted in the calculation of portfolio cost-effectiveness and PEB for utility incentive awards. That is, we will include the program savings and costs just as we would for any program in our assessment of portfolio cost-effectiveness and the calculation of PEB "net benefits" under our adopted shareholder incentive mechanism. However, the savings from these programs will not count towards achievement of energy savings goals for the purpose of assessing whether performance has reached the MPS (or falls within the various performance bands) under our adopted incentive mechanism." Pages 100-101.

⁶⁷ For example, on October 11, 2007, Walmart advertised a 12 pack of CFLs for $19.76, about $1.65 each.

⁶⁸ SCE does not explain how it reached an estimate of about $20.6 million for purchase and delivery of CFLs or break down those costs into component parts.

⁶⁹ Chapter 534, Signed October 12, 2007, adding Section 25210.9 to the Public Resources Code and Article 10.02 to the Health and Safety Code, and repealing Section 25210.11 of the Health and Safety Code.