Decision 00-07-020 July 6, 2000
BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA
Application of Southern California Gas Company (904-G) for Authority to Continue Low Income Assistance Programs and Funding Through 2000. |
Application 99-07-002 (Filed July 1, 1999) |
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Application of San Diego Gas & Electric Company (U 902-E) Authority to continue Low Income Assistance Programs and Funding Through 2000. |
Application 99-07-004 (Filed July 1, 1999) |
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Southern California Edison Company for Approval of Year 2000 Low Income Energy Efficiency Program Plans. |
Application 99-07-011 (Filed July 1, 1999) |
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Application of Pacific Gas and Electric Company for Approval of Year 2000 Low Income Programs (U 39M). |
Application 99-07-012 (Filed July 1, 1999) |
FINAL OPINION: PROGRAM YEAR 2000
LOW-INCOME ASSISTANCE PROGRAMS
(See Attachment 1 for appearances.)
TABLE OF CONTENTS
Title Page
FINAL OPINION: PROGRAM YEAR 2000
LOW-INCOME ASSISTANCE PROGRAMS 2
1. Overview and Summary 2
2. Background 9
2.1 DSM Rules and Competitive Bid Pilots 11
2.2 Independent Administration of Energy Efficiency and
Low-Income Assistance Programs 13
2.3 Competitive Bidding for Low-Income Assistance Programs 14
2.4 Obstacles to Independent Administration and Commission's
Stated Policies Regarding Competitive Bidding 17
2.5 AB 1393 21
3. Procedural History 22
4. Motions To Strike 25
5. Scope of Proceeding 26
6. Utility Applications 26
6.1 PG&E's Competitive Outsourcing Proposal 27
6.2 SDG&E's Competitive Outsourcing Proposal 30
6.3 SCE/SoCal Joint Competitive Outsourcing Proposal 31
6.4 SoCal's Separate Competitive Outsourcing Proposal 33
6.5 SCE's Separate Competitive Bidding Proposal 34
7. Case Management Statement 35
8. Commission Policies and Legislative Intent 36
9. Role of Utility in LIEE Implementation 41
10. Competitive Bidding As a Required Outsourcing Approach 54
10.1 Cost Comparisons 56
10.2 Bill Savings to Low-Income Customers 62
10.3 Installation Quality 64
10.4 Accessibility to Non-Utility Programs That Serve Low-Income Communities 77
11. Standardization 85
12. CBO Minimum Participation Requirements and Current
Contractor Preferences 88
13. Bid Evaluation Criteria and Weighting 95
14. Proposed Contract Terms for Winning Bidders 96
15. Pay-For-Measured Savings 98
16. Customer Lists, Confidentiality 101
17. CAS Testing 107
18. Licensing Issues 109
19. Program Evaluation and Monitoring for Future
Program Planning Cycles 111
20. Adopted PY2000 CARE and LIEE Budgets 116
21. Response to Comments on ALJ's Proposed Decision 117
Findings of Fact 118
Conclusions of Law 125
FINAL ORDER 131
ATTACHMENT 1 List of Appearances
ATTACHMENT 2 Acronyms and Abbreviations
ATTACHMENT 3 Assembly Bill 1393
ATTACHMENT 4 Utility Proposed Low-Income Assistance
Program Budgets, PY2000
FINAL OPINION: PROGRAM YEAR 2000
LOW-INCOME ASSISTANCE PROGRAMS
1. Overview and Summary1
Today's order addresses the applications for approval of Program Year (PY) 2000 low-income assistance programs submitted by Pacific Gas and Electric Company (PG&E), San Diego Gas & Electric Company (SDG&E), Southern California Edison Company (SCE), and Southern California Gas Company (SoCal), collectively referred to as "the utilities."
Pursuant to Decision (D.) 99-03-056, we address the role of the utilities in low-income energy efficiency (LIEE) program implementation issues, that is, the degree to which outsourcing program implementation functions is appropriate. For PY2000, the utilities plan to outsource to other market entities the following LIEE activities: in-home energy education, the installation of all weatherization measures and energy efficient appliances, and furnace repair and replacement work. The areas where further outsourcing is proposed by parties to this proceeding are: the prime contractor function, inspections, and the training of LIEE installation contractors. PG&E and SDG&E currently outsource the prime contractor function for their programs, whereas SCE and SoCal perform this function in-house.2 We find that there is insufficient evidence that outsourcing this function increases program efficiencies. Therefore, we do not impose the PG&E/SDG&E model on SCE and SoCal at this time.
In order to maintain quality control over the program, we find it reasonable for the utility to perform inspection functions itself if it is outsourcing the prime contractor function, as in the case of PG&E and SDG&E. We direct SoCal to explore the feasibility of outsourcing inspections for furnace repairs and replacements for our further consideration during the PY2002 planning cycle.
We find that outsourcing the training function or keeping it in-house can provide effective, quality training for contractors participating in the LIEE program. However, we conclude that this issue should be further examined from a cost-efficiency standpoint in time for PY2002 implementation. We direct the utilities to document and report their in-house (PG&E and SoCal/SCE)3 and out-sourced (SDG&E) training costs and requirements. For PY2002, PG&E and SoCal are required to use this information as a benchmark for reviewing and presenting comparison cost information on training proposals from other market entities.
The most controversial issue we examine in this proceeding is whether competitive bidding should be required as the outsourcing approach for all utilities at this time. PG&E has been using competitive bidding to outsource its LIEE program on a regular basis since 1987, and urges the Commission to allow it to solicit bids for PY2000. The southern California utilities have generally rolled over contracts that were the result of competitive bids in the early 1990s, or were not subject to competitive bidding at all. They recommend that competitive bidding be left to the discretion of the utility administrator, and not become a mandatory outsourcing approach.
In this decision, we examine testimony that compares experiences with competitive bidding to other outsourcing approaches with regard to (1) cost efficiencies, (2) bill savings to low-income customers, (3) quality and safety of installations, and (4) accessibility to non-utility programs that serve low-income communities. We conclude that experience to date with competitive bidding supports a finding that bidding can reduce unit costs appreciably, resulting in more homes being weatherized under the LIEE program. However, the testimony in this proceeding does not present the utility's costs of administering each bidding process, with which to compare these reductions in unit costs. The record also lacks comparable data on savings-per-measure installed that would allow us to translate these unit cost reductions into measurable bill savings to the low-income customer, or to compare the bill savings per dollar of expenditure across utility programs. We initiate a process today that will provide that information for our consideration no later than the PY2002 program-planning cycle.
With regard to the performance of weatherization contractors under a competitive bidding program or other outsourcing approach, we find that the evidence raises more questions than it answers. We cannot conclude, as some parties urge us to, that PG&E's per-home inspection pass rates reflect a lower quality program. Nor does the evidence lead to any definitive conclusions about whether bidding in general reduces the quality of work. Significant discrepancies between per-home pass rates in PG&E's program and the southern California utility programs existed even prior to PG&E's recent competitive bid, when SESCO Inc. (SESCO) won the contract. In sum, we find that there are too many variables at work that contribute to the per-home pass rate determination, including differences in inspection standards and procedures, differences in the definition of pass rate "fails," and differences in the number and type of measures installed per home. A standardization project is currently underway in Rulemaking (R.) 98-07-037 to address these and other differences in installation procedures and policies.
We also find that per-home pass rates have significant shortcomings as an indicator of relative performance quality. In particular, these pass rates do not reveal the nature of the problem in the installation of measures, or the impact of the problem on energy savings in the home. We direct the utilities to develop improved methods for tracking and reporting performance quality that can better recognize true differences in the quality of work provided under the LIEE program to low-income customers.
In terms of access to programs provided by community service providers, we observe that adequate referral systems between private contractors and community-based organizations (CBOs) are not currently in place under PG&E's program. We also observe that PG&E's program has experienced a precipitous drop in direct CBO participation, and currently has the lowest level of CBO participation in terms of the percentage of units treated by CBOs. However, we do not find that this decline is attributable to the competitive bidding process that took place for PY1998. The trend of declining CBO participation began well before SESCO assumed the role of PG&E's prime contractor under that bid, and several factors other than competitive bidding may have contributed to the further decline in CBO participation during SESCO's tenure.
Irrespective of the specific causes for the decline in CBO participation in PG&E's program, we conclude that this decline has adversely impacted the program with respect to the type of access intended by Assembly Bill (AB) 1393. We direct the utilities to report on the access of low-income customers to programs provided by community service providers, consistent with the intent of the Legislature. The report should indicate both the direct participation of CBOs in the program and the referral and financial leveraging procedures in place.
In view of our findings, we conclude that there is insufficient basis for endorsing competitive bidding as the best outsourcing approach for all utilities at this time. Therefore, we continue to afford utility administrators the flexibility to choose how they will outsource LIEE program functions, i.e., via competitive bidding, contract renegotiations, or a combination of both, subject to the policy guidance described in this decision. We will reexamine the issue of competitive bidding during the PY2002 program planning cycle.
For competitive bids that do take place during PY2000 and PY2001, we articulate several guidelines. Consistent with the provisions of AB 1393 and the Commission's policies, the bid evaluation criteria for competitive bidding should consider both cost and non-cost factors. The decision to reveal specific weightings or points assigned to bid evaluation criteria will be left to the utility, until further notice. In any event, the utilities should provide the scores and weighting applied to bid evaluation criteria to bidders, upon request, after the bid selection process is completed.
The competitive bid process should not establish CBO participation minimums or restrict the pool of bidders to a specific type of organization (e.g., CBOs or other nonprofit organizations). Goals for CBO participation may be established, but there should be no adverse consequences to the winning bidder if that goal is not achieved. Moreover, there should be no requirement that bidders must have provided LIEE services to low-income communities in the utility's service territory for a certain length of time to be eligible to bid.
We do not require standardization of bid solicitation materials or contract language at this time. We direct the utilities to obtain additional public input and coordinate with each other with the objective of developing more consistency in their competitive bid practices for PY2002.
We reiterate our expectation that utilities will negotiate final contract terms with all LIEE contractors in good faith. We continue to allow utilities the flexibility to craft contract terms that appropriately allocate the risks and benefits of the agreement among affected parties, including ratepayers. However, no contract provision should require utility permission for a LIEE contractor (or subcontractor) to participate in a public forum and to discuss any aspect of the LIEE program that is non-proprietary or non-confidential. Similarly, no communication or actions on the part of utility personnel should imply that such participation would be objectionable. In addition, as we required in D.92-03-038 and reiterated in D.92-09-080, the utilities should clearly state in their RFPs that proposed changes to their sample contracts will not be considered in the bid evaluation process, up to the selection of a short-list of highest ranking bidders. This will help to ensure that final contract negotiations can take place in good faith.
As described in this decision, we also direct the utilities to implement a pay-for-measured-savings pilot as part of their PY2002 LIEE program. The pilot size is limited to no more than 25% of the utility's program (number of homes treated). The pilot may be conducted as part of a competitive bid solicitation, or in conjunction with an alternative outsourcing approach.
In addition, we direct the southern California utilities to follow PG&E's lead in providing LIEE contractors with lists of eligible customers, subject to confidentiality agreements. We reiterate our policy that carbon monoxide testing should not be billed to the LIEE program, and direct SDG&E and SoCal to clarify whether this is their current practice.
Finally, with regard to the licensing issues raised in this proceeding, we recognize that all bidders (and LIEE utility contractors in general) should be in good standing with the California State Licensing Board (CSLB), consistent with the provisions of Pub. Util. Code § 327(b)(5). We direct the utilities to submit reports that demonstrate compliance of all of their current LIEE contractors and subcontractors with state licensing requirements at the time the contractor or subcontractor: (1) submitted a bid (if applicable) to win the initial or current contract, or (2) commenced work under a negotiated contract that was not subject to competitive bidding.
Between the filing of the applications in this case and the evidentiary hearings, the Legislature passed and the Governor signed AB 1393. The statute is Attachment 3 to this decision. The Legislature clarified its intentions with respect to the low-income assistance programs by adding Pub. Util. Code § 327, which provides in relevant part:
"327. (a) The electric and gas corporations that participate in the California Alternative Rates for Energy program, as established pursuant to Section 739.1, shall administer low-income energy efficiency and rate assistance programs described in Sections 739.1, 739.2, and 2790, subject to Commission oversight. In administering the programs described in Section 2790, the electric and gas corporations, to the extent practical, shall do all of the following:
(1) Continue to leverage funds collected to fund the program described in subdivision (a) with funds available from state and federal sources.
(2) Work with state and local agencies, community-based organizations, and other entities to ensure efficient and effective delivery of programs.
(3) Encourage local employment and job skill development.
(4) Maximize the participation of eligible participants.
(5) Work to reduce consumers' electric and gas consumption, and bills."
By adding Section 381.5, the Legislature also clarified its intention with respect to community service providers, as follows:
"381.5. It is the intent of the Legislature to protect and strengthen the current network of community service providers by doing the following:
(a) Directing that any evaluation of the effectiveness of the low-income energy efficiency programs shall be based not solely on cost criteria, but also on the degree to which the provision of services allows maximum program accessibility to quality programs to low-income communities by entities that have demonstrated performance in effectively delivering services to the communities.
(b) Ensuring that high quality, low-income energy efficiency programs are delivered to the maximum number of eligible participants at a reasonable cost."
The implementation of these legislative pronouncements is woven into the discussion of the issues which follows.
1 Attachment 2 explains each acronym or other abbreviation that appears in this decision. 2 The prime contractor secures the necessary contracts for program operations and delivery of services, and oversees the implementation of these services. In PG&E's case, the prime contractor also maintains a telephone center to answer customer questions, takes service requests and responds to complaints, tracks performance by service delivery subcontractors and overall program results, monitors customer satisfaction as well as maintains regional offices. In addition, the prime contractor may train contractors, as in the case of SDG&E, or perform installations itself, as in the case of PG&E's current prime contractor. 3 SoCal and SCE have a partnered approach to LIEE.
