Payment Frequency

Most parties did not provide significant comments regarding the ideal frequency of PBI payments. Only CalSEIA commented that a monthly PBI payment would be ideal. Monthly payment periods give customers relevant information regarding the performance of their systems in relation to their monthly energy bills. staff establishes monthly PBI payments included in the customers' energy bill as a meter technology working group goal described below in the Meter Requirements section of this document. Should monthly PBI payments not be possible at the start of the program, in the interim quarterly PBI payments will be made.

Questions and Unresolved Issues:

· Utilities should advise if on-bill payments of PBI could be in place by January 2007, or if an interim solution would require off-bill payments.

· On what frequency should solar PBI incentive payments, NEM credits, and system performance data be reported and/or paid? (monthly?, quarterly?, annual?)

· Utilities also should discuss feasibility and set-up costs for an on-bill PBI payment system.

6.2 Small systems, including Residential Retrofit and Small Commercial Program Administration

Recommendation:

· The type of entity desirable for administrator will have a demonstrated commitment to promoting solar development and innovation in California.

· This shall be a non-profit organization, under contract to one or more utilities.

· This administrator shall handle all applications for system sizes below 100 kW.

· PG&E shall conduct a competitive bidding process to select a third-party administrator, and prepare a short-list of leading candidates.

· A Commission advisory panel consisting of CPUC and CEC staff, and representatives from the Division of Ratepayer Advocates and TURN.

· The final decision will be made by the Assigned Commissioner.

Rationale:

Type of Administrator. Currently, CEC staff administers the residential/small commercial solar incentive program for projects under 30 KW in size, but by January 1, 2007, the Commission will consolidate incentives for residential retrofit and all non-residential solar projects into the statewide CSI program. The CEC will limit its new portion of the CSI program to new residential construction projects. Thus, a transition from CEC administration of the small solar incentives to some other administrative structure is necessary. In. D.06-01-024, the Commission announced it would consider expanding non-IOU program administration within the framework of the statewide CSI, specifically by engaging a non-profit entity to administer the residential retrofit portion. By that decision, the Commission indicated that the new administrative structure for smaller solar incentive applications should be carried out by an organization with demonstrated commitment to promoting solar development and innovation in California, and without any perceived or inherent conflicts that might discourage solar installations

There were three alternatives for administering the smaller solar system applications:

1. Administer all of the CPUC portions of the CSI using the existing SGIP administrative structure (i.e., the utilities and the San Diego Regional Energy Office (SDREO)), although this would not entirely meet the Commissions' stated desire to engage a new form of administrator

2. Utilize a competitive bidding process to select a third-party administrator of any kind for the small systems

3. Prescribe the type of entity (such as a non-profit organization) desirable for administrative responsibilities, and then utilize a competitive bidding process to select the appropriate entity.

Based on D.06-01-024, we believe it is the Commission's desire to utilize the third alternative above. That is, staff believes that the Commission's desire is to develop a specific set of criteria that a new administrator for the small systems portion of the CSI must meet. This is for several reasons.

First, the existing program administrators of the SGIP, with the exception of SDREO, do not have current experience or infrastructure prepared to handle large numbers of applications for small system incentives. The sheer number of applications involved in this portion of the program would threaten to overwhelm the existing utility infrastructure administering the SGIP. Moreover, we expect that like the CEC's current small system incentive program, there will be economies of scale in treating large numbers of more homogeneous solar incentive transactions.

In the case of the second alternative above, staff is not convinced that simply soliciting a private sector bidder (such as a consulting firm) to administer the CSI small retrofit portion will result in finding an administrator that is committed long-term to the success and sustainability of the CSI program.

Thus, staff intends that a third-party administrator proposal be solicited that has certain prescribed characteristics that we will discuss in more detail below.

This approach is consistent with the approach that the Commission adopted for energy efficiency third-party programs. The Commission, as part of R.01-08-028, considered various administrative options, including creating administrative entities, entering into contracts with existing entities, placing responsibilities on the IOUs, increasing Commission staff involvement, and a combination of these approaches.

In 2005, the Commission adopted a structure whereby the utilities solicit, select, and administer third-party energy efficiency programs. The Commission Energy Division staff, in collaboration with CEC staff, is responsible for measurement and evaluation of these programs.

As described in our December 2005 staff report, the Commission is familiar with non-profit entities as program administrators. By way of example, a non-profit entity, the San Diego Regional Energy Office, administers two solar incentive programs in SDG&E's service territory to serve residential and non-residential customers: the SGIP and the Rebuild San Diego Program. ¹¹SDREO also manages a number of publicly-funded energy efficiency, education, research, and technical assistance programs.

For the CSI, we will follow a similar approach where the Commission selects an administrator with a demonstrated commitment to promoting solar development and innovation in California, and without perceived or inherent conflicts to discourage solar installations. The CPUC will maintain the consistent agency oversight required to achieve a single statewide solar program.

Under our proposal, program administration for the residential retrofit and small commercial sector would be performed by a non-profit organization, under contract to one or more utilities. Because the funding for the CSI program is collected as part of the utility distribution revenues, the utilities will and must remain in fiscal control of the contract with a non-profit administrator.

Role of the Administrator. In addition, staff recommends that the new administrator be tasked with handling applications for all system sizes below 100 kW, which is consistent with our recommendation that systems 100 kW and over in size be given a performance-based incentive. By dividing the administration at the 100 kW cutoff point, it ensures that the administrator or the small systems will be offering incentives with the same basic set of rules, while those administering systems of 100 kW and above will also have a consistent set of rules for their incentives.

For purposes of the CSI, we distinguish between oversight activities performed by the Commission; administrative functions related to applications, information provision, and measurement and verification; and fulfillment activities performed by third party contractors selected by the administrator. This approach moves the program closer to the desired outcomes of clear responsibilities, broad participation in program delivery, and consistent statewide application of program eligibility rules.

Commission staff oversight responsibilities

· Participate in selection of small system program administrator.

· Select and oversee independent evaluation(s) and/or audit(s) of CSI program, including administration, peak demand reduction, and overall system performance.

· Provide an advisory function to administrator(s) on procedural and compliance matters.

· Coordinate periodic public workshops regarding the most effective approaches to the administrative functions.

Administrator duties

· Provide the primary point of contact for program applicants.

· Review applications to determine project eligibility.

· Monitor adherence to "proof of progress" milestones.

· Authorize payments for installed systems.

· Provide information, application forms, and program instructions on websites and in more traditional formats.

· Provide the Commission with monthly status reports on the program's progress.

· Maintain an interactive website to accept online applications, provide real-time information about application status, funding levels, number and types of systems funded, and number of applications in progress and on a waiting list.

Implementation fulfillment, coordination, and outreach activities

· Coordinate with energy efficiency programs to assure each customer maximizes energy efficiency improvements prior to installing a solar system.

· Verify system installations.

· Process incentive payments.

· Conduct education and outreach, coordinating with existing marketing efforts, such as Flex Your Power and energy efficiency marketing.

The administrator must have sufficient access to the annual administrative budget, and to the incentive funds it will pay out in CBI and EPBB customer rebates. The Commission has already approved CSI program funding and a budget which is allocated among the utilities. The Commission will need to determine the amount of budget necessary for the small systems (<100 kW) to be allocated to this segment of the CSI (See Section 5 above). The Commission should direct the utilities to appropriate and distribute the administrative budget allocation to the non-profit entity no less than annually, and distribute the annual incentive budget in a manner that will not delay rebate payments to the solar project applicants.

Administrator Selection. We recommend the Commission direct one utility, PG&E, in consultation with CPUC and CEC staff, to initiate a competitive bidding process that would solicit contract proposals from existing and newly-formed non-profit organizations to administer the residential retrofit/small commercial portion of the CSI. In order to limit the potential for conflicts of interest, an appearance for conflicts, and to minimize program costs, the solicitation should require that bidders be certified 501(c) (3) nonprofit or governmental organizations.

Proposals should demonstrate the organization's ability and willingness to work cooperatively with energy efficiency program administrators and the CSI independent evaluator. They should also provide information describing their qualifications for managing this major funding program and how they plan to initiate the program expeditiously. The program administrator should identify all subcontractors that will be hired to perform administrative and implementation tasks.

More specifically, PG&E should require the following qualifications:

· Experience managing projects of a similar budget size, either regionally or statewide; fiscal and accounting capability for handling large budgets is a necessity.

· Experience managing energy-related programs, such as energy efficiency, solar, distributed generation, demand response and/or training, marketing, and outreach.

· Demonstrated logistical resources appropriate for the geographic region proposed to be covered, such as multiple offices, access to site inspectors in multiple locations, etc.

· Demonstrated logistical ability to track large numbers of applications (through software, databases.)

· Adequate staffing resources to address workload (or adequate plan for attracting those resources quickly).

· Technical staff with strong knowledge of solar system production, installation, and functioning.

· Marketing and outreach staff capable of handling large program outreach and a well thought-out plan for initial marketing of this portion of the CSI.

· History of good working relationships with utility counterparts.

· Ability to work cooperatively with CEC staff to transition small systems from CEC program to new administrator between the end of 2006 and the beginning of 2007.

We expect PG&E to retain the program administrator(s) in time for third party(ies) to assume administrative duties on December 1, 2006. The initial review and screening process will be conducted by the utilities, in close consultation with CEC and Commission staff. To facilitate the administrator selection process, non-profit entities may submit Statements of Interest to the Energy Division by July 31, 2006. Submittals may be sent via US or electronic mail service, or by facsimile to

Valerie Beck,

505 Van Ness Avenue,

San Francisco, CA 94102,

vjb@cpuc.ca.gov or 415-703-2200(fax).

Staff will share these statements with the CEC staff and utility representatives involved in developing the RFP.

The bidders will be narrowed to a short list of no more than four contenders. The Commission Energy Division staff will form an advisory panel to participate in the final interviews of these contenders, and make the final selection. The panel will be comprised of CPUC and CEC staff, and representatives from the Division of Ratepayer Advocates and TURN.

Administrative Selection Schedule

July 31 Statements Of Interest submitted to Energy Division

September 6 PG&E issues Request For Proposal

October 1 Administrative proposals submitted to PG&E

October 8 Short list submitted to Energy Division

October 15-16 Final interviews held by Advisory Panel at the Commission's San Francisco office

October 21 Final selection announced

November 15 PG&E completes contract

December 1 Administration begins

Questions and Unresolved Issues:

· At what intervals should the IOUs transfer administrative funds to the non-IOU administrator(s)?

· Does non-IOU administration also require selection of an independent fiscal administrator?

· As described in Section 2.2, solar projects installed in 2006 and 2007 receive significant tax credits. IRS rules consider solar rebates received through a "utility program" as non-taxable income. Does the proposed non-IOU administrative structure jeopardize or restrict a program participant from taking advantage of federal solar tax credits? Could a utility-funded program administered by a third party be considered a utility program under IRS guidelines?

· Are there reasons to re-consider the idea of a non-profit administrator, perhaps expanding consideration to utilities (if this would ensure better integration with energy efficiency programs) or to a for-profit administrator (if this would increase greater certainty of finding an administrator with the right skills and experience to operate this program as of January 2007)?

7. METERING AND DATA COLLECTION REQUIREMENTS

¹¹ Rebuild San Diego provides incentives to residential customers displaced by the Summer 2002 fires in that area.