Earnings Claims

As indicated above, the CMS resolves the shareholders incentive claims for the pre-PY 1998 DSM programs.

PY 1994- 3rd Earnings Claim for Rates in 2000

We will authorize the utilities to recover in 2000 the shareholder incentive earnings amounts indicated in the CMS, in the amounts and for the reasons, as follows:

PG&E $5.40 million; ($20.20 million lifecycle)

This amount reflects an August 1999 update by PG&E correcting an error in the May 1999 filing. ORA accepts this value and no party disputes it.

SDG&E $2.181 million; ($8.190 million lifecycle)

ORA has reviewed this claim. Neither ORA nor any other party disputes it.

SoCal $0.725 million; ($2.898 million lifecycle)

ORA has reviewed this claim. Neither ORA nor any other party disputes it.

Edison $1.416 million; ($4.974 million lifecycle)

ORA has reviewed this claim. Neither ORA nor any other party disputes it.

All amounts indicated are plus interest and franchise fees. These updated amounts are for the third 25% payments of the lifecycle amounts previously approved by the Commission in D.98-03-063 and D.99-06-052.

PY 1997- 2nd Earnings Claim for Rates in 2000

We will authorize the utilities to recover in 2000 the shareholder incentive earnings amounts indicated in the CMS, as follows:

PG&E $6.02 million; (lifecycle $31.54 million)

This results from an updated August 9, 1999 claim which includes a number of updates and corrections, and incorporates the results of D.99-06-052. ORA's detailed review resulted in an increase of $10,000 to this earnings claim. The Independent Reviewer (IR) agrees with ORA, and no other party disputes it.

SDG&E $3.955 million; (lifecycle $16.093 million)

This amount is agreed to by SDG&E, ORA and the IR. This is a reduction from the amount requested by SDG&E due to corrected methodology for net-to-gross ratios and flawed calculations uncovered by ORA, and recommendations by the IR regarding the calculations.

SoCal $0.716 million; (lifecycle $2.865 million)

Neither ORA nor any other party disputes this claim.

Edison $2.224 million (lifecycle $15.397 million)

Edison and ORA reached a settlement at this amount. No other party disputes this amount.

All amounts indicated are plus interest and franchise fees. These updated amounts are for the second 25% payment of the lifecycle amounts previously approved by the Commission in D.98-03-063 and D.99-06-052.

PY 1997- 1st Earnings Claim for Rates in 2000

ORA, SoCal, and the Independent Reviewer agree on these values, with certain true-ups to be applied to subsequent claims. This is the same approach that has been approved in prior pre-1998 payments for earnings claims.

PY 1998- 1st Earnings Claim for pre-98 Program Commitments Paid in 98

We will authorize the utilities to recover in 2000 the shareholder incentive earnings amounts indicated in the CMS, and Joint Amendment to the CMS as follows:

All amounts indicated are plus interest and franchise fees, are agreed to by the parties.

PY 1998 LIEE 1st Earnings Claim for Rates in 2000

We will authorize the utilities to recover in 2000 the shareholder incentive earnings amounts indicated in the CMS, as follows:

PG&E $110,000, (+ $110,000 in 2001)

SDG&E $83,970, (+ $83,970 in 2001)

Edison $121,500, (+ $121,500 in 2001)

SoCal $108,000, (+$108,000 in 2001).

All amounts indicated are plus interest and franchise fees, are agreed to by the parties.

The second 50% earnings claim for PY 1998 LIEE will be subject to verification and adjustment.

Ratemaking

Pursuant to Ordering Paragraph 1 in D.97-10-057, electric utilities may not recover revenues during the rate freeze period except as authorized in Assembly Bill 1890 and implemented by the Commission. Conclusion of Law 3 prohibits the use of any regulatory account to accrue costs or revenues during the rate freeze for the purpose of affecting rates during or after the rate freeze. The result is that the electric DSM earnings authorized here must come from "headroom." In D.98-03-063 we determined that authorized DSM earnings should not be included in the utilities Transition Cost Balancing Accounts, but should be used to adjust the distribution revenue requirement in calculating headroom. We will continue that practice here.

SDG&E has no headroom because its rate freeze has ended, these earnings must be recovered in rates. SDG&E may file for this recovery in its next ratesetting proceedings.

D.98-03-063 further determined that DSM earnings related to the gas portion of SoCal, SDG&E, and PG&E should be deferred to the next gas rate adjustment. We will continue that practice here.

Findings of Fact

1. Phase 2 addresses the following earnings claims and issues for DSM programs:

2. The applicant utilities, ORA and REECH jointly support the CMS in which they agree to shareholder incentive claims for DSM programs. There is no opposition to the CMS, which resolves:

3. The parties agreed to a Joint Recommendation for the PY 2000 LIEE shareholder incentive mechanism.

4. The Joint Recommendation proposes that 25% of shareholder earnings come from mandatory items and 75% from non-mandatory energy savings measures.

5. The Joint Recommendation proposes that these shareholder incentives be recovered in two future AEAP proceedings.

6. There is no opposition to the Joint Recommendation.

7. PY 1998 earnings claims include both actual and committed programs.

8. Upstream market transformation is a Commission goal that may not result in verifiable energy savings.

9. Policy Rule III.G appended to D.97-12-103 states that CBEE is responsible for verifying the performance results of the interim administrator and recommending to the Commission on reward payments.

10. CBEE did not evaluate the PY 1998 energy efficiency programs and earnings claims for this proceeding.

11. D.99-03-056 indicates that ORA evaluates the utility earnings claims based on earnings verification efforts.

12. ORA did not fully verify the PY 1998 energy efficiency programs.

13. The utilities verified the PY 1998 energy efficiency programs primarily through consultants.

14. Cost-effectiveness of the PY 1998 energy efficiency programs is determined by both economic costs and benefits and non-energy and environmental benefits.

15. PG&E has satisfied the verification requirements of the Energy Star Label program.

16. PG&E has satisfied the verification requirements of the lighting control program.

17. PG&E satisfied the verification requirements of the Regional and National Alliances program.

18. Shareholder incentive claims for energy efficiency program commitments are appropriate.

19. The utilities' verification of PY 1998 energy efficiency program is adequate.

20. Edison's residential financing program met the performance adder milestones.

21. Edison's home warranty program met the performance adder milestone.

22. No protection for the third-party initiative software milestone is required.

23. PG&E signed a memorandum of understanding between CHEERS and the USDA Guaranteed Rural Housing Loan Coordinator to increase awareness of the loan program and energy efficiency.

24. PG&E produced two reports on energy information centers in a deregulated environment that make recommendations for development of energy centers.

25. D.97-12-103 determined that the PY 1998 shareholder incentives should be recovered in one year after immediate verification.

26. SDG&E's rate freeze has ended.

Conclusions of Law

1. The CMS is reasonable and should be approved.

2. The Joint Recommendation is reasonable and should be approved.

3. Ex post review of the PY 1998 energy efficiency programs is not necessary.

4. PG&E should be granted only half, or $16,500, of its requested incentive for Milestone 26-MS2.

5. PG&E should be granted only half, or $82,500 of its requested incentive for Milestone 2, Residential Single Family EMS.

6. Except for the disallowances for PG&E indicated above, the PY 1998 energy efficiency claims of PG&E, Edison, SoCal and SDG&E are reasonable and should be granted.

7. The PY 1998 energy efficiency claims should be recovered in one year, subject to later true-up regarding program commitments.

ORDER

IT IS ORDERED that:

1. The Case Management Statement of Office of Ratepayer Advocates, Pacific Gas and Electric Company (PG&E), San Diego Gas & Electric Company (SDG&E), Southern California Edison Company (Edison), Southern California Gas Company (SoCal), Residential Energy Efficiency Clearing House, Inc., indicating agreed upon shareholder incentives is approved.

2. The Joint Recommendation on the Program Year (PY) 2000 Low Income Energy Efficiency (LIEE) Shareholder Incentive Mechanism attached as Attachment A, and the supplement attached as Attachment B is approved.

3. All shareholder incentives amounts are awarded plus Franchise Fees and Uncollectibles, and interest accruing at the 90-day commercial paper rate from July 1 of the year following the program year.

4. The shareholder incentives granted herein for PY 1998 non-LIEE programs are subject to subsequent true-up and adjustment in future Annual Earnings Assessment Proceedings (AEAP) for present program commitments that do not materialize.

5. The shareholder incentives for electric energy efficiency programs of SDG&E shall be collected in a subsequent ratesetting proceeding, and shall be deferred for collection until SDG&E's next electric rate adjustment.

6. The shareholder incentives for electric energy efficiency programs of PG&E, and Edison shall be collected from headroom.

7. The shareholder incentives for gas energy efficiency programs shall be collected from gas rates, but recovery shall be deferred until such utility's next gas rate adjustment.

8. PG&E is authorized to collect the following shareholder incentives:

a. $20.20 million in life-cycle earnings for its PY 1994, with $5.40 million in third earnings claim to be collected in 2000.

b. $31.54 million in life-cycle earnings for its PY 1997, consisting of $30.24 million for Shared Savings programs and $1.30 million for Performance Adder programs, with $6.02 million in second earnings claim to be collected in 2000.

c. $8.4 million in life-cycle shared savings earnings, plus $0.055 million in Performance Adder earnings for pre-1998 program commitments paid in 1998, with $4.25 million to be collected in 2000 for the first claim and $4.25 million to be collected in 2001 for the second claim. The third and fourth claims will be $0.055 million each for only the Performance Adder.

d. $0.220 million lifecycle for PY 1998 LIEE with $0.110 million for the first earnings to be collected in 2000 and $0.110 million for the second claim to be collected in 2001.

e. $10.451 million for PY 1998 non-LIEE earnings to be collected in 2000.

9. SDG&E is authorized to collect the following shareholder incentives in a subsequent ratesetting proceeding:

a. $8.190 million in life-cycle earnings for PY 1994 with $2.181 million for the third earnings claim to be collected in 2000.

b. $16.093 million in life-cycle earnings for PY 1997 with $3.955 million for the second earnings claim to be collected in 2000.

c. $83,970 lifecycle earnings for PY 1998 LIEE with $41,985 for the first earnings claim to be collected in 2000.

d. $3.790 million for PY 1998 non-LIEE earnings to be collected in 2000.

10. Edison is authorized to collect the following shareholder incentives:

a. $4.974 million in lifecycle earnings for PY 1994 with $1.416 million for the third earnings claim to be
collected in 2000.

b. $15.397 million in lifecycle earnings for PY 1997 with $2.224 million for the second earnings claim to be collected in 2000.

c. $1.207 million in lifecycle earnings for pre- program commitments paid in 1998 with $0.302 million for the first earnings claim to be collected in 2000.

d. $0.243 million in lifecycle earnings for PY 1998 LIEE with $0.1215 to be collected in 2000 and in 2001.

e. $8.104 million for PY 1998 non-LIEE earnings to be collected in 2000.

11. SoCal is authorized to collect the following shareholder incentives in a subsequent ratesetting proceeding:

a. $2.898 million in lifecycle earnings for PY 1994 with $0.725 million for the third earnings claim.

b. $1.411 million in lifecycle earnings for pre-1998 program commitments paid in 1998 with $0.353 million for the first earnings claim.

c. $2.865 million in lifecycle earnings for PY 1997 with $0.716 million for the second earnings claim.

d. $0.216 million in lifecycle earnings for PY 1998 LIEE with $0.108 million to be collected in 2000 and 2001.

e. $1.965 million for PY 1998 non-LIEE earnings.

12. The Joint Recommendation on the PY 2000 LIEE Shareholder Incentive Mechanism is approved.

a. Authorization for recovery of the first 50% of shareholder incentives will be handled in the AEAP following PY 2000.

b. Authorization for recovery of the second 50% of shareholder incentives will be handled in the next AEAP following completion of program evaluation.

13. Application (A.) 99-05-002, A.99-05-005, A.99-05-007, and A.95-05-008 are closed.

This order is effective today.

Dated , at San Francisco, California.

ATTACHMENT A

ATTACHMENT B

ATTACHMENT C

ATTACHMENT D

ATTACHMENT E

ATTACHMENT F

ATTACHMENT G

ATTACHMENT H

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