7. Additional Phases of This Proceeding

This consolidated proceeding is also the forum for considering the following issues related to shareholder incentives:²⁵

1. Should LIEE shareholder earnings continue to be offered to utilities in the future in view of the fact that we have eliminated shareholder earnings for (non low-income) energy efficiency programs per D.01-11-066?

2. Should we reopen R.91-08-003/I.91-08-002 to modify the shared-savings earnings mechanism for pre-1998 (non low-income) energy efficiency programs?

3. Are the retention study methodologies and results that underlie the utilities' pre-1998 (non low-income) energy efficiency earnings claims reasonable?

4. Are the utilities' post-1997 (non low-income) energy efficiency earnings claims, which are based on milestone incentive mechanisms, reasonable?

Opening and reply comments have been submitted on the first two issues, and we are in the process of preparing decisions to address them. We will address the third and fourth issues upon completion of Energy Division's independent verification of earnings claims, which will be conducted via the Request For Proposal process authorized in D.03-04-055.

In addition to the incentive-related issues described above, the Commission identified this proceeding as the forum for considering the reasonableness of utility administrative costs associated with interruptible tariffs and rotating outages programs. Specifically, in D.01-07-029, the Commission directed the utilities to establish an Interruptible Load Program Memorandum Account (ILPMA) to track the costs and revenues associated with the programs, as follows:

"The memorandum account shall track all dollars spent above funds authorized in current rates to implement any program, activity, study or report ordered herein. The accounting shall separately identify the cost and revenue associated with each program, activity, study or report (e.g., separately track costs and revenues for the new Bas Interruptible Program, Voluntary Demand Response Program, each curtailment study, each report). Each respondent utility may include interest on the balance. The burden to demonstrate reasonableness for future cost recovery shall be on each respondent utility . . . . Upon a finding of reasonableness, balances in each memorandum account shall be recovered from ratepayers without respect to any policies otherwise in place regarding the end of the rate freeze. Memorandum account balances shall be reviewed in each utility's Annual Earnings Assessment Proceedings."²⁶

Accordingly, the utilities filed requests for cost recovery ILPMA balances in their 2002 AEAP applications, and the assigned ALJ solicited comment on those requests from interested parties.²⁷ ORA was the only party to respond to this solicitation, stating that: "ORA management has determined that ORA does not have the resources to conduct an independent reasonableness review of these expenses at this time."²⁸ In response, PG&E argues that since the utilities have made their showing and no party has taken issue with them, the Commission should authorize recovery of these administrative costs--which total approximately $4 million for all four utilities combined.

We disagree with PG&E's position. As SoCal and SDG&E point out in their joint reply comments, without independent findings concerning the reasonableness of these costs, we do not have an adequate record at this juncture upon which to base a decision.²⁹ However, their suggestion that ORA be required to submit its findings without delay is unworkable, given ORA's stated resource limitations at this time.

In the absence of active participation by intervenors on this issue, we will direct our Energy Division to conduct an audit of these administrative costs for our consideration. Energy Division may conduct the audit itself, or hire consultants for this purpose. The costs of the audit should be added to the utilities' memorandum accounts for recovery in rates, and allocated to each utility in proportion to the relative size of its interruptible load program administrative costs. We direct the Executive Director to establish the scope, schedule and budget for Energy Division's audit, taking into consideration the availability of Commission staff resources.