STATE OF CALIFORNIA GRAY DAVIS, Governor

PUBLIC UTILITIES COMMISSION

505 VAN NESS AVENUE

SAN FRANCISCO, CA 94102-3298

July 18, 2003 Agenda ID #2486

Ratesetting

TO: PARTIES OF RECORD IN APPLICATION 00-05-002 ET AL.

This is the draft decision of Administrative Law Judge (ALJ) Gottstein. It will not appear on the Commission's agenda for at least 30 days after the date it is mailed. The Commission may act then, or it may postpone action until later.

When the Commission acts on the draft decision, it may adopt all or part of it as written, amend or modify it, or set it aside and prepare its own decision. Only when the Commission acts does the decision become binding on the parties.

Parties to the proceeding may file comments on the draft decision as provided in Article 19 of the Commission's "Rules of Practice and Procedure." These rules are accessible on the Commission's website at http://www.cpuc.ca.gov. Pursuant to Rule 77.3 opening comments shall not exceed 15 pages.

Consistent with the service procedures in this proceeding, parties should send comments in electronic form to those appearances and the state service list that provided an electronic mail address to the Commission, including ALJ Meg Gottstein at meg@cpuc.ca.gov. Service by U.S. mail is optional, except that hard copies should be served separately on ALJ Gottstein and the Assigned Commissioner, and for that purpose I suggest hand delivery, overnight mail or other expeditious methods of service. In addition, if there is no electronic address available, the electronic mail is returned to the sender, or the recipient informs the sender of an inability to open the document, the sender shall immediately arrange for alternate service (regular U.S. mail shall be the default, unless another means - such as overnight delivery is mutually agreed upon). The current service list for this proceeding is available on the Commission's web page, www.cpuc.ca.gov.

/s/ ANGELA K. MINKIN________________________

Angela K. Minkin, Chief

Administrative Law Judge

ANG:hl2

Attachment

ALJ/MEG/hl2 DRAFT Agenda ID #2486

Ratesetting

Decision DRAFT DECISION OF ALJ GOTTSTEIN (Mailed 7/18/2003)

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

In the Matter of the Application of Southern California Gas Company (U904G) for Authority to increase its Gas Revenue Requirements to Reflect its Accomplishments for Demand-Side Management Program Years 1995 and 1997, Energy Efficiency Program Year 1999, and Low-Income Program Years 1998 and 1999 in the 2000 Annual Earnings Assessment Proceeding ("AEAP").	Application 00-05-002 (Filed May 1, 2000)
And Related Matters.	Application 00-05-003 Application 00-05-004 Application 00-05-005 Application 01-05-003 Application 01-05-009 Application 01-05-017 Application 01-05-018 Application 02-05-002 Application 02-05-003 Application 02-05-005 Application 02-05-007

INTERIM OPINION

LOW-INCOME ENERGY EFFICIENCY EARNINGS CLAIMS

AND PROCEDURAL NEXT STEPS

1. Introduction and Summary¹

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," provide energy efficiency services to eligible low-income customers within their service territories, per Legislative and Commission directives. These programs, referred to as "low income energy efficiency" or "LIEE," are paid for by non-participating ratepayers through their energy bills.

Since 1990, the Commission has implemented various types of performance-based incentive mechanisms for demand-side management (DSM) programs,² including LIEE. Utility earnings under the LIEE performance award mechanism have been based on parameters designed to encourage broad participation in LIEE by eligible low-income customers, rather than on the specific amount of energy savings produced by the program. The reasonableness of the utilities' LIEE earnings claims under these mechanisms requires the verification of program expenditures and program participation, i.e., the type and quantity of measures installed.

Today's decision addresses the LIEE earnings claims submitted by the utilities in their 2000, 2001 and 2002 AEAPs. These encompass the utilities' second-year claims for Program Year (PY) 1998 program activities, first and second-year claims for PY1999 and PY2000 program activities and first year claims for PY2001 program activities. The total request for LIEE earnings, by utility, is summarized below:

LIEE Earnings Claims, 2000, 2001 and 2002 AEAPs:

PG&E: $1,653,890

SCE: 995,896

SDG&E: 318,000

SoCal: 746,000

Total: $3,713,786

We approve recovery of the utilities' second-year claims for PY1998 program activities, which represents $382,081 in earnings claims for the four utilities combined. Per Decision (D.) 00-08-038, this claim is contingent upon the verification of program participation. As discussed in this decision, we are satisfied with the approach utilized by the Office of Ratepayer Advocates (ORA) to verify installations for PY1998, as well as for PY1999. However, based on the record in this proceeding, we find that the number of installations claimed by the utilities for PY2000 has not been adequately verified. In addition, we find that the utilities' expenditure data for PY1999, PY2000 and PY2001 require further verification before we can authorize rate recovery for these claims. The record lacks independent confirmation that all four utilities' expenditure data is actual recorded data, rather than estimated or budgeted.

Accordingly, we direct the utilities to track the earnings claims for PY1999, PY2000 and PY2001 in a memorandum account until Energy Division verifies the installations for PY2000 and expenditure data for PY1999, PY2000 and PY2001. Energy Division may conduct these verification efforts itself, or hire consultants for this purpose. The costs of these activities shall be funded with LIEE program funds. We delegate to the Executive Director the task of establishing the scope, schedule and budget for Energy Division's evaluation. Upon completion, Energy Division should file and serve its report and recommendations on the service list in this proceeding. We leave this consolidated proceeding open to consider Energy Division's recommendations.

We also describe in today's decision the steps we will take to resolve other issues in this consolidated proceeding, namely:

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 Rulemaking 91-08-003/Investigation 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?

5. Are the administrative costs booked in memorandum accounts by the utilities for their interruptible load programs reasonable? ³

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. We will address the fifth issue, i.e., the reasonableness of the utilities' booked administrative costs for interruptible load programs, once Energy Division has audited the utilities' memorandum accounts and submitted its recommendations. We direct the Executive Director to establish a schedule and budget for this audit based on the availability of Commission resources.