STATE OF CALIFORNIA GRAY DAVIS, Governor

PUBLIC UTILITIES COMMISSION

505 VAN NESS AVENUE

SAN FRANCISCO, CA 94102-3298

September 16, 2003 Agenda ID #2731

Ratesetting

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

RE: NOTICE OF AVAILABILITY OF DRAFT DECISION ON WHETHER TO REOPEN THE SHARED-SAVINGS INCENTIVE MECHANISM ADOPTED IN DECISION 94-10-059 FOR ENERGY EFFICIENCY

Consistent with Rule 2.3(b) of the Commission's Rules of Practice and Procedure, I am issuing this Notice of Availability of the above-referenced draft decision. The draft decision was issued by the Assigned Commissioner Lynch and Administrative Law Judge (ALJ) Gottstein on September 16, 2003. An Internet link to this document was sent via e-mail to all the parties on the service list who provided an e-mail address to the Commission. An electronic copy of this document can be viewed and downloaded at the Commission's Website ( www.cpuc.ca.gov). A hard copy of this document can be obtained by contacting the Commission's Central Files Office [(415) 703-2045].

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:hkr

Attachment

COM/LYN/ALJ/MEG/hkr DRAFT Agenda ID #2731

Ratesetting

Decision DRAFT DECISION OF COMMISSIONER LYNCH AND
ALJ GOTTSTEIN (Mailed 9/16/2003)

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 ON WHETHER TO REOPEN THE SHARED-SAVINGS INCENTIVE MECHANISM ADOPTED IN DECISION 94-10-059
FOR ENERGY EFFICIENCY PROGRAMS

TABLE OF CONTENTS

Title Page

INTERIM OPINION ON WHETHER TO REOPEN THE SHARED-SAVINGS
INCENTIVE MECHANISM ADOPTED IN DECISION 94-10-059
FOR ENERGY EFFICIENCY PROGRAMS 22

1. Summary 22

2. Procedural History 33

3. The Shared-Savings Mechanism Adopted in D.94-10-059 55

4. Scope of the Decision 1111

5. Positions of the Parties 1212

5.1 CEC 1313

5.2 ORA 1313

5.3 NRDC 1414

5.4 The Utilities 1414

5.5 TURN 1515

5.6 WEM 1616

6. Discussion 1717

7. Comments on Draft Decision 3333

8. Assignment of Proceeding 3333

Findings of Fact 3434

Conclusions of Law 3636

INTERIM ORDER 3838

o Attachment 1

o Attachment 2 [PDF]; Appendix 1 [PDF]; Appendices 2 & 3 [PDF]

o Attachment 3 [PDF]; Appendix 1; Appendix 2; Appendix 3; Appendix 4; Appendix 5

o Attachment 4; Table 2

INTERIM OPINION ON WHETHER TO REOPEN THE SHARED-SAVINGS INCENTIVE MECHANISM ADOPTED IN DECISION 94-10-059
FOR ENERGY EFFICIENCY PROGRAMS

1. 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," administer energy efficiency programs that are paid for by their electric and gas ratepayers. Since the early 1990s, the utilities have been awarded profits (also referred to as shareholder earnings) for administering these programs, based on various shareholder incentive mechanisms adopted through the years. Among other issues, this consolidated Annual Earnings Assessment Proceeding (AEAP) addresses the utility profits related to energy efficiency programs that were implemented or, in the case of long lead-time new construction projects, initiated, during program years (PYs) 1994-1997.²

By ruling dated March 13, 2002, the assigned Administrative Law Judge (ALJ), in consultation with the Assigned Commissioner, solicited comments on whether we should reopen Rulemaking (R.) 91-08-003/Investigation (I.) 91-08-002 to modify the shareholder incentive mechanism adopted in Decision (D). 94-10-059 for shareholder incentives before us in this proceeding and in future AEAPs. We address this issue today in full recognition that our authority under Public Utilities Code (Pub. Util.) Code § 1708 to reopen proceedings must be exercised with great care, with adherence to procedural due process requirements, and justified only by extraordinary circumstances. Consistent with our prior decisions, we examine whether the determinations reached in D.94-10-059 relied on misconception of fact or law, and whether the subsequent developments in electric restructuring would have materially changed our determinations on a shared-savings mechanism for the pre-1998 program years.

We conclude that the shared-savings incentive mechanism adopted in D.94-10-059 should not be reconsidered, and R.91-08-003/I.91-08-002 should not be reopened for that purpose. However, nothing in today's decision is intended to preclude us from disapproving or modifying the utility profits associated with this incentive mechanism that the utilities submit in pending and future AEAPs. All profits claimed by the utilities are subject to verification, consistent with our adopted measurement and evaluation protocols.