Program Budgets

We approve 100% of program budgets as proposed with the exception described below. Utility administrators will be given flexibility to shift funds as needed to meet demand and to maximize energy savings.

Funding Flexibility

We grant the utility administrators flexibility to shift funds between programs within a program area (e.g., within the residential program area, the nonresidential program area, and the new construction program area) during the course of the year, subject to the principles of equity and targeting underserved markets. We believe that such flexibility is needed for the utilities to expand and accelerate, as necessary, programs that achieve the maximum feasible reductions in uneconomic and peak electricity consumption. We require only that the utilities chronicle the changes in the program emphasis and funding in their April quarterly reports.

We maintain our objective of equity by ensuring that the customers contributing to the PGC, benefit from the programs funded through the PGC. We further state our continued goal of targeting underserved communities. These principles will not hinder the achievement of maximum energy and demand savings. On the contrary, there are substantial untapped conservation opportunities in virtually all customer classes and communities. We make programmatic suggestions below but expect the utilities to design, implement, and fund programs that both meet these guidelines and maximize energy and demand savings.

We will not, however, allow the utilities to shift funds between program areas without prior Commission approval. Further, we disapprove the utilities' proposal to combine the residential new construction budget with the residential program area budget and the nonresidential new construction budget with the nonresidential program area budget for fund-shifting purposes. Programs specifically targeted toward energy efficiency in new construction are an important part of our energy efficiency portfolio and have the potential for providing much needed energy and demand savings. Further, AB 970 specifically requires additional efforts to garner energy savings in new construction. Combining the new construction budgets with the residential and nonresidential budgets for fund-shifting purposes does not further the legislative mandate or energy saving goals. For this same reason, we believe that new construction budgets should be maintained at a minimum of 20% of the utilities' total program budget. Accordingly, we have increased Edison's and PG&E's new construction budgets from 19% and 16%, respectively, to 20%.

Refrigerator Rebates

PG&E and Edison omitted incentives for the purchase of energy efficient refrigerators in the program proposals. However, Edison and PG&E have indicated a willingness to include incentives for qualified Energy Star refrigerators if we determine that SB 1194/AB 995 does not prohibit them.

SB 1194/AB 995 ( §399.4 (b)(2)) provides that "the Commission, in evaluating energy efficiency investments under its existing statutory authorities, shall ensure both of the following: . . . (2) that no energy efficiency funds are used to provide incentives for the purchase of new energy efficient refrigerators."

The issue presented is whether this prohibition on funding for refrigerator rebates should be applied to PY 2001 programs or whether it is effective for programs conducted in PY 2002 and beyond. Since the statute is subject to more than one interpretation, we "look to a variety of extrinsic aids, including the ostensible objects to be achieved, the evils to be remedied, the legislative history, public policy, contemporaneous administrative construction, and the statutory scheme of which the statute is a part" (People v. Woodhead (1987) 43 Cal.3d 1002, 1008) in order to "ascertain the intent of the Legislature so as to effectuate the purpose of the law." (People v. Jenkins (1995) 10 Cal.4th 234, 246; Select Base Materials, Inc. v. Board of Equalization (1959) 51 Cal.2d 640, 645.)

SB 1194/AB 995 extends the collection of the nonbypassable system benefit charge to support energy efficiency programs through January 1, 2012

The overriding intent was to extend funding for energy efficiency programs that were scheduled to sunset by the end of 2001 or early in 2002. Thus, we construe the prohibition on funding for refrigerator rebates to apply only to energy efficiency programs funded by this legislation; that is, to programs that are continued and funded by collections made after January 1, 2002. Therefore, we find that the utilities are not prohibited by §399.4(b)(2) from providing incentives for qualified Energy Star refrigerators in their appliance programs for PY 2001.

Third Party Initiatives (TPI)

We recognized that TPI programs are a source for innovative energy efficiency ideas, implementation, and design. They take advantage of the unique expertise, relationships with customers, and have the ability to coordinate activities among individual and local governments. Our experience with the Summer 2000 Energy Efficiency Initiative, which was implemented as a general TPI solicitation, also confirms our view that there are many innovative, creative, and successful programs that have the potential of producing both short-term and long-term energy and demand savings.

A review of the utilities' applications shows the following TPI budgets for PY 2001 as compared to PY 2000:

TPI Funding ($ Millions)

Utility

PY 2000

Budget

PY 2000

Projected Spent

Yr.-End

PY2001

Proposed Budget

PY2000 Summer Initiative TPI Funding

PG&E

8.700

8.700

2.110

3.500

SCE

2.150

2.249

4.000

1.700

SDG&E

0.508

0.190

1.975

1.000

SCG

3.111

3.163

0.861

-

Total

14.469

14.302

8.946

6.200

There is evidence that the utilities have not been able to reach a substantial number of consumers with their energy efficiency programs. Third parties with established community ties, both individuals and government entities, can assist in breaking down those barriers and effectively promote energy efficiency. This is demonstrated by the successful program that PG&E operates with the City of San Jose. Finally, we note that the utilities have routinely failed to spend a substantial portion of program funds each year.

We direct each utility to reserve a minimum of 8% of their program budgets, across all three program areas, for third party initiatives. The Summer Initiative is a separate program, which has been designed and implemented on a separate track from the PY 2000 and PY 2001 programs. Thus, the Summer Initiative third party initiatives should not be included in the budget reserved for TPIs for PY 2001. The following table contains the minimum level of required TPI funding:

5 Assumes only statewide MA&E study budgets are approved. CEC and utility-specific budgets are not included. 6 Assumes shareholder incentives equal to 7% of program funding for all three types of milestones (energy savings, market effects, and performance adders). 7 We recognize that SoCalGas' minimum TPI funding is less than the TPI funds budgeted in PY 2000. However, this is reasonable since we raised a question regarding the cost-effectiveness of SoCalGas' program portfolio in PY 2000. However, as we state above, this is a minimum amount and we expect SoCalGas, like the other utilities, to continue cost-effective TPI programs from PY 2000.

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