ALJ/MEG/tcg DRAFT Agenda ID #4939
Ratesetting
Decision DRAFT DECISION OF ALJ GOTTSTEIN (Mailed 9/12/2005)
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 Year 1994 and 1997, and Low-Income Program Years 2002 and 2003 in the 2004 Annual Earnings Assessment Proceeding ("AEAP"). |
Application 00-05-002 (Filed May 1, 2000) |
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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 Application 03-05-002 Application 03-05-003 Application 03-05-004 Application 03-05-009 Application 04-05-005 Application 04-05-010 Application 04-05-008 Application 04-05-012 |
FINAL OPINION ADOPTING SETTLEMENT AGREEMENTS REGARDING ENERGY EFFICIENCY SHAREHOLDER EARNINGS CLAIMS
TABLE OF CONTENTS
Title Page
FINAL OPINION ADOPTING SETTLEMENT AGREEMENTS REGARDING
ENERGY EFFICIENCY SHAREHOLDER EARNINGS CLAIMS 22
2. Background and Procedural History 44
3. The Settlement Agreements 1313
4. Comments in Response to Settlement Agreements and Replies 1616
5.1. The Record on Reasonableness of Earnings Claims 1818
5.1.1. Pre-1998 Earnings Claims Under Shared-Savings Mechanism 1919
5.1.2. Post-1997 Earnings Claims Under Milestone-Based Mechanisms 2525
5.1.3. LIEE Earnings Claims Under Performance Adder Mechanism 3030
6. Comments on Draft Decision 4848
LIST OF TABLES
Table 1 -AEAP Claims-Summary by Incentive Mechanism
Table 2 - Verification Documentation Completed by ORA Consultants
During the 2001 AEAP
Table 3 - Summary of SERA Recommendations for Retention Studies
Table 4 - Net Claims Impact from Substitution of TDF = 1.0 Measures 3 and 20 for Past Shareholder Earnings Claims
Table 5 - Milestone Values Verified and Potentially Not at Risk by Utility
Table 6 - Earnings Claims at Risk Based on SERA Reports Pre-1998 Shared Savings and 1999-2001 Milestone-Related
LIST OF ATTACHMENTS
Attachment 1 - List of Acronyms and Abbreviations
Attachment 2 - Description of the Shared-Savings Incentive Mechanism
Adopted in D.94-10-059
Attachment 3 - Description of LIEE Performance Adder Incentive Mechanisms
Adopted by the Commission
Attachment 4 - Post 1997 Energy Efficiency Incentive Mechanisms
Attachment 5 - Pacific Gas and Electric Company Cross Walk 1999-2001
Milestone
Southern California Edison Company Cross Walk 1999-2001
Milestone
San Diego Gas & Electric Company Cross Walk 1999-2001
Milestone
Southern California Gas Company Cross Walk 1999-2001
Milestone
Attachment 6 - Updated DEER Measure Lifetimes (and Comparison to
Protocols EULs)
FINAL OPINION ADOPTING SETTLEMENT AGREEMENTS REGARDING ENERGY EFFICIENCY SHAREHOLDER EARNINGS CLAIMS
1. Summary1
Today's decision adopts settlement agreements that pertain to shareholder earnings claims for energy efficiency programs between the Office of Ratepayer Advocates (ORA) and each of the following utilities: San Diego Gas & Electric Company (SDG&E), Southern California Edison Company (SCE) Southern California Gas Company (SoCalGas) and Pacific Gas and Electric Company (PG&E). We refer to SDG&E, SCE, SoCalGas and PG&E collectively as "the utilities" throughout this decision.
In the above-captioned proceedings, the utilities have submitted earnings claims associated with Commission-adopted shareholder incentive mechanisms for energy efficiency. Most of those claims represent installments under the "shared-savings" incentive mechanism in place for resource programs initiated prior to electric industry restructuring. For program activities undertaken during the 1999-2001 timeframe, the utilities have also submitted earnings claims based on program accomplishments under the "milestone-based" incentive mechanism put in place for those years. And finally, the utilities have submitted earnings claims in this consolidated proceeding to recover "performance adder" based earnings associated with low-income energy efficiency programs over the 1999-2003 timeframe.
As discussed in this decision, these earnings claims have been pending for several years, while additional expert testimony and independent evaluations of program savings estimates have been submitted for our consideration. Based on the extensive record in this proceeding, we find that the settlement agreements between ORA and the utilities are reasonable in light of the whole record, consistent with law and in the public interest. Accordingly, we authorize the recovery of approximately 90% of the earnings claims, for the four utilities combined. Table 1 presents the outstanding earnings claims and the settlement amounts, by type of incentive mechanism, program year and by utility.
The shareholder earnings that we authorize today total $271.6 million for the four utilities combined, not including interest and franchise fees and uncollectibles.2 In keeping with the concept of a "shared-savings" incentive mechanism, the shareholder earnings we authorize today via the settlements are much less than the savings ratepayers have already received by deferring or avoiding more costly supply-side investments with energy efficiency. Conservatively, we estimate that the energy efficiency programs undertaken to generate this level of earnings have produced $670 million in total net resource benefits to all ratepayers, i.e., resource benefits minus costs. This level of net resource benefits is derived by applying the shared-savings formula to the pending earnings claims associated with programs subject to the pre-1998 shared-savings mechanism. It does not reflect the savings or net resource benefits associated with the pending low-income energy efficiency programs or non-low income energy efficiency programs subject to milestone incentives from 1999-2001.
In terms of rate impacts, the settlement agreements call for amortizing authorized earnings over time or consolidating them with other rate changes, in order to minimize or completely eliminate the need for any rate increases. In addition, the utilities have clarified that no additional interest will be added to the settlement amounts that are amortized for rate recovery purposes.
Today's decision resolves all outstanding issues in the above-captioned proceedings and closes this consolidated docket.
1 Attachment 1 describes the abbreviations and acronyms used in this decision. 2 To translate earnings claims into revenue requirements, they are adjusted upwards by a factor to reflect franchise fees and uncollectibles or "FF&U". In AEAPs, the utilities are permitted to earn interest on their shareholder incentives, calculated at the 90-day commercial paper rate, beginning on July 1 of the year following the program year. Therefore, the earnings claims are also adjusted upwards to reflect accrued interest, when revenue requirements are calculated.
