4. Overview of Utility Portfolio Plans, Funding Levels and Competitive Bidding Proposals

In the sections that follow, we present an overview of the utilities' portfolio plans and funding levels, the components of those plans that each utility plans to put out for competitive bid, and their proposed bid evaluation criteria. With respect to the portfolio plans, our description is intended to highlight the overall approach to portfolio design, rather than present a detailed description of each program offering. Such details are available in the utility filings, which include descriptions of program objectives, implementation strategies and the types of energy efficiency measures or equipment offered under each program category.

The descriptions below reflect changes that the utilities have agreed to in response to the PRG assessments and interested parties' comments since their June 1 filings, as reflected in the CMS.

4.1. Portfolio Plans and Funding Levels

Each of the utilities has approached the development of its portfolio plan by (1) analyzing the technical potential for energy efficiency identified in recent studies (and used to establish the Commission's goals) and (2) developing specific goals for each of the market segments and end-uses based on this potential. Using this information, SCE, SDG&E and SoCalGas started with their current structure of program offerings designed primarily around customer sectors (e.g., residential - single family, residential - multi-family, commercial, industrial, and agriculture), and modified them accordingly. PG&E, on the other hand, took a different approach by redesigning its programs around market segments (e.g., mass markets, schools and colleges, office buildings, etc.), rather than continuing with a historic program structure that primarily organizes program strategies around regulatory customer rate classes.

We provide a brief overview of the utilities' portfolio plans and funding levels, below. At the end of each section, we present the utility's estimate of portfolio cost-effectiveness, from two perspectives: (1) the total resource cost (TRC) perspective, whereby the value of the energy savings is greater than the total cost of installed measures and all program costs and (2) the program administrator cost (PAC) perspective, whereby the value of energy savings outweighs the cost of utility financial incentives to customers and all other program costs.

Attachment 3 presents a short description of the programs in each utility's portfolio, the share of funding allocated to the program, expected megawatt hour (MWh), summer peak megawatts (MW) and Mtherms savings, and the associated program-level TRC benefit-cost ratios. Attachment 4 also presents a program-by-program break down of the proposed portfolio budgets. Attachment 4 also presents a summary table with projected portfolio savings compared to our goals, by utility and program year.

4.1.1. SCE

SCE's proposed portfolio is based on a wide variety of programs for most sectors. Many of the programs are continuations and expansions of well-tested programs with established track records. Some programs will seek out innovative ideas for new opportunities, such as the Innovative Design for Energy Efficiency Applications (IDEEA) and Innovative Design for Energy Efficiency (INDEE) solicitations, that will seek new program designs and unique and newer energy efficiency technologies and/or approaches to capturing cost-effective energy efficiency. (See Section 4.2.1.2 below.) In addition, SCE has developed three flagship programs that are designed to produce efficiencies in implementation by combining multiple previous programs under a few umbrellas. These are the Business Incentive Program, the Residential Energy Efficiency Rebates and the Comprehensive HVAC program. Among them, these three large programs account for approximately one-third of the overall annual budget.

In particular, through the Business Incentive Program, SCE has integrated several previous stand-alone programs offered to the nonresidential sector (commercial, industrial, agriculture) into a centralized "one stop" source for audits, design assistance and rebates. In this way, SCE expects to more effectively tap the energy savings potential of the nonresidential sector, and incur lower program administrative costs.

Through its Comprehensive HVAC program, SCE plans to expand program activities that tap the savings potential in this sector, particularly with respect to the installation of efficient air conditioners. In addition, SCE is offering a new program, "retro-commissioning" in recognition of the significant energy savings potential in existing buildings. Retro-commissioning is a quality assurance program that reduces energy use by correcting operational inefficiencies in existing buildings with respect to the operation of HVAC, lighting, domestic hot water systems and related controls.

As part of its flagship Business Incentive Program, SCE is also initiating a new "on-bill" financing program, which offers eligible customers the option to finance their energy efficiency project through an on-the-bill repayment of the cost (after rebate) of installing qualified energy efficiency measures. SCE's program will initially target small businesses.

Additional program-specific information is provided in Attachments 3 and 4.

SCE proposes to spend $675 million (not including EM&V) over three years to save an incremental 3,292 giga-watt hours (GWh) and 714 MW annually by 2008. No therms are included in the TRC. The three-year portfolio is forecast to have a TRC benefit/cost ratio of 2.76 and a PAC ratio of 3.58.

4.1.2. PG&E

Based on its analysis of historical program records, load profile data and energy savings potential studies, PG&E developed a "Market Integrated Demand Side Management" portfolio, which organizes program offerings and strategies around "mass market" and "targeted market" segments.

PG&E's mass market is comprised of single-family residential retrofit, multifamily residential and small commercial customers. PG&E has organized these customers together as a single market because they have similar purchasing patterns and strategies, use the same vendors, and have similar approaches to energy efficiency. The mass market program is designed to provide a simple, but extensive menu of readily available energy efficiency measures with fixed rebate levels, and clear energy savings.

For some measures, the customer simply purchases and installs the measure, then submits the rebate application often on-line through "E-rebates" or obtains a "point of purchase" rebate at the store where the measure was purchased. Other energy efficiency measures will be available through contractors, who will also receive training on quality installation and maintenance to maximize equipment savings. PG&E expects that the mass market program budget will cover increased air conditioning services, based on the market potential of those services. Upstream program strategies involving manufacturers, distributors and retail vendors will be coordinated on a statewide basis.

PG&E is unable to offer on-billing financing at this time due to an ongoing upgrade to its billing system that precludes changes to billing until the upgrade is complete. However, as part of its mass market program, PG&E plans to pilot test an internet-based financing option for small business customers in 2006. PG&E believes that this approach will be less costly to develop and implement than on-bill financing-and can be available sooner to its customers. Based on evaluation of this pilot and the on-bill financing options offered by SDG&E and SoCalGas, PG&E may improve upon this option or proceed to incorporate a financing option within its energy billing system.

In addition, PG&E is organizing program strategies around the following targeted markets:

1) Agricultural and Food Processing includes food processors, wineries, dairies, greenhouses, and refrigerated warehouses;

2) Schools, Colleges and Universities includes K-12 schools, community colleges, universities and campus housing.

3) Retail includes general retail, big box retail, supermarkets, restaurants and food services;

4) Industrial includes fabrication industries, process industries (including waste water and water treatment) and heavy industrial manufacturing;

5) Medical includes hospitals, assisted living facilities, skilled nursing facilities, and medical specialty facilities;

6) Commercial includes office buildings, governmental facilities, and large institutional facilities;

7) Hospital Facilities include lodging, resort, and hotel facilities;

8) High Technology laboratories, clean-rooms, and data centers, and

9) Residential New Construction targets market actors involved in residential construction.

PG&E's program strategy for the targeted markets is to examine customers' existing facilities and expansion plans and develop a portfolio of services that best meets their needs and maximizes energy savings over time. PG&E intends to integrate both new construction and retrofit opportunities at a particular customer site. The portfolio of services would incorporate best practices, a variety of energy efficiency measures, financing, incentives, retro-commissioning, design assistance and equipment rebates. For particular large customers or customers that can serve to generate market response by other customers within the market segment, PG&E may assign an industry expert to serve as a one-point contact. The industry expert could be a third-party expert or PG&E staff, depending upon the technical expertise required.

Additional program-specific information is provided in Attachments 3 and 4.

PG&E proposes to spend $867 million (not including EM&V) over three years to save an incremental 3,020 GWh, 562 MW and 51,756 million therms (MTh) on an annual basis by 2008. The three-year portfolio is forecasted to have a TRC benefit/cost ratio of 1.61 and a PAC ratio of 2.24.

4.1.3. SDG&E and SoCalGas

The portfolio plans of SDG&E and SoCalGas reflect a standard program-oriented approach designed around customer sectors. In addition to continuing with successful information and audit services and direct install/rebate programs, SDG&E and SoCalGas will also offer new program strategies, including an on-bill financing program targeted to small businesses, local governments and multi-family building owners.

For example, to enhance participation and the comprehensiveness of measures installed under its existing multifamily rebate program, SDG&E plans to expand eligibility requirements (from 5+ units to 2+ units), offer new promotions for refrigerator and room air conditioning recycling, introduce rebates for mobile homes common areas, provide a "comprehensive approach incentive" to program participants, as well as introduce on-bill financing to this market.

SDG&E and SoCalGas also propose expanding several existing programs and market strategies. In particular, SDG&E points to the Advanced Home Program proposed by SoCalGas and SDG&E, which will target new construction "lost opportunities," including improvements to HVAC ducting and HVAC system maximum cooling capacity, which builders may not elect to incorporate into their home designs to meet the Title 24 requirements. Additionally, the Advanced Home Program will promote performance-based design levels of at least 15% more efficient than the energy code.

SoCalGas plans to expand efforts to replace standard coin-operated laundry machines with high-efficiency clothes washers and dryers, in order to meet its goal of replacing all such equipment by 2013. SoCalGas will also expand residential outreach efforts with the goal of providing all residential customers with "virtual auditors" by 2013. These interactive electronic assessment devices provide real-time energy consumption information and site-specific energy efficiency recommendations to the customer.

All of SoCalGas' programs will be closely coordinated with those offered on the electric side by SCE, and several of its core programs will be implemented in conjunction with SCE's corresponding programs.

SDG&E proposes to spend $257.5 million (not including EM&V) over three years to save an incremental 1,022 GWh , 213 MW and 9,537 Mth. SDG&E's three-year portfolio is forecasted to have a TRC benefit/cost ratio of 1.94 and a PAC ratio of 2.18.

SoCalGas' proposed energy efficiency budget is $169 million (not including EM&V) over the three-year program cycle. Natural gas savings are estimated at 60,696 Mth over the three years. SoCalGas' three-year portfolio is forecasted to have a TRC benefit/cost ratio of 1.41 and a PAC ratio of 1.80.

Additional program-specific information is presented in Attachments 3 and 4.

4.1.4. Statewide Programs and Coordination

Each of the utility portfolios includes support for statewide program activities in the areas of emerging technologies, support for codes and standards, and statewide marketing and outreach. Table 3 compares current funding for these programs with the utilities' proposed funding levels.

All four utilities propose to continue and build upon the success of existing statewide marketing and outreach activities. Current annual funding (approximately $20.5 million) for statewide marketing and outreach will not significantly increase, but future efforts will be more fully coordinated under the successful Flex Your Power umbrella of marketing and media partnerships. This program will continue to use a broad range of marketing and outreach strategies, including television, radio and newspaper ads, printed educational materials, events, a comprehensive website resource serving all parties statewide, a biweekly electronic newsletter, forums and workshops, and partnerships with businesses, local governments, water agencies, non-profits and others, including the state and federal government agencies responsible for energy and water efficiency.

The Flex Your Power statewide campaign will closely coordinate with the utilities, third-party implementers and other program providers to develop materials, events, the website and other outreach strategies that provide program information using consistent and compelling messages. Specific targeted campaigns for rural areas and to reach California's Hispanic population are also funded under the program.

The utilities and Efficiency Partnership plan to submit a joint plan on statewide marketing and outreach initiatives by the end of the year. This plan should address issues including: co-branding with third-party programs, coordination with both utility and non-utility program-specific marketing activities (particularly for non-resource programs), and marketing targeted at hard-to-reach market segments.¹⁵

To support improvements to building and appliance codes and standards, the utilities propose to increase their budgets for Codes and Standards advocacy work over the 2006-2008 program cycle. As indicated in Table 3 statewide annual funding will increase by 45% from approximately $2.9 million to $4.2 million per year. As part of this statewide program, the utilities will fund Codes and Standards Enhancement ("CASE") studies that will target enhancements to those standards. In addition, the utilities will work with customers and other market participants to ensure the implementation of current building codes and standards, and provide technical training and recommendations to builders, contractors, local building inspection and permitting departments to assist in implementing the new standards that took effect in October 2005.

The utility portfolios also include expanded funding for emerging technologies, in response to the Commission's direction in D.05-04-051. Emerging technologies are defined as new energy efficiency technologies, systems or practices that have significant energy savings potential but have not yet achieved sufficient market share (for a variety of reasons) to be considered self-sustaining or commercially viable. Emerging technologies include early prototypes of hardware, software, design tools or energy services.

Collectively, the utility portfolios include a total of $29.8 million in funding for emerging technologies over the three-year program cycle. This represents an increase of approximately 150% in annual funding, relative to the 2004-2005 program cycle. (See Table 3.) The utilities will continue to coordinate this program through the Emerging Technologies Coordinating Council, which is a group of representatives from the utilities and the CEC, charged with administrating California utility ratepayer funded programs for energy-related research and energy efficient emerging technologies.

In addition, each of the utilities will be working with upstream market participants, e.g., manufacturers, retailers and distributors, in order to increase the acceptance and availability of energy efficient measures and equipment in all market sectors. Program strategies for upstream market participants include wholesale discounts to the retailer (whereby the manufacturer receives the incentive payment based on delivery verification) and point of sale discounts provided by the retailer (whereby the retailer received the incentive payment based on sales information), among other approaches. The utilities are also coordinating to develop consistent rebate and participant rules for statewide offerings, with input from their joint PAG/PRG advisory groups.

The utilities plan to fully coordinate all of these efforts through joint meetings and the development of joint plans for these activities, as described more fully in Section 6.7 below.

4.1.5. Integrated Resource Programs

In their program offerings, the utilities also include strategies to integrate energy efficiency offerings with demand-response and distributed generation solutions. For example, for each of its targeted market segments, PG&E will include demand response and distributed generation program options in the marketing and outreach of energy efficiency offerings, in order to determine the best combination of resources to meet the particular customer's needs. In addition, PG&E will include information on customer options for participation in those programs to small customers as part of its mass market program.

SCE, SoCalGas and SDG&E are also initiating a "sustainable communities" program, which offers a higher tier incentive for sustainable building projects that significantly exceed Title 24 standards. Qualified projects will incorporate high performance energy efficiency and demand reduction technologies, along with clean on-site generation, water conservation, transportation efficiencies and waste reduction strategies. In 2006, SoCalGas will be jointly working with SCE on a sustainable communities program for the City of Santa Monica. SoCalGas and SDG&E have also incorporated sustainable design concepts, green building practices and emerging technologies into their new construction/advanced home demonstration programs.

4.1.6. Partnership Programs

The utilities plan to continue their history of partnering with local governments and other entities in order to effectively tap the energy savings potential in local communities. The partnerships are already defined in some instances, and in others they will be finalized once the competitive bid solicitations are completed.

For example, SDG&E proposes partnerships with the City of San Diego, the City of Chula Vista and the County of San Diego that will, among other things, test an expedited permit processing for construction projects that exceed Title 24 standards-as an alternative to providing financial incentives to contractors and builders. SDG&E will also collaborate with the San Diego County Water Authority and City of San Diego Water Resources to provide rebates to customers for energy efficiency clothes washers (residential and commercial) that also meet these agencies' water efficiency standards. SDG&E's June 1 application includes a variety of partnership activities, comprising approximately 10% of its non-EM&V budget.

SCE will continue seven current partnerships with local governments and add four new ones in 2006-2008. These include partnerships with counties and cities (e.g., Kern and Riverside Counties and City of Bakersfield) to provide energy information and education and facilities retrofits, partnerships for new construction assistance and emerging technologies demonstrations (e.g., California Community College system), among others. SCE has budgeted approximately $44 million for its local government partnerships program.

PG&E has taken a two-step approach to the development of its partnership programs. First, PG&E requested and reviewed program abstracts from potential local government partners and developed a short list of partners in early summer. PG&E received approximately 40 abstracts, and has identified 17 local government partnerships and three statewide government partnerships for its 2006-2008 partnership portfolio. Eight of them are continuations of 2004-2005 successful partnerships, including the statewide partnership with the University of California/California State University system to target government facilities in the large commercial, high tech and industrial process markets.

Local partnerships include the Silicon Valley Energy Partnership and the San Francisco Peak Energy Program. Both represent partnership efforts to achieve PG&E's electric and natural gas goals for residential and non-residential customers in those geographic regions. Each local government partnership will focus on the markets that offer the greatest opportunity for energy savings in their jurisdiction. The specific blend of markets and strategies will be determined for each local partnership once the competitive bid solicitation is completed, and specific budgets and energy goals will be developed at that time.

SoCalGas has also been exploring local partnership arrangements, and plans to continue collaborations with the Energy Coalition, Bakersfield/Kern County Energy Watch, the South Bay Cities Energy Efficiency Savings Center, and the Ventura County Regional Energy Alliance, among others. SoCalGas is allocating $12 million, or approximately $4 million per year for this purpose.

SoCalGas and PG&E will finalize all partnership plans once the competitive bid solicitations are complete, and submit those plans with their compliance filing. In their view, this sequence will avoid any overlap of program offerings or delivery mechanism and will ensure that the partnership arrangements appropriately complement the portfolio.

4.1.7. Co-Branding With the Climate Change Action Registry

The policy rules adopted in D.05-04-051 for 2006 and beyond direct the utilities to "explore with their advisory groups ways in which to co-brand with the California Climate Action Registry (Registry) that will encourage the accurate reporting of emissions in California," and describe how such co-branding will be supported through their proposed programs.¹⁶

Each utility reports that it is a member of the Registry and plans to incorporate co-branding efforts into its program offerings during implementation. SDG&E and SoCalGas identify the statewide marketing and outreach program and their own industrial and commercial program offerings as specific opportunities for providing information about the Registry to customers, and encouraging them to join the Registry.¹⁷ SCE also includes references to planned co-branding activities with the Registry in the descriptions of its proposed Industrial Energy Efficiency and Local Government Partnerships Programs.¹⁸ PG&E states that it plans to tailor co-branding efforts to each program during implementation. For this purpose, it will continue to develop the following strategies with further input from its advisory groups, along with others that may be suggested by advisory group members.¹⁹

· Non-utility implementers will be encouraged to join the Registry;

· All implementers will be provided training on the Registry and its programs, so that they can educate participants in energy efficiency programs about the Registry and the benefits of joining;

· Printed information materials on the Registry can be distributed to energy efficiency program participants;

· Programs that target large energy users can include a brief presentation to energy efficiency program participants about the Registry and the benefits of participation. Interested participants can be encouraged to sign up for one of the in-depth informational presentations that are conducted frequently by the Registry around the state, and

· Facilities to educate the public about energy efficiency (such as the Pacific Energy Center) can add displays about the Registry. Costs for these displays should be added to these programs.

4.1.8. Green Buildings Initiative

In July, 2004, Governor Schwarzenegger issued Executive Order S-20-04, also referred to as the "Green Buildings Initiative" or "GBI." Noting that commercial buildings utilize 36% of the state's electricity and account for a large portion of greenhouse gas emissions, the GBI directs the State to "commit to aggressive action to reduce state building electricity usage" by retrofitting, building and operating the most energy and resource efficient buildings by taking all cost-effective measures described in the Green Building Action Plan for facilities owned, funded or leased by the state.²⁰ The State is also urged to encourage cities, counties and schools to do the same.

More specifically, the GBI establishes a goal to increase State-owned building efficiencies by 20% (compared to the Title 20 and 24 non-residential standards adopted in 2003), through cost-effective energy efficiency measures and distributed generation technologies. These measures should include (but are not limited to) designing, constructing and operating all new and renovated state-owned facilities paid for with state funds as "LEED Silver" or higher certified buildings, as well as purchasing or operating Energy Star electrical equipment whenever cost-effective.²¹

The GBI solicits the active participation of government entities not directly under the Governor's direct executive authority, including the Commission, to actively participate in this effort. In particular, the GBI urges the Commission to apply its energy efficiency authority to support a campaign to inform building owners and operators about the compelling economic benefits of energy efficiency measures, and to improve commercial building efficiency programs "to help achieve the 20% goal." The Commission is required to submit a biennial report to the Governor commencing in September 2005, on progress towards meeting these goals.

In our energy efficiency rulemaking proceeding, R.01-08-028, the Assigned Commissioner gathered information on how currently authorized energy efficiency programs could be utilized to accomplish the goals outlined in the GBI and sought comments on how subsequent program design and funding might be modified to further support that initiative.²² As part of the planning process for the 2006-2008 program cycle, the utilities were directed to include GBI initiatives in their 2006-2008 Energy Efficiency program portfolios, based on further discussion with their advisory groups.

In developing their portfolio plans, the utilities have incorporated strategies to improve commercial building efficiencies into the portfolio offerings that will be implemented by the utilities themselves, third parties and through the partnership arrangements with local governments and other entities. Rather than establish a separate statewide program focused exclusively on commercial and/or state buildings, each utility has integrated the GBI initiatives into the portfolio plans in a manner that can be responsive to differing customer needs across the various market sectors.

SCE's programs to support the goals of the GBI include Retrocommissioning, Savings by Design, Sustainable Communities, and Education, Training and Outreach programs. These programs are designed to focus on the commercial and government sectors as well as other market sectors. SDG&E's programs include Building Operator Certification, San Diego Resource Center (Partnership with San Diego Regional Office), Savings by Design, and Sustainable Communities programs. PG&E's portfolio includes market-focused programs to support the GBI, such as Mass Market offerings to small businesses and the Targeted Market programs, particularly the Schools and Colleges, Office and Institutional Buildings, and Education and Training programs. Finally, SoCalGas' portfolio includes Building Operator Certification, Energy Efficiency Education & Training, Energy Efficiency Delivery Channel Innovation Program, Savings by Design, and Sustainable Communities programs.

Attachment 5 describes the utilities' GBI program offerings in greater detail, and presents tables with funding and projected savings levels over the 2006-2008 program cycle. As described in that attachment, and in addition to what has already been discussed, many of the utility program offerings will provide seminars, training, workshops and certification programs that educate building operators and facilities staff on how to incorporate energy efficiency practices and measures in their facilities. In addition, programs such as "Savings by Design," "Sustainable Communities Programs" and others that specifically focus on industrial, agricultural and commercial sectors will provide energy efficiency audit services and offer financial incentives for the purchase and installation of efficient equipment in both government and private buildings.

Attachment 5 also describes the statewide partnership programs with the University of California/California State University, the California Community Colleges and the California Department of Corrections that will offer incentives for retrofit and new construction projects, continuous commissioning and other initiatives to improve building efficiencies. The utilities are also developing a series of local government partnerships that will emphasize raising efficiency in local government facilities, as well as work to increase efficiency in businesses and homes. They are all increasing their efforts during 2006-2008 to support Code and Standards Enhancement Studies that promote the upgrade and enhancement to existing California building and appliance codes. Finally, the utilities anticipate that additional program services to support the GBI will also become available through the competitive solicitation process.

Overall, the utilities' portfolio plans will increase funding for GBI-related activities from approximately $170 million per year in 2004/2005 to $230 million per year during the 2006-2008 program cycle, for an increase of approximately 36% in annual program funding. The savings associated with these efforts over the 2006-2008 program cycle are projected at 526 MW, 2,843 GWh and 45,436 Mth, for all four utilities combined. Funding specifically targeted to state buildings is projected to increase by approximately 58%, from the current level of approximately $10 million to over $15 million per year over the 2006-2008 program cycle. The utilities estimate that these efforts will produce savings in state buildings of 23 MW, 135 GWh and 1,766 Mth, for all four utilities combined.

Attachment 5 presents additional information on GBI funding and associated savings, broken down between government buildings (Federal, State, Local) and private buildings (Commercial, Industrial, Agricultural).²³ The utilities will continue to report this type of information and work with Energy Division to develop the appropriate tracking mechanisms, so that the utilities, their advisory groups and Energy Division can assess whether the utility offerings and funding levels will meet the GBI efficiency improvement goals. This assessment will be included in Energy Division's biennial report to the Governor.

4.2. Competitive Bid Components and Evaluation Criteria

All four utilities plan to solicit bid proposals that will (1) enhance proposed program offerings through improved design and implementation, or (2) offer new program strategies and energy efficiency technologies designed to tap longer-term savings potential. Overall, SCE has proposed setting aside approximately 37% of total portfolio funding for this purpose over the three-year program cycle, for a total of approximately $250 million. For 2006, PG&E plans to solicit bids for a minimum of $49 million of the total 2006 budget, or a minimum of $173 million (20%) over the three-year funding cycle will be approximately 40-50%, on average. SDG&E and SoCalGas each plan to solicit third-party proposals for a minimum of 20% of their total portfolio funding, or approximately $51 million and $34 million over the three-year funding cycle, respectively.

We describe the portfolio components each utility will bid out, the bid solicitation process, and the evaluation criteria they will use in the following sections.

4.2.1. SCE

SCE proposes offering three unique types of bid solicitation: (1) Targeted, (2) Innovative Design for Energy Efficiency Applications (IDEEA) and (3) Innovative Design for Energy Efficiency (INDEE). SCE plans to conduct each of these solicitations during the latter months of 2005 to allow for program implementation as early as possible in 2006. For IDEEA and INDEE, SCE proposes conducting additional solicitations during the three-year program cycle.²⁴ We describe these solicitations further below.

4.2.1.1. Targeted Solicitation

During the planning process, SCE identified various program areas to target under its competitive bid solicitation, where performance could be enhanced through improved design and implementation. These are: appliance recycling, home energy efficiency surveys, new homes, comprehensive HVAC, retro-commissioning, industrial energy efficiency, agricultural energy efficiency, small business direct install and education, training and outreach.²⁵ The solicited enhancements may include greater outreach, improved penetration, improved coordination with other programs, or a creative delivery approach which may reduce ratepayer cost. In addition to improving cost-effectiveness, winning proposals under the targeted solicitation should also contribute to program implementation and design through new and innovative approaches. SCE has set aside approximately $215 million to fund winning bids in targeted solicitation over the three-year program cycle.²⁶

4.2.1.2. IDEEA and INDEE Solicitations

In addition to targeted solicitation, SCE proposes conducting a general solicitation seeking new program designs with potential to deliver cost-effective energy efficiency savings during the program cycle. SCE suggests that the overall IDEEA portfolio must provide cost-effective energy efficiency opportunities similar to the performance of its overall program portfolio. The winning bids must also provide installed energy savings in the years they are funded.

SCE proposes conducting two IDEEA solicitations in consecutive years beginning in 2005. Selected IDEEA program providers will be allowed up to two years to implement and complete their programs, but SCE requests that it be permitted to conclude any program sooner, or reduce its funding level, if it is not achieving appropriate results. Conversely, program funds may be increased for a particular IDEEA program if the design is so effective that it should be expanded, or "mainstreamed," into the larger program portfolio. SCE has proposed setting aside approximately $33 million to fund winning bids drawn from the IDEEA solicitations over the program cycle.²⁷

Under the INDEE solicitation, SCE will seek bids that place more emphasis on innovation and the promotion of promising technologies, than on current energy savings. More specifically, SCE will search for unique and newer energy efficiency technologies and/or very distinctive approaches to capturing cost-effective energy efficiency for the next generation of energy efficiency programs. SCE has set aside approximately $5.8 million to fund winning INDEE bids over the program cycle.²⁸

4.2.1.3. Bid Process and Evaluation Criteria

SCE proposes a bid process that incorporates the two-stage approach utilized during the 2004-2005 IDEEA solicitation. The bid process will begin with a pre-announcement sent to all energy efficiency providers, engineering firms, consultants, government organizations, and non-profit organizations. These organizations will be encouraged to share and forward program information to ensure widest coverage. SCE will also post an announcement on the targeted, IDEEA, and INDEE programs bidding process on its website, the Commission's website, and other energy efficiency forums as available.²⁹

SCE plans to start the sealed bid process with the issuance of a RFP, which will be sent to the list used for the announcement, as revised to reflect new parties and updated information received. The RFP will also be available for download on SCE's website. SCE proposes that prospective bidders be required to register by sending an e-mail to SCE before they submit a proposal in response to the RFP.

Due to the substantial interest the RFP is likely to generate, and the subsequently large volume of submissions, SCE proposes asking bidders to first submit a program abstract with technical documentation substantiating claimed energy savings. SCE program managers, analysts, and engineers will review the abstracts and make recommendations to the energy efficiency portfolio managers, based on Stage 1 review criteria. Selected abstracts will undergo a technical energy savings review from SCE's Design and Engineering group. Selected Stage I bidders will be notified of their eligibility to submit a detailed proposal based on the concepts of the abstract.³⁰

Stage 2 of the evaluation process will require bidders to submit full proposals electronically and in paper form. SCE proposes assigning evaluation teams typically consisting of program management, measurement, and engineering members, who will be charged with, among other things, assessing the cost-effectiveness of particular bids and rating them on a high to low scale. After the evaluation teams have completed their rating of the proposals, they will submit them to portfolio managers for determination of the program's sustainability. If a program is selected for implementation, any changes suggested by the portfolio managers or evaluation teams must be incorporated into the program design by the winning bidder before they will be accepted.

In evaluating Stage 1 abstracts, SCE will consider the target market, the proposed method(s) for achieving the program goals, the program goal metrics (e.g., energy savings for resource programs and cost-effectiveness), program innovation and program budget. For Stage 2, SCE proposes using the evaluation criteria and weighting of those criteria presented in Attachment 6.

4.2.2. PG&E

PG&E plans to issue competitive bid solicitations for virtually all areas of its energy efficiency portfolio that are expected to produce measurable energy savings. One exception is upstream lighting programs, as PG&E contends that it already has a successful program in this area and does not believe that there is any real potential for additional savings. In addition, in response to PRG recommendations, PG&E plans to exclude from competitive bidding certain activities within the Mass Market program that will be consistent statewide among the utilities. Instead, PG&E proposes that such activities be managed or coordinated by the utilities or through a single or small number of coordinated contractors.³¹ Nonetheless, PG&E expects to leave open for competitive bid proposals implementation strategies for services, or the selective provision of products within those statewide and upstream activities.

PG&E intends to issue RFPs in three different areas: (1) Targeted Markets, (2) Innovative Savings, and (3) Market Integrated Demand Side Management (MIDSM). The bids, once received, will be evaluated in a two-stage process similar in nature to that suggested by the other utilities.

PG&E will finalize the allocation to each area and market when it can better determine the extent to which it is able to meet its savings targets for competitively-bid third-party programs. Overall, PG&E will put to competitive bid a minimum of 20% of its total portfolio funding. PG&E expects that 45-55% of its portfolio would be open to competitive third party proposals.³²

4.2.2.1. Targeted Markets

PG&E intends to offer an RFP for Targeted Markets, where parties will bid programs targeting one or more of the following market sectors: mass market, agricultural and food processing, schools, colleges and universities, retail, heavy industry, medical, large commercial, hospitality, residential new construction, and high technology. In evaluating targeted markets proposals, PG&E will only compare like against like. Agricultural process proposals, for example, will not be compared against proposals targeting hospitals or schools.³³

For statewide programs and upstream activities within the mass market sector, PG&E will solicit proposals for implementation strategies for services or the provision of selected products. Examples include: (1) small commercial refrigerator/freezer maintenance and tune up services (2) direct install activities consistent with the statewide programs, (3) service delivery for small air conditioners (residential and small commercial, (4) new activities linking audits and direct install, and (5) new activities targeting boiler upgrades or replacement for multifamily or small commercial facilities.³⁴

In response to the Targeted Markets RFP, PG&E hopes to achieve greater market penetration, reduce costs, and minimize lost opportunities. PG&E intends to set aside approximately 70% of funds allocated for third-party bidding for Targeted Markets.³⁵

4.2.2.2. Innovative Savings and Market Integrated Demand-Side Management (MIDSM)

PG&E plans to offer two RFPs for Innovative Savings programs - one each in 2006 and 2007 - seeking programs with a focus on long-term, cost-effective savings. Because these activities will be new and untested, and may be expensive to implement in the short term, programs selected through these RFPs will be tested on a small scale before they are considered for implementation on a larger scale. PG&E proposes that approximately 20% of competitive bid funds be allocated to Innovative Savings programs.

PG&E also intends to offer a single MIDSM RFP, seeking programs that assist customers in choosing and implementing a package of demand side measures such as conservation, demand response, and self-generation. PG&E tentatively proposes to set aside 10 percent of third-party solicitation funds be set aside for MIDSM programs, though they note that this funding allocation is subject to change based on the responses received from the various RFPs. PG&E plans to hold this solicitation later in 2006, by which time it will have completed additional work on the development of this RFP in further consultation with the PRG.³⁶

4.2.2.3. Bid Process and Evaluation Criteria

Like SCE, PG&E proposes to evaluate bids through a two-stage process, in order to minimize the burden on third-party bidders while making sure that PG&E gets all of the information needed to select the most promising proposals. For the first stage, PG&E proposes that bidders only be required to submit summary information about their program proposals. These initial submittals will then be reviewed by PG&E, and the most promising proposals will then be moved on to Stage 2. At this time, bidders will be required to submit a fully developed proposal for further evaluation. In evaluating bids, PG&E intends to use the Stage 1 and Stage 1 evaluation criteria and weightings presented in Attachment 6.

4.2.3. SDG&E and SoCalGas

As described below, SDG&E and SoCalGas also propose to solicit competitive bids for targeted and innovative program ideas.

4.2.3.1. Targeted Solicitation

SoCalGas has developed 13 different concepts for its targeted bid solicitation, concentrating largely on residential and cross-cutting programs. For the residential segment, SoCalGas' solicitation will include requests for a mobile/manufactured home innovative outreach and measure installation program, a residential upstream central heating replacement program and a school-based residential energy efficiency program. Targeted non-residential market segments include small-medium industrial processors (e.g., food processors, metal fabricators and automotive customers) and purchasers of used foodservice equipment. SoCalGas' RFP for cross-cutting program concepts will solicit a coin-operated commercial clothes washing replacement program, a comprehensive upstream/midstream/downstream water heating replacement program, and an energy efficient equipment exchange program, among others.³⁷

SDG&E identifies specific areas for targeting solicitation, including: (1) a multi-family affordable housing retrofit program, (2) an advanced home renovations program, (3) an appliance recycling program, (4) a nonresidential technology demonstration program, (5) an HVAC training, sizing, and duct services program, (6) an upstream incentive program for distributors to stock high efficiency motors and HVAC systems, and (7) a school education program.

4.2.3.2. Innovative Program Idea Solicitation

The Innovative Program Idea solicitation will provide third-parties the opportunity to submit bids to test the market feasibility for newer energy efficiency technologies and innovative market approaches. This solicitation will seek new program designs that have a longer term potential for cost-effective energy savings, and may include commercialization/demonstration projects for emerging technologies. Results of this solicitation may override submittals for the targeted solicitation if they better address a customer segment and/or offer more portfolio innovation. The winning bidders will be allowed up to two years to implement and complete their programs.

4.2.3.3. Bid Process and Evaluation Criteria

SoCalGas and SDG&E also propose a two-stage evaluation approach, similar to the Stage 1 and Stage 2 process described for SCE in Section 4.2.1 above. Their supply management and energy efficiency staff (program managers, analysts, and engineers) will review the submitted Stage 1 abstracts, based on the criteria presented in Attachment 6. Selected Stage 1 bidders will be notified of their selection and will be asked to develop a full proposal based on the concepts in the abstract. Evaluation teams comprised of program management, marketing, and engineering members will be rank proposals from high to low using the evaluation criteria listed in Attachment 6, and make final bid selections.