10. Comments on Draft Decision

The draft decision of ALJ Gottstein on this matter was mailed to the parties in accordance with Public Utilities Code §311(g)(1) and Rule 77.7 of the Commission's Rules of Practice and Procedure. Comments were filed on September 6, 2005 by ConSol, County of Los Angeles, CCSF, TURN, ORA/TURN (joint comments), PG&E, Proctor, NRDC, jointly by SDG&E and SoCalGas, SCE and WEM. Reply comments were filed on September 12, 2005 by CCSF, jointly by ORA and TURN, PG&E, NRDC, SCE and jointly by SDG&E and SoCalGas.

In response to these comments, we have made a number of clarifications and corrections to the decision text, tables and attachments. Our discussion in Section 8.3 and 8.8 reflect the major areas of modifications to the draft decision, namely, with respect to the process by which we will address the issues related to the definition of peak demand, the E3 calculator and avoided cost updating.

There are other proposed changes to the draft decision that we do not adopt, based on our careful consideration of the issues raised by them and the reply comments. One in particular warrants some further discussion. We do not adopt the proposal of NRDC and CCSF to authorize in today's decision the counting of "embedded energy savings" in reducing water usage towards the 2006-2008 savings goals. As NRDC explains it, when energy efficiency programs save water, the only associated energy savings that are currently "counted" are those saved due to reduced on-site water heating. However, NRDC quotes a recent CEC study that indicates that saving water also saves substantial amounts of energy associated with water use efficiency, due to reduced pumping, treatment and wastewater treatment. It is these upstream or "embedded" savings that NRDC and CCSF argue should also explicitly count towards the savings goals.

We have no record in this proceeding to address the merits of this proposal, as it was not presented for our consideration in the CMS documents or in comments on that document. As a procedural matter, therefore, we believe that it is problematic to consider the counting of embedded energy savings based solely on the very brief comments presented by NRDC and CCSF on the draft decision. Moreover, the issue of counting the embedded savings associated with water has broader implications for energy efficiency policy that should be considered. In particular, it raises the issue of how far beyond the site-specific end-use (water heating or any other) we should extend the definition of "energy efficiency" to capture upstream reductions in energy inputs. There are also significantly new EM&V-related issues associated with this approach to defining energy savings that we would need to consider. Moreover, even if we determined that these types of upstream or embedded savings should be counted in the future, it seems to follow that before we start counting them towards specific numerical goals, the potential studies underlying those goals would need to be broadened to consider embedded savings potential as well.

At the same time, assuming that the value of embedded energy savings in water efficiency is substantial, then we should explore the issues raised above in a forum that provides for their full consideration with adequate notice to all interested parties. As NRDC points out, the type of policy clarification it seeks with respect to water efficiency measures is similar to clarifications provided by D.05-04-051 in R.01-08-028 with respect to the eligibility of solar water hearings as an energy efficiency measure. We believe that the energy efficiency rulemaking, where we address policy rules and definitions for energy efficiency applications on a generic basis, is the appropriate forum for considering these embedded energy savings issues. Consistent with the procedures we have established for updating those rules and definitions,¹⁶⁹ we will direct the Assigned Commissioner to explore the issue of counting embedded energy savings associated with water efficiency by informal or formal procedural vehicles in our rulemaking proceeding, as she deems appropriate, in order to fully address the issues associated with the NRDC/CCSF proposal. We recognize that there are many tasks and priorities for the coming weeks and months set forth in today's decision, and therefore leave to the Assigned Commissioner to determine the appropriate schedule for considering this issue further.