3. Energy Division's Program Recommendations

Below, we briefly summarize Energy Division's January 31, 2001 program proposals. For all programs, Energy Division recommends extensive outsourcing of installation, outreach, and as many aspects of program administration as possible. Energy Division also recommends that all program evaluation activities be outsourced to independent consultants or contractors.

For each program type and utility distribution company, the table below presents Energy Division's recommended annual collections and budgets through the end of 2004, which is the sunset period of AB 970.²

Utility	Demand Responsiveness Budget ($ million)	Self Generation Budget ($ million)	Total Annual Budget ($ million)
PG&E	$3.0	$60.0	$63.0
SCE	$5.9	$32.5	$38.4
SDG&E	$3.9	$15.5	$19.4
SoCal	NA	$17.0	$17.0
Total	$12.8	$125.0	$137.8

3.1 Demand-Responsiveness Programs

Energy Division proposes three pilot programs to implement demand-responsiveness initiatives pursuant to AB 970. SDG&E is designated to administer the residential sector pilot, SCE to administer a small commercial sector pilot, and PG&E to implement an internet information test pilot reaching both residential and small commercial customers.

3.1.1 Residential Demand-Responsiveness Pilot Program

The residential pilot program proposed in the Energy Division report calls for installing remotely controlled thermostats using an internet-based communication link. This approach differs from existing "direct control" air-conditioning (A/C) cycling programs in that it uses internet technology as the means to communicate and monitor customer demand responsiveness. It also allows participants to maintain control over their equipment and even override the remote signal, if so desired, via the internet connection.

Energy Division recommends that the program be designed for a pool of 5,000 customers in SDG&E's service territory. Program participants would receive the equipment and installation free of charge from the utility. In addition, Energy Division recommends that the customer receive an incentive of $100 at the end of each year of program participation.³ The incentive would be reduced by $2 each time the default thermostat setting is overridden, although it would never be less than $0.

Under Energy Division's proposal, SDG&E would target three distinct customer groups: 1) residential customers whose average monthly electricity consumption is greater than 250 kWh; 2) residential customers residing in geographical areas in SDG&E's service territory known to have high electric consumption due to climate; and 3) customers residing in known limited- to moderate-income areas. Energy Division's preliminary estimates indicate that the program will save approximately $6.6 million over ten years (1.68 benefit-cost ratio).

3.1.2 Small Commercial Demand-Responsiveness Pilot Program

Energy Division recommends that 5,000 small commercial customers in SCE's service territory receive the same demand-responsiveness technology described above. These customers would be paid $250 at the end of each year of program participation. The incentive would be reduced by $5 each time the default thermostat setting is overridden.

SCE would administer the pilot and target commercial customers 1) with high average consumption in the summer, 2) with high consumption due to climate, and/or 3) located in small cities or rural areas. Energy Division estimates that the program will produce $13.1 million in savings over ten years (2.22 benefit-cost ratio).

3.1.3 Interactive Consumption and Cost Information For Small Customers Pilot Program

Energy Division recommends that PG&E contract with an independent web designer to develop a website that provides customer online access to historical energy bill information and presents information on tariff options, representative energy usage and cost information for common appliances, and other information to better support the needs of small customers. Energy Division proposes to reach 10,000 to 15,000 customers under this pilot, targeted to: 1) residential customers with monthly consumption of more than 250 kWh, 2) residential customers known to have swimming pools, 3) homes and small businesses in the San Francisco peninsula or in Silicon Valley, and/or 4) rural residences and small businesses.

Energy Division recommends that PG&E provide an incentive to a customer for actually logging onto the web site and accessing their own energy profile. The incentive could be in the form of a gift certificate of approximately $20 for a home improvement center, appliance store, or a particular product, such as a compact fluorescent lamp. Energy Division does not present a projection of expected energy savings in its report, due to the difficulty in generating such an estimate at this time.

3.2 Self-Generation Program

In its report, Energy Division defines "self-generation" as "distributed generation (DG) installed on the customer's side of the utility meter, which provides electricity for a portion or all of that customer's electric load." (Report, p. 5.) DG units sited on the utility-side of the customer's meter or owned by the distribution utility or a publicly-owned utility would not be eligible for incentives under Energy Division's proposal.

For the purpose of this program, Energy Division defines DG technologies as internal combustion engines, microturbines, small gas turbines, wind turbines, photovoltaics, fuel cells, and combined heat and power or cogeneration. A subset of these technologies is considered renewable and eligible for differential incentives, as required by § 399.15(b) paragraph (7), including wind turbines, photovoltaics and fuel cells. Diesel-fired DG resources and emergency or backup systems would not be eligible under the program.

Energy Division proposes to limit the AB970 initiatives to renewable self-generation technologies that are 30 kW or greater in capacity. The proposed program offers incentives of $4.50 per watt of installed on-site renewable generation capacity, up to a maximum of 50% of total installation costs. Non-renewable self-generation (of any capacity) would also be eligible under the program, but with a lower incentive: $1.00 per watt of on-site generation, up to 30% of total costs.

In addition, Energy Division recommends that the utilities be required to waive interconnection and standby fees for any self-generation units installed through this program, as well as through the CEC renewables buy-down program.

Energy Division estimates program costs at $125 million, and projects benefits of $1.12 billion over the life of the units (benefit-cost ratio of 9.98).