3. Discussion

Attachment 2 presents a summary of the consensus issues reached at the March 22, 2001 workshop. In the following sections, we discuss the reasoning behind our conclusions on these issues and others raised in comments, concentrating on the chief points of contention. ⁵

3.1 PY 2001 Shareholder Incentive Mechanism

In this proceeding, the utilities propose to retain and update the LIEE shareholder incentive mechanism adopted for PY 2000. As a context for our discussion of this proposal, we present a brief history of LIEE shareholder incentive mechanisms and a description of the proposed incentive design.

3.1.1 History of LIEE Shareholder Incentive Mechanism

Since 1990, the Commission has experimented with incentive mechanisms designed to encourage the utility to offer energy efficiency information and direct assistance equitably and without discrimination. As a result, the Commission has encouraged the utilities to expand LIEE services by authorizing funding for these programs and by rewarding utilities in modest amounts for their efforts. ⁶ Performance adder mechanisms were put in place by D.90-08-068 to apply to programs funded primarily for equity reasons, such as LIEE, or in which the link between programs and savings is difficult to measure. Performance adder mechanisms are similar to a "management fee" incentive. They generally calculate earnings by multiplying the amount of recorded program expenditures by some percentage, usually a fixed five percent.

Historically, the level of incentives for LIEE programs has averaged approximately $2 million per year for the four utilities combined. However, the performance adder mechanism applied to these programs has been modified over the years. Before PY 1995, utility earnings were based exclusively on program expenditures, subject to a minimum performance standard (MPS). The MPS was linked to program accomplishments in installing the "Big Six" mandatory measures, i.e., those that were required by Public Utilities (Pub. Util.) Code § 2790 at the time: 1) attic insulation, 2) caulking, 3) weatherstripping, 4) low flow showerheads, 5) water heater blankets and 6) door and building envelope repairs which reduce infiltration. After achieving a certain MPS, the utilities would receive 5% of actual expenditures on all "non-mandatory" measures, e.g., appliance replacement and energy education.⁷ The utilities were not allowed to earn on expenditures on Big Six measures or to shift funds from these mandatory measures to non-mandatory measures during this period.

By D.94-10-059, the Commission further refined the performance-based adder mechanism for LIEE by standardizing the MPS across utilities and adding an additional link to improve productivity. Specifically, the MPS was established at 75% of forecasted first-year energy savings from the mandatory measures under the program, with a true-up in the following Annual Earnings Assessment Proceeding (AEAP) to reflect actual program participation levels. If the utilities achieved this MPS, earnings would be calculated as 5% of expenditures on non-mandatory measures, adjusted by a factor based on the ability of the utility to reduce average costs relative to the previous year. This performance adder mechanism remained in effect through PY 1999.

Parties to the 1999 AEAP proposed an alternate performance adder mechanism in response to the passage of Assembly Bill 1393, which was signed by the Governor in October 1999. Among other things, this bill modified Pub. Util. Code § 2790 by removing the distinction between mandatory and non-mandatory measures. ORA, RESCUE, the utilities and others developed a joint recommendation to replace the current incentive mechanism with one that would provide incentives for all measures, as opposed to non-mandatory measures only. In approving the joint recommendation, the Commission stated: "This is recommended as a trial mechanism...for PY 2000 only. For PY 2001 and beyond, parties will work on and recommend a longer-term performance incentive mechanism." (D.00-09-038, mimeo., p. 30.)

3.1.2 PY 2000 Incentive Mechanism and Proposed Updates

The trial PY 2000 shareholder incentive mechanism modifies the performance adder mechanism approved in D.94-10-059 to reflect actual installations of measures, rather than a demonstration of efficiency calculated as a ratio of past year expenditures and savings to current year expenditures and savings. For measures that produce no energy savings, or have energy savings that are difficult to measure ("non-savings measures"), earnings are based on a fixed percentage of expenditures on these measures, similar to the pre-1995 performance adder mechanism. Non-savings measures include energy education, furnace repair and replacements, and weatherization outreach.

LIEE measures that produce measurable savings, referred to as "savings measures", are assigned a monetary incentive reward based on their relative contribution to life cycle energy savings. Savings measures include weatherization (e.g., insulation, caulking) and appliance replacements. Attachment 3 presents the per measure monetary rewards for each savings measure under the proposed shareholder incentive mechanism, by utility. Utility earnings are equal to the actual number of savings measures installed, multiplied by the incentive per measure.

The starting point for the calculation of incentive rewards is the target earnings level. The utilities propose to maintain the target adopted for the PY 2000 program, which is roughly 5% of expenditures on non-mandatory measures. For all four utilities combined, this target is approximately $1.4 million, broken down as follows:

PG&E: $723,500

SCE: 305,500

SDG&E: 100,497

SoCal 305,553

$1,435,050

The target earnings number for each utility is used to derive the incentive factors applied to actual measure installations (for savings measures) or to actual expenditures (for non-savings measures). It "bounds" the level of the incentive factors, but not the total amount of potential earnings. As discussed more fully below, the utility can earn more or less than targeted earnings depending on how many and what type of measures are actually installed. For non-savings measures, the utility can earn more or less than targeted earnings depending on the actual level of expenditures.

The first step in deriving the incentive factors is to allocate target earnings between savings and non-savings measures, which is 75/25 under the PY 2000 incentive mechanism. For SDG&E, those figures are $75,373 and $25,124, respectively. The 75% portion is further broken down between forecasted gas and electric earnings ($47, 930 and $27,443, respectively, for SDG&E).

To derive the incentive factor for one of SDG&E's gas measures, for example, the $47,930 gas target earnings figure is multiplied by the relative proportion that each measure is expected to contribute to total gas life cycle savings. For example, R-19 ceiling insulation is expected to contribute 4.10% to total gas savings under SDG&E's program. Therefore, $1,965 of target gas earnings ($47,930 x 4.10%) is allocated to this measure. Dividing $1,965 by the projected installation frequency for R-19 ceiling insulation (217) produces the incentive factor of $9.06 per unit installed. This incentive factor is then applied to the actual number of installations of R-19 ceiling insulation during 2001.

The utilities propose to retain this approach to shareholder incentives through 2001, using updated information to calculate the lifecycle savings for each measure. Lifecycle savings are calculated based on what the measure saves during the first year after installation (first-year savings), the measure life and the installation frequency, that is, the number of installations of that measure during the program year. The utilities propose to update the estimates of first-year savings used for PY 2000 shareholder incentives based on the most recent load impact evaluation for LIEE. They propose to update measure lives based on more recent information from the energy efficiency programs. They also recommend updating installation frequency forecasts based on actual activity in 2000 and expectations for 2001.

For education and furnace repair/replacement, the incentive factor is calculated very differently, and much more simply: The target earnings for these measures is divided by the budget for these measures. For SDG&E, this derives an incentive factor of 1.40% ($25,124 divided by $1,790,640), which is multiplied by actual expenditures on these measures during 2001.

3.1.3 Adopted PY 2001 Incentive Mechanism

During the March 22 Workshop, participants reached consensus on the utilities' proposal. They recommend that we maintain the status quo on incentive mechanisms for 2001 and reevaluate the mechanism for 2002.⁸ This consensus was reached after substantial discussion over the efficacy of the current incentive mechanism, alternatives that might be considered for the longer term, and a variety of implementation issues. ⁹

We have major concerns over extending the proposed incentive mechanism beyond 2000. It was intended as an experimental incentive, and not to be continued past 2000 without further evaluation and consideration of longer term alternatives. We understand why parties to this proceeding have not had an opportunity to more fully explore alternatives, given the myriad of issues related to the energy crisis that this Commission has asked them to address since the issuance of D.00-09-038. However, we do not concur with workshop participants that the most reasonable alternative at this time is to maintain the status quo while we wait for time and resources to address the issue of LIEE shareholder incentives more fully.

In their applications, the utilities proposed that the Commission adopt the same mechanism for PY 2001 "because the next year's program is a continuation of the PY 2000 program. "¹⁰ However, this is no longer the case. Subsequent to the workshop and development of the workshop report, we issued D.01-05-033 on May 3, 2001. By this decision, we directed the utilities to rapidly deploy LIEE programs over the coming months and allocated unspent carryover funds and new appropriations by the Legislature for this purpose.

In particular, we authorized a continuation of PY 2000 annual funding via the public goods charge ($60,706,088 for all four utilities combined) until further order of the Commission, along with: 1) a one-time amount of $45,829,220 in unspent carryover funding from prior program years, including interest, and 2) a one-time sum of $40,000,000 authorized through Senate Bill 5 from the First Extraordinary Session (Stats. 2001, ch. 7). In total, this represents approximately $147 million in program funding for the rapid deployment of LIEE programs in the coming months.

In order to mobilize resources most effectively, D.01-05-033 directs the utilities to leverage the programs provided through the network of service providers under the Low-Income Home Energy Assistance Program (LIHEAP), administered by DCSD. As explained in D.01-05-033, the utilities can do this in several ways. The utilities can purchase equipment and appliances in bulk and have a LIHEAP provider install them in eligible low-income homes within the service territory, along with additional weatherization measures provided by LIHEAP. The utilities can contract directly with a LIHEAP provider to deliver the LIEE program, so that the LIHEAP provider can use funds from both LIEE and LIHEAP to provide a comprehensive set of services. In addition, the utilities can enter into a memorandum of understanding with LIHEAP providers to complete units in a coordinated manner, using LIEE contractors to install measures not provided under LIHEAP, for example. The utilities can also use non-LIHEAP service providers, under certain circumstances.

Finally, by D.01-05-033 we added the following new measures to the LIEE program on a pilot basis: high efficiency air conditioners, duct sealing and repair, whole house fans, high efficiency water heaters, the installation of set-back thermostats and evaporative cooler maintenance.

In considering the utilities' proposal for PY 2001 incentives, we therefore have to evaluate whether or not the PY 2000 incentive mechanism is workable under the rapid deployment strategy adopted in D.01-05-033. We conclude that it is not. As described above, the derivation of per measure incentive factors requires the development of life-cycle savings for all of the measures offered under the program. The relative contribution of each measure to life cycle savings is a key determinant of the incentive factor per measure, and yet that information for the new measures is not on the record and may not even be available for these measures on a reliable basis at this time.¹¹ Even if we wanted to continue the PY 2000 incentive mechanism through 2001, we could not do so without further evaluation of life cycle savings for the new measures adopted by D.01-05-033, and a recalculation of all of the incentive factors proposed by the utilities in their filings, based on that evaluation.

In addition, we believe that the PY 2000 experimental mechanism is overly complicated and administratively burdensome to implement during a rapid deployment period, where many different entities will be mobilized to deploy these measures, very quickly, throughout the utilities' service territories. Moreover, to overlay this effort with an incentive mechanism that places a different monetary value on each particular measure installed is likely to work at cross-purposes to our goals for rapid deployment. In negotiating contracts with LIHEAP providers to best leverage resources, we do not want the utility motivated by the particular incentive factor in determining which measures to purchase in bulk to leverage LIHEAP resources, for example. Nor do we want these monetary factors to influence utility decisions on whether the LIHEAP program should provide the basic weatherization services in a particular area, and use the LIEE program to supplement with additional measures not provided under LIHEAP (or vice versa). However, such considerations are unavoidable with an incentive structure that produces differential incentives for each measure installed under LIEE.

In sum, we conclude that the PY 2000 incentive mechanism is not workable under the rapid deployment approach we recently adopted for the LIEE program. As the utilities point out in their filings, the performance adder mechanism that was in place for PY 1999 becomes the default if we do not extend the PY 2000 incentive mechanism beyond December 31, 2000. As described above, that version of the performance adder mechanism includes an adjustment based on the average costs of savings each year. During periods when program design is relatively stable, it makes sense to tie financial incentives to a reduction in average costs from one year to the next. However, such an adjustment does not make sense when program design radically shifts in size or design, as is currently the case. Accordingly, we will revert to a performance adder mechanism that does not include such an adjustment, similar to the one in effect prior to PY 1995.

Specifically, we will award incentives based on actual program expenditures and subject to a MPS. Historically, the MPS was based on achieving a percentage of expected first-year savings from the mandatory portion of the LIEE program, based on the installation goals presented by each utility in the proceeding. We believe it is still reasonable to require a certain threshold level of savings from the "Big Six" measures, even though there is no longer any distinction in the statute between those and other feasible LIEE measures. As we stated in D.94-10-059:

"More efficient appliances and other ...measures are important and lead to increased energy savings and reduced demand for the utilities, as well as lower bills for the participants. However, it is essential that our low-income ratepayers be afforded the building envelope efficiencies and amenities provided by basic weatherization measures."

Consistent with this philosophy, we articulated our intent that the "whole home" focus of LIEE should continue during rapid deployment, stating: "We are not advocating the rapid deployment of a few new measures without expanding the comprehensive weatherization work that is being done well now." (D.01-05-033, mimeo. p. 37.) Basing the MPS on all feasible measures would work at cross purposes with this objective by motivating the utilities to simply blanket their service territories with refrigerator or air conditioner replacements, and ignore the basic weatherization measures. Therefore, we will establish the MPS based on actual achievements in installations of the Big Six weatherization measures, and their associated first-year savings.

The expected savings from LIEE measures during PY 2001, as presented by the utilities in their applications and supplemental filings, are based on annual funding levels and program design in effect during PY 2000. However, as explained in this decision, funding for LIEE has been dramatically increased by D.01-05-033 in order to implement a rapid deployment of services in the coming months. Therefore, we believe it is reasonable to increase the MPS from 75% to 100% of the PY 2001 savings goals presented by the utilities in this proceeding. As in the past, this threshold of performance will apply to the first-year savings achieved from Big Six measures, as verified with actual program participation levels in the AEAP. Once this level is achieved, utilities are eligible for

performance adder incentives. Attachment 3 presents this MPS information, by utility:

	kWh	therms
PG&E	2,139,056	1,198,319
SCE	415,880	---
SDG&E	---	150,921
SoCal	---	458,580

The next issue to determine for a performance adder mechanism is whether the "management fee" should be applied to all program expenditures, or only those associated with the installation of the Big Six measures. In the past, the basis for the management fee (referred to as the "performance basis") has been program expenditures related only to "non-mandatory" measures, i.e., all measures or program activities other than the Big Six measures. The range of monetary rewards under performance adder mechanisms in the past, applying a 5% management fee to this performance basis, has been from $1.5 to approximately $3.0 million for the four utilities combined.

However, we see no reason to continue with this limited definition of performance basis, since the Big Six measures are no longer mandatory under the statute. Moreover, a performance basis that is limited to a certain subset of LIEE measures has the potential for encouraging expenditures on those measures even if focusing on other measures would more effectively promote the rapid deployment strategy adopted in D.01-05-033. Therefore, we will define the performance basis as total LIEE program expenditures, not including shareholder earnings. To retain target incentives within the range authorized in past years, we will adjust the management fee to 2%. Assuming that the utilities do meet the MPS and expend all authorized funding for rapid deployment by December 31, 2001, then target earnings would be approximately $3.0 million for the four utilities combined. We believe that a target level at the higher range of historical earnings for the LIEE program is reasonable, in view of the extra effort we are demanding of utility administrators to implement a much larger program, under an ambitious timeframe in the coming months.

We will continue our current practice of authorizing recovery of LIEE incentives over two, equal installments. Authorization for recovery of the first 50% of these incentives will be handled in the first AEAP proceeding in which the Commission conducts an assessment of actual program participation levels and expenditures for PY 2001. The remaining 50% of the earnings claim will be authorized for recovery in the AEAP proceeding following the completion of a first-year load impact study for PY 2001. Because of the significant change in program scope and design between PY 2000 and PY 2001, we adopt RESCUE's recommendation to require this study for PY 2001, even though current measurement protocols would allow us to "skip" a year. The load impact study will not affect the amount of earnings claim recovery, but rather will be used to guide future program development.

3.1.4 Ratemaking Treatment for PY 2001 Incentives

In its workshop comments, RESCUE states that LIEE shareholder incentives for PY 2001 should not be funded out of public goods charge (PGC) funds.¹² We recently clarified our ratemaking policy for shareholder incentives as they relate to non low-income energy efficiency programs. We believe that this policy is relevant in considering RESCUE's position.

By D.00-10-019, in response to Petitions For Modification of D.00-05-019, we clarified that PG&E, SDG&E and SCE were to fund PY 2001 shareholder incentives for electric energy efficiency programs out of energy efficiency PGC funds (rather than headroom) until the rate freeze was over for all electric utilities. For gas energy efficiency programs, we continued the longstanding policy that shareholder incentives should be recovered through rate increases, and not out of energy efficiency budgets. We also acknowledged that funding for shareholder incentives associated with LIEE has not come from program budgets in the past, and did not extend the ratemaking treatment for energy efficiency incentives to LIEE in that decision. However, we did not specifically address the ratemaking treatment for shareholder incentives we adopt today for the rapid deployment of LIEE.

We believe that present circumstances warrant the same treatment for LIEE incentives as those currently in effect for energy efficiency programs that serve non low-income customers, at least through the rapid deployment period. Adopting the same treatment at this time puts the non-low income and low-income electric energy efficiency activities on equal footing from a ratemaking standpoint for the electric utilities. To do otherwise would send the wrong message to utility administrators, e.g., that their efforts will result in monetary rewards if they deploy services to non low-income customers but not if they deploy those same services effectively to low-income customers during rapid deployment.¹³

Therefore, we authorize PG&E, SDG&E and SCE to fund incentives associated with electric LIEE program expenditures for PY 2001 out of the annual public goods charge LIEE budget authorized by D.01-05-033, consistent with current treatment for the non low-income side of the program.¹⁴ How these incentives will be recovered when the rate freeze has ended for all of the electric utilities should be considered as part of the post-2001 program planning process, or other appropriate forum (e.g., AEAP), as determined by the Assigned Commissioner. As currently provided by statute (Pub. Util. Code § 368), the rate freeze ends on March 31, 2002. LIEE program incentives for gas measures will continue to come out of gas rate increases using the same regulatory mechanisms as are used today.

As we stated in D.01-05-033, we anticipate the need to continue rapid deployment efforts through the end of 2001, and very possibly well into 2002. We directed the Assigned Commissioner, ALJ or Energy Division to initiate checkpoint meetings and other forums to monitor utility activities during the rapid deployment period, and directed utility administrators to submit regular status reports to aid us in our monitoring and program evaluation efforts. (D.01-05-033, mimeo. pp. 65-68.) We currently cannot predict at what exact point in time we will embark on the "post-2001" planning process. That will depend upon several factors, including the results of rapid deployment as reported in the status filings. However, we expect the issue of shareholder incentives for LIEE programs to be revisited in the future, either in the post-2001 program planning process, AEAP, or other procedural forum, as deemed appropriate by the Assigned Commissioner. Until that time, the performance adder mechanism adopted today will apply to the utility's LIEE programs.

3.2 Ratemaking Treatment For CARE Administrative Costs

Currently, the utilities are subject to different cost recovery treatment for CARE administrative costs. For PG&E and SCE, once we approve a budget for CARE administrative costs for the coming year(s), they are authorized to recover costs based on the adopted forecast, not actual expenditures. In contrast, SoCal and SDG&E receive balancing account treatment for CARE administrative costs, that is, they are authorized to recovery any undercollections (or credit any over-collections) of administrative costs through rate adjustments.

The history of CARE administrative costs sheds some light on this issue. By D.89-09-043, the Commission authorized the utilities to book administrative costs associated with the CARE program (formally referred to as the Low Income Ratepayer Assistance or "LIRA" program), into a new balancing account. During the initial years of the program, the utilities recovered all actual (or "booked") administrative costs, subject to an after-the-fact reasonableness review of expenditures:

"Administrative budgets cannot be guaranteed rate recovery until they are found to be reasonable. Thus, the utilities should book their administrative expenses to the LIRA balancing account....However, unlike the residential rate shortfall, administrative costs must be reviewed for reasonableness before they may be recovered in rates. Booked costs will be reviewed to ascertain whether they are indeed incremental or had been provided for in the utility's base rates. " (D.89-09-043, 32 CPUC 2d, 406, 413.)

As we explained in D.89-09-043, we adopted this ratemaking approach due to the specific circumstances associated with estimating LIRA administrative costs during program start-up. In particular, we did not have a reasonable basis for identifying administrative costs that would not have been incurred in the absence of LIRA, particularly since the utilities' lacked uniformity in their treatment of overhead expenses. We established a single audit team to perform reasonableness reviews for all utilities, on an ongoing basis during the first year. After uniform practices were established, the utilities were expected to "trend" recurring LIRA-administrative costs and recover them on a forecasted basis, consistent with the ratemaking treatment of other administrative costs. The utilities were directed to propose the inclusion of LIRA administrative costs in their administrative and general expenses "coincident with each utility's general rate case cycle." (Ibid. pp. 412-413, 416.)

Apparently, this directive was not applied consistently across the utilities in subsequent rate case cycles, which resulted in the disparity in ratemaking treatment described above. In its application, PG&E states that the trending approach it implemented in response to D.89-09-043 has made sense until now because CARE administrative costs have been relatively stable. However, PG&E and SCE argue that, beginning in 2001, it has been difficult to accurately forecast CARE administrative expenditures because of the energy crisis. Therefore, these utilities request that they be afforded the balancing account treatment that SDG&E and SoCal currently receive.

We agree that the current energy crisis, coupled with our directive to rapidly deploy low-income assistance programs over the coming months, does introduce some uncertainty over CARE administrative budgets. From this perspective, PG&E's and SCE's arguments for balancing account treatment of CARE administrative expenses have some merit.

However, we are not persuaded that a modification to current ratemaking treatment is warranted at this time. By D.01-05-033, we augmented funding for CARE outreach (including capitation fees) by $15 million to cover additional expenses during rapid deployment.¹⁵ In doing so, we believe that we have addressed the fundamental concern of PG&E and SCE, i.e., that current administrative budgets do not reflect the need for expanded CARE outreach. Moreover, we note that forecasting errors under the ratemaking approach in place for PG&E and SCE also work to the advantage of the utility during periods when actual CARE expenditures are less than anticipated. Without a comparison of actual versus forecasted CARE administrative costs over the last several years, we cannot conclude that these utilities will be financially disadvantaged if we continue the current ratemaking treatment for CARE administrative expenses during PY 2001 rapid deployment, particularly with the augmented funding approved by D.01-05-033.

Neither PG&E nor SCE acknowledge that a reasonableness review would be the ratemaking corollary to such balancing account treatment, as discussed in D.89-09-043. SCE mentions this issue only in passing, stating that "the Commission could adopt a reasonableness test for the CARE administrative costs balancing account."¹⁶ PG&E's proposed CARE Preliminary Statement does not contain any provision for a reasonableness review. In contrast, SDG&E's CARE Preliminary Statement acknowledges the annual reasonableness review that must accompany balancing account treatment, for both gas and electric expenditures.¹⁷ In addition, these utilities are silent on the issue of how their proposed balancing account rate recovery would be accomplished while they are both still subject to an electric rate freeze.

In sum, we believe that the current ratemaking approach for CARE administrative costs is reasonable and should be continued at this time. We may revisit this issue during the post-PY 2001 planning process.

3.3 Compliance Information Filed Pursuant to D.00-09-036

In compliance with D.00-09-036, the utilities' applications present information on the stand-alone attic ventilation pilot, the CARE outreach pilot and utility procedures for monitoring program quality, cost-efficiency and customer satisfaction. We discuss this information in the following sections.

3.3.1 Attic Ventilation Pilot

Historically, the utilities' weatherization program restricted the installation of additional attic ventilation only to those homes that received attic insulation, but had insufficient attic ventilation. The Low-Income Advisory Board asked the Commission to direct utilities to change this practice, and to permit the installation of attic ventilation as a "stand alone" measure.

By Resolution E-3586, dated January 20, 1999, the Commission ordered SDG&E and PG&E to conduct a pilot program (beginning June 1, 1999) which would test the feasibility and cost effectiveness of installing attic ventilation as a stand-alone measure. SDG&E and PG&E were directed to track the costs, energy savings, number of call backs and complaints, and other information.

To isolate the effects of stand-alone attic ventilation, the utilities must identify homes that have already received LIEE measures in the past (but not attic venting), and then install only attic venting. Both SDG&E and PG&E report that they have had difficulty in identifying low income households that meet this criteria. Moreover, PG&E reports that the pilot was delayed due to the La Nina climatic conditions in northern California in the early fall of 1999 and well into 2000.

At this time, PG&E has installed attic ventilation in 250 homes, and SDG&E has completed 88 homes. Both PG&E and SDG&E are measuring energy use changes and tracking other information on the pilot for a full 12-month period. They plan to report their findings and recommendations during 2002.

SDG&E and PG&E should continue to monitor pilot results and report their findings and recommendations by May 1, 2002 in this proceeding, or successor proceeding.

3.3.2 Tracking CARE Outreach Pilot

By Resolution E-3601, issued June 3, 1999, the Commission approved a CARE outreach pilot designed to solicit new and innovative approaches toward identifying and enrolling hard-to-reach and/or under-served low-income customers that are eligible for CARE rate discounts. In 1999, public input meetings were held by the utilities throughout California to solicit comments on the content of a joint Request For Proposals (RFP) to implement the pilot. The utilities issued a joint RFP in Spring, 2000, selected contractors in May 2000 and began work in June 2000. Together, 25 contractors are participating in the pilot. The proposed statewide outreach goals are 220,114, the proposed statewide enrollment goals are 37,069, and the funding is $909, 379 (out of a total allocation of $950,000).

To track pilot results, the utilities will identify those methods that achieved the proposed outreach and enrollment goals. This will include evaluating the effectiveness and cost (per applicant) of the methods, including customer reaction. The utilities will then also sort the contractors' methods by type, how often used and whether the potential benefits are short-term or long-term. The assessment will indicate which methods may generate the greatest increase in CARE enrollment per dollar expended. The utilities will also identify which methods can be successfully implemented by the utility versus those that are better suited to third party implementation. Because the results may help to identify subsegments of the low-income ratepayers that are eligible, but not participating in CARE, they will also try to link the pilot findings with Phase II of the Needs Assessment Study.

The utilities reported preliminary results of the outreach pilot at the March 14, 2001 Workshop on CARE Outreach in this proceeding.¹⁸ The final report will discuss each of the proposed outreach and enrollment methods tested during the pilot and summarize pertinent customer feedback about third party and/or utility CARE outreach and enrollment practices. It will contain quantitative comparisons of actual-to-proposed goals and costs (overall and per participant). The report will also present qualitative assessments on the successes and challenges encountered during the pilot, expected and unexpected results, and lessons learned.

We believe that this report will be very valuable to the utilities, third party service providers and the Commission as we move forward with rapid deployment in the coming months. We direct the utilities to file the final report by September 1, 2001, and to serve it on all appearances and the state service list in this proceeding. In order to ensure that this report is available to service providers in the field as soon as it is available, the utilities should also provide copies of this report to LIHEAP agencies, community organizations and other contractors that they are working with to deploy low-income assistance programs during PY 2001. In addition, Energy Division should post the report on the Commission's website.

3.3.3 Program Monitoring and Evaluation Procedures

Per D.00-09-036, the utilities summarized the procedures currently in place for monitoring program quality, cost-efficiency, and customer satisfaction. These consist of various inspection and training procedures, complaint resolution and tracking procedures, customer satisfaction surveys, verifications of contractor licenses and visits to subcontractors' offices, among others.

We find that the utilities have complied with the directives of D.00-09-036 and take no further action on program monitoring and evaluation for PY 2001.