4. Comments on Draft Decision

Rule 77.7(f)(9) of the Commission's Rules of Practice and Procedure provides in relevant part that:


"...the Commission may reduce or waive the period for public comment under this rule...for a decision where the Commission determines, on the motion of the party or on its own motion, that public necessity requires reduction or waiver of the 30-day period for public review and comment. For purposes of this subsection, "public necessity" refers to circumstances in which the public interest in the Commission adopting a decision before expiration of the 30-day review and comment period clearly outweighs the public interest in having the full 30-day period for review and comment. "Public necessity" includes, without limitation, circumstances where failure to adopt a decision before expiration of the 30-day review and comment period...would cause significant harm to public health or welfare. When acting pursuant to this subsection, the Commission will provide such reduced period for public review and comment as is consistent with the public necessity requiring reduction or waiver."

We balance the public interest in quickly addressing these compliance matters, in order to further rapid deployment of low-income programs during the current energy crisis, against the public interest in having a full 30-day comment cycle on the proposed amendment. We conclude that the former outweighs the latter. A reduced period for review and comment balances the need for parties' input with the need for timely action.

Comments were filed on by .

Findings of Fact

1. The PY 2001 LIEE program adopted by D.01-05-033 differs from the one authorized for PY 2000 in several ways. First, budget authorization is greatly expanded through the use of unspent carryover funding and funds appropriated by the Legislature. Second, D.01-05-033 authorizes several new LIEE measures, including the replacement of inefficient air conditioners. Third, D.01-05-033 adopts a rapid deployment strategy that requires the utilities to specifically leverage programs provided through the network of service providers under the LIHEAP program.

2. The LIEE incentive mechanism adopted for PY 2000 modifies previous performance adder mechanisms to reflect actual installations of all measures, rather than a demonstration of efficiency calculated as a ratio of past year expenditures and savings to current year expenditures and savings. It also eliminates the requirement of achieving a certain minimum performance standard with respect to basic weatherization measures, before any incentives would be awarded.

3. The LIEE incentive mechanism adopted for PY 2000 includes per measure incentive factors. The derivation of those factors requires the development of life-cycle savings for all of the measures offered under the program.

4. The PY 2000 LIEE incentive mechanism could not be applied to PY 2001 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.

5. Life cycle information for the new measures adopted by D.01-05-033 is not on the record and may not even be available for these measures on a reliable basis at this time.

6. The LIEE incentive mechanism adopted for PY 2000 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.

7. An incentive mechanism that places a different monetary value on each particular measure installed, such as the PY 2000 mechanism, may work at cross purposes with the Commission's goals for rapid deployment.

8. The performance adder mechanism in place for PY 1999 included an adjustment based on the average costs of savings each year. Such an adjustment is not appropriate when program design radically shifts in size or design, as is the case for PY 2001.

9. The performance adder mechanism in place before PY 1995 did not include an adjustment based on the average costs of savings each year, but did include a MPS related to basic weatherization measures.

10. Adopting a performance adder mechanism for PY 2001 that includes a MPS related to basic weatherization measures is consistent with the policies articulated in D.01-05-033.

11. Since the development of expected savings from basic weatherization measures during PY 2001, as presented in the utilities' applications, funding for PY 2001 activities has been dramatically increased for rapid deployment.

12. 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 may more effectively promote the rapid deployment strategy adopted by D.01-05-033.

13. By D.01-05-033, the Commission requires the utilities to implement a much larger LIEE program than in prior years, under an ambitious timeframe.

14. A management fee of 2% on total LIEE program expenditures would approximate the upper range of LIEE earnings in the past, when the performance basis was based on savings from basic weatherization measures ("mandatory measures") and the management fee was 5% of expenditure on non-mandatory measures.

15. As described in this decision, adopting a different ratemaking treatment for PY 2001 LIEE shareholder incentives from that approved for non low-income energy efficiency programs would send inconsistent monetary signals to utility administrators. This, in turn, could work at cross purposes with the Commission's goals for rapid deployment.

16. By D.89-09-043, the Commission articulated its expectation that all utilities would trend recurring CARE administrative costs and recover them on a forecasted basis, consistent with the ratemaking treatment of other administrative costs. However, the ratemaking treatment for CARE administrative expenditures evolved differently among utilities during their subsequent general rate cases. PG&E and SCE recover CARE administrative expenses on a forecasted basis, whereas SDG&E and SoCal recover them via balancing accounts, subject to after-the-fact reasonableness reviews.

17. By D.01-05-033, the Commission augmented funding for CARE outreach by $15 million to cover additional administrative costs during rapid deployment that were not budgeted.

18. Although CARE administrative costs for PY 2001 may be more difficult to forecast than in recent years, it does not necessarily follow that SCE and PG&E will be financially disadvantaged by continuing current ratemaking treatment for these costs. As discussed in this decision, the forecasted amounts have recently been augmented by additional funding per D.01-05-033. In addition, the forecasting errors that may work to PG&E's and SCE's disadvantage for PY 2001 may have worked to their advantage in prior years.

19. PG&E and SCE's proposal for balancing account ratemaking does not include the requisite, after-the-fact, reasonableness review. PG&E and SCE's proposal also fails to address the issue of how their proposed balancing account rate recovery would be accomplished while they are both still subject to an electric rate freeze.

20. The information presented by the utilities with regard to the stand-alone attic ventilation pilot, CARE outreach pilot and program monitoring and evaluation procedures complies with the directives of D.00-09-036.

21. By D.01-03-028 in R.98-07-037, the Commission adopted the interim method for calculating CARE penetration rates that appears in the utilities' compliance applications.

Conclusions of Law

1. The PY 2000 LIEE incentive mechanism is not workable under the rapid deployment strategy adopted for PY 2001 by D.01-05-033.

2. For PY 2001 and until further order of the Commission, the LIEE incentive mechanism described in this decision is reasonable and should be adopted.

3. PG&E, SDG&E and SCE should 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 non low-income energy efficiency programs. How these incentives will be recovered when the rate freeze will have ended for all of the electric utilities should be considered as part of the post-2001 program planning process, AEAP, or other appropriate forum as determined by the Assigned Commissioner. LIEE program incentives for gas measures should continue to come out of gas rate increases using the same regulatory mechanisms as are used today.

4. Current ratemaking treatment 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.

5. SDG&E and PG&E should continue to monitor the results of the stand-alone attic ventilation pilot and report their findings and recommendation by May 1, 2002.

6. As discussed in this decision, the utilities should jointly file a final report on the CARE outreach pilot by September 1, 2001 and 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.

7. This proceeding should remain open to monitor the rapid deployment of low-income assistance programs, pursuant to D.01-05-033.

8. The period for public review and comment on the draft decision should be reduced, pursuant to Rule 77.7(f)(9).

9. In order to move forward with the shareholder incentive mechanism and reporting requirements adopted herein, this order should be effective today.

ORDER

IT IS ORDERED that:

1. Beginning with program year (PY) 2001 and until further order of the Commission, the Low-Income Energy Efficiency (LIEE) incentive mechanism adopted for PY 2000 by Decision 00-09-038 for Pacific Gas and Electric Company (PG&E), San Diego Gas and Electric Company (SDG&E), Southern California Edison Company (SCE) and Southern California Gas Company (SoCal) shall be replaced with the following:

2. As discussed in this decision, PG&E, SDG&E and SCE shall 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 non low-income energy efficiency programs. The issue of how these incentives should be recovered after the rate freeze ends for all of the electric utilities shall be considered as part of the post-2001 program planning process, AEAP, or other appropriate forum as determined by the Assigned Commissioner. LIEE program incentives for gas measures shall continue to come out of gas rate increases using the same regulatory mechanisms as are used today, e.g., rate adjustments in the Biennial Cost Adjustment Proceeding.

3. SDG&E and PG&E shall jointly file a report on the results of the stand-alone attic ventilation pilot and their recommendations by May 1, 2002 and serve it on all appearances in this proceeding, or its successor proceeding.

4. PG&E, SDG&E, SCE and SoCal shall jointly file a final report on the California Alternate Rates For Energy outreach pilot by September 1, 2001 and serve it on all appearances and the state service list in this proceeding, or its successor proceeding. They shall also provide copies of the report to agencies for the Low-Income Home Energy Assistance Program, community-based organizations and other contractors that they are working with to deploy low-income assistance programs during PY 2001. In addition, Energy Division shall post the report on the Commission's website.

5. This proceeding shall remain open to monitor the rapid deployment of low-income assistance programs, pursuant to Decision 01-05-033.

This order is effective today.

Dated , at San Francisco, California.

Attachment 1

(Acronyms/Abbreviations)

Abbreviation Meaning

AEAP Annual Earnings Assessment Proceeding

ALJ Administrative Law Judge

CARE California Alternate Rates For Energy

D. Decision

DCSD Department of Community Services and Development

LIEE Low-Income Energy Efficiency

LIHEAP Low-Income Home Energy Assistance Program

LIRA Low-Income Ratepayer Assistance

MPS minimum performance standard

ORA Office of Ratepayer Advocates

PGC public goods charge

PG&E Pacific Gas and Electric Company

PHC prehearing conference

PY program year

R. Rulemaking

RESCUE Residential Service Companies' United Effort

RFP Request For Proposals

SCE Southern California Edison Company

SDG&E San Diego Gas & Electric Company

SoCal Southern California Gas Company

(END OF ATTACHMENT 1)

Attachment 2

SUMMARY OF CONSENSUS REACHED

AT MARCH 22, 2001 WORKSHOP

· Participants at the workshop agreed that the Commission should maintain the status quo on incentive mechanisms for 2001 and reevaluate the mechanism for 2002.

· Participants at the workshop agreed that the shareholder incentives for weatherization measures that are installed by linear feet or square footage (e.g. caulking, weatherstripping and insulation) should not be based on the amount of a measure that is installed but rather on a per-dwelling basis.

· Participants at the workshop agreed that the utilities should be awarded dollar for dollar recovery of administrative expenses incurred for any new California Alternate Rate for Energy outreach efforts that the Commission may order.

· Participants at the workshop agreed that the Commission should remove fund shifting prohibitions and instead permit fund shifting between all measures in the utilities' program year (PY) 2001 Low Income Energy Efficiency programs.

· Most of the workshop participants agreed that an independent load impact analysis should not be ordered for PY 2001.

(END OF ATTACHMENT 2)

See CPUC Formal File for Attachment 3

Proposed PY 2001 Shareholder Incentives

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