Phase 3: Performance Incentives and Related EM&V

Based on the PHC statements and workshop comments, I believe that performance incentives for energy efficiency cannot be fully considered until the Commission resolves the issue of administrative structure for energy efficiency. Nonetheless, EM&V issues that relate to performance incentives irrespective of administrative structure can and should be addressed without delay. As discussed at the PHC, we can proceed to define the basis for evaluating the performance of energy efficiency programs (I refer to this metric as "performance basis") and adopt standardized procedures and protocols for measuring that performance basis.

The performance basis for energy efficiency programs designed primarily to replace more costly supply-side options (resource programs) will be different than those designed for other purposes (e.g., informational programs). Over time, it will be very useful to develop standardized EM&V procedures and protocols, including standardized performance basis, for all types of energy efficiency programs and during all phases of program implementation. As discussed at the PHC, a Framework Study that proposes a comprehensive approach to EM&V will be published by the end of February and posted on the Commission's Website.⁵ However, I believe it is prudent to bifurcate our efforts to address EM&V-related issues by first addressing those most directly related to performance incentive design. Irrespective of the Commission's determinations on administrative structure and incentives, we need to standardize the performance basis and measurement/verification protocols associated with resource programs for a range of other purposes, such as the ongoing assessment of energy savings potential, feedback and refinement of program design, as well as overall program evaluation.

In D.03-12-062, the Commission discussed its interest in developing an incentive mechanism for the energy efficiency component of energy procurement that is consistent with overall procurement goals and incentive policies. It was within this context that the Commission referred the evaluation of energy efficiency performance incentives to this proceeding.⁶ The priority for workshops on Incentives and Related EM&V should therefore be on: (1) defining the performance basis of programs in terms of net resource benefits, and (2) updating existing procedures and protocols for measuring that performance basis, generally referred to as load impact evaluation.

This is not to preclude discussion of performance basis for programs with other purposes or goals as their primary focus. However, Energy Division should allocate the workshop time in April and May in a manner that enables sufficient development of detailed consensus and non-consensus proposals for the performance basis and measurement protocols associated with resource programs. Sufficient time should also be set aside for workshop participants to develop estimates of the costs associated with the consensus and non-consensus measurement proposals. Where consensus cannot be reached on workshop issues, Energy Division staff should include a discussion of the pros and cons of each proposal in the Workshop Report, and present its recommendations.

As time permits, Energy Division may also schedule workshops during May 2004 to discuss and develop standardized approaches to evaluating the performance of programs that do not have energy savings as a primary goal, and include parties positions and Energy Division recommendations in the June 8, 2004 Workshop Report. In any event, as discussed below, I will hold a further PHC in July to schedule further work on EM&V so that the Commission can resolve remaining EM&V-related issues in time for the 2006 program planning cycle.

The schedule for this phase of the proceeding is as follows:

Energy Division Workshop Notice by March 11, 2004

with reference to relevant sections of

EM&V framework study

Pre-Workshop Comments and Proposals March 26, 2004

for Defining Performance Basis and

Associated Measurement Protocols

Energy Division Workshops April 2, 2004, with additional dates scheduled during May 2004, as needed.

Energy Division Workshop Report June 8, 2004

Presenting Consensus and Non-consensus

Positions and Energy Division Recommendations

Opening Comments on Workshop Report June 25, 2004

Reply Comments on Workshop Report July 9, 2004

As discussed above, the full EM&V Framework Study will be posted on the Commission's Website by the end of February 2004. However, only a subset of the report (generally referred to as "load impact evaluation") will be relevant to this phase of the proceeding. Energy Division will identify those specific sections in its Workshop Notice. Pre-workshop comments should focus on the relevant portions of the Framework Study and the workshop priorities discussed above. I encourage parties to communicate with each other prior to the filing of pre-workshop comments to identify areas where joint comments or proposals would be appropriate.

In late July 2004, I will hold a further PHC in this proceeding to discuss the next procedural steps regarding EM&V and incentives. At that juncture, we should have a final Commission decision on administrative structure per the schedule outlined for Phase 1. I will then be in a better position to schedule additional filings on incentives and EM&V and establish my target dates for issuing decisions on these issues during the second half of 2004.

⁵ The Framework Study is entitled: "Next Generation Evaluation Framework," and the primary authors are TecMRKT Works, Architectural Energy Corporation, and Megdal and Associates. This report will be posted on the Commission's Website at the following link: http://www.cpuc.ca.gov/static/industry/electric/energy+efficiency/rulemaking/index.htm

⁶ See the Commission's discussion under Section G. "Performance Incentives for Procurement Energy Efficiency Activities," D.03-12-062, mimeo., pp. 70-71.