BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Transcription

1 BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA Application of Southern California Edison Company (U 338-E) for Approval of Energy Efficiency Rolling Portfolio Business Plan A (Filed January 17, 2017) And Related Matters A A A A SOUTHERN CALIFORNIA EDISON COMPANY S (U 338-E) FINAL COMMENTS ON ENERGY EFFICIENCY ROLLING PORTFOLIO BUSINESS PLANS FADIA KHOURY JANE LEE COLE Attorneys for SOUTHERN CALIFORNIA EDISON COMPANY 2244 Walnut Grove Avenue Post Office Box 800 Rosemead, California Telephone: (626) Facsimile: (626) Jane.Lee.Cole@sce.com Dated: September 25, 2017

2 SCE S FINAL COMMENTS ON ENERGY EFFICIENCY ROLLING PORTFOLIO BUSINESS PLANS TABLE OF CONTENTS Section Title Page I. INTRODUCTION...1 II. DISCUSSION...2 A. Overview Background and Information Supporting SCE s Energy Efficiency Business Plan SCE s Energy Efficiency Business Plan Guiding Principles Organization of SCE s Energy Efficiency Business Plan Comments...7 B. SCE s Proposed Portfolio in its Business Plan is Reasonable SCE s Forecast Budget in its Business Plan is Reasonable and SCE has Provided Sufficient Budget Detail SCE s Proposed Portfolio in its Business Plan is Cost- Effective SCE s Proposed Portfolio in its Business Plan Achieves the Commission s Savings Goals for SCE...11 C. The IOU PAs Statewide Program Proposals are Compliant with Commission Directions, Reasonable and Should Be Adopted The IOU PAs Statewide Program Proposals are Compliant with D LGSEC s Proposal for Statewide Administration of LGPs Should Be Rejected Because SCE is Already Addressing the Issues Identified by LGSEC...21 D. SCE s Third-Party Solicitation Proposal is Compliant with Commission Direction, Reasonable and Should be Adopted SCE s Third-Party Solicitation Proposal Complies with the Requirements in D All Third-Party EE Contracts Should Not Be Approved Through Advice Letters...31 i

3 SCE S FINAL COMMENTS ON ENERGY EFFICIENCY ROLLING PORTFOLIO BUSINESS PLANS TABLE OF CONTENTS Section Title Page 3. The Commission Should Permit the PAs to Extend Existing Third-Party Contracts that are Set to Expire The Commission Should Permit SCE to Count EE Savings From Alternative EE Procurement Mechanisms Toward Achieving Its EE Goals...33 E. SCE s Metrics Proposal is Reasonable and Should be Adopted...34 F. The Commission Should Establish a Policy for EE/DR Integration Before Requiring Implementation...35 G. Additional Issues SCE s Business Plan Complies with Requirements for EM&V in D CEE Incorrectly Asserts that PA EE Portfolios Should be Responsible for Creating Jobs Additional Information Regarding Strategic Energy Management (SEM) Detailed Review of the Annual Budget Advice Letters by CAEECC Is Not Necessary...40 III. CONCLUSION...41 ii

4 BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA Application of Southern California Edison Company (U 338-E) for Approval of Energy Efficiency Rolling Portfolio Business Plan A (Filed January 17, 2017) And Related Matters A A A A SOUTHERN CALIFORNIA EDISON COMPANY S (U 338-E) FINAL COMMENTS ON ENERGY EFFICIENCY ROLLING PORTFOLIO BUSINESS PLANS I. INTRODUCTION Pursuant to, and in compliance with, the Administrative Law Judges (ALJs) Ruling Denying Motions for Evidentiary Hearings and Testimony, But Providing for Briefs, issued on July 25, 2017, and ALJs Ruling Clarifying July 25, 2017 Ruling, And Denying In Part, Pacific Gas And Electric Company s Motion To Amend Its Application (together, the Rulings) issued on August 4, 2017, Southern California Edison Company (SCE) respectfully submits its Final Comments on Energy Efficiency Rolling Portfolio Business Plans ( Final Comments ) in this proceeding. 1 In these Final Comments, SCE summarizes its Business Plan application, along 1 SCE also submits as Attachment 1 and Attachment 2, two corrections it made to its Amended Business Plan which were previously served on the parties to the proceeding but were not filed or made part of the record. Since evidentiary hearings will not occur in this proceeding, SCE is attaching these documents so that they can become part of the record in this proceeding. 1

5 with the supplemental information provided throughout this proceeding, and demonstrates that SCE s Business Plan application meets the requirements established by the California Public Utilities Commission (Commission or CPUC) and therefore should be approved expeditiously so that SCE can begin to implement the plan. II. DISCUSSION A. Overview The Commission has stated that the objectives of implementing the Rolling Portfolios are to: (1) avoid the disruptions to programs caused by the stop/start nature of current method of extending energy efficiency (EE) portfolios on a year-to-year basis, (2) reduce administrative burdens and other costs for the Commission, administrators, and program implementers, compared to the current triennial review process, and (3) facilitate Program Administrator (PA) focus on longer-horizon projects and implementers investments in long term business plans. 2 A key component of the Rolling Portfolio is each PA s EE Business Plan, which explains at a high level of abstraction how PAs will achieve the goals of the Commission s strategic plan; leads to a Commission guidance decision adopting the business plan and setting budget expectations to be more fully developed in annual budget filings Background and Information Supporting SCE s Energy Efficiency Business Plan Consistent with the Commission s objectives, SCE s vision for its EE portfolio from 2018 through 2025, as articulated in its Business Plan, 4 is to continue to achieve costeffective energy savings, expand innovative EE solutions, and drive toward market 2 See R , Order Instituting Rulemaking Concerning Energy Efficiency Rolling Portfolios, Policies, Programs, Evaluation, and Related Issues, dated November 21, 2013, pp See D , Decision Re Energy Efficiency Goals for 2016 and Beyond and Energy Efficiency Rolling Portfolio Mechanics, p See A , SCE s Amended Energy Efficiency Rolling Portfolio Business Plan For , February 10,

6 transformation. 5 In support of this vision, SCE s proposed Business Plan has been influenced by its own internal analysis and Commission guidance. In addition, a hallmark of implementing the rolling portfolio process is the deep stakeholder collaboration which has resulted in a robust exchange of ideas among the Commission staff, the California investor-owned utilities (IOUs), stakeholders in the industry, and intervenors. This collaboration was facilitated by the California Energy Efficiency Coordinating Committee (CAEECC) which was authorized by D Such stakeholder engagement included participation in the CAEECC 6 collaboration process, through which SCE actively participated in 18 coordinating committee meetings, 14 subcommittee meetings, and 11 workshops and working group meetings. The stakeholder collaboration informed SCE s Business Plan and supporting proposals. SCE considered various stakeholder input, and its Business Plan sought to reflect the best ideas and balance diverse views among stakeholders. In addition, as a result of the stakeholder collaboration and Commission guidance, SCE maintains that a substantial record was developed in this proceeding to inform the Commission s decision in this proceeding. For example, SCE filed four exhibits and nineteen appendices to support its EE Business Plan application. 7 While several parties protested SCE s Business Plan application often expressing differing views on the same issues SCE provided timely responses to each protest to explain its positions. 5 See A , SCE s Amended Energy Efficiency Rolling Portfolio Business Plan For , February 10, 2017, p CAEECC was established in D and provides for stakeholder input into the development of the PAs' EE Business Plans, Implementation Plans, and related matters. The CAEECC-enabled collaboration process was instrumental in the development of the content in the PA Business Plans. 7 See A , SCE s Amended Energy Efficiency Rolling Portfolio Business Plan Application, dated February 10, Such exhibits included EE savings forecasts, CEET outputs, market potential by sector, EM&V lessons learned, Commercial-Industrial-Agricultural strategies and tactics, agricultural sector market trends, public sector potential methodology, ETP accomplishments, ETP tracking metrics, Esource sector snapshots, food processing optimization plan, agriculture segment plan, issues tracking workbook and facility condition assessments. 3

7 Subsequent to the PAs Business Plan application filings, ALJ Fitch, ALJ Kao and Commissioner Peterman issued a ruling requesting information on a variety of topics. 8 In addition, ALJs Fitch and Kao issued a separate ruling seeking comments on Business Plan metrics. 9 Together these rulings contained approximately 130 questions on topics such as management and administrative strategies, proposed budgets, proposed solicitation structure and schedule, statewide programs proposal, and sector-level metrics. 10 SCE provided timely responses to each question, and submitted a revised sector-level metrics proposal as requested by the ALJs. 11 Further, ALJs Fitch and Kao and Commissioner Peterman required the IOUs to submit comprehensive proposals for third party solicitations. 12 SCE submitted a detailed thirdparty solicitation proposal, and submitted both opening and reply comments on its own and others proposals and comments thereto. 8 See Scoping Memo and Ruling of Assigned Commissioner and Administrative Law Judges, dated April 14, See Administrative Law Judge s Ruling Seeking Comment on Energy Efficiency Business Plan Metrics, dated May 10, SCE responded to: (1) over 50 questions for Business Plan components (see Responses to Questions in Attachment A of the Scoping Memo and Ruling of Assigned Commissioner and Administrative Law Judges, May 15, 2017 (SCE responses to 11 questions for all prospective PAs, 18 questions for all IOUs (submitted jointly), and 24 questions for SCE), (2) over 20 questions on EE Business Plan metrics (see SCE s Response to the Questions in Attachment A of Administrative Law Judge s Ruling Seeking Comments on Energy Efficiency Business Plan Metrics, May 22, 2017 (SCE responded to 2 questions for prospective PAs, 4 questions for all IOUs, and 15 questions applicable to SCE.); (3) approximately 10 requests for budget and related information, including 8 appendices, including organizational charts, headcount by function, costs by function, solicitation schedule, and budget information (see SCE s Responses to the Request for Supplemental Budget and Related Information, June 12, SCE responded to TURN and ORA s May 2, 2017 Proposals for a Supplemental Budget Showing. ); and (4) over 50 questions related to a variety of topics, including overall portfolio, statewide programs, third-party programs, REN proposals, sector programs, local government programs, and Codes and Standards (See SCE s Responses to Questions in Attachment B of the Scoping Memo and Ruling of Assigned Commissioner and Administrative Law Judges, dated June 22, 2017). 11 See Administrative Law Judge s Ruling Seeking Comment on Energy Efficiency Business Plan Metrics, May 10, See Scoping Memo and Ruling of Assigned Commissioner and Administrative Law Judges, April 14, 2017, p. 8. 4

8 Finally, discovery began before the Business Plan application was filed, as the Office of Ratepayer Advocates (ORA), for example, submitted data request questions to SCE and other IOUs regarding statewide program leads in September Discovery was conducted subsequent to the Business Plan application filing and up to about August 10, SCE responded to over 300 data requests submitted by intervenors. 13 The information described above represents the detailed record in this proceeding, and the information provided by SCE supports the reasonableness of SCE s Business Plan. The Commission should not delay the proceedings any further, but should make its rulings on the substantial record developed in this proceeding to enable the PAs to move forward to implement their Business Plans. 2. SCE s Energy Efficiency Business Plan Guiding Principles To support the Commission s objectives, SCE developed the following principles that guided the development of policy positions and related information as articulated in SCE s Business Plan: a) SCE s Portfolio Shall Be Cost Effective and Achieve Its Energy Savings Goals SCE remains committed to providing value for its customers by achieving its energy savings goals in a cost-effective manner. As such, SCE s Business Plan application as amended on February proposed a cost-effective EE portfolio that will allow SCE to meet its energy savings goals. The EE portfolio in SCE s Business Plan has a Total Resource Cost (TRC) test result of 1.0, which meets the Commission s most recent cost effectiveness reasonableness standard. 14 In addition, EE can also provide value by enabling greater reductions 13 Data requests were received from multiple parties, including ORA, The Utility Reform Network (TURN), Commission s Energy Division (ED), the Coalition for Energy Efficiency (CEE), California Street Light Association (CALSLA), and Small Business Utility Advocates (SBUA). The data request numbers include questions and sub-questions. 14 D , p

9 in greenhouse gases (GHG), supporting system and local distribution reliability, reducing system costs, and providing customers with ways to better manage their energy usage and utility bills. b) Statewide Administration Shall Support the Commission s EE Policy Goals, Leverage Expertise, and Consider Stakeholder Feedback As stated in the IOU s Statewide Administration Approach, SCE supports the Commission s statewide PA policy goals. 15 In addition, the selection of statewide administrators should take into consideration a portfolio approach and natural bundling, costeffectiveness, capacity to effectively delivery programs at a statewide level, technical and administrative expertise, and strategic relationships. Further, the development of statewide administration assignments should consider CAEECC stakeholder feedback. c) SCE s Multi-Phased Solicitation Process Shall Support the Commission s Policy Goals SCE is committed to pursuing new sourcing and delivery strategies in order to capture innovation, improve the customer experience, and reduce the cost of delivery. SCE s proposed solicitation process will help achieve greater customer adoption of EE. This will also lead greater energy savings, and support California s legislated goal to double EE by Importantly, SCE s proposed solicitation process will create a smooth transition to a new statewide portfolio administration and third-party implementation structure that benefits stakeholders. 16 d) SCE s Sector-Level Metrics Shall Provide Objective Insights SCE s proposed sector-level metrics will be useful, unbiased, timely, and will be used to track the sector s progress towards the overall objectives and sector-level goals established in the Business Plan. Because the Business Plan focuses on intervention strategies, 15 See Southern California Edison Company s Amended, Energy Efficiency Rolling Portfolio Business Plan Application , Exhibit SCE-4, dated February 10, See SCE s Comprehensive Solicitation Process Proposal filed on August 4, 2017 for more information. 6

10 rather than on specific programs that will be specified in the Implementation Plans after the third-party solicitations have been conducted, the sector-level metrics should measure progress against the outcomes the intervention strategies aim to achieve. 17 e) SCE Supports the Integration of EE and DR SCE supports EE-DR integration which will better facilitate alignment of statewide goals, 18 support locational and grid needs, and help customers understand opportunities to reduce their usage. 19 In particular, SCE supports common goals for DSM that are better aligned to meet statewide objectives, such as GHG reduction. SCE supports common measurement and valuation protocols, 20 consistent with the procurement of other resources, to better optimize resource choices. SCE also supports the consolidation of DSM funding mechanisms and/or proceedings that would better facilitate choices between DSM resources (e.g., EE, DR), programs, and procurement options. 21 Finally, SCE supports a common delivery framework to simplify and improve the customer experience. Such commonalities will help parties and the Commission better evaluate whether proposed activities are effective toward achieving statewide goals. 3. Organization of SCE s Energy Efficiency Business Plan Comments SCE s Final Comments on its Business Plan are organized into six sections focused on : (1) SCE s proposed EE portfolio, (2) SCE s statewide program proposal, (3) SCE s 17 See May 10, 2017 ALJ s Ruling Seeking Comment on EE Business Plan Metrics, pp. 3-4 for metric guiding principles that have been put together by CAEECC. 18 For example, efficiencies would be gained by conducting one site visit to identify opportunities for both EE and DR, or by marketing EE and DR together in one campaign rather than separately. 19 Integrating EE and DR would help customers better understand peak load and opportunities to reduce their usage because SCE can present one vision that includes more efficient equipment combined with controls that allow the customer to participate in DR and the positive effects the combination of EE and DR can have on their bill. 20 Common measurement and valuation protocols, including cost-effectiveness evaluations, would enable IOUs and DSM PAs to more effectively evaluate and select resources. 21 Common resource funding (for example, EE and DR funding) would facilitate resource allocation among DSM resources (i.e., among programs, resource types (EE and DR), and procurement strategies (e.g., third-party solicitations, IOU / PA program, etc.). 7

11 third-party solicitation proposal, (4) SCE s sector-level metrics proposal, (5) SCE s EE-DR integration proposal, and (6) other issues, such as Business Plan integration with the annual budget advice letter process. SCE respectfully requests that the Commission approve SCE s Amended EE Rolling Portfolio Business Plan for B. SCE s Proposed Portfolio in its Business Plan is Reasonable In this section, SCE demonstrates that its proposed portfolio meets budget, costeffectiveness, and savings goals requirements. SCE s proposed Business Plan budget for each year from 2018 to 2025 is less than the current authorized budget for SCE s EE portfolio. 22 These budgets are forecast to be cost-effective (without codes and standards) and will allow SCE to achieve the Commission s adopted energy savings goals for SCE s EE portfolio. 1. SCE s Forecast Budget in its Business Plan is Reasonable and SCE has Provided Sufficient Budget Detail The Commission in D provided the following guidance regarding budgets to be included in the PAs Business Plans: The Commission will address budgets at a general level in response to business plans, but the Commission will give funding authorization in response to a subsequent PA budget advice letter; 23 Tracking staffing levels, or even individual employee activities, is more detail than appropriate for the business plans; 24 the business plans are to provide general information on the expected levels of annual spending for the duration of the business plan (i.e., under 22 See Southern California Edison Company s 2018 Energy Efficiency Program and Portfolio Annual Budget Advice Letter, dated September 1, 2017, p See D , p Id., p

12 the business plan, we expect spending to be $X per year for up to ten years ); 25 The decision on the business plan will provide guidance for PAs on funding levels to use in developing the more detailed annual budgets that PAs will file via advice letter. 26 The decision on the business plans will not establish a particular amount for cost recovery (for IOUs) It will establish a ballpark figure for spending for the life of the business plan. The annual advice letter filings, not the business plans, will propose detailed budgets for cost recovery, transfer, and contracting purposes. 27 SCE believes the Commission s direction as articulated in D intended for the PAs to submit high-level budgets in their Business Plans. SCE proposed such a budget. Despite the Commission direction, several parties have consistently requested more detail on SCE s proposed budget. 28 The Commission saw merit in their requests and directed parties to meet and confer to develop a standard template for PAs proposed budgets. 29 The PAs, ORA, and TURN held multiple meet and confer sessions in the second quarter of 2017 to develop such a template. Parties agreed to a standard template in May 2017, and the PAs filed supplemental budget information using that template on June 12, The standard template includes detailed information, such as organizational structures, number of full-time equivalent (FTE) resources for various activities, headcounts, and other detailed information that was neither required initially by the Commission nor anticipated by SCE for its Business Plan submission pursuant to prior Commission guidance. 25 Id. 26 Id. (emphasis added) 27 Id., p See, e.g., March 3, 2017 protests and responses from TURN, pp. 2-9; ORA, pp. 2, 11-14; SoCalREN, p. 7; CEE, pp , 32; and Greenlining, p See Scoping Memo and Ruling of Assigned Commissioner and Administrative Law Judges, p

13 Notwithstanding that, SCE and the other PAs, through their supplemental budget filings, exceeded the level of detail required for submitting budget proposals set by D In addition, ORA, TURN, CEE, SBUA, and CALSLA submitted several data request questions pertaining to the budget information, including staffing details. SCE continued to collaborate with the parties by providing detailed responses to their data requests. The additional significant level of detail SCE has provided regarding its Business Plan budget demonstrates its reasonableness, and SCE believes none of the parties demonstrated with sufficient evidence that the proposed budget is unreasonable. The Commission authorized an annual budget of $ million for SCE through SCE s proposed budget in its Business Plan is below the current authorized amount for every year of the Business Plan. SCE has provided a reasonable budget to fund a cost-effective portfolio (i.e., a portfolio that has a TRC result of 1.0 without codes and standards) that achieves SCE s savings goals. Thus, the Commission should approve SCE s Business Plan and provide additional guidance regarding annual budgets to be provided in annual budget advice letters required by D SCE s Proposed Portfolio in its Business Plan is Cost-Effective SCE s proposed EE portfolio contained in its Business Plan is cost-effective without Codes and Standards. However, the Commission should evaluate portfolio cost effectiveness in the PA s annual budget advice letter (AL) which will have more current and specific data and assumptions for the coming year. In D , the Commission maintained the long standing Commission requirement that an EE PA s portfolio must be cost-effective excluding the costs and benefits of 30 SCE s 2015 Total Approved Budget, adopted in D and modified in D , is $ million. The decisions approved an annual authorized budget level for 2015 which is to remain in place (less carry-forward of unspent funds from prior portfolio cycles) until the earlier of 2025 or when the Commission issues a superseding decision on funding. See OP

14 Codes and Standards. 31 SCE s Amended Business Plan has a minimum threshold TRC of and a Program Administrator Cost (PAC) of 1.29 when costs and benefits from Codes and Standards are excluded. 33 The proposed Amended Business Plan is also cost-effective for 2019 and In addition, SCE proposed an interim budget for a cost-effective EE portfolio in its annual budget advice letter for 2018, AL 3654-E, filed on September 1, Because SCE has demonstrated that the EE portfolio in its Business Plan is cost effective, the Commission therefore should find that SCE s proposed Business Plan is also cost-effective. In addition, because the annual budget advice letter uses the most current cost and benefit data, the determination of cost-effectiveness of the portfolio should occur in review of the annual budget advice letters and the Commission s approval of the Business Plan should not be delayed. 3. SCE s Proposed Portfolio in its Business Plan Achieves the Commission s Savings Goals for SCE This section demonstrates that SCE s proposed portfolio is forecast to achieve its EE savings goals. SCE also explains why the upcoming Decision Adopting Energy Efficiency Goals For should not trigger an update to the PA s Business Plans at this time. 31 See D , pp In D , the Commission noted that corrections to the cost-effectiveness calculations will materially lower TRCs and that to the extent they drop below 1.0 we will require portfolio adjustments to exceed that minimum threshold. D , p. 6, fn 3. The Commission also recognized, but did not resolve, what it called a tension between prior TRC expectation of 1.25 and the modified expectations made for Id., p. 110 fn. 96. Then, in D (pp ), the Commission did not address this tension but referred generally to the requirement that the utility portfolio be cost-effective on its own, prior to consideration of the costs and benefits of the codes and standards activities. See, also, Energy Efficiency Policy Manual, which states [t]he portfolio of energy efficiency programs are required to show a positive net benefit, based on the TRC and PAC tests, on a prospective basis during the program planning stage. Test results are usually shown as a benefit cost ratio, and a portfolio is said to have passed a test if the benefit cost ratio is greater than 1. EE Policy Manual, Version 5, pp , July See SCE Amended EE Business Plan, p Id. 35 See AL 3654-E, pp

15 The Commission has a statutory obligation to set energy savings targets, or goals, for the EE PAs. 36 In D , the Commission adopted energy savings goals for SCE and the other PAs. 37 SCE s developed its Business Plan to achieve the Commission s goals. SCE has provided sufficient evidence and data to show its ability to achieve its EE goals with its proposed strategies and requests that the Commission find that SCE s Business Plan is a reasonable means of achieving its EE goals. SCE acknowledges that there is currently a Proposed Decision in Rulemaking (R.) that will establish new energy savings goals for the EE PAs for 2018 and beyond. 38 However, that Proposed Decision on EE goals should not affect approval of the Business Plans because any updates to the EE goals should be reflected in the annual budget advice letters. Requiring further updates before approval of the Business Plans (and consistent with the final decision not yet issued) would provide only limited benefits, would not be an efficient use of resources, and would further delay implementation of the PA business plans. Rather, SCE recommends that the Commission re-evaluate the timing for future potential and goal studies within six months following an issuance of a Final Decision in R in order to provide greater alignment between EE potential, goals, annual budget advice letters, and the adopted Business Plans. 39 Such alignment could be created by clarifying that for 2018 and beyond, the IOUs should incorporate new energy savings goals through their annual budget advice letters that are submitted on September 1 of each year. For the 2018 budget advice letters, the new energy savings goals should be reflected in the March 1, 2018 true-up advice letter See D , p Id., pp See Proposed Decision Adopting Energy Efficiency Goals for , R , mailed on August 25, See SCE Opening Comments to the PD of ALJs Fitch and Kao adopting EE Goals for , p See A , Administrative Law Judges Ruling Modifying Schedule, June 9,

16 C. The IOU PAs Statewide Program Proposals are Compliant with Commission Directions, Reasonable and Should Be Adopted This section demonstrates that the PAs statewide program proposals comply with the requirements of D This section also shows that LGSEC s proposal for a statewide Local Government Partnership (LGP) program duplicates existing processes and should be rejected. 1. The IOU PAs Statewide Program Proposals are Compliant with D SCE s statewide program proposals comply with the requirements for statewide programs established by D In that decision, the Commission D identified the following requirements for Statewide Programs to be addressed in the Business Plans: 41 All upstream and midstream 42 programs and / or subprograms from the existing portfolios, plus any new programs that are market transformation, upstream, or midstream shall be delivered under the new statewide model; 43 PAs must propose four downstream programs to be piloted on a statewide basis; 44 Business Plans must include the PA s approach for delivering each of the statewide programs; There are additional requirements in D for Statewide Programs that are not applicable to the Business Plans because they are required as part of implementation and operation of the statewide programs following approval of the Business Plans. Examples include: annual true-up of statewide budgets, contract terms, goal crediting, etc. 42 See D limits application of the statewide model to midstream programs that are at the distributor or retailer level but not at the contractor or installer level (see D , OP 5, p ). 43 See D , OP 8, pp Id., OP 9, p Id., pp

17 PAs must propose a single lead PA for each statewide program in their Business Plans; 46 PAs proposals for statewide programs and/or subprograms should comprise at least 25 percent of their total portfolio budgets; 47 Business Plans must include metrics by which progress towards objectives for statewide programs can be assessed and a schedule for reviewing metrics; 48 The Commission expects a collaborative process among lead PAs and other PAs; 49 and Business plans must include specific information about solicitation strategies and functional areas that could be performed on a statewide basis; 50 SCE s Business Plan, including statewide elements developed with the other IOU PAs, complies with the requirements from D as further discussed herein. Therefore, the Commission should approve the IOU PAs statewide proposals including the lead PA assignments for statewide programs and subprograms. In addition to the requirements identified above, the new definition for statewide programs requires that a program must be designed and delivered uniformly throughout the IOU territories and clarifies that local or regional variations in incentive levels, measure eligibility, or program interface are not generally permissible (except for measures that are weather dependent or when the program administrator has provided evidence that the default statewide customer interface is not successful in a particular location). 51 SCE is committed to meeting the statewide requirements in a collaborative manner 46 Id, p. 64 and OP 9 at p Id., OP 6, p Id., p Id., p Id., p See D , Decision Providing Guidance for Initial Energy Efficiency Rolling Portfolio Business Plan Filings, August 18, 2017, pp

18 as envisioned by D Any potential implementation issues will be addressed during the development of Implementation Plans. a) SCE Business Plan is Compliant as it Considers All Upstream and Midstream Programs to be Statewide, Proposes Four Downstream Pilots, and Includes Approaches for the Programs / Subprograms SCE s Business Plan complies with D by considering all upstream and midstream programs as statewide programs and proposing approaches for each of them. As described below, the PAs also proposed four downstream pilots and included program details and approaches. In D , the Commission identified 19 programs and subprograms (in addition to Energy Upgrade California ME&O, which is already delivered statewide) that are required to be delivered under the new statewide model. 52 SCE included in its Business Plan a Statewide Administration Approach document which included the IOUs joint proposal for administration under the new statewide model. In that document, the PAs described the required programs that would be delivered under the statewide model. 53 The upstream and midstream programs and subprograms to be delivered statewide are also identified in SCE s Business Plan. 54 The Statewide Administration Approach also identifies four downstream programs / subprograms for piloting the statewide model, as required by D As shown in SCE s Business Plan, the proposed downstream statewide programs / subprograms are: (1) WE&T Career and Workforce Readiness Program, (2) Water/Wastewater Pumping (downstream pilot), Id., pp See A , SCE-03, pp See SCE Amended Business Plan, pp See A , SCE-03, pp This program is referred to as Water Infrastructure and System Efficiency (WISE) in SCE s Business Plan. 15

19 (3) Indoor Agricultural Program, and (4) Residential Contractor HVAC Quality Installation / Quality Maintenance Program. 57 In D , the Commission also required the IOU PAs to propose an approach for delivering the statewide programs and subprograms in one of two ways: (1) the proposed lead PA could present the approach on behalf of all the administrators, or (2) all PAs could present identical approaches that were developed collaboratively. 58 The IOU PAs elected the first option and included proposed approaches for the statewide programs for which they are the proposed lead in their respective Business Plans. As the proposed statewide program lead SCE included its proposed approaches for: (1) Electric Emerging Technologies Program, 59 (2) Lighting (including Primary Lighting, Lighting Innovation, and Lighting Market Transformation), 60 (3) Commercial New Construction Savings by Design, 61 (4) Government Institutional Partnerships University of California / California State University (UC / CSU) & California Community Colleges, 62 and (5) the Water/Wastewater Pumping (downstream pilot) downstream program. 63 The PAs proposal to separate the Emerging Technologies Program into two statewide programs one for electric and one for gas was opposed by NAESCO, GreenFan, and Verified. 64 These parties assert that the PAs are not in compliance by proposing to administer the Emerging Technologies Program as two statewide programs. However, D See SCE Amended Business Plan, p See D , p See SCE Amended Business Plan, pp Id., pp Id., pp Id., pp Id., pp See NAESCO Comments on the Supplemental Applications of SCE, PG&E, SDG&E, & SoCalGas for Approval of Energy Efficiency Rolling Portfolio Business Plans and Related Matters, p. 12 (filed June 22, 2017) ( NAESCO Comments ); Comments of GreenFan Inc. on the SCE, PG&E, SDG&E, and SoCalGas Solicitation Process Proposals for Applications , p. 5 (filed August 18, 2017) ( GreenFan Comments ); and Comments of Verified Inc. on the SCE, PG&E, SDG&E, and SoCalGas Solicitation Process Proposals for Applications , p. 5 (filed August 18, 2017). 16

20 permits the PAs to propose reconfigurations to the required statewide programs. 65 NAESCO argues that the PAs proposal introduces unnecessary administrative and coordination costs. 66 GreenFan and Verified assert that the proposal is illogical and not supported by any evidence and that it does not make sense and will cause significant unintended negative consequences. 67 However, while these parties make general arguments, they did not identify or calculate the specific unnecessary administrative and coordination costs or significant unintended negative consequences or present specific evidence to support their claims. The PAs on the other hand explained the rationale for their proposal. 68 The primary reason for the proposal to split Emerging Technologies into fuel-specific statewide programs is to leverage knowledge and skills associated with each fuel type and distribution system. The Commission should therefore reject the protests on this issue and approve the PAs proposal. b) The PAs Business Plans Designated Lead PAs Following Feedback from CAEECC This section shows that the lead PA proposals for statewide programs comply with D and explains the reasonableness of SCE s proposals. As described below, the IOU PAs modified the proposals based on stakeholder feedback, and the proposals strike the correct balance among the various stakeholder viewpoints. In D , the Commission required the PAs, in their Business Plans, to designate a single lead PA for each statewide program and subprogram. 69 The Commission recommended that the proposed lead PAs be worked out in the discussions already occurring as part of the CAEECC process. 70 To the extent a consensus approach could not be 65 See D , pp NAESCO Comments, p GreenFan Comments, p See A , SCE-03, pp See D , p Id. 17

21 resolved through CAEECC, the Commission requested that the Business Plans identify the options considered and bring the proposals forward to the Commission to resolve. 71 The IOU PAs complied with these requirements. 72 The IOU PAs proposed draft lead PA assignments, including potential statewide downstream pilot programs, to the CAEECC members on September 21, 2016, hosted a follow-up discussion via webinar regarding proposed statewide downstream pilot programs on October 14, 2016, and presented a revised proposal at the October 19, 2016 CAEECC meeting. Based on feedback from CAEECC members and stakeholders, the IOU PAs revised the proposed lead assignments as well as their proposed statewide downstream pilot programs and included the revised proposal in their Business Plans. 73 The proposal includes the rationale from each proposed lead PA. Because the IOU PAs have provided ample justification for their proposal, the Commission should adopt the proposed lead PA assignments. c) SCE s Business Plan Budget Allocates at Least 25 Percent to Statewide Programs SCE s proposed Statewide governance model complies with the budget requirements in D In that decision, the Commission required that 25 percent of the PA s budget in its Business Plan be devoted to statewide programs and subprograms. 74 Table II- 1 below shows that SCE s forecasted budget for Statewide programs exceeds the required 25 percent of PA s portfolio budget as provided in SCE s Amended Business Plan. 71 Id. 72 See California Energy Efficiency Coordinating Committee website: for a record of proposal submissions and stakeholder input considered. 73 See A , SCE-03, pp and SCE Amended Business Plan, pp See D , p

22 Table II-1 Statewide Administrated Program Proposed Budget Allocation # Year State Government Partnerships (State of CA/CDCR) $1,114,725 $1,148,167 $1,171,130 2 C&S Advocacy $3,294,312 $3,393,142 $3,461,005 3 WE&T Connections $1,934,509 $1,934,509 $1,934,509 4 WE&T Career & Workforce Readiness (downstream $671,000 $671,000 $671,000 pilot) 5 Indoor Agriculture (downstream pilot) TBD TBD TBD 6 7 Emerging Technologies Electric $7,476,487 $7,700,782 $7,854,797 8 Lighting $1,074,804 $1,107,048 $1,129,189 9 Savings by Design $11,871,885 $12,228,042 $12,472, Government Institutional Partnerships (UC/CSU, $4,405,629 $4,537,798 $4,628,554 CCC) 11 Water/Wastewater Pumping (downstream pilot) $2,500,000 $2,500,000 $2,500, Residential New Construction $1,790,142 $1,790,142 $1,790, Emerging Technologies--Gas $0 $0 $0 15 Food Service POS $3,431,751 $3,534,703 $3,605, Commercial Midstream Water Heaters $0 $0 $ Commercial Upstream HVAC $22,240,495 $22,907,710 $23,365, Residential Upstream HVAC $0 $0 $0 20 Residential PLA* $6,691,721 $6,892,472 $7,030, Residential HVAC QI/QM (downstream pilot) $1,329,960 $1,329,960 $1,329, Total SW Budget Allocation $69,827,420 $71,675,475 $72,944, Forecasted Portfolio Budget from SCE Amended Business Plan 24 Statewide program budget % allocated from portfolio (row 22 divided by row 23) $250,289,260 $270,624,585 $289,113, % 26.49% 25.23% d) The Business Plans Identified Metrics for Tracking Progress Towards Objectives of Statewide Programs SCE s proposed statewide governance model complies with the metric requirements in D The Commission required the PAs Business Plans to identify the specific metrics by which progress towards objectives may be assessed, and a schedule for 19

23 reviewing results against performance indicators on a regular recurring basis. 75 As set forth in its Amended Business Plan, SCE submitted Exhibit-04 Statewide Administration Approach 76 which describes the metrics and review process. That exhibit shows that the Lead PA (or the Implementer) is responsible for providing regular reports including energy savings accomplishments, energy savings forecast, incurred cost, forecasted costs, and other relevant metrics to the other PAs. Other PAs will provide input regarding the appropriate metrics for each strategy including budget, savings and cost-effectiveness targets, target sectors/ subsectors, and key performance indicators. Business Plan metrics developed to date are based on a sector level approach. Specific Program level metrics will be included as part of the program implementation plans once the solicitation process is complete and program implementers are chosen. The Lead PA, the other PAs, and the Implementer(s) will develop program metrics with data requirements to support the timely reporting of progress for these metrics as part of the program design process. e) The Proposed Statewide Governance Model Enables Sufficient Collaboration Among PAs SCE s proposed statewide governance model complies with the collaboration requirements in D The Commission clarified that a statewide lead PA will be the final arbiter or decision maker with respect to the program, but that it expects a consultative and collaborative process with other administrators, either via the CAEECC or via separate sector and/or program-level coordination venues created and hosted by the lead administrators and involving all other relevant administrators. 77 The IOU PAs presented a highlevel governance approach in the Statewide Administration Approach document that establishes guidelines consistent with the Commission s expectations for a collaborative process. 78 SCE 75 Id, p See A , Southern California Edison Company s Amended Energy Efficiency Rolling Portfolio Business Plan For , SCE-02, pp , February 10, See D , p See A , Exhibit SCE-04, pp

24 believes the IOU PAs governance approach is consistent with the Commission s direction and should be adopted by the Commission. f) The Proposed Statewide Governance Model and the Comprehensive Solicitation Proposal Includes Information About Solicitation Strategies and Functional Areas that Could be Performed on a Statewide Basis The Commission also required that the Business Plans include specific information about solicitation strategies and functional areas that could be performed on a statewide basis. 79 SCE provided an overview of the various roles and responsibilities for a Lead PA, other PAs, and an Implementers by function and task in SCE s Statewide Administration Approach in Exhibit SCE On August 4, 2017, the PAs filed comprehensive third-party solicitation proposals. SCE described its statewide solicitation strategies in that filing, including a discussion of estimated budgets and what the PAs will be seeking in statewide solicitations LGSEC s Proposal for Statewide Administration of LGPs Should Be Rejected Because SCE is Already Addressing the Issues Identified by LGSEC The Commission, in D , expressed interest in a proposal by LGSEC to designate a statewide implementer for all the LGPs of all of the utilities. 82 As SCE stated in its Response to LGSEC s Business Plan and further described below, 83 the Commission should reject this proposal. First, SCE is already addressing most of the LGP issues identified by LGSEC. For example, LGSEC states it will develop standard terms and conditions for procurement and contracting activities for LGPs because financing and business solutions have not been 79 See D , p See A , SCE-04, pp See SCE s Comprehensive Solicitation Proposal, Attachment A, pp. A-21 A See D , p See SCE s Response to Local Government Sustainable Energy Coalition s (LGSEC) Statewide Local Government Partnership Business Plan Proposal, March 3,

25 developed. 84 However, the IOUs are already developing a plan to address this issue by implementing a statewide tiered model for LGPs with consistent contract terms for implementers. Another example is that LGSEC states that local governments in rural, remote or economically disadvantaged communities lack staff or other resources to take advantage of costeffective EE opportunities. 85 However, the IOU LGP program pays for a Rural Hard-to-Reach working group to study issues and design solutions related to rural, remote or economically disadvantaged communities. 86 Additionally, SCE proposes a separate Rural and Disadvantaged Community Outreach strategy in its Business Plan. 87 The strategies identified in SCE s Business Plan will also achieve consistency across the state, as desired by LGSEC, while avoiding duplication of work and still allowing LGPs the local autonomy to set program priorities. Second, the LGSEC proposal may result in a $17.55 million dollar increase in LGP implementation cost, and the source of its funding is unclear. 88 SCE assumes LGSEC allocated two SCE program budgets for its programs, 89 but as SCE pointed out in filed comments, those program budgets include funding for non-lgp programs. 90 Further, LGSEC s budget proposal is a $17.55 million increase over the next 10 years, which may further drive 84 See SCE Amended Business Plan, pp Also, see SCE s Response to Local Government Sustainable Energy Coalition s (LGSEC) Statewide Local Government Partnership Business Plan Proposal, March 3, 2017, which provides additional examples of how SCE is already addressing most of the LGP issues identified by LGSEC, such as rural hard-to-reach and statewide consistency. 85 See LGSEC Business Plan, p See SCE Amended Business Plan, p Id., p See SCE s Response to Local Government Sustainable Energy Coalition s (LGSEC) Statewide Local Government Partnership Business Plan Proposal, March 3, 2017, pp See SCE s Response to Local Government Sustainable Energy Coalition s (LGSEC) Statewide Local Government Partnership Business Plan Proposal, March 3, LGSEC proposed an administration and implementation budget of $17.55M from and also proposed to integrate all four IOU LGP budgets (of $69.28M for 2017) to LGSEC, of which approximately $20M is assigned to Southern California Edison LGP budget. LGSEC states it used the IOUs 2016 Energy Efficiency programs 2016 Advice Letters to prepare the proposed starting year budget for LGC. SCE assumes LGSEC combined SCE s Energy Leadership Partnership Program of $13.7M and Institutional and Government Partnership Programs of $6.65M from its 2016 Budget Advice Letter to come up with the proposed SCE LGP Budget of $20M. 90 Id., p

26 down cost-effectiveness for local government programs. LGSEC proposes that the Commission re-allocate the budget to a non-resource model. 91 The majority of SCE s LGPs, however, are resource programs. Moving budget from resource programs to non-resource programs does not support energy savings goals. Third, SCE agrees with the Natural Resources Defense Council (NRDC) and Rural Hard to Reach Local Government Partnerships Working Group (RHTR) who oppose the approval of LGSEC s statewide LGP EE Business Plan. NRDC recommends further review and discussion of several issues, including how duplication would be avoided, the cost of LGSEC s plan, opt-in rights of local government partnerships, and what structures would be required to preserve successful local programs. In addition, NRDC states, a number of comments were made at the CAEECC expressing that not all local government partnerships feel similarly to how the LGSEC proposal portrayed the partnership situation. 92 RHTR s members include a number of LGPs, 93 and yet it does not support LGSEC s proposal. Specifically, RHTR states that the LGSEC proposal is not necessary, not compelling, and did not receive consensus at CAEECC. 94 RHTR supports local control of such programs and observes that there are other paths for improving program delivery. 91 See LGSEC Business Plan, p See Natural Resources Defense Council (NRDC) Response to Program Administrator Applications and Regional Energy Network Motions for Business Plan Approval, March 3, See Protest of the Rural Hard To Reach Local Government Partnerships Working Group to Southern California Regional Energy Network s Motion for Approval of its Energy Efficiency Rolling Portfolio Business Plan and Local Government Sustainable Energy Coalition Statewide Local Government Program Energy Efficiency Business Plan Proposal, RHTR states, Our members include the Association of Monterey Bay Area Governments, Community Development Commission of Mendocino County, High Sierra Energy Foundation, County of Kern, Redwood Coast Energy Authority, San Joaquin Valley Clean Energy Organization, County of San Luis Obispo, Sierra Business Council, and Valley Vision, p See Protest of the Rural Hard to Reach Local Government Partnerships Working Group to Southern California Regional Energy Network s Motion for Approval of its Energy Efficiency Rolling Portfolio Business Plan and Local Government Sustainable Energy Coalition Statewide Local Government Program Energy Efficiency Business Plan Proposal, March 3, 2017, pp

27 For the reasons described above, including its lack of support, the Commission should reject LGSEC s proposal. However, if the Commission deems that a statewide implementer is necessary for LGPs, SCE recommends that the Commission direct the PAs to coordinate the role of lead statewide implementers at the CAEECC to reach a consensus on an appropriate lead statewide implementer. 95 D. SCE s Third-Party Solicitation Proposal is Compliant with Commission Direction, Reasonable and Should be Adopted In this section, SCE demonstrates that its third-party solicitation process proposal complies with the requirements in D , recommends a more efficient process for review of EE contracts, and requests Commission authority to extend existing third-party contracts that are set to expire before new third-party programs are likely to be operational. 1. SCE s Third-Party Solicitation Proposal Complies with the Requirements in D SCE s Third-Party solicitation proposal complies with the requirements for thirdparty programs contained in D D identifies the following requirements for Third-Party Programs to be addressed in the Business Plans: Going forward, each IOU PA must outsource at least 20 percent of its program activity to third parties under the new definition for third-party programs; 96 Each IOU PA must propose a plan to transition to at least 60 percent of their EE portfolio being outsourced to third parties (under the new definition) by the end of 2020; LGSEC s Business Plan assumes that the LGC will become the Program Administrator for LGPs upon Commission approval. See LGSEC Business Plan, p See D , OP 11, p Id., OP 12, p

28 "Each utility program administrator shall include in its business plan filing the objectives and metrics that will be met with each statewide or thirdparty program or subprogram, whether a solicitation will be conducted, and the functional activities that are proposed to be conducted statewide. ; 98 Stakeholders are encouraged to present a proposal for using procurement review groups (PRGs) and / or independent evaluators (IEs) to review and monitor selection of third-party programs; 99 and IOU PAs are encouraged to use pay-for-performance contracts in all contracts where savings measurement will be performed and where risk can be shared and not solely placed on ratepayer funding. 100 Collectively, SCE s Business Plan and its Comprehensive Solicitation Proposal filed in this proceeding, comply with the Third-Party solicitation requirements as further discussed in the following sections. Therefore, the Commission should approve SCE s thirdparty solicitation proposal. a) SCE s Proposal Includes At Least 20 Percent of its Portfolio Budget Allocated to Third Parties Going Forward The Commission has required that each IOU PA must outsource at least 20 percent of its program activity to third parties, under the new definition for third-party program adopted in D , on a going forward basis. 101 The decision does not clarify what the Commission means by going forward. In Administrative Law Judges Ruling Modifying Schedule, dated June 9, 2017, while the ALJs clarified that any new or clarified third party requirement would be applicable to the business plan period, once the plans are approved 98 D , OP 13. pp Id., p Id., pp Id., OP 11, p

29 or modified by the Commission the ALJs also acknowledged that the timeframe of applicability of the third party requirement was not explicit in D , and sought comment from parties on the interpretation. 102 SCE submits that a reasonable interpretation for the 20-percent requirement is that this requirement must be met some time after the IOU PAs conduct their first solicitations under the new definition. This will allow time for the IOU PAs to select third-party programs from the bids and enable third parties to implement the programs. In its Business Plan, SCE provided annual targets for the percentage of its portfolio SCE plans to outsource to third parties (under the new definition). SCE expects to meet the 20-percent requirement by the end of 2018, but this estimate is dependent on the timely issuance of a final decision authorizing SCE to conduct its third-party solicitations. 103 If the schedule is further delayed, this requirement should be interpreted as requiring the IOUs to achieve the 20-percent allocation by the end of the first year the Commission approves SCE s Business Plan. b) SCE s Business Plan Includes a Proposal for Transitioning at Least 60 Percent of its Portfolio to Third Parties by the End of 2020 In D , the Commission required the IOU PAs to present a plan to outsource to third parties at least 60 percent of their total EE portfolio budget by the end of SCE included such a plan in its Business Plan. 105 This plan was further refined in SCE s Comprehensive Solicitation Proposal filed on August 4, Despite assertions by some parties to the contrary, 106 SCE does not consider the 60-percent goal as a maximum, or a ceiling, and SCE has consistently stated that it plans to outsource at least 60 percent of its 102 Administrative Law Judges Ruling Modifying Schedule, dated June 9, 2017, pp See SCE Amended Business Plan, p See D , p See SCE Amended Business Plan, pp See Reply Comments of the Office of Ratepayer Advocates on Comprehensive Solicitation Process Proposal, September 1, 2017, p. 6, and see National Association of Energy Service Companies Comments on the Third-Party Solicitation Plans of SCE, PG&E, SDG&E, & SoCal Gas, August 18, 2017 p

30 portfolio to third parties. 107 In addition, SCE has stated that it plans to outsource as much of its portfolio to third parties as possible. 108 In D , the Commission also held, In cases where utilities propose to continue staffing program design and/or delivery functions with utility personnel, they should explain why this continues to be necessary. 109 Several parties have suggested that SCE s Business Plan is deficient because it does not make such a justification. 110 As SCE explained in its Reply Comments on Comprehensive Solicitation Process Proposals, SCE asserts that the requirement to justify the EE program activities an IOU PA will conduct must occur, as a practical matter, after the IOU PA executes solicitations for third-party programs. 111 The approach is logical because until an IOU PA knows which programs and program activities third parties are willing and able to perform, the IOU PA cannot make a reasonable determination about which programs or program activities it may need to conduct. The Commission has stated, [b]asically, all program design and delivery would be presumed to be conducted by third parties, unless the utility specifically made a case for why the program activity must be conducted by utility personnel. 112 At the time SCE filed its Business Plan, SCE presumed that it would conduct third-party solicitations for nearly all program design and delivery during the timeframe covered by its Business Plan. If needed, SCE will demonstrate why program activity must be conducted by SCE after solicitations have been completed. SCE recommended that the 107 See SCE Comprehensive Solicitation Proposal, Attachment A, p. A-4, p. A-5, p. A-11, Appendix 1 pp See also Southern California Edison Company s Amended Energy Efficiency Rolling Portfolio Business Plan For , February 10, 2017, pp See SCE s Reply to Parties Protests and Responses, p See D , p See Reply Comments of the Office of Ratepayer Advocates on Comprehensive Solicitation Process Proposals, September 1, 2017, pp. 6-7, and see National Association of Energy Service Companies Comments on the Third-Party Solicitation Plans of SCE, PG&E, SDG&E, & SoCal Gas, August 18, 2017, pp See SCE s Reply Comments on Comprehensive Solicitation Process Proposals, p See D , p

31 Commission require the IOU PAs to file Tier 2 Advice Letters to request authority, with proper justification, to operate particular EE programs. 113 For the reasons explained above, the Commission should approve SCE s proposed process for third-party program solicitations and should clarify the process by which an IOU PA should justify the EE programs and program activities it will conduct following selection of third-party bids. c) SCE s Objectives and Metrics for Statewide Programs are Included within Each Sector of the SCE Amended Business Plan. Solicitation Strategies including Functional Activities are Included within SCE's Third-Party Solicitation Proposal SCE collaborated with the other IOU PAs to develop a proposal for which PA should be the lead administrator for each statewide EE upstream and midstream program or subprogram. In some cases, the PAs recommend separate leads for different aspects of a program in order to take advantage of a particular PA s expertise, relationships, and other factors. The PAs also collaborated to determine a recommendation for which downstream programs should be used to pilot the new statewide approach. These proposals were discussed in Section E page of SCE Amended Business Plan. They are also discussed in more detail in a whitepaper jointly developed by the IOU PAs titled Statewide Administration Approach, which is attached as Exhibit 4 to SCE s Amended Business Plan application. SCE has included details about the statewide programs for which it is the proposed lead administrator in the relevant sector chapters of SCE Amended Business plan with functional activities of each program discussed in SCE Third-Party Solicitation Proposal. Non-Statewide programs will not be identified until after the solicitation process is complete. Details regarding objectives, program metrics, and strategies including functional activities will be provided as part of 113 See SCE Comprehensive Solicitation Proposal, Attachment A, p. A

32 program Implementation Plans which will be completed upon selection of program implementers through the solicitation process. d) SCE s Third-Party Solicitation Proposal Includes a Proposal for Using SCE s Existing Supply-Side PRG and IE The Commission encouraged parties to bring forward a workable proposal regarding the use of PRGs and/or IEs for reviewing and monitoring third-party solicitations and contracts. 114 SCE included a high-level proposal in its Business Plan 115 and a more detailed proposal in its Comprehensive Solicitation Proposal. 116 SCE proposes to use its existing PRG and IE process that monitors SCE s supply-side procurements. Several parties support the use of existing supply-side PRGs. 117 ORA, in its Comprehensive Solicitation Proposal, provided an accurate summary of the advantages of using existing PRGs: 118 The existing Procurement Review Groups have a set of regularized practices and regulatory infrastructure that have been developed and refined over the past 15 years for the specific purpose of ensuring fairness, transparency, and providing meaningful oversight in resource procurement. Existing Procurement Review Groups have also been successful for a variety of resource procurements including solicitations for third-party designed and implemented demand-side resources such as demand response and can flexibly accommodate participation from EE stakeholders in their current format. One concern raised by some parties is that the IE should have experience with demand-side solicitations. 119 Because the IE s role is to monitor and review the solicitation 114 See D , p See SCE Amended Business Plan, p See SCE Comprehensive Solicitation Proposal, Attachment A, pp. A-12 A See Comments of the California Efficiency + Demand Management Council on Solicitation Process Proposals, August 18, 2017, pp. 8-10, and see Natural Resource Defense Council (NRDC) Opening Comments on Third-Party Solicitation Proposals, August 18, 2017, pp See Response of ORA to the Request for Comprehensive Solicitation Process Proposals, Appendix 1, pp See Comments of the California Efficiency + Demand Management Council on Solicitation Process Proposals, August 18, 2017, p. 11, and see Coalition for Energy Efficiency Comments on Solicitation 29

33 process for fairness and transparency, significant experience in solicitations focused on demandside resources should not be a requirement. However, SCE is willing to identify new IEs with such experience if the Commission prefers it. For the reasons described above, the Commission should adopt SCE s proposal to use its existing PRG to monitor third-party EE solicitations. The Commission should also approve the use of SCE s existing IEs unless it determines that more experience in EE and demand-side resources is essential for determining that a solicitation process is fair and transparent. e) SCE s Third-Party Solicitation Proposal Includes Appropriate Use of Payfor-Performance Contracts The Commission encouraged PAs to ensure risk-sharing and performance emphasis by utilizing pay-for-performance contracts in all contracts where savings measurement will be performed and where risk can be shared and not solely placed on ratepayer funding. 120 As SCE stated in its Business Plan, SCE plans to generally use contracts that are pay-forperformance, except for strategies programs, or measures that cannot reasonable accommodate this contract type. 121 Therefore, the Commission should find that SCE s Business Plan achieves this requirement. Process Proposals, August 18, 2017, pp. 2-3, and see National Association of Energy Service Companies Comments on the Third-Party Solicitation Plans of SCE, PG&E, SDG&E, & SoCal Gas, August 18, 2017 pp , and see Natural Resource Defense Council (NRDC) Opening Comments on Third-Party Solicitation Proposals, August 18, 2017, pg. 3, and see Reply Comments of the Office of Ratepayer Advocates on Comprehensive Solicitation Process Proposal, September 1, 2017, p See D , pp See SCE s Amended Business Plan, p

34 2. All Third-Party EE Contracts Should Not Be Approved Through Advice Letters ORA and CEE recommended that the Commission require all third-party EE contracts to go through advice letter approval. 122 SCE, the other IOUs, NRDC, and SBUA 123 oppose this recommendation As SCE stated in its Opening Comments on the Solicitation Proposals, this recommendation would be duplicative, will add undue time and inefficiency to the portfolio administration process, and is not necessary to maintain transparency. 124 SCE elaborated on these points in its Reply Comments on the Solicitation Proposals. 125 As noted above, and acknowledged by ORA, 126 all program design and delivery activity is presumed to be conducted by third parties except when a utility PA makes a case for why it should conduct such activities. Therefore, a Commission decision approving an IOU s Business Plan is, in effect, approving the use of third parties to conduct the majority of the program activities associated with that plan. In addition, the IOUs are already required to file an annual advice letter to report on the previous year s Business Plan activities (e.g., significant program changes, fund shifts, etc.) and propose a budget for the coming year. These are appropriate opportunities for stakeholders to provide input on the IOU PAs EE plans. In addition, if the Commission approves a PRG / IE process for EE third-party solicitation, that will provide yet another opportunity and one with the ability to review specific solicitations for stakeholders to provide feedback on third-party contracts. Therefore, the Commission should reject the parties suggestion to require all EE contracts should be approved via an advice letter process. 122 See Response of ORA to the Request for Comprehensive Solicitation Process Proposals, Appendix 1, pp. 7-8; CEE Solicitation Process Proposals, pp See NRDC Opening Comments, pp. 6-7; SBUA Opening Comments, pp See SCE s Opening Comments on Comprehensive Solicitation Process Proposals, p See SCE s Reply Comments on Comprehensive Solicitation Process Proposals, pp See Response of ORA to the Request for Comprehensive Solicitation Process Proposals, Appendix 1, p

35 SCE presented an alternative suggestion to require the IOU PAs to report on their contracts in a solicitation compliance report in their annual budget advice letters, similar to SCE s AB 57 Quarterly Compliance Report. 127 ORA acknowledged the merit in SCE s proposal to provide EE contracts in a compliance advice letter, though ORA would prefer they be submitted quarterly rather than annually. 128 If the Commission determines a need to review EE contracts, SCE recommends that such review be performed through a compliance advice letter process rather than the use of Tier 2 advice letters seeking contract approval. 3. The Commission Should Permit the PAs to Extend Existing Third-Party Contracts that are Set to Expire In D , the Commission authorized the PAs to execute new third-party contracts up to October In its Business Plan Application, SCE stated, If the IOUs are required to wait until the Commission approves their new Business Plans, and the decision is issued after the second quarter of 2017, it would be extremely difficult for the IOUs to issue RFPs, award and finalize contracts, and have the third-party programs up and running by October 2018 to replace the existing third-party contracts that must expire in October SCE also explained that in this scenario, there could be a gap in third-party programs, which would limit SCE s ability to meet the 20-percent requirement for third parties. 131 The scenario described above has come to fruition. The Commission has provided guidance to the IOU PAs to wait until it issues a decision on the Business Plans before conducting third-party solicitations. 132 In the event a final decision approving the Business Plans is not issued until the end of 2017 or early 2018, the Commission should provide direction on how the IOU PAs should address the third-party contracts set to expire in October In its 127 See SCE s Opening Comments on Comprehensive Solicitation Process Proposals, p See Reply Comments of ORA on Comprehensive Solicitation Process Proposals, pp See D , p See SCE s Amended BP Application, A , pp Id. 132 See Administrative Law Judges' Ruling Modifying Schedule, June 9, 2017, p

36 Business Plan Application, SCE recommended that if the Commission cannot issue the decision by June 2017, the Commission should consider 2018 to be a transition year and allow IOUs the flexibility to meet the 20-percent requirement for third-party programs by extending the current third-party contracts as needed until 2020, at which time the IOUs would need to comply with 60 percent of the total budget going to third-party programs, and by procuring third-party contracts under the new definition. 133 This continues to be guidance appropriate to address this situation. 4. The Commission Should Permit SCE to Count EE Savings From Alternative EE Procurement Mechanisms Toward Achieving Its EE Goals In its Business Plan application, SCE requested the Commission s approval to use the portfolio budget for procurement of EE through alternative mechanisms that were not proposed and developed as part of the portfolio. For example, the Commission should permit SCE to count EE resources procured through an all source LCR Request for Offers (RFO) solicitation or other market-based procurement processes (e.g., SCE s Energy Storage and Distribution Deferral RFO) when calculating the percentage of the portfolio outsourced to third parties. 134 SCE also requested approval to count savings procured through alternative mechanisms toward its EE savings goals. 135 These requests are reasonable because such solicitations help achieve the state s EE goals (e.g., Senate Bill 350 s goal to double EE by 2030). The Commission and stakeholders will have ample opportunity to review any such solicitations through SCE s PRG / IE and through the annual budget advice letter. In addition, as SCE proposed in its Amended EE Business Plan, SCE suggests establishing a single common DSM goal that rests on a foundation of optimizing DSM resource value through integrated resource planning. Allowing EE savings from alternative EE procurement mechanisms to count toward achieving EE goals would be an important first step. 133 See SCE s Amended BP Application, A , pp Id. 135 Id. 33

37 E. SCE s Metrics Proposal is Reasonable and Should be Adopted As described in the May 10, 2017 ALJ s Ruling Seeking Comment on EE Business Plan Metrics, the Commission has significant experience developing and implementing metrics, and has provide numerous key directions on metrics. 136 Furthermore, the CAEECC developed a set of guiding principles to govern the development and adoption of metrics. 137 Commission staff also conducted a review of PA metrics. 138 In addition, Commission Staff had a number of clarifying questions, and SCE responded to over 20 of these questions. 139 On July 14, 2017, SCE provided its revised sector-level metrics proposal, which included over 160 sector-level metrics, with baseline, short-term targets ( ), mid-term targets ( ), and long-term targets ( ). 140 On July 10, 2017, Commission Staff provided additional clarifications and metrics for the PAs. 141 This clarification document included both significant modifications to the recommended metrics in the Ruling and introduced 18 new metrics. However, due to the timing of the issuance of the clarification document, SCE was not able to include all the modifications or new metrics in its revised sector-level metrics proposal. Essentially, SCE s proposed sector-level metrics are similar to those proposed by the Commission and Commission Staff. However, while well-intentioned, over 160 sector level metrics may be too many metrics to effectively and efficiently evaluate the PAs portfolios, especially given that many of the metrics include multiple dimensions to be reported (e.g., gross and net savings, kwh and kw savings, and baseline, short-term targets, medium-term targets, and long-term targets), and that there will also be portfolio-level and program-level metrics. 136 See ALJ s Ruling Seeking Comment on EE Business Plan Metrics, May 10, 2017, pp Id., pp See Commission staff feedback on Proposed Business Plan Metrics available at See SCE s Response to the Questions in Attachment A of Administrative Law Judge s Ruling Seeking Comments on Energy Efficiency Business Plan Metrics, May 22, SCE responded to 2 questions for prospective PAs, 4 questions for all IOUs, and 15 questions applicable to SCE. 140 See SCE s Revised Sector-Level Metrics Proposal, July 14, See Additional Clarifications for July 14th Program Administrator Filing of Revised Statewide (Common) Sector/Cross-Cutting Level Metrics, July 10,

38 Although the metrics are not yet finalized (e.g., not all of Commission Staff s clarifications have been provided by the PAs), the Commission should move forward and adopt SCE s sector-level metrics and, concurrently, create a process by which future updates and modifications 142 can be made after the Commission has had adequate time to review the metrics and evaluate according to the CAEECC s guiding principles (e.g., used and useful, timely, rely on program implementation data, simplicity, objective, output based, readily interpretable meaning, not a replacement for EM&V, and have longevity). 143 Such an approach will allow Business Plans to be approved without further delay and institute a process to refine sector-level metrics as needed. F. The Commission Should Establish a Policy for EE/DR Integration Before Requiring Implementation In its Business Plan, SCE proposed that EE and DR should be further integrated, 144 and appreciates that Commission Staff offered a proposal to integrate EE and DR. On June 30, 2017, ALJs Fitch and Kao issued a Ruling Requesting Comments on Energy Efficiency and Demand Response Integration Options. The Ruling included an Energy Division straw proposal on limited EE/DR Integration and a series of questions for parties to provide responses to in opening comments on the Ruling. As SCE stated in its opening comments on the Ruling: Updates may include adding and modifying metrics per Commission Staff Additional Clarifications for July 14th Program Administrator Filing of Revised Statewide (Common) Sector/Cross-Cutting Level Metrics which SCE was unable to address due to the timing of the guidance (see discussion later for more information), adding new metrics and targets, sunsetting metrics and targets that are later found to be unnecessary, or updating existing metrics and targets based upon new information. 143 See A , Administrative Law Judge s Ruling Seeking Comment on Energy Efficiency Business Plan Metrics, pp See A , Southern California Edison Company s Amended Energy Efficiency Rolling Portfolio Business Plan For , SCE-1, February 10, 2017, pp See SCE s Opening Comments on Revised Sector-Level Metric Proposals and Response to Administrative Law Judge s Ruling Requesting Comments on Energy Efficiency and Demand Response Integration Options, pp

39 The Staff Proposal is limited in that it focuses primarily on automated energy management technologies that integrate EE and DR. While these proposals are important to consider, SCE recommends the Commission establish overarching policy objectives and goals for the integration of EE and DR. These should include a common goal for EE and DR (and potentially other DSM resources); a common funding source to enable flexible use of customer funds for EE, DR, and the combination of the two (and potentially other DSM resources); and updated costeffectiveness protocols that enable appropriate evaluation of combined EE and DR portfolios. The integration of EE and DR should not be limited to automated energy management technologies because there are other means to achieve integrated EE and DR. Rather than focusing on improvements of energy management technologies (EMT) and EMT programs, the Commission should establish an overarching policy and/or a goal for the integration of EE and DR and then determine the appropriate activities to achieve that goal. As SCE stated in its comments, the Commission should also consider further integration of EE and DR to provide PAs and customers more flexibility to achieve GHG reduction goals. 146 This would entail establishing common EM&V protocols and cost-effectiveness methodologies to enable PAs to evaluate and select resources. 147 It would also involve establishing a common funding source for EE and DR with flexibility to shift funds across resource types as needed to achieve goals cost-effectively. 148 SCE understands that many of these activities cannot be completed as part of the Business Plan approval process; however, the Commission should establish a goal and high-level schedule for when such integration could occur. G. Additional Issues In this section, SCE provides comments on other issues, including EM&V compliance, assertions about job creation, and the annual budget advice letters. 146 Id, p Id. 148 Id. 36

40 1. SCE s Business Plan Complies with Requirements for EM&V in D The Commission s D provided specific guidance about the PAs EM&V budgets and collaboration. 149 SCE s Business Plan complies with this guidance. More specifically, in compliance with OP 15, SCE s EE portfolio EM&V funding is capped at four percent of the authorized budget. 150 In addition, consistent with OP 16, 60 percent of the SCE s portfolio EM&V budget is reserved and available to Commission staff overseeing evaluation activities, and the remaining budget is available to SCE for EM&V purposes outlined in D Further, also in compliance with OP 16, funding for SoCalREN s EM&V activities has been set on a proportional basis rather than the current up-to-40 percent allocation. Finally, in compliance with OP 17, SCE will continue a collaborative approach to determining evaluation, measurement, and verification priorities and activities under the rolling portfolio process See D , Decision Providing Guidance for Initial Energy Efficiency Rolling Portfolio Business Plan Filings, August 18, SCE s EE portfolio budget in its Business Plan and in its 2018 Budget Advice Letter filed on September 1, 2017 are consistent with OP 15 of D OP 15 p. 112, states, The budget for evaluation, measurement, and verification activities shall remain at four percent of the total portfolio budget. 151 SCE s EE portfolio budget in its Business Plan and in its 2018 Budget Advice Letter filed on September 1, 2017 are consistent with OP 16. OP 16 states, Beginning after the energy efficiency business plans are approved by the Commission, at least sixty percent of the evaluation, measurement, and verification budget shall be reserved and available under reimbursable budget authority to Commission staff overseeing evaluation activities. The remaining budget, up to 40 percent, shall be available to program administrators for their evaluation activities for the additional purposes outlined in this decision for evaluation priorities, with the exact amounts to be finalized during the collaborative process between program administrators and Commission staff. Funding for community choice aggregators (CCAs) and regional energy networks for evaluation shall be set on a proportional basis, based on total program budget, from among the up-to-40 percent allocation within the relevant utility service territory. Approved budgets for CCA administrators shall be transferred on January 15 of every year by the relevant utility. 152 OP 17 states, Commission staff and program administrator staff shall continue a collaborative approach to determining evaluation, measurement, and verification priorities and activities under the rolling portfolio process. 37

41 2. CEE Incorrectly Asserts that PA EE Portfolios Should be Responsible for Creating Jobs CEE proposes metrics to measure: (1) whether disadvantaged communities have access to jobs created by the Business Plans, 153 (2) outcomes of WE&T programs, 154 (3) installation of EE measures by an adequately trained and qualified workforce, 155 and (4) meaningful implementation of Assembly Bill (AB) 802 meter-based verification goals. 156 The proposed CEE metrics are overly cumbersome and unnecessary for the WE&T program and the EE portfolio to be effective. The WE&T program has a history of educating contractors about the importance of quality installations and identifying emerging training needs before the 153 CEE proposes the following specific metric: The percentage of incentives verified to have been installed by contractors that have demonstrated a commitment to provide middle class career pathways to workers from low-income, minority and disadvantaged communities (e.g., through adoption of workforce diversity and inclusion goals or through a contractual agreement to hire through state-certified apprenticeship programs, community colleges or other local or state organizations that have a proven track record of training and providing career opportunities to workers from low-income households and disadvantaged communities and those with barriers to employment.), See Coalition For Energy Efficiency (CEE) Response to Revised Portfolio and Sector- Level Metrics, July 24, 2017, p CEE proposes the following specific metrics: The percentage of WE&T program participants that meet the definition of disadvantaged workers; The number of new worker participants that go on to graduate from individual partners occupational programs (e.g., apprenticeship programs or community college degrees); For existing workers, the number of projects related to the WE&T training on which an incumbent participant has been employed within 12 months of completing the WE&T training; full time employment and income outcomes for WE&T program participants. See CEE Response to Revised Portfolio and Sector-Level Metrics, July 24, 2017, p CEE proposes the following specific metrics: Overall Metric: Percentage of incentives verified to have been installed by a skilled and trained workforce. Verification should be based on compliance with one of the Don Vial Center Workforce Guidance Plan recommendations for increasing engagement of skilled and trained workforce, such as requiring installers to be journeymen with relevant occupational training and experience and holding relevant specialty certifications, or to be supervised-enrollees of state-approved apprenticeship programs or accredited occupational degree programs. Short-Term Metrics: Adopt workforce standards for all midstream and downstream lighting control and HVAC measures; identify all other program energy efficiency measures requiring special skills and training in order to achieve energy outcomes and ensure safety. Mid-Term Metrics: Adopt workforce standards for 50% of energy efficiency measures with moderate installation complexity and 100% of energy efficiency measures with high skill complexity. Long-Term Metrics: Adopt workforce standards for 100% of energy efficiency measures with moderate or high installation complexity. See CEE Response to Revised Portfolio and Sector-Level Metrics, July 24, 2017, p See CEE Response to Revised Portfolio and Sector-Level Metrics, July 24, 2017, p

42 passage of Senate Bill 350 and AB 802. CEE s proposed metrics incorrectly suggest that the purpose of the WE&T program is specifically to create jobs, job access, or career tracks. Rather, the WE&T program focuses on educating and training people to perform the jobs needed to reach California s clean energy goals. 157 The two goals identified for WE&T in the California Long-Term Energy Efficiency Strategic Plan are: (1) establish EE education and training at all levels of California s educational systems, and (2) ensure that minority, low income, and disadvantaged communities fully participate in training and education programs at all levels of the DSM and EE industry. 158 The metrics proposed by CEE go beyond the scope of the WE&T program. The metrics that require tracking of whether EE measures are installed by an adequately trained and qualified workforce are unnecessary because all contractors participating in EE programs are required to be appropriately licensed, expected to fulfill their legal and contractual obligations, and to pass local jurisdiction inspections for code and safety compliance. Moreover, creating data to develop the baselines or targets for the proposed metrics would be costly and difficult to collect, track, accurately verify, and report. Therefore, the Commission should reject the metrics proposed by CEE. 3. Additional Information Regarding Strategic Energy Management (SEM) Subsequent to filing its Amended Business Plan, SCE received an inquiry from the Energy Division on one of its intervention strategies, Strategic Energy Management (SEM). In SCE's Amended Business Plan, SCE referred to SEM as a proposed pilot and referenced SEM in the commercial, industrial, agricultural, and public sectors. SCE clarifies for the record that the SEM intervention strategy is currently applicable only to the industrial sector as set forth in 157 See California Long-Term Energy Efficiency Strategic Plan, Achieving Maximum Energy Savings in California for 2009 and Beyond, dated September 2008 at p. 74, available at Id. 39

43 the California Industrial SEM Design Guide. 159 SCE includes this additional clarification in this filing rather than amending its Business Plan as this is a minor clarification. 4. Detailed Review of the Annual Budget Advice Letters by CAEECC Is Not Necessary D states that the coordinating committee (i.e., CAEECC) should [p]rovide input into annual budget advice letters, again, prior to and throughout the drafting process. 160 The decision also clarifies that the review of the budget advice letters should be relatively ministerial and should focus on the question, Does this conform to the approved business plan? 161 To this end, CAEECC discusses and reviews the inputs into the Budget Advice Letters, such as significant program changes and solicitation process. However, a detailed review of the budget advice letters to assure conformity to the Business Plan is not necessary. SCE must already comply with the Commission s decision, and parties will have an opportunity to comment or protest once the budget advice letter is filed. In addition, as a practical matter, there is not sufficient time between the development of an initial draft budget and the September 1 filing date to allow for additional input. As such, the Commission should clarify that the CAEECC should provide a high-level review and guidance to the inputs of the budget advice letter, and provide any necessary comments, via protests, similar to any other advice filing. 159 California Industrial SEM Design Guide, Version 1.0, February 8, 2017, available at See D , OP Id. at 62, To clarify, the annual budget filings and their associated review should be relatively ministerial. The question for Commission Staff in reviewing a budget advice letter should be does this conform to the approved business plan? The annual budget filings are not designed to create a forum for debating the merits of particular programs; that is for the Business Plan proceeding. Neither are the annual budget filings supposed to create a forum for debating the merits of how PAs implement particular programs, p

44 III. CONCLUSION SCE appreciates the opportunity to provide these Final Comments on Energy Efficiency Rolling Portfolio Business Plans, and respectfully requests that the Commission approve SCE s Amended Business Plan as filed on February 10, Respectfully submitted, FADIA KHOURY JANE LEE COLE By: /s/ Jane Lee Cole Jane Lee Cole Attorneys for SOUTHERN CALIFORNIA EDISON COMPANY 2244 Walnut Grove Avenue Post Office Box 800 Rosemead, California Telephone: (626) Facsimile: (626) Jane.Lee.Cole@sce.com September 25,

45 Attachment 1

46