OF THE STATE OF CALIFORNIA

Transcription

1 BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA Order Instituting Rulemaking to Examine the Commission s Post-2008 Energy Efficiency Policies, Programs, Evaluation, Measurement, and Verification, and Related Issues. Rulemaking (Filed November 20, 2009) OPENING COMMENTS OF THE DIVISION OF RATEPAYER ADVOCATES IN RESPONSE TO ADMINISTRATIVE LAW JUDGE S PROPOSED DECISION AND ALTERNATE PROPOSED DECISION OF COMMISSIONER FERRON REGARDING PUBLIC PURPOSE PROGRAM FUNDS, PHASE III DIANA L. LEE Attorney for the Division of Ratepayer Advocates California Public Utilities Commission 505 Van Ness Ave. San Francisco, CA Phone: (415) Fax: (415) diana.lee@cpuc.ca.gov CHRIS UNGSON Analyst for the Division of Ratepayer Advocates California Public Utilities Commission 505 Van Ness Ave. San Francisco, CA Phone: (415) Fax: (415) chris.ungson@cpuc.ca.gov September 22,

2 TABLE OF CONTENTS Page I. INTRODUCTION AND BACKGROUND...1 II. DISCUSSION...3 A. THE COMMISSION SHOULD CONDUCT ANNUAL INDEPENDENT FINANCIAL AND MANAGEMENT AUDITS OF INCOME (COLLECTIONS) AND EXPENSES RELATED TO THE UTILITIES ENERGY EFFICIENCY PROGRAMS, AND ISSUE A PUBLIC AUDIT REPORT...3 B. THE COMMISSION SHOULD AUTHORIZE PG&E AND SDG&E TO USE UNSPENT, UNCOMMITTED ELECTRIC FUNDS FROM PREVIOUS CYCLES TO FUND ONLY GAS PROGRAMS THAT ALSO BENEFIT ELECTRIC RATEPAYERS AND SHOULD ALLOCATE THE BURDEN OF SB 87 FAIRLY BETWEEN GAS AND ELECTRIC RATEPAYERS IN DETERMINING THE TOTAL AMOUNT OF UNSPENT, UNCOMMITTED PRE-2010 ELECTRIC FUNDS THAT CAN POTENTIALLY BE MADE AVAILABLE TO GAS PROGRAMS...4 C. THE COMMISSION SHOULD REJECT THE PD S ALLOCATION OF THE ENTIRE $21.6 MILLION GAS PPP FUNDS REMAINING TO PG&E IF THE $155 MILLION IS TRANSFERRED TO THE GENERAL FUND...6 D. THE COMMISSION SHOULD REDIRECT ANY REMAINING UNSPENT, UNCOMMITTED FUNDS FROM PREVIOUS CYCLES AND FROM THE PROGRAM CYCLE TOWARD A STATEWIDE CONSOLIDATED FINANCING PROGRAM RUN AND OPERATED BY AN INDEPENDENT FINANCING ADMINISTRATOR...7 III. CONCLUSION...8 APPENDIX 1 APPENDIX 2 i

3 TABLE OF AUTHORITIES COMMISSION DECISIONS D , 5 ii

4 OPENING COMMENTS OF THE DIVISION OF RATEPAYER ADVOCATES IN RESPONSE TO ADMINISTRATIVE LAW JUDGE S PROPOSED DECISION AND ALTERNATE PROPOSED DECISION OF COMMISSIONER FERRON REGARDING PUBLIC PURPOSE PROGRAM FUNDS, PHASE III I. INTRODUCTION AND BACKGROUND Pursuant to Rule 14.3 of the Commission s Rules of Practice and Procedure, the Division of Ratepayer Advocates (DRA) submits the following comments on the Proposed Decision of Administrative Law Judge (ALJ) Ferrar regarding Gas Public Purpose Program Funds ( PD ) and the Alternate Proposed Decision of Commissioner Ferron Regarding Gas Public Purpose Program Funds ( APD ). The PD and APD were issued on September 2, 2011 in response to Senate Bill (SB) 87, signed by Governor Brown on June 30, SB 87 authorized the transfer of up to $155 million of natural gas Public Purpose Program (PPP) surcharge funds from the Board of Equalization to the state s General Fund. If this transfer occurs in full, there will be approximately $21.6 million left in the PPP fund, thus creating a shortfall between the Commission s approved budget for authorized gas energy efficiency programs and the amount of funds actually available to implement those programs. The PD and APD each address how the Commission should deal with this potential funding gap. The PD would: Authorize Pacific Gas and Electric Company (PG&E), San Diego Gas & Electric Company (SDG&E) and Southern California Gas Company (SoCalGas) 1 to use uncommitted and unspent gas energy efficiency funds from previous program cycles to help defray the current funding shortfall; Authorize PG&E and SDG&E to use 18% of the unspent prior years electric energy efficiency funds to cover the funding shortfall expected to result from SB 87; Allocate to PG&E the entire $21.6 million of the gas PPP surcharge funds expected to be available from the Board of Equalization in the event the full $155 million is transferred to the General Fund, thereby effectively requiring SDG&E and SoCalGas customers to fund programs that benefit PG&E ratepayers; and 1 DRA s Comments refer collectively to PG&E, SDG&E and SoCalGas as Utilities. 1

5 Direct an audit to determine the amount of funds left. The APD would: Authorize PG&E, SDG&E and SoCalGas to use uncommitted and unspent evaluation, measurement and verifications funds from previous program cycles, to the extent those funds are available to help defray the current funding shortfall; Authorize PG&E, SDG&E and SoCalGas to use uncommitted and unspent gas energy efficiency funds from previous program cycles to help defray the current funding shortfall; Authorize PG&E, SDG&E and SoCalGas to use uncommitted and unspent electric energy efficiency funds from previous program cycles to help defray the current funding shortfall, without any showing that the expenditure of electric funds for gas programs would also benefit electric ratepayers. DRA agrees with the PD and the APD that the Commission should authorize PG&E, SDG&E and SoCalGas to use any prior unspent gas energy efficiency funds to close the SB 87 funding gap. DRA agrees with the PD that the Commission should perform an audit to determine the exact amount of funds that remain available, and with its fundamental premise that funding by electric ratepayers for gas energy efficiency programs require that such funding delivers benefits to electric ratepayers. DRA recommends that the Commission reject the APD and adopt the PD with the following changes. DRA disagrees with the PD s allocation to PG&E of the entire $21.6 million remaining after the Board of Equalization transfers $155 million of gas PPP funds to the general fund. Such an allocation effectively requires SDG&E and SoCalGas ratepayers to fund programs that provide no benefits to them, and should be revised to reflect the contributions of each utility s ratepayers. While DRA appreciates the PD s rationale for the use of the 82/18 ratio of electric and gas benefits to allocate prior unspent electric energy efficiency funds to close the SB 87 funding gap for PG&E and SDG&E, it believes that a greater proportion of these funds could be used to more fairly allocate the burden created by SB 87, so long as the funds are used to support gas programs that also benefit electric ratepayers. Table A in Appendix 1 shows that under DRA s recommendations, all three Utilities will have enough funds to mitigate the full impact of SB 87 and still have $52.32 million in surplus unspent monies, which should be directed to the 2

6 Consolidated Financing Program DRA recommended in the Bridge Funding phase of this proceeding. Thus, DRA s recommendation allows the Commission to 1) reaffirm its existing policies on the use of funds across utilities and the use of gas and electric funds; 2 2) distribute the burden of SB 87 fairly between gas and electric customers; 3) reaffirm and support its policy to encourage energy efficiency programs that employ comprehensive, integrated, whole building system delivery approaches that reduce the overall energy consumptions of buildings; and 4) take meaningful and material action toward addressing a longstanding market barrier in energy efficiency financing. II. DISCUSSION A. The Commission should conduct annual independent financial and management audits of income (collections) and expenses related to the Utilities energy efficiency programs, and issue a public audit report. Given the uncertainty about the amount of funds available to cover the potential deficit in gas energy efficiency program caused by SB 87, DRA recommended that the Commission require an annual independent financial and management audit. 3 The APD is silent on the discrepancy between the funds identified as available in the ACR and those identified in the Utilities motion. 4 In contrast, the PD acknowledges the significant problem that exists for both SB 87 planning and overall Commission oversight given the uncertainty regarding the amount of energy efficiency funds available: Though Energy Division met several times with IOU representatives, and the Assigned ALJ issued a ruling requiring the IOUs to clarify the estimates of funds available to them, we ve yet to conclusively determine what these amounts actually are, why they are so substantial, or even why the IOUs are in possession of funds they were previously directed to spend. While some of this confusion is likely the result of ongoing spending, 2 No party disagrees with the soundness of these policies. 3 Comments of the Division of Ratepayer Advocates in Response to Assigned Commissioner s Ruling and Scoping Memo Regarding Public Purpose Program Funds, Phase III (DRA Comments) p. 3; see also Comments of TheUtility Reform Network on 2013 Bridge Funding and Mechanics of Portfolio Extension, June 16, 2011, pp , citing D , p. 300 (recommending a similar audit). 4 See Joint Motion of Pacific Gas and Electric Company, San Diego Gas & Electric Company, and Southern California Gas Company to Shift Unspent, Uncommitted Energy Efficiency Funds to Ensure Adequate Funding for the Energy Efficiency Portfolio in the Wake of Senate Bill 87, July 1,

7 we are obliged to investigate further. We will therefore direct that Energy Division supervise an audit of these program funds. 5 The PD therefore directs the Commission s Energy Division to supervise an audit of the program funds. 6 DRA believes the PD does not go far enough. Some parties were surprised to learn about the existence of substantial amounts of unspent funds ($117,000,000 reported in the Joint IOU Motion in this proceeding) accumulated from previous program cycles. Had this been known, the Commission could have considered returning these monies to ratepayers or otherwise redirecting them to other productive uses. 7 The Commission should address this obvious lack of transparency and accountability. DRA therefore urges the Commission to require annual independent financial and management audits of income (collections) and expenses related to energy efficiency programs and to issue a report on an annual basis to be made available to all interested parties and to the general public. The Commission should authorize the Energy Division to hire an outside auditing firm to accomplish this task and should authorize funding for these audits in current and future EM&V budgets. B. The Commission should authorize PG&E and SDG&E to use unspent, uncommitted electric funds from previous cycles to fund only gas programs that also benefit electric ratepayers and should allocate the burden of SB 87 fairly between gas and electric ratepayers in determining the total amount of unspent, uncommitted pre-2010 electric funds that can potentially be made available to gas programs. The APD would authorize SDG&E and PG&E to use without limitation all unspent, uncommitted electric SDG&E and SoCalGas funds from prior energy efficiency cycles to close the SB 87 funding gap. 8 This would in effect make whole the funding for PG&E and SDG&E gas programs. The APD contends that the Energy Efficiency Policy Manual provision providing that gas PGC funds must fund natural gas energy efficiency programs and that electric PGC funds must fund electric energy efficiency programs 9 is not a firm legal requirement. 10 The 5 PD, p PD, p. 6 and Ordering Paragraph 2, p See e.g., D , Ordering Paragraph 15(j), p. 371 directed the Utilities to identify, as a component of their adopted budgets the applicable unspent/unallocated funds to be used to reduce energy efficiency budgets. 8 APD, p APD, p. 10, citing Energy Efficiency Policy Manual Version 4, p. 6; see also DRA Comments, p. 6. 4

8 APD states the Commission in the unique circumstances presented here may authorize the use of electric [energy efficiency] funds to make up part of the loss gas PPP funds to prevent hardship. 11 While the Energy Efficiency Policy Manual may not establish a firm legal requirement in establishing a nexus between the payment of PGC energy efficiency funds and the receipt by ratepayers of benefits from PGC energy efficiency funds, it reflects good public policy. Allowing the unrestricted use of electric PGC funds to backstop the SB 87 shortfall without regard to benefits provided to electric ratepayers would conflict with sound and established Commission policy, and there is no reason to believe as the APD suggests that the SB 87 will be the only time the legislature authorizes the transfer of gas PPP funds. The PD, in contrast, denies as overbroad the requested authority to offset any remaining gas-under collection by transferring funds from any remaining electric funds. 12 Instead, the PD determines that consistent with D s recognition that electric funds can be used to support gas programs that also benefit electric ratepayers, a portion of the unspent electric funds should be used to backstop the gas funds shortfall SB 87 may create. SDG&E and PG&E failed to state which of the programs in jeopardy are mutually beneficial programs or to provide information about the relative (gas/electric) benefits of the programs at issue, 13 so the PD used the formula for the electric and gas cost recovery expense ratio developed in D as a proxy. 14 The PD therefore applied the 18% figure used to the unspent electric funds. The PD justifies the use of the proxy by the failure of PG&E and SDG&E to identify which gas programs are beneficial to gas and electric ratepayers. DRA believes, however, that the application of the proxy does not fairly distribute the burden of SB 87 and, in addition, may shortchange such mutually beneficial programs that strive to employ consolidated, integrated, whole building delivery approaches to energy efficiency. In this 10 APD, p APD, p PD, p PD, p PD, p

9 regard, DRA agrees with the APD. 15 SB 87 was not an indictment on gas programs; the gas PPP surcharge funds were simply available to close California s budget deficit because of the mechanics of their collection. However, unlike the APD, DRA would only allocate unspent electric funds to fill the funding gap that remains after exhaustion of the available funds from all other sources. In addition, DRA believes that the use of electric funds made available to fill this remaining gap should be limited to gas programs that also benefit electric ratepayers. 16 To this end, the Commission should direct PG&E and SDG&E to file advice letters to identify the gas programs that meet this condition. Referring to Table A in Appendix 1, the funding gap that remains after all other funds have been exhausted is $18.3 million for PG&E and $2.10 million for SDG&E. PG&E has $47.9 million of unspent electric funds. SDG&E has $22.2 million in unspent electric funds. Of these unspent electric funds, the Commission should authorize PG&E to use $18.3 million and SDG&E to use $2.10 million, thus fully addressing the remaining funding gap. As mentioned earlier, use of these electric funds made available should be limited to gas programs that also benefit electric ratepayers. DRA s recommendation results in an unspent funds surplus of $52.32 million across all of the three Utilities. As DRA suggests below, these surplus funds should be directed to the Consolidated Financing Program, which DRA recommended in the Bridge Funding phase of this proceeding. C. The Commission should reject the PD s allocation of the entire $21.6 million gas PPP funds remaining to PG&E if the $155 million is transferred to the general fund. The PD proposes to allocate the [entire] amount that will be left over if a full transfer occurs ($21.6 million) to PG&E. 17 The Energy Efficiency Policy Manual reflects the sound public policy that energy efficiency funds should be spent to deliver energy efficiency benefits 15 APD, p PG&E, SDG&E and SoCalGas argue electric ratepayers benefit from natural gas usage by customers because it results in lower natural gas prices overall, which lowers the cost of producing electricity. Thus, by extension, they appear to argue that all gas energy efficiency programs benefit electric ratepayers. See Utility Opening Comments, pp. 5-6, citing the CEC 2009 Integrated Energy Policy Report, California Energy Commission (CEC) =CMF, p PG&E, SDG&E and SoCalGas have failed to demonstrate in this proceeding the extent to which their gas energy efficiency programs have specifically contributed to lower natural gas prices. 17 PD, p. 7. 6

10 to ratepayers in the service territory from which funds were collected. 18 The requirement that funds be spent to deliver benefits to ratepayers in the service territory from which funds were collected reflects more than rational public policy; the requirement is consistent with the Commission s obligation under Section 451 of the Public Utilities Code to ensure just and reasonable rates. 19 Both the PD and the APD recognized that [n]o party asserted that shifting funds among the utilities was either permissible or desirable. 20 DRA noted that [i]t would be patently unfair to require ratepayers of one utility to pay rates for programs whose benefits accrue solely to the ratepayers of another utility in another service territory. 21 Yet the PD s allocation of the entire remaining $21.6 million in PPP funds to PG&E, when those funds include money contributed by ratepayers of SDG&E and SoCalGas, would require ratepayers in southern California to fund energy efficiency in northern California with no showing that this would benefit those ratepayers. The Commission should revise the PD consistent with Table A in Appendix 1 to ensure that SoCalGas and SG&E ratepayers do not pay for programs in PG&E s service territory. This table also notes and resolves discrepancies between the raw numbers used in the PD and the APD. D. The Commission should redirect any remaining unspent, uncommitted funds from previous cycles and from the program cycle toward a statewide Consolidated Financing Program run and operated by an independent financing administrator. The PD would return any remaining unspent, uncommitted funds to the originating Utility. DRA disagrees. In its opening comments, DRA recommended that any remaining unspent, uncommitted funds that cannot be used to mitigate the impact of SB 87 be redirected to the Consolidated Financing Program advocated by DRA in the 2013 Bridge Funding Proceeding. 22 The purpose of establishing the Consolidated Financing Program is to fund, develop, and implement a variety of financing mechanisms that will leverage several-fold the capital raised from ratepayers with private capital to make low interest loans or financing 18 PD, p DRA Comments, p PD, p. 9; APD, p DRA Comments, p DRA Comments, p

11 available for energy efficiency projects. 23 DRA suggested an initial budget of at least $85 million, much more if possible, and urged the Commission to begin a separate proceeding to develop the details of the program. The initial budget for the program would be obtained through the elimination of rebates, incentives, and subsidies for screw-in Compact Fluorescent Lamps (CFLs) and the appliance recycling programs (which would generate more than $50 million), reducing the EM&V budget for the 2013 Bridge Year by about half (which would free up an additional $21.6 million), and allocating to the program all unspent monies remaining from the program cycle. As Table A in Appendix 1 shows, there will be $52.32 million of surplus funds after the impact of SB 87 is mitigated consistent with DRA s recommendations. DRA believes these surplus funds should be redirected to the Consolidated Financing Program. DRA believes it is necessary to facilitate the development and implementation of a variety of financing mechanisms which substantially increase the flow of private capital in energy efficiency markets. Vibrant participation of private capital is necessary to transform energy efficiency markets, increase the order volume of energy efficiency projects, accelerate innovation, and, ultimately, reduce the need for ratepayer subsidies. Therefore, DRA urges the Commission to act now to establish a Consolidate Financing Program, administered by an independent entity with the single mission of facilitating the development and commercialization of financing mechanisms in the marketplace. This needs to be in place, with adequate funding, beginning of the 2013 Bridge Year, sooner if possible. Otherwise, DRA is fearful that the Commission may have to wait until the program cycle in order to do so. This is a delay that energy efficiency markets and ratepayers cannot afford. III. CONCLUSION The Commission should adopt the PD, but should allocate to PG&E, SDG&E, and SoCalGas each utility s proportionate share of gas PPP funds remaining after the Board of Equalization transfers up to $155 million of gas PPP funds to the General Fund. DRA supports replacing the PD s use of the 82/18 ratio of electric and gas benefits to allocate prior unspent electric energy efficiency funds to close the SB 87 funding gap and in its place providing PG&E and SDG&E the authority to use $18.30 million and $2.10 million of the unspent electric funds 23 The Division of Ratepayer Advocates Comments In Response to Administrative Law Judge s Ruling Requesting Comments Regarding 2013 Bridge Funding and Mechanics of Portfolio Extension ( DRA 2013 Bridge Funding Opening Comments ), June 16, 2011, p. 7. 8

12 respectively to be allocated to gas programs that also benefit electric ratepayers. DRA believes this limited use of electric funds more fairly allocates the burden of SB 87 between gas and electric ratepayers. Finally, any funds remaining should be allocated to DRA s proposed Consolidated Financing Mechanism, which would substantially increase the flow of private capital in energy efficiency markets. Vibrant participation of private capital is necessary to transform energy efficiency markets, increase the order volume of energy efficiency projects, accelerate innovation, and, ultimately, reduce the need for ratepayer subsidies. Respectfully submitted, /s/ DIANA L. LEE Diana L. Lee Attorney for the Division of Ratepayer Advocates September 22, 2011 California Public Utilities Commission 505 Van Ness Avenue San Francisco, CA Phone: (415) Fax: (415) Diana.lee@cpuc.ca.gov 9

13 APPENDIX 1 Table A - As Revised by DRA Estimated Summary of IOU Available Funds (million $) PG&E SDG&E SCG Total 1 Forecast Gas PPP Collections/Budget FY 2011/2012 $ $ $ $ Pro Rata Impact if SB 87 Transfer Occurs $ (63.55) $ (15.50) $ (75.95) $ (155.00) 3 Gas Funds Remaining (Line 1+ Line 2) a/ $ $ 5.20 $ (9.95) $ Total (Gap) to be addressed $ (37.20) $ (10.30) $ (85.90) $ (133.40) 5 Estimated 6/30/2011 Unspent Gas Funds $ (1.80) $ 0.70 $ Pre-2010 Uncommitted, Available Gas Funds b/ $ 7.20 $ 7.20 $ Pre-2010 EM&V $ $ 0.30 $ Subtotal Available Funds (add Lines 5, 6, 7) $ $ 8.20 $ Subtotal Remaining (Gap)/Surplus (Line 4 + Line 8) $ (18.30) $ (2.10) $ Pre-2010 Unspent, Uncommitted Electric Funds c/ $ 47.9 $ Allocation of Unspent, Uncommitted Electric Funds for Gas $ $ 2.10 Programs that also Benefit Electric Ratepayers 12 Total Surplus (Directed to Consolidated Financing $ $ $ a/ Table A of APD does not address use of this $21.6M, while Table A of the PD allocates this entire amount to PG&E (in effect transferring monies from one IOU to another). b/ For SDG&E, the PD uses $7.2M and the APD uses $6.9M. For SCG, the PD uses $31.3M and the APD uses $28.1M. This revised table uses $7.2M for SDG&E and $31.4M for SCG, consistent with Joint Reseponse of Joint IOUs to ALJ Ruling Seeking Information Regarding Gas EE Programs, pg. 7. c/ Table A of the PD recognizes the existence of $22.2M of Pre-2010 Unspent, Uncommitted Electric Funds for SDG&E while Table A of the APD does not.

14 APPENDIX 2 Proposed Changes to Findings of Fact and Ordering Paragraphs of the PD Findings of Fact 4. If the full amount allowed by SB 87 is transferred, there will only be $21.6 million remaining in the Gas Consumption Surcharge Fund: $26.5 million for Pacific Gas and Electric Company; $5.2 million for San Diego Gas & Electric Company, and an undercollection of $9.95 million for Southern California Gas Company, as shown in Table A of DRAs Appendix For the most part, parties agreed that the IOUs should fully fund their ARRA, and, in particular, the Energy Upgrade California program, and gas programs that demonstrate benefits both gas and electric ratepayers, including programs that deliver consolidated, integrated, whole building approaches to energy efficiency. Ordering Paragraphs 7a. Pacific Gas and Electric Company and San Diego Gas & Electric Company each shall file a Tier 3 Advice Letter within 30 days of the mailing of this decision that identifies which gas energy efficiency programs benefit both gas and electric ratepayers. 10. Pacific Gas and Electric Company may use up to $18.3 million and San Diego Gas & Electric Company may use up to $2.10 million 18% of their electric energy efficiency program funds to support gas programs that they identify as also having electric energy efficiency program benefits. 11. All funds provided for in today s decision in excess of funds transferred pursuant to Senate Bill 87 shall be returned to their source of origin on or before July be redirected to the Consolidated Financing Program advocated by DRA in the 2013 Bridge Funding phase of this proceeding.