CPUC Energy Efficiency Policies and InvestorOwned Utility IOU

CPUC Energy Efficiency Policies and Investor-Owned Utility (IOU) Programs Senate Committee on Energy, Utilities & Communication Hearing on Energy Efficiency, May 17, 2011 Jeanne Clinton and Simon Eilif Baker California Public Utilities Commission (CPUC)

CPUC Process for Approval / Oversight of IOU Energy Efficiency Programs • 3 -Year Budget Cycle Policy Guidance • Savings Potential / Goals • Strategic Plan • Shareholder Incentives • 20% Third-party IOU Portfolio Applications • Must meet goals • Budgets / Costeffectiveness • Alignment with Strategic Plan 3 -Year Portfolio Implementation • IOU Administration • Energy Division EM&V and Oversight • Current cycle: 2010 -2012 • Next cycle: 2014 -2016 (with 2013 “bridge” year)* – Portfolio guidance decision: June 2012 (est. ) – Budget applications: Q 1 2013 (est. ) *Pursuant to the December 23, 2010 Assigned Commissioner Ruling in Rulemaking (R. ) 09 -11 -014, a 2013 bridge year is expected Slide 2

How the CPUC Sets Direction and Measures Outcomes 5. Utility Risk/Reward Incentive Mechanism 1. CPUC Resource Goals & Policy Direction 4. CPUC Evaluation, Measurement & Verification 1. 2. 3. 4. 5. CPUC Authorizes 2. Utility Portfolio Planning 3. Utility Program Design & Implementation Efficiency goals set from information on efficiency potential, market assessment, economics. Policy direction based on evaluation findings, stakeholder feedback, gap analysis. Portfolio plans and design/implementation vetted w/ stakeholders; CPUC analyzes for policy consistency. Program designs based on logic models & performance metrics. Utilities report expenditures, installations, estimated savings & key metrics. Program savings verified by independent evaluators managed by CPUC staff. Audit staff assess financial and administrative procedures. Utility performance assessed & incentive paid via Risk Reward Incentive Mechanism. Slide 3

Funding Sources for Mainstream IOU Energy Efficiency Programs Average Annual EE Budget by Funding Source (Total ~ $1 billion) • CPUC pools all funding sources into one overall (costeffective) portfolio • Gas PPP funds lost to budget transfer for FY 11 -12 Slide 4

California Long-Term Energy Efficiency Strategic Plan • In 2007, CPUC ordered the development of a Strategic Plan to achieve “all costeffective energy efficiency. ” • In 2008, Strategic Plan established – A roadmap for energy efficiency through 2020 and beyond • Big Bold Energy Efficiency Strategies: – Zero Net Energy (ZNE) goals for new & existing buildings – Optimization of HVAC system performance – Saturation goals for low income household EE • Extensive stakeholder engagement via 12 www. californiaenergyefficiency. com Task Forces • Momentum continuing via Action Plans Slide 5

Commission-Adopted IOU Savings Goals* Example: 2020 Energy Savings Goals (k. Wh)** * Adopted pursuant to P. U. Code Sections 454. 55 and 454. 56 (SB 1037, Kehoe, Statutes of 2005) **Pursuant to CPUC Decision (D. )08 -07 -047, as modified by D. 09 -09 -047 Slide 6

2010 -2012 IOU Energy Efficiency Portfolios • D. 09 -09 -047 approved $3. 1 billion in 20102012 EE funding (ESAP not included): • Three-year combined savings targets: 7, 000 GWh / 1, 500 MW / 150 MMTherms – Equivalent to 3 major power plants – Savings incorporated into procurement planning • IOUs’ approved portfolios were guided by the Strategic Plan – 2010 -2012 portfolio is a “transition” portfolio – Many new “strategic programs” – e. g. , Whole-house retrofit (Energy Upgrade Calif. ), ZNE building pilots, on-bill financing (OBF) Slide 7

IOU Forecasted Savings of EE Portfolios Exceed Commission-Adopted Goals Slide 8

*Other includes Codes & Standards; Institutional; Local Government Partnerships (LGPs); Marketing, Education & Outreach (ME&O); Workforce Education & Training (WE&T); Integrated Demand-side Management (IDSM); Lighting Market Transformation; and Evaluation Measurement & Verification (EM&V) Slide 9

2010 -2012 EE Portfolio Highlights • 12 statewide programs implemented consistently across 4 IOUs Program Budget Residential $718 M Emerging Technologies $68 M Commercial $863 M Codes & Standards $30 M Industrial $405 M Integrated DSM $11 M Agricultural $128 M Workforce Education & Training $102 M New Construction $ 137 M Marketing Education & Outreach $ 80 M HVAC $128 M Lighting Market Transformation $1. 5 M • Local government partnerships ($233 M); institutional partnerships ($95 M) • Third-party programs + Local Government Partnerships ~ 1/3 of portfolio spending by non-utility entities Slide 10

2010 -2012 Planned Resource Program Savings Slide 11

IOU EE Portfolio Organization Statewide Programs • Residential • Commercial • Industrial • Agricultural • Heating, Ventilation, Air Conditioning • New Construction • Emerging Technologies • Codes & Standards • Marketing, Education & Outreach • Workforce Education & Training • Integrated Demand-side Management • Lighting Market Transformation PG&E (7) PG&E (50) PG&E (25) SCE (4) SCE (31) SCE (30) SDG&E (6) SDG&E (14) SCG (5) SCG (18) SCG (17) (#) = Number of individual programs

2010 -2012 EM&V Objectives • Measure & Verify Savings - for load impact and procurement planning • Program Evaluation - for timely performance feedback, improvement • Market Assessment – For determining baseline, remaining potential, goal-setting • Policy and Planning Support – Such as goals studies, DEER database, market transformation insight, and other overarching studies outside of core EM&V • Financial and Management Audit – Ensures adherence to CPUC requirement for efficient and effective use of funds (e. g. administrative and marketing cost caps, prudency, etc. ) Slide 13

New Focus for EM&V in 2010 -2012 Scope: • More evaluation of programs in “real time” as implemented • Studies of markets for new technologies • Pilot use of experimental design and per capita consumption to inform post 2012 program goals and plans • Utilizing Program Performance Metrics (PPMs) and Market Transformation Indicators (MTIs) to assess non-energy savings outcomes • More rigorous audit of IOU administration activities Approach: • Evaluation requirements integrated efficiently into multi-faceted studies • Stakeholder input invited into evaluation plans Challenge: • Disparity between IOU’s savings projections and evaluated savings widening at increasing rate since 2002 as multiple influences operate in ever-busier EE markets Slide 14

Energy Division Staffing of Demand-Side Management Group Total Staffing: 34 / 51 Demand-Side Programs Branch Demand-Side Analysis Branch (Filled / Total Authorized Positions) Residential Programs (EE, ESAP, DR) Integrated Demand-Side Analysis (EE, ESAP, DR, DG) 5/9 8/9 Non-Residential Programs (EE, DR) Retail Rate Design 6/8 3/7 Customer Generation Programs (DG) Demand-side Evaluation (EE, ESAP, DR, DG) 4/7 8/9 ESAP = Energy Savings Assistance Program DR = Demand Response DG = Distributed Generation (CSI Solar & SGIP) Slide 15

Coordination with CEC Programs & Activities • Codes & Standards (C&S) – C&S advocacy; Codes & Standards Enforcement (CASE) studies – Compliance Enhancement – Training, tools, outreach to building departments • Emerging Technologies Program (ETP) – Commercialization focus; coordinate with PIER through Emerging Technologies Coordinating Council (ETCC) • AB 758 – Financing assessment underway in anticipation of coordinating with CEC on program design • Energy Upgrade California (EUC)* – IOU-administered activities funded by ratepayers - $110 M • “Whole-house retrofit” incentives, marketing, training, quality assurance – CEC-administered activities funded by ARRA / SEP - $52 M • Marketing, website, financing support, training, (limited) local government incentives – Local government-administered activities funded by ARRA block grants / DOE “Better Buildings” - $40 M • • • (Limited) local government incentives, innovative marketing ARRA appliance rebates & IOU rebates Evaluation coordinating group (CEC / CPUC staff) – Lending CPUC expertise / resources to CEC’s limited ARRA evaluation budget – Ensuring no double-counting of savings * Note: EUC is residential and commercial buildings retrofit program and brand. Initially, the program is focused mostly on single-family residential. $ figures are for residential sector only. Slide 16

Commission Staff Planning Activities • Extending current portfolio through 2013 or 2014 to allow sufficient time for updated analysis, planning, policy guidance – Will require bridge-year funding decision • Cost-effectiveness methodology update • Database for EE Resources (DEER) update • Potential and Goals update • Strategic Plan update / Action Plan progress report • Post-2012 EM&V approach Slide 17

Looking Ahead… • Market Transformation – Need to distinguish market transformation (MT) from “resource acquisition. ” Consider statewide administration of MT approaches? • Innovation – Many promising technologies. How to bring to market and scale-up faster? – New business models for EE program deliverers. Develop protocols for EE aggregators to allow consideration as an energy resource by the ISO? • Competition – Increase competition for highly effective programs to access ratepayer funds in some way? – Utilize 3 rd-party program solicitations to drive new program approaches and scaling? • Financing – California needs to find market-specific solutions for EE financing. What is the appropriate ratepayer $ involvement / support? – Need solutions that allow cost repayment by successor owners or tenants. What solutions are they, and how structured? Slide 18

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