CPUC Energy Efficiency Policies and Investor-Owned Utility (IOU)

Programs

Senate Committee on Energy, Utilities & CommunicationHearing on Energy Efficiency, May 17, 2011

Jeanne Clinton and Simon Eilif BakerCalifornia Public Utilities Commission (CPUC)

CPUC Process for Approval / Oversight of IOU Energy Efficiency Programs

• 3-Year Budget Cycle

• Current cycle: 2010-2012• Next cycle: 2014-2016 (with 2013 “bridge” year)*

– Portfolio guidance decision: June 2012 (est.)– Budget applications: Q1 2013 (est.)

Policy Guidance

•Savings Potential / Goals•Strategic Plan•Shareholder Incentives•20% Third-party

IOU Portfolio Applications

•Must meet goals•Budgets / Cost- effectiveness•Alignment with Strategic Plan

3-Year Portfolio Implementation

•IOU Administration•Energy Division EM&V and Oversight

*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

1. Efficiency goals set from information on efficiency potential, market assessment, economics. Policy direction based on evaluation findings, stakeholder feedback, gap analysis.

2. Portfolio plans and design/implementation vetted w/ stakeholders; CPUC analyzes for policy consistency.

3. Program designs based on logic models & performance metrics. Utilities report expenditures, installations, estimated savings & key metrics.

4. Program savings verified by independent evaluators managed by CPUC staff. Audit staff assess financial and administrative procedures.

5. Utility performance assessed & incentive paid via Risk Reward Incentive Mechanism.

1. CPUCResource Goals& Policy Direction

3. Utility Program Design & Implementation

4. CPUCEvaluation, Measurement& Verification

5. Utility Risk/Reward Incentive Mechanism

2. UtilityPortfolio Planning

CPUC Authorizes

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Funding Sources for Mainstream IOU Energy Efficiency Programs

• CPUC pools all funding sources into one overall (cost-effective) portfolio

• Gas PPP funds lost to budget transfer for FY 11-12

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- 200 400 600 800

EnergyProcurement

Electric PGC

Gas PPP

$ Millions

$175

$256

$576

17%

25%

57%

Average Annual EE Budget by Funding Source (Total ~ $1 billion)

California Long-Term Energy Efficiency Strategic Plan

• In 2007, CPUC ordered the development of a Strategic Plan to achieve “all cost-effective 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 Task Forces

• Momentum continuing via Action Planswww.californiaenergyefficiency.com

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Commission-Adopted IOU Savings Goals*

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

GW

h

Original Cummulative (D.04-09-060 and D.08-07-047) Current Cummulative (D.09-09-047 and D.08-07-047)

Original Annual (D.04-09-060 and D.08-07-047) Current Annual (D.09-09-047 and D.08-07-047)

Net Net Gross Total Market Gross

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* 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

Example: 2020 Energy Savings Goals (kWh)**

2010-2012 IOU Energy Efficiency Portfolios

• D.09-09-047 approved $3.1 billion in 2010-2012 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)

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IOU Forecasted Savings of EE Portfolios Exceed Commission-Adopted Goals

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2010 - 2012

0

2,000

4,000

6,000

8,000

10,000

Commission Adopted 6,967 1,535 151

IOU Forecasted 9,279 1,830 185

GWH MW MMtherms

Residential23%

Commercial28%

Industrial 13%

Agriculture4%

New Construction

4%

HVAC4%

Emerging Technologies

2%

Other *22%

IOU Energy Efficiency Budgets 2010-2012(Total = $3.1 Billion)

*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)

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2010-2012 EE Portfolio Highlights

• 12 statewide programs implemented consistently across 4 IOUs

Program Budget 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 ($233M); institutional partnerships ($95M)

• Third-party programs + Local Government Partnerships ~ 1/3 of portfolio spending by non-utility entities

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2010-2012 Planned Resource Program Savings

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StatewidePrograms

•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)

SCE (4)

SDG&E (6)

SCG (5)

PG&E (50)

SCE (31)

SDG&E (14)

SCG (18)

PG&E (25)

SCE (30)

SDG&E (14)

SCG (17)

IOU EE Portfolio Organization

(#) = 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.)

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New Focus for EM&V in 2010-2012Scope:

• 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

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Energy Division Staffing of Demand-Side Management Group

Integrated Demand-Side Analysis(EE, ESAP, DR, DG)

8 / 9

Retail Rate Design

3 / 7

Demand-side Evaluation(EE, ESAP, DR, DG)

8 / 9

Residential Programs(EE, ESAP, DR)

5 / 9

Non-Residential Programs(EE, DR)

6 / 8

Customer Generation Programs(DG)

4 / 7

Demand-Side AnalysisBranch

Demand-Side ProgramsBranch

Total Staffing:

34 / 51

(Filled / Total Authorized Positions)

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ESAP = Energy Savings Assistance ProgramDR = Demand ResponseDG = Distributed Generation (CSI Solar & SGIP)

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 - $110M• “Whole-house retrofit” incentives, marketing, training, quality assurance

– CEC-administered activities funded by ARRA / SEP - $52M• Marketing, website, financing support, training, (limited) local government incentives

– Local government-administered activities funded by ARRA block grants / DOE “Better Buildings” - $40M

• (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.

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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

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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 3rd-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?

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Appendix

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Utility Reported Energy Efficiency Budgets for 2010-20121

PG&E SCE SDG&E SoCal Gas TOTAL

Statewide Programs

Residential $288,274,078 $261,313,102 $73,436,928 $95,072,879 $718,096,987

Commercial $347,492,293 $366,544,232 $96,475,997 $52,619,571 $863,132,093

Industrial $159,680,735 $158,939,402 $19,544,771 $67,749,931 $405,914,839

Agriculture $78,045,046 $34,263,574 $5,415,499 $10,954,859 $128,678,978

New Construction $38,537,260 $70,472,102 $15,008,132 $13,522,348 $137,539,842

HVAC $58,727,572 $67,786,353 $911,705 $979,794 $128,405,424

Emerging Technologies $43,449,873 $17,194,725 $4,050,854 $3,515,000 $68,210,452

Workforce, Education & Training (WE&T) $44,492,361 $33,256,452 $14,008,009 $10,877,458 $102,634,280

Marketing, Education & Outreach (ME&O) $24,948,382 $39,353,776 $9,074,223 $6,341,089 $79,717,470

Codes and Standards $19,642,285 $6,766,714 $2,204,291 $1,802,536 $30,415,827

Integrated DSM $8,500,000 $1,251,238 $600,122 $600,122 $10,951,482

Lighting Market Transformation $462,565 $1,043,394 $0 $0 $1,505,959

Other Programs

Institutional - UC/CSU, DGS, Etc. $38,839,695 $45,580,141 $6,702,786 $4,070,407 $95,193,029

Local Gov't Partnerships2 $133,387,856 $75,114,797 $19,446,614 $5,494,005 $233,443,272

Evaluation, Meas. & Verification3 $53,520,000 $49,120,000 $11,120,068 $11,400,005 $125,160,073

TOTAL $1,338,000,002 $1,228,000,001 $277,999,999 $285,000,004 $3,129,000,006

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