STATE OF CALIFORNIA EDMUND G. BROWN JR., Governor

PUBLIC UTILITIES COMMISSION

505 VAN NESS AVENUE

SAN FRANCISCO, CA 94102-3298

May 18, 2012

TO: ALL PARTIES OF RECORD IN RULEMAKING 09-11-014.

Decision 12-05-015 is being mailed without the Concurrence of President Michael R. Peevey and Concurrence of Commissioner Timothy Alan Simon. The Concurrences will be mailed separately.

Very truly yours,

/s/ KAREN V. CLOPTON

Karen V. Clopton, Chief
Administrative Law Judge

KVC/lil

Attachment

ALJ/EDF/lil Date of Issuance 5/18/2012

Decision 12-05-015 May 10, 2012

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 09-11-014
(Filed November 20, 2009)

DECISION PROVIDING GUIDANCE ON 2013-2014 ENERGY EFFICIENCY PORTFOLIOS AND 2012 MARKETING, EDUCATION, AND OUTREACH

R.09-11-014 ALJ/EDF/lil

TABLE OF CONTENTS

(Cont’d)

Title Page

DECISION PROVIDING GUIDANCE ON 2013-2014
ENERGY EFFICIENCY PORTFOLIOS AND 2012
MARKETING, EDUCATION, AND OUTREACH 1

1. Summary 2

2. Background 4

2.1. Procedural Background 4

3. Overview of Policy Guidance 8

3.1. Implementation of Energy Efficiency Strategic Plan 15

3.2. Financing 18

3.3. Deep Retrofit Strategies and AB 758 20

3.4. Expansion of Local Government and Third-Party Delivery 22

3.5. Codes and Standards and Emerging Technologies 23

3.6. Energy Upgrade California 24

3.7. Ex Ante Savings Values and Utilization of Evaluation Results 25

4. Energy Savings Goals for the 2013-2014 Applications 26

4.1. Background 26

4.2. Avoided Cost and Cost-Effectiveness Guidance for 2013-2014 Applications 27

4.2.1. Consistency with Other Demand-Side Programs 31

4.2.2. Updates to Data Inputs 32

4.2.3. New Avoided Cost (“Separate Components”) Calculator 32

4.2.3.1. Avoided Cost of Energy 33

4.2.3.2. Avoided Cost of Generation Capacity 34

4.2.3.3. Avoided Cost of Transmission and Distribution Capacity 35

4.2.3.4. Avoided Cost of Ancillary Services Procurement 35

4.2.3.5. Avoided Cost of Renewable Procurement 35

4.2.3.6. Avoided Cost of Greenhouse Gas Emissions 36

4.2.4. Discount Rate 37

4.2.5. Adoption of the Avoided Cost Calculator and
Discount Rate 39

4.2.6. Issues to be Considered in Future Proceedings 40

4.3. DEER 2011 Update 42

4.3.1. DEER 2011 Update Process 43

4.3.1.1. Party Positions 43

4.3.1.2. Discussion 45

4.3.2. Complexity of Ex Ante Values 46

4.3.2.1. Party Positions 46

4.3.2.2. Discussion 47

4.3.3. DEER Net-To-Gross Values 49

4.3.3.1. Net-to-Gross Development Methodology and Complexity of Resulting Values 49

4.3.3.1.1. Party Positions 49

4.3.3.1.2. Discussion 52

4.3.3.2. Considering Recent Program Improvements in DEER Net-to-Gross Values 54

4.3.3.2.1. Party Positions 54

4.3.3.2.2. Discussion 56

4.3.3.3. Net-to-Gross Values for Customized Projects
and Emerging Technologies Measures 57

4.3.3.3.1. Party Positions 57

4.3.3.3.2. Discussion 60

4.3.3.4. DEER Values for HVAC Interactive Effects 62

4.3.3.4.1. Positions of the Parties 62

4.3.3.4.2. Discussion 64

4.3.4. Other Updates to DEER Values 65

4.3.5. Adoption of DEER 2011 for Planning 66

4.4. 2011 Energy Efficiency Potential Study 66

4.4.1. Positions of the Parties 68

4.4.2. Discussion 70

4.4.3. Refrigerator Recycling 71

4.4.3.1. Positions of the Parties 71

4.4.3.2. Discussion 72

4.4.4. Basic Compact Fluorescent Lamps 72

4.4.4.1. Position of the Parties 72

4.4.4.2. Discussion 72

4.4.5. Behavior Programs 73

4.4.5.1. Positions of the Parties 74

4.4.5.2. Discussion 75

4.5. 2013-2014 Transition Portfolio Goals 76

4.5.1. Positions of the Parties 77

4.5.2. Discussion 78

4.5.3. Use of 2011 Potential Study 79

4.5.3.1. Positions of the Parties 80

4.5.3.2. Discussion 80

4.5.4. Codes and Standards Advocacy Savings 81

4.5.4.1. Positions of the Parties 83

4.5.4.2. Discussion 84

4.5.5. Separate Targets for Goals Components 85

4.5.5.1. Positions of the Parties 86

4.5.5.2. Discussion 87

4.5.6. Goals Applied on a Net or Gross Basis 88

4.5.6.1. Positions of the Parties 88

4.5.6.2. Discussion 89

4.5.7. Annual and Cumulative Goals 90

4.5.7.1. Positions of the Parties 93

4.5.7.2. Discussion 94

4.5.8. Adopted 2013-2014 Goals 95

5. Financing 96

5.1. Background 98

5.2. Positions of the Parties 101

5.3. Discussion 106

5.3.1. Continuation of on-bill financing Programs 109

5.3.2. Continuation of American Recovery and Reinvestment
Act Financing Programs 110

5.3.3. Design of New Financing Strategies 113

5.3.3.1. Credit Enhancement for Single Family
Residential Customers 118

5.3.3.2. Strategy for Multifamily Residential Buildings 126

5.3.3.3. Credit Enhancement for Small Business
Customers 129

5.3.3.4. Onbill repayment for Non-Residential
Customers 131

5.3.3.5. Financing Database Development and
Data Sharing 133

5.3.4. Other Issues 135

5.3.4.1. Utility Credit for Energy Savings Associated
with Financing Programs 135

5.3.4.2. Next Steps for Financing Programs 137

6. Local Government, Government Partnerships and
Third-Party Delivery 141

6.1. Government Partnerships 142

6.1.1. Continuation of Successful Government Programs/Partnerships 143

6.1.2. Expansion of Successful Government Programs/
Partnerships 144

6.1.3. Local Government Regional Energy Efficiency Pilots 146

6.2. Third-Party Programs 151

6.2.1. Positions of Parties 152

6.2.2. Discussion 154

7. Reducing the Number and Complexity of Programs 157

7.1. Positions of Parties 157

7.2. Discussion 160

8. Program Guidance for the Residential Sector 161

8.1. Energy Upgrade California (Whole House) Program 162

8.1.1. Background 162

8.1.2. Energy Upgrade California: A Market TransformationOriented Program 163

8.1.2.1. Positions of the Parties 164

8.1.2.2. Discussion 165

8.1.3. Energy Upgrade California: Long-Term Commitment
and Stepwise Declining Incentives Approach 167

8.1.3.1. Positions of Parties 167

8.1.3.2. Discussion 168

8.1.4. Energy Upgrade California: HVAC Incentives and
Program 170

8.1.4.1. Participation Rules 170

8.1.4.2. Parties’ Positions 170

8.1.4.3. Discussion 171

8.1.5. Energy Upgrade California: Role of Local Governments 176

8.1.5.1. Positions of the Parties 176

8.1.5.2. Discussion 177

8.1.6. Energy Upgrade California: Workforce Training 178

8.1.6.1. Positions of the Parties 178

8.1.6.2. Discussion 178

8.1.7. Energy Upgrade California: Proposals for Additional Incentives 180

8.1.7.1. Positions of Parties 181

8.1.7.2. Discussion 182

8.1.8. Energy Upgrade California: Multifamily Program 185

8.1.8.1. Positions of Parties 186

8.1.8.2. Discussion 188

8.1.9. Energy Upgrade California: Whole House Home
Energy Rating System (HERs) and Energy Upgrade
California Approved Software 190

8.1.9.1. Positions of Parties 192

8.1.9.2. Discussion 194

8.1.10. Energy Upgrade California: Investor-Owned Utilities
Data Sharing 196

8.1.10.1. Positions of Parties 197

8.1.10.2. Discussion 198

8.1.11. Energy Upgrade California: Other Program Direction 199

8.2. Plug Loads/Appliances 200

8.2.1. Positions of Parties 201

8.2.2. Discussion 202

8.3. Appliance Recycling Program 204

8.3.1. Positions of Parties 204

8.3.2. Discussion 205

8.4. Residential New Construction 207

8.4.1. Residential New Construction Guidance for 2013-2014 Implementation Activities 208

8.4.1.1. Positions of Parties 208

8.4.1.2. Discussion 209

8.4.2. Residential New Construction Guidance for Future
Zero Net Energy Roadmap 211

9. Program Guidance for the Commercial Sector 213

9.1. Targeting the Untapped Potential of Small Commercial
Buildings 214

9.1.1. Positions of the Parties 215

9.1.2. Discussion 216

9.2. Increasing the Adoption of Emerging Technologies into
Current Programs 219

9.2.1. Positions of Parties 219

9.2.2. Discussion 220

9.3. Increasing the Measurement of Performance Data 221

9.3.1. Positions of Parties 222

9.3.2. Discussion 222

9.4. Providing Deeper Energy Retrofits Through Innovative
Auditing Approaches and Packages of Measures 223

9.4.1. Positions of Parties 224

9.4.2. Discussion 224

9.5. Addressing Split-Incentive Barriers in Multi-Tenant Buildings 226

9.5.1. Positions of Parties 226

9.5.2. Discussion 227

10. Lighting Programs 227

10.1. Upstream Rebates for Basic Compact Fluorescent Lamps 229

10.1.1. Positions of the Parties 229

10.1.2. Discussion 231

10.2. Lighting Program Re-design 234

10.2.1. Positions of the Parties 234

10.2.2. Discussion 235

10.3. Lighting Market Transformation as a Coordination Program 237

10.3.1. Positions of the Parties 237

10.3.2. Discussion 238

10.4. Upstream Rebates for Advanced Lighting Measures 239

10.4.1. Positions of the Parties 239

10.4.2. Discussion 241

11. Codes and Standards 243

11.1. An Integrated Approach 246

11.1.1. Positions of the Parties 247

11.1.2. Discussion 248

11.2. Workforce Education and Training, and Marketing and
Outreach 250

11.2.1. Positions of the Parties 251

11.2.2. Discussion 252

11.3. Incentives for Codes and Standards 253

11.3.1. Positions of the Parties 254

11.3.2. Discussion 254

11.4. Local Government Role 256

11.4.1. Positions of the Parties 256

11.4.2. Discussion 257

12. Emerging Technologies Program 258

12.1. Positions of Parties 262

12.2. Discussion 265

12.2.1. Coordination with External Market Actors 268

13. Workforce Education and Training 272

13.1. Positions of Parties 275

13.2. Discussion 277

13.2.1. Continuation of the California Advanced Lighting
Controls Training Partnership (CALCTP) 278

13.2.2. Heating, Ventilation, and Air Conditioning
Sector Strategy Pilot 279

13.2.3. General Direction 281

13.2.4. Skill Standards and Certifications 282

14. Water-Energy Nexus Programs 284

14.1. Party Positions 284

14.2. Discussion 286

15. Marketing, Education, and Outreach 290

15.1. Positions of Parties 293

15.2. Discussion 295

16. Continuation of 2010-2012 Programs not Addressed Elsewhere
in this Decision 310

16.1. HVAC and Benchmarking Programs 310

16.2. Integrated Demand-Side Management 311

16.2.1. Positions of Parties 313

16.2.2. Discussion 314

16.2.2.1. Integrated Demand-Side Management
Taskforce 314

16.2.2.2. Integrated Pilots 315

16.2.2.3. Integrated Audit Tool 315

16.2.2.4. Integrated Marketing 316

16.2.2.5. Access to Relevant Data 317

16.2.2.6. Integrated Demand-Side Management ResourceSpecific Funding Guidance 317

16.3. Continuous Energy Improvement 318

17. Other Portfolio Direction 320

17.1. Ex Ante Review and Updates 320

17.1.1. Future DEER Updates 321

17.1.1.1. Party Positions 321

17.1.1.2. Discussion 326

17.1.2. Non-DEER Workpaper Updates 330

17.1.2.1. Retirement of Specific Non-DEER Workpapers 331

17.1.2.2. Application of DEER Values to Non-DEER Workpapers 332

17.1.2.3. Updates of Non-DEER Workpapers not
Covered in the 2011 DEER Update to
Reflect 2006-2008 Evaluation Results 332

17.1.2.4. Review of Non-DEER Workpapers in 2013-2014 Portfolio Applications 333

17.1.2.5. “Phase 2” Process for Mid-Cycle Review of
Interim Approved or New Measure
Workpapers 334

17.1.2.6. Summary of 2013-2014 Portfolio Non-DEER Workpaper Disposition Processes 336

17.1.3. Relationship of DEER to non-DEER Ex Ante Values 337

17.1.3.1. Party Positions 337

17.1.3.2. Discussion 338

17.1.4. Custom Project and Measure Ex Ante Review 340

17.1.4.1. Custom Project and Measure Review Process 340

17.1.4.2. Custom Project and Measure Gross
Realization Rates 342

17.1.5. Ex Ante Value Gross Savings Baselines 345

17.1.5.1. Parties’ Positions 345

17.1.5.2. Discussion 346

17.2. Next Steps for Post-2014 Process Reforms 352

18. Evaluation 354

18.1. Evaluation Budget 355

18.2. Next Steps for Workshops 355

18.3. Next Steps for Program Performance Metrics/Market
Transformation Indicators 356

18.4. Data Needs for Reporting and Evaluation 358

19. Shareholder Incentive Mechanism 360

20. Next Steps and the Process for 2013-2014 Utility Portfolio
Applications and Review 362

20.1. Inclusion of Spillover in Cost-Effectiveness Calculations 362

20.2. Program Implementation Plans 363

20.3. Application Structure and Contents 364

20.4. High-Level Application Budget and Cost-Effectiveness
Summary Tables 365

20.5. Detailed Application Cost-Effectiveness Showing 366

20.6. Programs Advisory Groups 366

21. Comments on Proposed Decision 367

22. Assignment of Proceeding 369

Findings of Fact 369

Conclusions of Law 384

ORDER 397

ATTACHMENT A: Summary of Changes to Database for Energy Efficiency Resources 2011

ATTACHMENT B: HVAC Emergency Retrofit Protocol

ATTACHMENT C: 2013-2014 WE&T Course Listings/Programs

ATTACHMENT D: Integrated Pilot Programs (2013-2014)

- ix -

R.09-11-014 ALJ/EDF/lil

DECISION PROVIDING GUIDANCE ON 2013-2014 ENERGY EFFICIENCY PORTFOLIOS AND 2012 MARKETING, EDUCATION, AND OUTREACH

1.  Summary

In this decision, the Commission directs Pacific Gas and Electric Company, Southern California Edison Company, San Diego Gas & Electric Company, and Southern California Gas Company (collectively, the investorowned utilities) to file applications no later than July2, 2012 to establish energy efficiency programs and budgets for 2013 and 2014.

The past several energy efficiency portfolios have been approved on a three-year cycle, which has sometimes been followed by a one-year “bridge” year extending the existing programs to allow plans to be made for the next portfolio cycle. In this decision, rather than have a simple one-year “bridge” year extension following the 2010-2012 portfolio, we establish a two-year “transition” period. This decision takes the best elements of the existing portfolio, gives guidance on some modifications, and signals the way toward broader changes to the energy efficiency portfolio starting in 2015. Rather than make fundamental changes to the California energy efficiency market in this decision, we identify what is working well and build upon it, remove what is not working well, and modify programs that have merit but are not realizing full ratepayer benefit. We primarily give guidance in this decision to support modifications to existing elements of the 2010-2012 programs. Our intent is to have this two-year transition period enable some additional research and provide time to make more fundamental changes to the energy efficiency programs.

This decision gives guidance to the utilities on the 2013-2014 energy efficiency programs, with the overall direction that they should begin a transition away from short-lived energy savings and towards deeper retrofits. The decision also gives guidance on expanding energy efficiency financing, by directing development of a portfolio of options at a total of $200 million over the two-year period. We also take steps to reduce the number and complexity of energy efficiency programs. In addition to the guidance for 2013-2014, this decision clarifies certain aspects of the 2012 Marketing, Education, and Outreach program, and other changes detailed in this decision, which will impact the 2013-2014 transition period.[1]

Collectively, this decision establishes the parameters by which the Investor-Owned Utilities (IOUs) will design their portfolios and propose program budgets for 2013-2014. Their applications will include an optimization to take the guidance from this decision to simultaneously (a) meet or exceed energy savings goals utilizing adopted ex ante parameters, (b) demonstrate portfolio cost-effectiveness utilizing updated avoided cost and ex ante parameters, (c)implement program modifications or new programs directed herein, (d)sustain other existing programs, (e) align their programs with the Strategic Plan, and (f) comply with all relevant decisions and statutes.

This decision is organized to, first, step through the sequence of quantitative issues, from avoided cost and ex ante parameters, to the potential study, and finally energy savings goals. Once we establish the numerical requirements, we turn to the qualitative aspects of our guidance to the IOUs’ portfolio applications, in various sections providing program direction in specific markets and cross-cutting areas. We also make certain improvements to the energy efficiency regulatory process.