CCC PPPPP U U CCC N N EEEEE W W W SSS C C P p U U C C NN N E W W W S S C P P U U C N N N E W W W S C PPPPP U U C N N N EEE W W W W SSS C P U U C N N N E WW WW S C C P U U C C N NN E W W S S CCC P UUUU CCC N N EEEEE W W SSS California Public Utilities Commission 505 Van Ness Avenue, Room 5301 San Francisco, CA 94102 CONTACT: Dianne Dienstein February 5, 1997 CPUC - 5 415-703-2423 (R.94-04-031/I.94-04-032) PUBLIC PURPOSE PROGRAMS IN A COMPETITIVE ELECTRIC INDUSTRY The California Public Utilities Commission (CPUC) today established initial fundings levels and an administrative structure to continue beneficial energy efficiency, research/development/demonstration, and low-income assistance public purpose programs in the coming competitive electric industry in California, consistent with the requirements of recently-enacted Assembly Bill 1890. Until these new administrative structures are fully operational, San Diego Gas & Electric (SDG&E), Southern California Edison (SCE), Southern California Gas (SoCal Gas) and Pacific Gas & Electric (PG&E) will continue to administer their energy efficiency and low-income assistance programs. Participation by gas utilities will be voluntary at this time. Most RD&D programs will be overseen by the California Energy Commission. Electric industry competition - where consumers can purchase electricity from any supplier and continue to have their current utility deliver it to their home or business - is scheduled to begin next year and be completed by 2002. ENERGY EFFICIENCY Currently, the Commission sets utility energy efficiency program funding levels, guidelines, incentives, and standards to measure program success. Utilities then develop energy efficiency programs consistent with funding levels and Commission guidelines, and implement those programs. - more - In a competitive electric market, however, utilities have no incentive to promote conservation and energy efficiency because doing so reduces their overall revenues. Nor do utilities have incentive to help develop an independent energy efficiency market because market participants would compete with utility services. Instead, utilities are motivated to try to continue their relationship with customers and to encourage greater energy use because the resulting higher revenue assures full recovery of transition costs. Transition costs, also called stranded costs, are costs currently being recovered in utility rates. They are costs utilities made for construction of power plants and for purchasing power that the Commission approved as reasonable, but that will not be recovered in a competitive generation market. The Commission goal is to facilitate development by 2002 of a competitive market which will promote energy efficiency and where companies, in addition to utilities, provide energy efficiency services. To achieve this goal, by January 1, 1998, the Commission intends to have in place an administrative structure which includes a statewide Independent Board (independent of utilities or other entities with a vested interest in provision of energy services, but subject to Commission oversight and jurisdiction), a Board-appointed Technical Advisory Committee for assistance, program administrator(s) selected through competitive bidding, and a procurement process that taps the private market, via competitive bids, for delivery of market transformation services. The nine-member Independent Board will consist of two representatives from the CPUC, one from the California Energy Commission (CEC), and six from the public to oversee limited term contracts for administration of market transformation programs. During the next 30 days, recommendations for the public representatives with their qualifications should be submitted to the Commission's Docket Office. During transition to a fully competitive energy efficiency service market, ratepayers will continue, as they do now, to fund energy efficiency programs. However, by law, electric rates cannot exceed June 10, 1996 levels, and must go down 10 percent for small customers by January 1, 1998 and until March 31, 2002. - more - LOW-INCOME RATE AND ENERGY EFFICIENCY ASSISTANCE By January 1, 1999 the Commission also intends to have in place a Governing Board and administrator for low-income assistance programs. They will remain in place for the four-year period until the electric industry becomes fully competitive, and then either disband or become self-funded. Although the expectation is that entities other than utilities will apply to be administrator, utilities can also apply. The Board will establish safeguards to prevent potential conflicts of interest, market power abuse, or self-dealing for all who bid to become administrator. In the future, the Commission may establish a gas surcharge mechanism to fund all public purpose programs which all retail gas customers will pay. The Commission will seek any legislation necessary to implement this policy. The Governing Board will oversee electric low-income rate assistance and energy efficiency programs. It will coordinate closely with the Independent Board, particularly with respect to weatherization and education programs, and be charged specifically with providing low-income ratepayers with information to help them manage their energy bills. The Governing Board will include representatives from the CPUC and the public. The Board will hire an administrator to collect and disburse funding for rate discounts, to verify customer eligibility for low-income programs, and to make energy efficiency and education services available to eligible low-income ratepayers. The Governing Board for low-income programs will hold workshops and submit recommendations on California Alternate Rates for Energy program design options by September 1, 1997. PUBLIC PURPOSE PROGRAM FUNDING AB 1890 requires all customers to pay a surcharge based on use of distribution service to fund all public purpose programs, and sets minimum annual funding for all programs. The estimated surcharge is 3.1 percent, subject to final calculation later this year. The surcharge will not increase rates, but will be unbundled from current rate levels. - more - RD&D Assembly Bill 1890 authorizes $62.5 million to fund public interest research, development and demonstration (RD&D) programs. The CPUC has allocated $61.8 million to the CEC for public interest RD&D not related to transmission or distribution with $29.7 million coming from PG&E, $28.2 million from SCE, and $3.9 million from SDG&E. Of the remaining $700,000 allocated to the utilities for public interest RD&D related to transmission and distribution, $300,000 will go to PG&E, $300,000 to SCE and $100,000 to SDG&E. Energy Efficiency AB 1890 sets minimum annual funding levels for energy efficiency January 1, 1998 - December 31, 2001: $32 for SDG&E, $106 million for PG&E, $90 million for SCE for 1998, 1999, and 2000 and $50 million for 2001. The Commission shares with the CEC responsibilities for RD&D, energy efficiency, and renewables public purpose programs and activities, and the two agencies will continue coordination in these matters. The Commission also is providing the Working Group reports on RD&D and Rewnewables to the CEC and Legislature for their consideration. Low Income AB 1890 sets initial funding for low-income rate and energy efficiency assistance at 1996 authorized levels. Renewables AB 1890 sets funding to be transferred to the CEC 1998 - 2000 at a total of $109.5 million, with $12 coming from SDG&E, $49.5 million from SCE, and $48 million from PG&E; for 2001, funding is set at a total of $136.5 million, with $12 million coming from SDG&E, $76.5 million from SCE, and $48 million from PG&E. A workshop will be scheduled soon to develop a "roadmap" to implement today's Commission decision. ###