Before the Public Utilities Commission

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Order Instituting Rulemaking to Examine the Commission’s post-2005 Energy Efficiency Policies, Programs, Evaluation, Measurement and Verification, Rulemaking 06-04-010 and Related Issues (Filed April 13, 2006)

COMMENTS OF THE LOCAL GOVERNMENT SUSTAINABLE ENERGY COALITION ON COST-EFFECTIVENESS METRICS AND ENERGY EFFICIENCY POLICY MANUAL

JODY S. LONDON Jody London Consulting P.O. Box 3629 Oakland, California 94609 Telephone: (510) 459-0667 E-mail: [email protected]

For THE LOCAL GOVERNMENT SUSTAINABLE ENERGY COALITION

April 1, 2008 I. INTRODUCTION

In accordance with the Assigned Commissioner’s and Administrative Law Judge’s

Ruling of March 14, 2008, as amended by ALJ Gamson on March 19, 2008, the Local

Government Sustainable Energy Coalition1 (“LGSEC”) submits these comments on cost- effectiveness metrics and the energy efficiency policy manual. The Ruling asks parties to provide input on how the cost-effectiveness metrics for energy efficiency programs should be modified in light of the Preliminary Energy Efficiency Strategic Plan, submitted March 6, 2008

(“Plan”). A key focus of the Plan is transforming the way all sectors of the California economy approach energy management activities, with an attendant goal of reducing greenhouse gas emissions.

Achieving the goals of this Strategic Plan will necessitate a change in how cost- effectiveness is evaluated, as the Assigned Commissioner and ALJ realize in the Ruling. There must be a different set of metrics that looks at activities that extend over many years, such as the roles envisioned in the Plan for local governments. One of the topics often discussed in the context of energy efficiency is the need for life-cycle cost-benefit analysis, not analysis based solely on simple payback or initial capital expenditures. It is time for the Commission to apply these same principles to the long-term energy efficiency programs it intends to authorize for the

2009-2011 program cycle.

II. A DIFFERENT METRIC FOR LOCAL GOVERNMENT PROGRAMS

The Strategic Plan recognizes that:

Local governments perform a number of key functions relating to promoting energy efficiency, energy conservation and renewable energy resource

1 For purposes of this filing, the Local Government Sustainable Energy Coalition includes: Association of Bay Area Governments; Association of Monterey Bay Area Governments; City of Oakland, Public Works Agency; City of Santa Monica; County of Los Angeles; County of Marin; Local Government Commission.

1 development. Any statewide plan must recognize, strengthen and reinforce the capacity and interest of local governments in carrying out functions including: 1. Setting goals and establishing policies and programs, including “green” or “sustainable” communities; 2. Leading by example, with built projects and implementation of policies; 3. Enforcing state energy efficiency codes; 4. Adopting local codes for new and existing buildings that are stricter than the state’s Title 24; and 5. Creating incentives for projects that voluntarily exceed state and local minimum energy codes.2

This long-term vision of structural change cannot be evaluated using the short-term metrics employed currently for energy efficiency programs. Changes in codes, zoning and permitting requirements, and municipal construction and retrofit practices simply cannot be guaranteed to happen in a three-year program cycle; the savings resulting from these measures can accrue for decades. Local government decision-making necessary for improved local codes and standards, and new mandates at points of intervention (e.g., time-of-sale, renovation, zoning, subdivision approvals) is subject to democratic process. While, in aggregate, programs focused on promoting and assisting such changes can achieve significant and persistent long-term savings, no one can be sure which communities will act and when. There are different ways the

Commission can best recognize this unique time horizon and responsibility of local governments. One is to develop a different cost-effectiveness tool, with a longer time horizon and more appropriate milestones to measure progress of local government partnerships. Metrics may need to reflect progress towards the goals rather than savings from installed measures.

Results may need to be evaluated on an aggregated basis across all similar programs rather than by specific communities in which progress may be advanced or impeded by ever-changing local priorities.

2 Strategic Plan, p. 102.

2 To meet the Plan’s goals for zero net energy buildings, local government actions that affect the potential for energy savings, not simply absolute savings, must be considered as well.

For example, protection of solar access and climatically-appropriate subdivision orientation increase the potential for savings while not actually delivering savings. Proper orientation of lots and homes in a subdivision can determine whether the homes can ultimately achieve zero net energy in the future even if climatically appropriate heating and cooling, passive and active solar thermal, and solar electric measures are not installed from the start. While such actions do not guarantee savings (indeed, installed measures do not either) they remove barriers that would permanently prevent savings that are likely to result from long-term market transformation. Such measures are necessary to capture otherwise lost opportunities, but require different metrics than we have now to understand and reflect their value.

Local governments can and will continue to implement their current suite of resource programs, but even with these programs, the metrics must recognize the value of investing more time with the customers and facilities at the front end to achieve more comprehensive and ultimately greater savings over the long-term.

While the LGSEC applauds this ruling and believes development of new metrics reflecting the goals of the Plan are long overdue, we are concerned that this process may hold up local government partnership programs being developed and proposed for the 2009-11 funding cycle. An interim option is to fund these long-term, structural local government programs from a set-aside for local governments that are willing to meet certain criteria. These criteria would indicate the jurisdiction’s intent to build institutional capacity and effect the large-scale change discussed in the Plan. Note that many of these programs will be undertaken by regional groups of local governments, usually small and medium sized cities that join together in energy

3 management and in implementing common sets of policies and programs. The Commission has already established precedent for such a set-aside when it directly solicited and approved programs for the 2002-03 and 2004-05 funding cycles that were “information-only” rather than resource programs based on criteria other than savings from installed measures.

Finally, it would be remiss in the context of comments on alterations to the cost- effectiveness tools and policy manual to not mention the tension between current shareholder incentive policies for the investor-owned utilities and utility interest in working toward long-term goals. The LGSEC described in comments last week the difficulty that some members have encountered in trying to work with some of the utilities on local government partnerships for the

2009-2011 program cycle.3 There has not been the type of expansive examination of local government partner goals and how utility programs can assist in achieving those goals that members of the LGSEC have been requesting for many years.

III. CONCLUSION

The Commission should develop a different mechanism for evaluating local government programs with a long time horizon, such as envisioned in the Strategic Plan.

3 “Comments of the Local Government Sustainable Energy Coalition on Preliminary Energy Efficiency Strategic Plan and 2009-2011 Energy Efficiency Portfolio,” March 24, 2008, pp. 5-6.

4 Dated: April 1, 2008 Respectfully submitted,

By:

Jody S. London

Jody London Consulting P.O. Box 3629 Oakland, California 94609 Telephone: (510) 459-0667 E-mail: [email protected]

For THE LOCAL GOVERNMENT SUSTAINABLE ENERGY COALITION

5 CERTIFICATE OF SERVICE ______

I, Jody London, certify that I have, on this date, served a copy of “Comments Of The

Local Government Sustainable Energy Coalition On Cost-Effectiveness Metrics and Energy

Efficiency Policy Manual” on all known parties to R.06-04-010 by transmitting an e-mail message with the document attached to each party named in the official service list, and by serving a hard copy on the Administrative Law Judge.

I declare under penalty of perjury, pursuant to the laws of the State of California, that the foregoing is true and correct April 1, 2008 in Oakland, California.

______Jody London CALIFORNIA PUBLIC UTILITIES COMMISSION Service Lists Proceeding: R0604010 - CPUC - PG&E, EDISON, Filer: CPUC - PG&E, EDISON, SDG&E, SOCALGAS List Name: LIST Last changed: March 28, 2008

2 [email protected] [email protected] [email protected]