Utility Energy Efficiency Program Administration in a Statewide Model Erin Palermo Brooks, Southern California Gas Company Presented at the 2017 ACEEE National Conference on Energy Efficiency as a Resource

California’s Leadership has a BOLD Vision “We lead the nation in energy efficiency, cleaner cars and energy storage … But now, it is time to establish our next set of objectives for 2030 and beyond…” …Double efficiency of existing buildings & make heating fuels cleaner” – Governor Jerry Brown, January 2015

Senate Bill 350 Requires Doubling Cost-Effective EE by 2030 Establishes annual targets for statewide energy efficiency (EE) savings and demand reduction to achieve a cumulative doubling of EE savings in electricity and natural gas final end uses of retail customers by January 1, 2030 Includes savings from IOU and POU incentive programs, CEC programs (e.g., Prop 39), PACE, fuel switching, conservation, voltage reduction, etc. Requires updated policies to allow for market transformation, pay for performance programs, behavioral, retrocommissioning (RCx) and operational savings

California’s EE Rolling Portfolio 10-year Energy Efficiency Business Plans filed in January 2017. Contained high-level vision, goals, and budgets for EE programs from 2018-2025. Presented sector-level strategies for achieving goals. Sectors: Residential Commercial Industrial Agricultural Public Cross-cutting (emerging technologies, codes & standards, financing, workforce education and training) As IOUs move into more of a Portfolio Manager role in the coming years, we will do less program creation and implementation Instead, we will describe the need, allow 3rd Parties to propose programs, and monitor their implementation and success through performance metrics

IOUs Shift to Portfolio Managers and Determiners of Need IOUs rely more on third-parties to propose, design and deliver programs Describe portfolio need Implement Implement Propose Propose Measure Measure Design Design Ideate As IOUs move into more of a Portfolio Manager role in the coming years, we will do less program creation and implementation Instead, we will describe the need, allow 3rd Parties to propose programs, and monitor their implementation and success through performance metrics As Portfolio Managers, IOUs ensure all the pieces fit together and work cohesively as a portfolio vs IOU IOU IOU 3P IOU IOU 3P 3P 3P IOU Today Tomorrow

New definitions for Statewide and Third-Party programs The New Paradigm New definitions for Statewide and Third-Party programs Programs must be proposed, designed, and delivered by non-utility entities Upstream and Midstream Programs to be delivered seamlessly Statewide 3rd Party (60% of Budget by end of 2020) Statewide (25% of Budget by end of 2020) Maximize Overlap EE’s portfolio must evolve in response to new policies, technologies, industry trends, customer needs, and lessons learned from the past. The August 2016 Commission Decision focuses on two key areas to create efficiencies and increase customer focus: 3rd Party 60% of budget by 2020 Designed and implemented by 3P vendor Statewide 25% of budget Programs overseen by lead IOU admin Statewide implementer(s) design and deliver programs Designed to get innovative program ideas from the marketplace to tap into deeper energy savings

What do Statewide Programs Look Like? One program delivered uniformly throughout California Customers in PG&E territory have same experience as customers in SDG&E territory Create operational and administrative efficiencies Transition from 4 utilities performing program tasks (rebate processing, marketing, etc.) to 1 on behalf of all Reduce confusion in marketplace and enable economies of scale

Statewide Programs Any upstream (manufacturer) or midstream (distributor/retailer) programs will be delivered on a Statewide basis Statewide Program examples: Plug Load & Appliances Point-of-Sale Commercial Midstream Water Heating Midstream Lighting

Statewide Programs CPUC also requires four downstream programs piloted on a Statewide basis The IOUs have proposed: Workforce Education & Training – Career & Workforce Readiness Wastewater pumping HVAC Quality Installation/Quality Maintenance Indoor Agriculture

IOU Guiding Principles Support the State’s energy efficiency policy goals Do no harm Advocate for all Program Administrators (PAs) Assume best intentions Be good listeners Take a stand for customers Wisely pursue change The following Guiding Principles represent the shared commitments of IOU PAs in the delivery of statewide-administered energy efficiency programs. Support the State’s energy efficiency policy goals. Orient portfolio design around State and Regulatory objectives and act in the best interests of all customers. Do no harm. Make decisions that preserve our collective ability to meet energy savings goals, achieve cost-effectiveness goals, and minimize impacts to existing local and downstream programs. Advocate for all PAs. Recognize that the whole is greater than the sum of its parts.  Be willing to collaborate with other PAs in planning and decision-making efforts. Assume best intentions. In an environment of shared goals and shared directives, be humble in the approach and ambitious for the broader group’s success. Be good listeners. Take responsibility for the environment by which decisions are made such that all participants have the opportunity to participate. Take a stand for customers. Take into consideration the customer experience and strive for simplicity, clarity, and ease. Wisely pursue change. Demonstrate open-mindedness to changes in design, delivery and administration.

IOU Statewide Program Governance Model Executive Portfolio Program To ensure success of this new statewide administration model, the IOUs are working to develop a statewide program governance structure for a number of administration elements, such as program budgets and customer satisfaction The governance structure consists of a multi-level administrative framework to promote effective and efficient statewide program implementation and administration.  The structure consists of three council levels. Each statewide program has a dedicated Program Council comprised of program experts from each participating PA.  The primary consultation and collaboration among PAs occurs within the individual Program Councils.        In contrast, the Portfolio Council supports portfolio-wide oversight comprised of a portfolio representative from each participating PA.  A single Portfolio Council will oversee all Program Councils to timely address any issues identified by any Program Councils.  The Executive Council is comprised of senior management from each PA who have final decision-making authority on unresolved program administration issues, if necessary

Statewide Lead Roles Clear roles and responsibilities for each party should result in efficiencies by minimizing duplication of effort The Lead PA has lead responsibility for program design and delivery, procurement, contract administration, invoicing, and contract payments. The Lead PA is responsible for overseeing Implementer performance, including the achievement of contract goals, meeting energy savings and cost-effectiveness goals, and achieving customer satisfaction service levels in all IOU service territories. Following are some key principles governing the relationship between the Lead and Other Program Administrators:

Statewide Lead Roles The Lead PA (or Implementer) shall provide regular reports including energy savings accomplishments, energy savings forecasts, incurred costs, forecasted costs, and other relevant metrics to Other PAs. All IOUs may propose changes in program funding, or propose cancelation of program activity, based on local concerns or portfolio needs, including fund shifting.  Changes should be approved by the impacted IOU administrators through the Program Council. Following are some key principles governing the relationship between the Lead and Other Program Administrators:

What Are We Excited About? 1 New program models to scale cost-effectively and streamline customer experience 2 Increased collaboration with the EE industry to provide innovative programs to customers 3 Customer targeting via interval data analytics IOUs are embracing roles as portfolio managers Transition to third party program design and delivery: IOUs are embracing role as portfolio administrator and determiner of need, and will look more and more to 3Ps to bring innovation, expertise, and cost-efficiencies to our portfolio Transforming markets through the new statewide model: The SW model will allow us to leverage the buying power of California, effectively prepare the market for more efficient products, and ultimately transform the market. New program models to scale cost-effectively: Programs like P4P and SEM have the potential to capture stranded potential, offer more comprehensive energy savings opportunities, and wisely target energy waste in California New transaction structures to further the reach of ratepayer dollars: Tariffed financing opportunities, like DERBI, or MEETs, spur greater customer and market engagement in EE. We want to move away from the traditional incentive into structures that are more sustainable and less reliant on ratepayer subsidies Customer targeting via interval data analytics: We want to target customers who can yield the greatest energy savings and/or grid value location specific resources. We want to drive peak demand savings during the times and at the locations that are most valuable to all customers

What’s Next? 1 2 December 2017: Expected Decision Approving IOU Business Plans There is still a LOT to learn, but we are excited to hit the ground running and implement these new programs in this new model! 2 Q1 2018: First set of IOU Solicitations Released