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Justification: It is CPUC standard practice to allow IOUs to recoup benefit and pension costs in the GRCs, <br />whereas payroll taxes are typically recouped as administrative costs. It is also standard CPUC practice to <br />allow vacation and sick leave costs to follow labor costs (i.e., to DI -NI, DI, M &0). <br />4) INFORMATION TECHNOLOGY COSTS: IOUs want IT costs related to tracking systems for <br />individual programs to be charged to M &O /DI respectively, and that only overall portfolio IT equipment <br />and work should be charged to administrative costs. <br />Recommendation: IOUs should be permitted to charge program- specific IT costs to the relevant <br />DI /M &O program categories. EM &V and other portfolio -level IT costs should be charged to <br />administrative costs except in the case that these constitute capital costs, such as the recent PG &E <br />request for MDSS cost recovery through the EE portfolio (that request was denied and PG &E referred to <br />the GRC to recoup those costs). <br />Justification: The ACA is silent on including IT costs in the EM &V category, thus these are reasonably <br />included — as overall portfolio IT costs — in the administrative cost categories, except when these are <br />capital costs, as noted above. It is reasonable that individual programs must have unique and high - <br />quality IT systems developed; such systems are critical for program implementation and savings <br />tracking. Comparison data for costs in other states indicate that IT is frequently not included in the <br />administrative cost category, and thus it is reasonable for the CPUC to not require that all IT costs are <br />placed in administrative costs. <br />5) INCLUSION OF LOCAL GOVERNMENT AND THIRD PARTY M &O AND DIRECT IMPLEMENTATION <br />(NON- INCENTIVE) (DI -NI) COSTS IN THE 6% AND 20% COST CAPS: In recent discussions between EE and <br />IOU staff, some confusion arose as to whether LGP /3`d Party M &O and DI -NI costs are subject to the 6% <br />and 20% cost targets. <br />Recommendation: LGP and3rd Party M &O and DI -NI costs are subject to the 6% and 20% overall <br />portfolio cost targets. <br />Justification: D. 09 -09 -047 is silent on ring- fencing LGP /3r0 Party costs outside of the cost caps. <br />Controlling these costs is important in order to increase incentives offered directly to customers. It <br />should be noted, however, that the M &O and DI -NI cost targets are targets, not caps (p. 71 & 72; OP 13) <br />and that in the compliance filing an accompanying IOU explanation of why exceeding these caps is <br />critical to program implementation should be sufficient to justify exceeding these targets if special <br />circumstances can be explained. Special circumstances may be warranted in a variety of cases. For <br />instance, in the case of SCE, up to $50 million in non - resource program direct implementation costs <br />were either not identified by ED in our analysis (OBF program) or added as part of the budget <br />adjustment ($32 million for LGP Strategic Plan innovative programs). <br />01 -01 -2013 Proligc b4nfidential Page E -4 <br />