25C - AGMT - ENERGY EFFICIENCY PROGRAMS

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