BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Transcription

1 BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA Application of Southern California Edison Company (U 338-E) for Approval of Its Clean Energy Optimization Pilot Application MOTION FOR APPROVAL OF SETTLEMENT AGREEMENT BETWEEN AND AMONG SOUTHERN CALIFORNIA EDISON COMPANY (U338-E) AND THE PUBLIC ADVOCATES OFFICE, NATURAL RESOURCES DEFENSE COUNCIL, UNIVERSITY OF CALIFORNIA AND CALIFORNIA STATE UNIVERSITY ANNA VALDBERG ROBIN Z. MEIDHOF Attorneys for SOUTHERN CALIFORNIA EDISON COMPANY 2244 Walnut Grove Avenue Rosemead, California Telephone: (626) Dated: December 4, 2018

2 MOTION FOR APPROVAL OF SETTLEMENT AGREEMENT BETWEEN AND AMONG SOUTHERN CALIFORNIA EDISON COMPANY (U338-E) AND THE PUBLIC ADVOCATES OFFICE, NATURAL RESOURCES DEFENSE COUNCIL, UNIVERSITY OF CALIFORNIA AND CALIFORNIA STATE UNIVERSITY TABLE OF CONTENTS Section Page I. II. III. INTRODUCTION...1 PROCEDURAL AND REGULATORY BACKGROUND...2 SUMMARY OF PARTIES POSITIONS...2 A. B. C. D. E. F. G. H. I. J. Many of SCE s Proposals in Its Application Were Not Contested...2 The Public Advocates Office and SCE Disagreed on the Structure of the Performance Payments...3 The Public Advocates Office and SCE Disagreed on Whether the Pilot Should Account for Greenhouse Gas Abatement from Reducing Methane Leakage...4 The Public Advocates Office and SCE Disagreed on the Proposed Method for Measuring the Energy Intensity of Buildings...4 The Public Advocates Office Sought Confirmation that Pilot Participants Would Not Earn Double Payments for Participation in the Pilot and Participation in Demand Response Programs...5 The Settling Parties Agree that the GHG Revenue Balancing Account is an Appropriate Source of Funding but the Public Advocates Office and SCE Disagreed on How SCE Should Prioritize Use of Those Funds Each Year...5 The Public Advocates Office and SCE Disagreed on Pilot Participants Ability to Earn Performance Payments for EV Charging and Resulting Incremental GHG Emissions Reductions...5 The Settling Parties Agree that the Performance Baseline Will Reflect the Gradual Decarbonization of California s Electric Grid so that Participants Are Only Paid for Achieving On-Site Greenhouse Gas Abatement...6 The Settling Parties Agree that SCE Has Developed a Reasonable Method to Account for Weather Variability...6 The Settling Parties Agree that SCE s Proposal to Use Clean Net Short (CNS) Emissions Factors Is Reasonable...6 i

3 MOTION FOR APPROVAL OF SETTLEMENT AGREEMENT BETWEEN AND AMONG SOUTHERN CALIFORNIA EDISON COMPANY (U338-E) AND THE PUBLIC ADVOCATES OFFICE, NATURAL RESOURCES DEFENSE COUNCIL, UNIVERSITY OF CALIFORNIA AND CALIFORNIA STATE UNIVERSITY TABLE OF CONTENTS (CONTINUED) Section K. The Settling Parties Agree that SCE s Proposal to Aggregate Emissions Factors by Time-of-Use Periods is Reasonable...7 Page IV. SUMMARY OF SETTLEMENT...7 A. B. C. D. E. F. G. The Settling Parties Agree That All of SCE s Uncontested or Agreed-Upon Proposals Should be Adopted by the Commission...7 The Settling Parties Agree that the Commission Should Approve the Structure of the Performance Payments that Incorporates a 7- Year Average Asset Life and the Reduction of $1 Million from SCE s Proposed Performance Payment Budget...8 The Settling Parties Agree that the Pilot Will Account for Greenhouse Gas Emissions from Methane Leakage...8 The Settling Parties Agree on the Proposed Method for Measuring the Energy Intensity of Buildings...8 The Settling Parties Agree That There is Potential for Double Counting Greenhouse Gas Mitigation Related to Demand Response Programs, but the Effect is De Minimis...9 The Settling Parties Agree the Commission Should Decide the Priority of Funding Issue Based on the Current Record...9 The Settling Parties Agree to Terms Regarding the Method to Be Used to Calculate GHG Emissions Reductions of EV Charging for Purposes of this Pilot Only...10 V. REQUEST FOR ADOPTION OF SETTLEMENT AGREEMENT...10 A. B. C. The Settlement Agreement is Reasonable in Light of the Record...11 The Settlement Agreement is Consistent with the Law...12 The Settlement Agreement Is In the Public Interest...12 VI. CONCLUSION...13 ATTACHMENT A SETTLEMENT AGREEMENT ATTACHMENT 1 CEOP: ELECTRIC VEHICLES COMPONENT ii

4 BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA Application of Southern California Edison Company (U 338-E) for Approval of Its Clean Energy Optimization Pilot Application MOTION FOR APPROVAL OF SETTLEMENT AGREEMENT BETWEEN AND AMONG SOUTHERN CALIFORNIA EDISON COMPANY (U338-E) AND THE PUBLIC ADVOCATES OFFICE, NATURAL RESOURCES DEFENSE COUNCIL, UNIVERSITY OF CALIFORNIA AND CALIFORNIA STATE UNIVERSITY I. INTRODUCTION Pursuant to Rule et seq. of the California Public Utilities Commission s ( Commission or CPUC ) Rules of Practice and Procedure, Southern California Edison Company (SCE), on behalf of itself and the Public Advocates Office, Natural Resources Defense Council (NRDC), University of California, and California State University (referred to hereinafter collectively as Settling Parties or individually as Party ), respectfully moves for the Commission to find reasonable and adopt the Clean Energy Optimization Pilot Settlement Agreement ( Settlement Agreement ) which is appended to this motion as Attachment A. In accordance with Rule 1.8(d), SCE confirms the Settling Parties have authorized SCE to file this motion on their behalf. The Settlement Agreement seeks to resolve all issues pending in the instant Application ( Application or A ). Section II of this motion provides the procedural and regulatory background related to this proceeding. Section III describes in general the positions advocated by the parties in this 1

5 proceeding and summarizes the terms of the Settlement Agreement. Section IV demonstrates that the Settlement Agreement is reasonable in light of the whole record, consistent with law, is in the public interest pursuant to Rule 12.1(d), and therefore, should be adopted without modification. SCE filed a motion for submission of its written testimony and supporting workpapers into evidence pursuant to Rule 13.8(c) on November 15, II. PROCEDURAL AND REGULATORY BACKGROUND For the complete regulatory history of the proceeding, please see Attachment A (the Settlement Agreement) at Article 1. SCE properly noticed and held an all-party settlement conference pursuant to Rule 12.1(b) on September 19, 2018, to discuss resolution of this Application and continued settlement negotiations with the Settling Parties through November. This motion follows. III. SUMMARY OF PARTIES POSITIONS The Settling Parties positions on the proposed Clean Energy Optimization Pilot ( CEOP or Pilot ) and the issues in dispute are summarized herein. A. Many of SCE s Proposals in Its Application Were Not Contested SCE s CEOP Application requested authority from the Commission to proceed with a proposed Pilot that is designed to evaluate the effectiveness of a program to incent Pilot Participants to reduce greenhouse gas emissions through on-site measures. The Public Advocates Office was the only party to file a protest of SCE s Application and to describe any disputed issues. Although not a signatory to the attached Settlement Agreement, the Rural Hard to Reach Local Government Partnerships Working Group ( RHTR ) filed general Comments in support of the CEOP. 1 The Public Advocates Office propounded, and SCE and the University of 1 See Comments of the Rural Hard to Reach Local Government Partnerships Working Group on Southern California Edison Company s Application for Approval of its Clean Energy Optimization Pilot, (filed June 14, 2018). 2

6 California ( UC ) and California State University ( CSU ) (collectively, Pilot Participants ) responded to approximately 60 discovery requests in this proceeding. In its Comments on E- mail Ruling Setting Questions for Party Comment on CEOP Workshop ( Comments ), filed on August 30, 2018, the Public Advocates Office attached all of the discovery responses for the record. In addition, in its Comments, the Public Advocates Office either agreed with or did not take exception to many of the proposals in SCE s application and testimony. The Settlement Agreement makes clear that except as expressly modified by the Settlement Agreement itself, the Commission should approve all of the relief requested in SCE s Application. B. The Public Advocates Office and SCE Disagreed on the Structure of the Performance Payments The only party to comment on SCE s incentive payment structure and timing proposal was the Public Advocates Office. 2 Specifically, the Public Advocates Office recommended that SCE justify its proposal to pay incentives upfront and recommended the Commission afford parties the opportunity to propose alternative payment schedules including compensating for GHG mitigation at the end of the Pilot, or after initial evaluation and measurement has occurred. 3 The Public Advocates Office objected to SCE s proposed method to reward Pilot Participants for actual GHG emissions savings measured at the meter and anticipated future emissions reductions by using a predetermined average asset life of 8 years for all interventions within the performance payment calculation. SCE maintained that a key aspect of the CEOP design ensures that no performance payments would be issued until after SCE and its consultant have measured, evaluated and verified the GHG emissions reductions. 4 SCE maintained that the use of the 8 year average asset 2 See Protest of the Office of Ratepayer Advocates of SCE s Clean Energy Optimization Pilot, p. 6 (filed June 18, 2018) ( Protest of the Public Advocates Office ). 3 See Protest of the Public Advocates Office, pp SCE Comments to Ruling Setting Questions for Party Comment on CEOP Workshop, pp 1-2 (filed August 30, 2018) ( SCE s Comments). 3

7 life multiplier ensured that Pilot Participants are fairly compensated for capital investments that are expected to result in long term GHG emissions reductions. The Pilot Participants maintained that they were still assuming the performance risk in making investments to implement GHG emissions reduction technologies without a guarantee of performance payments. 5 C. The Public Advocates Office and SCE Disagreed on Whether the Pilot Should Account for Greenhouse Gas Abatement from Reducing Methane Leakage The Public Advocates Office asserted that because the CEOP aims to comprehensively encourage greenhouse gas (GHG) abatement, SCE should develop a method for estimating the value of reductions in methane leakage that the Pilot achieves or adjust the incentive structure of the Pilot to account for those GHG emissions reductions. SCE maintained that methane leakage is currently being evaluated as part of the methane leak abatement proceeding [Rulemaking ]. D. The Public Advocates Office and SCE Disagreed on the Proposed Method for Measuring the Energy Intensity of Buildings SCE maintained that while covered outdoor spaces (e.g., parking structures) do not use as much energy as indoor spaces, they still use some amount of energy (e.g., lighting fixtures), and as such, outdoor spaces have the potential to reduce GHG through technologies such as energy efficiency retrofits, solar, battery storage, and transportation electrification. SCE determined it was appropriate to use a single variable to capture the relative energy usage from covered outdoor areas where there are opportunities to reduce GHG emissions. The Public Advocates Office recommended SCE develop a method that separately controls for indoor and covered outdoor space. 5 See e.g., UC s Reply to Comments to Ruling Setting Questions for Party Comment on CEOP Workshop, pp. 1-3 (filed September 10, 2018) ( UC s Reply to Comments ); CSU s Reply Comments, pp. 1-2 (filed September 10, 2018). 4

8 E. The Public Advocates Office Sought Confirmation that Pilot Participants Would Not Earn Double Payments for Participation in the Pilot and Participation in Demand Response Programs The Public Advocates Office recommended that SCE demonstrate that the Pilot Participants would not be paid twice for reducing their greenhouse gas emissions by participating in both CEOP and demand response programs. 6 SCE maintained that its demand response budgets do not incorporate the avoided cost of GHG emissions to determine the incentives or the administrative budgets for those programs. 7 F. The Settling Parties Agree that the GHG Revenue Balancing Account is an Appropriate Source of Funding but the Public Advocates Office and SCE Disagreed on How SCE Should Prioritize Use of Those Funds Each Year SCE proposed to fund the Pilot through the GHG Revenue Balancing Account ( GHGRBA ) which receives revenue from the sale of the utilities emissions allowances in California s cap-and-trade system. The Settling Parties all agreed that the GHGRBA was an appropriate source of funding for the CEOP. However, the Public Advocates Office recommended the Commission require SCE to prioritize GHGRBA funds each year based on the sequence in which programs have been approved by the Commission. SCE maintained that the GHGRBA could support the Solar on Multifamily Affordable Housing (SOMAH) program, the Community Solar Green Tariff, Disadvantaged Communities Green Tariff (DAC-GT), and Disadvantaged Communities Single-family Solar Homes (DAC-SASH) programs, but proposed to prioritize CEOP funding behind SOMAH, because the other Commission-approved DAC programs have alternate sources of funding available in addition to the GHGRBA. G. The Public Advocates Office and SCE Disagreed on Pilot Participants Ability to Earn Performance Payments for EV Charging and Resulting Incremental GHG Emissions Reductions The Public Advocates Office recommended that the Pilot design account for a ramp-up period after installation of new EV charging stations. SCE maintained that Pilot Participants 6 See Protest of the Public Advocates Office, p See SCE s Reply to Comments to Ruling Setting Questions for Party Comment on CEOP Workshop, pp (filed September 10, 2018) ( SCE s Reply to Comments ). 5

9 should be allowed to immediately take credit for all EV charging and incremental GHG emissions reductions resulting from their participation in the Pilot. UC maintained that the recommendation to include a one year ramp up period was arbitrary and would cause a decrease in campus participation in this aspect of the Pilot. 8 H. The Settling Parties Agree that the Performance Baseline Will Reflect the Gradual Decarbonization of California s Electric Grid so that Participants Are Only Paid for Achieving On-Site Greenhouse Gas Abatement After further discussion at the publicly-noticed CEOP Workshop and after reviewing SCE s discovery responses, the Public Advocates Office confirmed that the performance baseline will be adjusted to reflect the projected carbon intensity of grid electricity for each year. 9 I. The Settling Parties Agree that SCE Has Developed a Reasonable Method to Account for Weather Variability After further discussions at the publicly-noticed CEOP Workshop and after reviewing SCE s discovery responses, the Public Advocates Office confirmed that its questions related to the proposed weather adjustment method, the adoption of the typical meteorological year within the analysis, and the timescale of historical data have been addressed and SCE s proposed approach to weather normalization is reasonable. 10 J. The Settling Parties Agree that SCE s Proposal to Use Clean Net Short (CNS) Emissions Factors Is Reasonable In its Comments to the Ruling Setting Questions for Party Comment on CEOP Workshop, NRDC asked SCE to explain why it chose to use the CNS emissions factors instead of the long run marginal emission factors developed through the 2018 avoided cost calculator (2018 ACC). SCE maintained that the CNS methodology and average hourly emissions factors 8 See UC s Reply to Comments, pp See Comments of the Office of Ratepayer Advocates on Ruling Setting Questions for Party Comment on CEOP Workshop, p. 2 and pp (filed August 30, 2018) ( Comments of the Public Advocates Office ). 10 Id. p. 2 and pp

10 are the most reasonable and nearest to a hypothetical, long-run marginal emissions factor that can be applied to evaluate hourly GHG emissions at this time. The Public Advocates Office in its Comments to the Ruling Setting Questions for Party Comment on CEOP Workshop confirmed its understanding that the emissions intensity factors will be locked in place at the beginning of the Pilot based on the version of the CNS Calculator that is current at that time, and will not change during the 4-year pilot. 11 K. The Settling Parties Agree that SCE s Proposal to Aggregate Emissions Factors by Time-of-Use Periods is Reasonable In its Comments to the Ruling Setting Questions for Party Comment on CEOP Workshop, NRDC asked SCE to explain why it proposed to apply emissions factors aggregated to their time-of-use periods instead of applying hourly emissions factors to estimate GHG savings and customer payments. Public Advocates Office recommended that SCE use hourly emissions factors as a proxy that incorporates a time-of-use component, thus providing an alternative option for the Pilot that would be easy for Pilot Participants to understand and plan for. SCE clarified that it would use a straight average when aggregating emissions factors by TOU period. 12 IV. SUMMARY OF SETTLEMENT A. The Settling Parties Agree That All of SCE s Uncontested or Agreed-Upon Proposals Should be Adopted by the Commission As noted above, the Public Advocates Office and NRDC either agreed with or did not take exception to the design and evaluation elements of the CEOP as described in SCE s application and testimony. When there is no disagreement between the parties, and when the applicant has set forth sufficient testimony satisfying its burden of proof, the Commission should adopt the applicant s proposals. 11 Id. p See SCE s Reply to Comments, p

11 B. The Settling Parties Agree that the Commission Should Approve the Structure of the Performance Payments that Incorporates a 7-Year Average Asset Life and the Reduction of $1 Million from SCE s Proposed Performance Payment Budget Recognizing the inherent uncertainty of continued litigation, and in light of the other tradeoffs in the Settlement Agreement, the Settling Parties agree that SCE will use an average asset life multiplier of 7 years instead of 8 years in the performance payment calculation. In addition, the Settling Parties support the reduction of SCE s proposed performance payment budget from approximately $19.1 million to $18.1 million. This is a reasonable outcome within the range of litigation positions advocated by the Settling Parties. C. The Settling Parties Agree that the Pilot Will Account for Greenhouse Gas Emissions from Methane Leakage The Public Advocates Office maintained that SCE s Pilot should account for the greenhouse gas effects of methane leakage. 13 UC did not oppose taking methane leakage into account as part of the Pilot s measurement of emission factors. 14 CSU agreed with the recommendation to include methane leakage as part of the greenhouse gas emissions factors in the Pilot. 15 SCE agreed to include the impact of methane leakage in its evaluation of greenhouse gas abatement realized through the Pilot. 16 D. The Settling Parties Agree on the Proposed Method for Measuring the Energy Intensity of Buildings As a result of the CEOP Workshop held in A , and in light of the other tradeoffs in the Settlement Agreement, the Settling Parties agree that SCE will remove all unconditioned space from the control factor for calculating performance payments. SCE will instead use Basic Gross Square Footage in the CEOP square footage control factor for calculating performance payments. 13 See Comments of the Public Advocates Office, pp See UC s Reply to Comments, p See Reply Comments of CSU, p See SCE s Reply to Comments, p. 7. 8

12 E. The Settling Parties Agree That There is Potential for Double Counting Greenhouse Gas Mitigation Related to Demand Response Programs, but the Effect is De Minimis The Settling Parties acknowledge the potential for double counting for GHG emissions reduction in demand response programs and CEOP is real. SCE has demonstrated that current demand response budgets do not directly incorporate an avoided cost calculation, although avoided GHG emissions are valued as a benefit in the cost-effectiveness evaluation of demand response programs and budgets. The Public Advocates Office is satisfied that the effect of those avoided costs, if it were incorporated in the CEOP s estimation of GHG reductions, is de minimis. F. The Settling Parties Agree the Commission Should Decide the Priority of Funding Issue Based on the Current Record The Public Advocates Office recommends that programs authorized by statute should take precedence, and programs authorized by the Commission should be prioritized in the order of approval and SCE should ensure that DAC-related programs authorized to be funded from the GHG Cap-and-Trade balancing account are fully funded each year before drawing on that balancing account for the CEOP. 17 SCE proposes that the Commission direct a set-aside of $20.4 million (reflecting settlement decrease of $1 million from the performance payment budget) for the CEOP Pilot or direct that SCE may permit CEOP to follow SOMAH in priority for allocation of Cap-and-Trade Auction Revenue dollars, because the Commission has approved alternative sources of funding for the DAC-related programs, if needed. 18 NRDC supports SCE s proposal for a set-aside or priority so that SCE can make clear and dependable incentive offers to attract participants. 19 The Settling Parties agree that the record of each Party s position is sufficient for the Commission to make a determination on how to treat priority of funding for 17 See Comments of the Public Advocates Office, pp See SCE s Comments, pp See Comments of the Natural Resources Defense Council (NRDC) on the Administrative Law Judge s Ruling Providing Questions on the Clean Energy Optimization Pilot Workshop, p. 5 (filed August 30, 2018). 9

13 the CEOP and ask the Commission to resolve this remaining issue based on the record in this proceeding. G. The Settling Parties Agree to Terms Regarding the Method to Be Used to Calculate GHG Emissions Reductions of EV Charging for Purposes of this Pilot Only Recognizing the inherent uncertainty of litigation in this proceeding, and in light of other tradeoffs in the Settlement Agreement, the Settling Parties agree to further terms regarding the method to calculate GHG emissions reductions and performance payments for EV Charging and the evaluation of that method as described in Attachment 1 to the Settlement Agreement. The Settling Parties agree that the method proposed for evaluating GHG benefits from EV charging equipment is intended only to measure and reward the GHG savings associated with electric throughput on the Pilot equipment. While the Low Carbon Fuel Standard (LCFS) method is not the only method for calculating GHG savings for public EV chargers, the Settling Parties acknowledge that the LCFS-based method is the most practical method given the Pilot design. NRDC s position is that there is a limited GHG savings contribution expected from public charging. SCE s position is that the LCFS-based method underestimates additional associated benefits provided by the increased availability of EV charging stations and other activities that support EV adoption (e.g., campuses encouraging staff and students to purchase EVs). The Public Advocates Office takes a position that the LCFS-based method may under or overestimate the associated benefits provided by the increased availability of EV charging stations. Consequently, Settling Parties agree that calculations to determine the benefits and associated GHG value beyond the direct electric throughput measured in the Pilot is beyond the scope of this proceeding. V. REQUEST FOR ADOPTION OF SETTLEMENT AGREEMENT The Settlement Agreement is submitted pursuant to Rule 12.1 et seq. of the Commission s Rules of Practice and Procedure. The Settlement Agreement is also consistent 10

14 with Commission decisions on settlements, which express the strong public policy favoring settlement of disputes if the settlements are fair and reasonable in light of the whole record. 20 This policy supports many worthwhile goals, including reducing the expense of litigation, conserving scarce Commission resources, and allowing parties to reduce the risk that litigation will produce unacceptable results. 21 As long as a settlement taken as a whole is reasonable in light of the record, consistent with the law, and in the public interest, it should be adopted without change. 22 A. The Settlement Agreement is Reasonable in Light of the Record The record of this proceeding includes SCE s Application, the Public Advocates Office s Protest and SCE s Response thereto, Parties written testimony and supporting workpapers, 23 the Comments to the Ruling Setting Questions for Party Comment on CEOP Workshop, 24 and Replies to those Comments, 25 as well as this motion (with the attached Settlement Agreement). Together, the above documents provide the information necessary for the Commission to find the Settlement Agreement reasonable. As has been demonstrated since the submission of SCE s Clean Energy Optimization Pilot (CEOP) Application, the parties to the proceeding have been largely supportive of the proposed Pilot. The Settlement Agreement represents a reasonable compromise of the Joint Settling Parties positions. Specifically, it resolves or alleviates the Public Advocates Office s concerns including: ensuring SCE provides sufficient justification for its proposed baseline calculation methods including an estimated average asset life; ensuring SCE demonstrates that 20 See e.g., D at p. 56 (mimeo), 30 CPUC 2d 189, ; and D at p. 42, 40 CPUC 2d, 301, See D at p. 8 (mimeo), 46 CPUC 2d, 538, See Rule 12.1(d) of the Commission s Rules of Practice and Procedure 23 The following Parties submitted written testimony in A , as described in SCE s Motion to Offer Testimony into Evidence (filed November 15, 2018): SCE (Exhibits SCE-01, SCE-02, SCE-03, and SCE-06); UC (Exhibit SCE-04); CSU (Exhibit SCE-05). 24 The following Parties filed Comments: SCE, Public Advocates Office, and NRDC. 25 The following Parties filed a Reply to the Comments: SCE, UC and CSU. 11

15 incentive payment levels and timing are designed to reflect actual benefits to ratepayers; and ensuring SCE s Pilot targets incremental greenhouse gas mitigation, rather than rewarding current behavior. B. The Settlement Agreement is Consistent with the Law The Settling Parties believe that the terms of the Settlement Agreement comply with all applicable statutes and prior Commission decisions, and reasonable interpretations thereof. In agreeing to the terms of the Settlement Agreement, the Joint Settling Parties have explicitly considered the relevant statutes and Commission decisions and believe that the Commission can approve the Settlement Agreement without violating applicable statutes or prior Commission decisions. C. The Settlement Agreement Is In the Public Interest The Settlement Agreement is supported by parties that fairly represent the affected interests at stake in this proceeding. 26 This is a multi-party settlement and the only Party not a signatory is the Rural Hard to Reach Local Government Partnerships Working Group (RHTR) that submitted Comments on the Application on June 14, 2018, evincing general support of the CEOP. The Settling Parties believe the Settlement Agreement is in the public interest because it supports state goals regarding the acceleration of reductions in GHG emissions. The Settlement Agreement supports these goals through the Pilot format that provides stakeholders an opportunity to learn about the effectiveness of Pilot Participants on-site investments to incrementally reduce and accelerate the reduction of GHG emissions, before seeking authorization to make a larger investment of ratepayer funds. The Settlement Agreement is a reasonable compromise of the Settling Parties respective positions, as summarized in Section III. The Settlement Agreement is in the public interest and in the interest of SCE s customers. The Settlement Agreement, if adopted by the Commission, 26 See D , p. 6 [internal citation omitted]. 12

16 avoids the cost of further litigation, and frees up Commission and Party resources for other proceedings. Each portion of the Settlement Agreement is dependent upon the other portions of the Settlement Agreement. Changes to one portion of the Settlement Agreement would alter the balance of interests and the mutually agreed upon compromises and outcomes which are contained in the Settlement Agreement. As such, the Settling Parties request that the Commission adopt the Settlement Agreement as a whole, as it is reasonable in light of the whole record, consistent with law, and in the public interest. VI. CONCLUSION WHEREFORE, SCE, on behalf of itself and the Settling Parties, respectfully requests that the Assigned Commissioner Picker, Assigned ALJ Kline, and the Commission expeditiously approve the attached Settlement Agreement as reasonable in light of the record, consistent with law, and in the public interest. Respectfully submitted, ROBIN Z. MEIDHOF By: /s/ Robin Z. Meidhof Robin Z. Meidhof Attorney for SOUTHERN CALIFORNIA EDISON COMPANY 2244 Walnut Grove Avenue Rosemead, California Telephone: (626) Robin.Meidhof@sce.com December 4,

17 Attachment A Settlement Agreement

18 BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA Application of Southern California Edison Company (U 338-E) for Approval of Its Clean Energy Optimization Pilot Application CLEAN ENERGY OPTIMIZATION PILOT SETTLEMENT AGREEMENT BETWEEN AND AMONG SOUTHERN CALIFORNIA EDISON COMPANY (U 338-E) AND THE PUBLIC ADVOCATES OFFICE, NATURAL RESOURCES DEFENSE COUNCIL, UNIVERSITY OF CALIFORNIA AND CALIFORNIA STATE UNIVERSITY The Public Advocates Office at the California Public Utilities Commission ( Public Advocates Office or Cal Advocates ), Southern California Edison Company ( SCE ), Natural Resources Defense Council (NRDC), University of California (UC), and California State University (CSU) (collectively, the Settling Parties ) hereby enter into this Settlement Agreement ( Settlement ) as a compromise of their respective litigation positions to resolve all disputed issues raised in the above-captioned proceeding. The Settling Parties have addressed all of the issues in this proceeding and have negotiated this Settlement to resolve their disputes. Unless specifically addressed herein, any undisputed SCE proposals addressed in its Application and supporting testimony (as discussed more fully below) should be deemed to have been supported by the Parties, and the Parties request that the CPUC approve such proposals as just and reasonable. The Settling Parties were the only active parties to the above-captioned proceeding, anticipate that this Settlement will be unopposed, and therefore request the CPUC deem this an all-party Settlement. A-1

19 ARTICLE 1 PROCEDURAL HISTORY 1.1 On May 15, 2018, SCE filed its Application ( A ) and supporting testimony. 1.2 On June 14, 2018, the Rural Hard to Reach Governmental Partnership Working Group (RHTR) filed Comments to the Application. 1.3 On June 18, 2018, the Public Advocates Office filed a Protest to the Application. 1.4 On June 28, 2018, SCE filed its Response to the Public Advocates Office Protest. 1.5 On July 6, 2018, the Settling Parties participated in a pre-hearing conference with the assigned Administrative Law Judge ( ALJ ) Zita Kline. 1.6 On July 25, 2018, the Assigned Commissioner Michael Picker issued a Scoping Memo and Ruling setting the procedural schedule and defining the scope of the proceeding. 1.7 On August 16, 2018, the Energy Division held a publicly-noticed workshop on the CEOP. 1.8 On August 17, 2018, ALJ Kline issued an Ruling Setting Questions for Party Comment on CEOP Workshop. 1.9 On August 30, 2016, SCE, Public Advocates Office and NRDC filed Comments on the Ruling Setting Questions for Party Comment on CEOP Workshop 1.10 On September 7, 2018, SCE provided a notice of settlement conference to the service list pursuant to Commission Rule of Practice and Procedure 12.1(b). The settlement conference was scheduled for September 19, On September 10, 2018, SCE, UC and CSU each filed a Reply to the Comments on the Ruling Setting Questions for Party Comment on CEOP Workshop 1.12 On September 14, 2018, the Public Advocates Office informed ALJ Kline and the service list to this proceeding that Parties had scheduled preliminary settlement discussions. The Public Advocates Office further stated given the substantial record that has been developed through comments, and the opportunity to potentially resolve remaining disputed issues amongst the parties through settlement, the Public Advocates Office did A-2

20 not foresee a need for further record development through intervenor direct testimony, rebuttal testimony, briefs, or hearings On September 14, 2018, SCE informed ALJ Kline and the service list to this proceeding that it agreed with the assessment of the Public Advocates Office and that it expected to resolve any disputed issues without the need for evidentiary hearings On September 18, 2018, ALJ Kline issued a ruling taking the evidentiary hearings scheduled for October 18-19, 2018, off-calendar On September 19, 2018, the initial settlement conference was held in-person at the CPUC. Parties participating in the settlement conference were: SCE, Public Advocates Office, NRDC, UC, and CSU On October 15, 2018, ALJ Kline issued a Ruling directing parties to meet and confer and to file a joint case management statement by October 25, The Ruling also set a telephonic status conference for November 2, On October 25, 2018, SCE filed a Joint Case Management Statement in which it described the remaining issues in dispute that were still being addressed in settlement discussions: (1) the prioritization of funding for the CEOP; (2) Pilot budget levels; baseline calculation methods for Electric Vehicle (EV) participation and Demand Response (DR) participation; (4) Pilot s inclusion of carbon intensity of natural gas; (5) the method for calculating the energy intensity of buildings; and (6) asset life assumptions At the November 2, 2018 telephonic status conference, SCE confirmed for ALJ Kline that the Parties were continuing to engage in settlement discussions During this proceeding, SCE responded to 30 formal discovery requests propounded by the Public Advocates Office and engaged in multiple follow up discussions with their staff. In addition, the Pilot Participants, UC and CSU each responded to discovery requests propounded by the Public Advocates Office: UC responded to 24 formal discovery requests and CSU responded to 15 formal discovery requests. In its August 30, A-3

21 2018 Comments to the Ruling Setting Questions for Party Comment on CEOP Workshop, the Public Advocates Office attached all of the formal discovery responses provided by SCE, UC and CSU On November 15, 2018, SCE filed a Motion to Offer Testimony and Supporting Workpapers into the record. ARTICLE 2 SETTLEMENT TERMS AND CONDITIONS In order to avoid the risks and costs of litigation, the Settling Parties agree to the following terms and conditions as a complete and final resolution of this proceeding. Baseline Calculation Methods 2.1 Demand Response Program Participation and Eligibility: During the proceeding, the Public Advocates Office raised double payment principle concerns if demand response (DR) program budgets were based on the avoided cost of GHG emissions. SCE has demonstrated in the record that DR is primarily used to ensure grid reliability and provided record evidence in its Comments to the Workshop that current DR program budgets for incentives do not directly incorporate the avoided cost of GHG emissions. SCE and the Public Advocates Office agree that any double payment or double counting of avoided costs of GHG emissions due to Pilot Participants participation in CEOP and DR programs are likely de minimis. The Settling Parties agree that CEOP Participants will be eligible to participate in DR Programs for the duration of the CEOP. 2.2 Electric Vehicle Charging: Public Advocates Office expressed concerns regarding (1) CEOP Participants receiving incentives for existing charging stations that were funded through SCE s Charge Ready program, and (2) an appropriate ramp-up period to account for customer behavior and adoption of EV charging opportunities. The settlement terms below detail an approach that resolves Public Advocates Office's concerns. A-4

22 2.2.1 All existing and new, public and fleet charging stations shall be eligible for CEOP performance payments CEOP Participants will be eligible for the Charge Ready Pilot and the Charge Ready Make-Ready Expansion program or similar EV infrastructure programs, but would be excluded from the EV charger rebate portion CEOP Participants will be ineligible for the Charge Ready Customer Owned option, Charge Ready SCE Owned and Operated option, and Charge Ready New Construction programs CEOP Participants agree to further terms regarding the method to calculate GHG emissions reductions and performance payments for EV Charging and the evaluation of that method as described in Attachment 1 to the Settlement Agreement. 2.3 Emissions Intensity Factor: The Settling Parties agree that for purposes of calculating CEOP performance payments, SCE s use of the Commission s Clean Net Short (CNS) Calculator is reasonable and appropriate. Therefore, SCE will use its proposed emissions intensity factor for calculating performance payments. 2.4 Asset Life Assumptions: In Comments on the CEOP Workshop, the Public Advocates Office raised concerns that SCE s estimated average 8 year asset life may result in overpaying incentives for measures installed through the CEOP. The Public Advocates Office proposed the Commission require SCE to base performance payments on measured performance by removing the predetermined average asset life of 8 years from SCE s proposed performance payment calculation, or alternatively to have SCE only pay for performance within the measurement period, or to collect data to verify the asset life of the measures actually implemented and use that data to true-up performance payments. SCE and the Pilot Participants provided Comments to the Workshop noting that removal of the asset life multiplier, or a requirement to calculate performance payments with a post-pilot verification and project-specific life cycle approach, would add significant uncertainty, complexity and risk for Pilot Participants, and potentially diminish or eliminate their participation in the Pilot. To address all Parties concerns, SCE agrees to A-5

23 implement an estimated asset life of 7 years for purposes of calculating CEOP performance payments, and has agreed to conduct a detailed analysis of the average asset life as part of the ongoing Pilot Evaluation that will be used to inform program design. 2.5 Method for Calculating Carbon Intensity of Natural Gas: In Comments on the CEOP Workshop, the Public Advocates Office stated that while SCE proposes to pay for GHG emissions reduction, the proposed method is incomplete without the inclusion of the greenhouse gas impacts of methane leakage. To address the concerns raised by the Public Advocates Office, and to provide a more comprehensive approach to incentivizing GHG emissions abatement associated with Pilot Participants potential for reduction in natural gas consumption, SCE will add a natural gas leakage rate into the CEOP carbon intensity factor to calculate performance payments. The CEOP will use Southern California Gas Company s Compression and Loss and Unaccounted For (LAUF) rates as published in the Commission s Avoided Cost Calculator. The methane leakage rate results in an increase of approximately 16% to the natural gas emissions factor which would be constant for the duration of the Pilot. 2.6 Method for Calculating Energy Intensity of Buildings: In Comments on the CEOP Workshop, the Public Advocates Office discussed concerns regarding square footage control factors, stating that (1) SCE s method is not verified for accuracy, and (2) SCE should consider separate methods to control for indoor and outdoor covered spaces (including covered outdoor unconditioned spaces). To address Public Advocates Office s concerns, SCE will remove all unconditioned space from the control factor for calculating performance payments. SCE will instead use Basic Gross Square Footage in the CEOP square footage control factor for calculating performance payments. Basic Gross Square Footage includes (1) Assignable Square Footage, which includes interior occupied spaces such as labs and classrooms, (2) Non-Assignable Square Footage, which includes spaces like corridors and restrooms, and (3) space occupied by interior walls. A-6

24 2.7 CEOP Performance Payment Budget: To reflect the change to SCE s estimated average asset life in Section 2.4 and the inclusion of a natural gas leakage rate into the CEOP carbon intensity factor to calculate performance payments in Section 2.5, SCE agrees to reduce the overall CEOP performance payment budget requested in its Application by $1 million. 2.8 Cost Recovery: The Settling Parties agree that SCE s proposed cost recovery for its CEOP is in compliance with applicable statutes related to the use of Cap-and-Trade allowance revenues for clean energy and energy efficiency projects pursuant to Pub. Utilities Code 748.5(c) The Settling Parties agree that SCE s proposed CEOP meets Decision (D) s requirement of clean energy and energy efficiency projects and SCE has (a) demonstrated that existing funds are available to fund the proposed Pilot; (b) SCE has sufficiently explained why the project qualifies under Pub. Util. Code 748.5(c); and (c) the record supports a finding that the Pilot is best funded to use Greenhouse Gas allowance revenues instead of ordinary recovery through rates The Settling Parties do not agree, however, on how the Commission should treat priority of funding for the CEOP. The Public Advocates Office recommends that programs authorized by statute should take precedence, and programs authorized by the Commission should be prioritized in the order of approval and SCE should ensure that DAC-related programs authorized to be funded from the GHG Capand-Trade balancing account are fully funded each year before drawing on that balancing account for the CEOP. SCE proposes that the Commission direct a setaside of $20.4 million (reflecting settlement decrease of $1 million from the performance payment budget) for the CEOP Pilot or direct that SCE may permit CEOP to follow SOMAH in priority for allocation of Cap-and-Trade Auction Revenue dollars, because the Commission has approved alternative sources of A-7

25 funding for the DAC-related programs, if needed. NRDC supports SCE s proposal for a set-aside or priority so that SCE can make clear and dependable incentive offers to attract participants. The Settling Parties agree that the Commission should resolve this remaining issue based on the record in this proceeding. ARTICLE 3 REGULATORY APPROVAL 3.1 The Settling Parties, by signing this Settlement Agreement, acknowledge that they pledge support for Commission approval and subsequent implementation of all the provisions of this Settlement Agreement. The Settling Parties shall jointly request that the Commission approve the Settlement Agreement without change, and find this Settlement Agreement to be reasonable, consistent with law, and in the public interest. 3.2 Any Party may withdraw from this Settlement Agreement prior to the Settlement Effective Date if the Commission through a Proposed Decision or Alternate Proposed Decision proposes to modify, delete from, or add to the disposition of the matters stipulated herein. The Settling Parties agree, however, to negotiate in good faith with regard to any Commission-proposed changes in order to restore the balance of benefits and burdens, and to exercise the right to withdraw only if such negotiations are unsuccessful. The Settling Parties shall promptly discuss any Commission proposed modifications and negotiate in good faith to achieve a resolution acceptable to the Settling Parties, and shall promptly seek Commission approval of the resolution so achieved. 3.3 This Settlement Agreement shall become effective on the mailing date of a final Commission Decision approving the terms of this Settlement Agreement without modifications unacceptable to any Settling Party ( Settlement Effective Date ). 3.4 Upon the Settlement Effective Date, Settling Parties agree that this Settlement Agreement resolves all issues in A A-8

26 ARTICLE 4 GENERAL TERMS AND CONDITIONS 4.1 The Settlement Agreement is intended to be a resolution among the Parties of all issues raised in A None of the Parties admit or concede error as part of this Settlement Agreement. 4.2 This Settlement Agreement is a negotiated compromise of issues. Nothing contained herein shall be deemed to constitute an admission or an acceptance by any Party of any fact, principle, or position contained herein. Notwithstanding the foregoing, the Parties, by signing this Settlement Agreement and by joining the motion requesting Commission approval of this Settlement Agreement, acknowledge that they pledge support for Commission approval and subsequent implementation of these provisions. 4.3 The Parties agree by executing and submitting this Settlement Agreement that the relief requested herein is just, fair, and reasonable, and in the public interest. 4.4 Consistent with Rule 12.5 of the Commission s Rules of Practice and Procedure, this Settlement Agreement is not intended by the Settling Parties to be precedential regarding any other pending or future proceeding before this Commission, except as expressly provided in this Settlement Agreement. The Settling Parties have assented to the terms of this Settlement Agreement only for the purpose of arriving at the compromise embodied in this Settlement Agreement. Each Party expressly reserves its right to advocate, in current and future proceedings, positions, principles, assumptions, and arguments which may be different than those underlying this Settlement Agreement and each Party declares that this Settlement Agreement should not be considered as precedential for or against any of the Parties. This Settlement Agreement embodies compromises of the Settling Parties positions. No Party agrees to any individual term of this Settlement Agreement, except in consideration of the other Settling Parties agreement to all other terms of the Settlement Agreement. Thus the Settlement Agreement is indivisible and each part is interdependent on each and all other parts. A-9

27 4.5 The terms and conditions of the Settlement Agreement may only be modified in writing if agreed upon by all Parties. Should the Commission reject or modify this Settlement Agreement, the Parties reserve their rights under Rule 12.4 of the Commission s Rules of Practice and Procedure. 4.6 This Settlement Agreement contains the entire agreement and understanding between and among the Settling Parties as to the resolution of SCE s Clean Energy Optimization Pilot Application. In the event there is any conflict between the terms and scope of this Settlement Agreement and the terms and scope of the accompanying joint motion in support of the Settlement Agreement, this Settlement Agreement shall govern. 4.7 This Settlement Agreement and its terms are to be effective for the duration of the Clean Energy Optimization Pilot. 4.8 This Settlement Agreement may be executed in counterpart, each of which shall be deemed an original, and all of which taken together shall constitute one agreement binding on all the Settling Parties hereto. Facsimile or pdf documents containing signatures shall be valid as original signatures. Each person signing this Settlement Agreement warrants and represents that he or she has the authority to sign on behalf of the Settling Party represented and to bind such Settling Party to this Settlement Agreement. A-10

28 Attachment 1 CEOP: Electric Vehicles Component

29 Attachment 1: Clean Energy Optimization Pilot Electric Vehicles Component Southern California Edison Company, the Public Advocates Office, Natural Resources Defense Council, University of California, and California State University (the Settling Parties) agree to these further terms regarding the method to calculate greenhouse gas (GHG) emissions reductions and performance payments for electric vehicle (EV) Charging and the evaluation of that method for purposes of this Pilot only. The Settling Parties agree that the method proposed for evaluating GHG benefits from EV charging equipment is intended only to measure and reward the GHG savings associated with electric throughput on the Pilot equipment. While the LCFS based method is not the only method for calculating GHG savings for public EV chargers, the Settling Parties acknowledge that the LCFS based method is the most practical method given the program design. 1 SCE s position is that the LCFS based method underestimates additional associated benefits provided by the increased availability of EV charging stations and other activities that support EV adoption (e.g., campuses encouraging staff and students to purchase EVs). The Public Advocates Office takes a position that the LCFS based method may under or overestimate the associated benefits provided by the increased availability of EV charging stations. Consequently, Settling Parties agree that calculations to determine the benefits and associated GHG value beyond the direct electric throughput measured in the Pilot is beyond the scope of this proceeding. Public EV Charging Stations For Electric Vehicle charging stations on campus and in public locations (that is, stations accessible to faculty, staff, students, and visitors), the following principles should apply. Performance Payment Caps Performance payments for public EV charging stations are capped at 4% of the overall performance payment budget. Baseline charging amount The baseline amount of EV charging should be computed in the aggregate at each campus, to recognize that users can easily shift their charging between charging stations. Some charging at newly installed charging stations represents incremental EV usage, while some charging may 1 LCFS is designed to be applied when EV use directly displaces gasoline fueled car use. This program may, in addition to displacing gasoline use, also impact EV charging patterns (e.g., faculty who already own EVs may charge at UCs during the day instead of charging at home during nighttime). Higher GHG savings are expected from gasoline displacement than changes in EV charging timeperiod. Due to the addition of a GHG performance payment cap for public charging, the settling parties agreed to use the simpler LCFS method to compute GHG savings instead of developing methods to consider impact of change in EV charging patterns. This issue does not impact GHG savings from fleet EV charging stations.

30 represent shifting from existing to new charging stations (which may be less busy or more conveniently located). The campus s baseline amount is one year s worth of pre Pilot charging across all installed, public charging stations on campus. In general, this is the sum of kilowatt hours consumed at charging stations in the year prior to the Pilot (year 0). Baseline measurement period The baseline measurement period should include times when the university is in session and out of session. For existing stations that are already metered, SCE should use a baseline measurement period of at least one full year. For stations that are already installed but not yet metered, the baseline measurement period (after a meter is added) should include at least 3 months of in session time and 3 months of out of session time. Using this data, SCE can extrapolate to estimate the expected EV charging consumption over a full year. Adding meters to existing charging stations If the campus has existing (installed and operational) charging stations that are not currently metered, these are eligible to be included in the CEOP once the following conditions are met: o The charging station is metered o A baseline charging amount is determined for that charging station (or cluster of stations). The baseline measurement period begins when a meter is installed. As noted above, the baseline measurement period should include at least 3 months of in session time and 3 months of out of session time. Once a baseline amount is determined for the newly metered station, SCE should add that amount to the campus s aggregate baseline for the remaining years of the Pilot. Calculating GHG savings SCE will use the LCFS methodology for all public charging. Asset life multiplier EV charging will receive the same 7 year asset life multiplier that is agreed upon for other technologies in the Pilot. Eligibility for Charge Ready incentives CEOP Participants will be eligible for the Charge Ready Pilot and the Charge Ready Make Ready Expansion or similar EV infrastructure programs, but would be excluded from the EV charger rebate portion. CEOP Participants will be ineligible for the Charge Ready Customer Owned infrastructure option, Charge Ready SCE Owned and Operated option, and Charge Ready New Construction programs. Evaluation questions As part of the evaluation, where a year or more of pre Pilot charging data is available, a CEOP evaluation consultant will examine whether there is a trendline in pre Pilot EV charging that would indicate a secular trend unrelated to actions incentivized in this Pilot.

31 The CEOP evaluation consultant should make recommendations on a proper method for calculating GHG savings associated with public EV chargers for use in future program design. Research may, among other things, utilize university data (such as parking permit information), other publicly available data, or a method outlined in other Commission proceedings. Fleet EV Charging Stations For charging stations reserved for campus fleet vehicles (that is, stations in a separate area that is not publicly accessible), the following principles should apply. If a charging station is used for both public and fleet vehicles, it should be treated as a public charging station. Performance Payment Caps Settling Parties agree that Pilot Participants should not receive performance payments that exceed 100% of the cost of their investment in the electric fleet charging equipment. Settling Parties agree that the Pilot Participants would need to document new investment in EV fleet charging equipment, by campus, starting from the beginning of the Pilot. That total investment per campus would become the cap on CEOP performance payments that each campus could receive for EV fleet charging. Baseline charging amount The baseline amount of EV charging at fleet charging stations should be computed in the same manner as for public charging stations. The baseline amount should be computed separately for public and fleet charging stations. Therefore, each participating campus will have two EV baseline amounts. Baseline measurement period Same as for public charging stations Adding meters to existing charging stations Same as for public charging stations Calculating GHG savings SCE will use the LCFS methodology for all fleet charging. Asset life multiplier Same as for public charging stations Eligibility for Charge Ready incentives Same as for public charging stations

32

33 Executed this 4th day of December, SETTLING PARTY: University of California Office of the President BY: NAME: TITLE: David Phillips Associate Vice President, Energy & Sustainability

34

35

36