California Public Utilities Commission

1. California Public Utilities Commission Paul Clanon Executive Director August 2011

2. Presentation Overview About the CPUC Energy Climate Change Mitigation Communications Water Rail Safety Passenger Transportation

3. CPUC Mission The CPUC serves the public interest by protecting consumers and ensuring the provision of safe, reliable utility service and infrastructure at reasonable rates, with a commitment to environmental enhancement and a healthy California economy.  We regulate utility services, stimulate innovation, and promote competitive markets, where possible, in the communications, energy, transportation, and water industries.

4. About the CPUC • Californians spend more than $59 billion annually for services from industries regulated by the CPUC. • Headquartered in San Francisco with offices in Los Angeles and Sacramento. • 1,000 Employees: Including Engineers, Analysts, Lawyers, Auditors, Support • Five Governor-appointed Commissioners serve staggered six-year terms: Michael R. PeeveyPresident Timothy Alan Simon Mike Florio Catherine J.K.Sandoval Mark Ferron

5. Executive Director Role The CPUC's Executive Director works with Commissioners, Directors, staff, oversight agencies, the Legislature, the Governor's Office, and all external stakeholders to coordinate and facilitate timely handling of procedural matters and efficient internal operations. The Executive Director's office works to anticipate regulatory and agency needs in order to develop and implement appropriate strategies to meet those needs. Paul Clanon, CPUC Executive Director

6. Funding for CPUC $157 million Operating Budget Reimb. from Utilities $22.9 15% Transportation Accounts $22.4 14% Federal Trust Fund $1.3 1% Telecom Utility Reimb. Universal Account $104.8 Service $5.7 4% 66% CPUC Budget 2009-10 • The CPUC’s Fiscal Year2009-10 budget is $1,364 million, which consists of approx. $157 million for operations and $1,207 million in pass-through funds ($638 for Telco Universal Service and $569 for Gas Consumption Surcharge Programs) • The total number of authorized positions is 1,022

7. CPUC Proposed Budget FY 2010-11($ millions)

8. FY 2010-11 Authorized Position Changes

9. Aggressive Recruiting Leadsto Diverse Staffing • 90 employees are fluent in 20 different languages combined

10. Customer Care and Protection The CPUC responds to ratepayer inquiries, resolves customers’ informal complaints regarding their utility billing and services, assists the public participating in CPUC proceedings, and investigates and enforces public safety standards.

11. Environmental Awareness Day CPUC Staff Participates in the Community • John Muir School • SF Food Bank – Food From the Bar • Environmental Awareness Day • C5 Children’s School • Halloween Fair for School Children Food From the Bar

12. CPUC Reaches Out to all Consumers, Especially the Underserved • Outreach officers • Consumer education campaigns in 13 languages • Bill Fairs • Small Business Expos • Public Hearings and Workshops Bill Fair Small Business Expo

13. Helping Consumers • California LifeLine provides discounted residential telephone services to qualified low income consumers • Deaf and Disabled Telecommunications Program provides equipment and services to deaf, hearing impaired and/or disabled consumers • California Alternate Rates for Energy provides low income consumers with a 20 percent discount on their electric and natural gas bills • Low Income Energy Efficiency Program provides no-cost weatherization services to low-income households • The Low Income Oversight Board advise the CPUC on low income electric and gas customer issues and serves as a liaison for the CPUC to low income consumers

14. CPUC Buys Products and ServicesFiscal Year 2008-2009 • Statewide Contracting & Procurement Goals: • Small BusinessGoal: 25 percent • Achieved: 3.35% • Disabled Veteran Business Enterprises • Goal: 3% • Achieved: 0.92% • Proposition 209 prohibits: • Preferential treatment to any individual or group in public contracting on the basis of race, sex, color, ethnicity, or national origin

15. Customer Care and Supplier Diversity • Wins for the Consumers: • Resolved through the Consumer Affairs Branch (CAB) over 21,600 utility customer complaints and helped to obtain $2.3 million in refunds/bill credits in 2010. • Improved CAB response time to consumers by 36% – in 2010 complaints were resolved, on average, in 45 days; compared to 70 days in 2009. • Technological improvements are being made to CAB’s phone system. • Resolution CSID-003 was approved allowing a set of customer complaint data to be published on the website. Feedback is being solicited on the data posting and will guide efforts to post additional data. • Online access provides benefit to consumers: • Electronic online form accessed through CPUC website allows consumers to submit complaints to CAB 24/7. • Electronic online form accessed through CPUC website allows public speakers to sign up to speak at CPUC Voting/Business Meetings in advance.

16. Customer Care and Supplier Diversity (cont.) Established a Small Business Advisory Council to ensure that small businesses are educated about regulatory policies and have the right tools to make informed decisions. Supplier Diversity – General Order 156 Results - 2010 Performance Both Verizon and AT&T wireline have surpassed the 40% mark in procurement from diverse suppliers. Cal-AM Water procured over 26% of their total from diverse suppliers; this has never been done in the water industry. Overall, the traditional six companies once again exceeded their prior year procurement from diverse suppliers; this time around by an unprecedented $900 million.  For calendar year 2009 the traditional six companies’ total procurement from diverse suppliers was just over $3 billion, while for calendar year 2010 it was just over $3.9 billion. PG&E = $1.1 billion or 32.67% SDG&E = $385 million or 36.68% SoCalGas = $230 million or 37.42% SCE = $1.1 billion or 27.10% AT&T = $948 million or 40.04% Verizon = $123 million or 41.30%

17. Energy

18. Overview of CPUC Energy Oversight • The CPUC regulates the investor-owned electric and gas utilities in California that collectively serve over two-thirds of total electricity demand and over three-quarters of natural gas demand throughout California. • Through its oversight of these utilities, the CPUC has played a key role in making California a national and international leader on a number of energy related initiatives designed to benefit consumers, protect the environment, and support California’s economy. • The CPUC develops and administers energy policy and programs to serve the public interest and ensures compliance with decisions and statutory mandates. The CPUC staff provides objective and expert analyses that promote reliable, safe, and environmentally sound energy services at lowest reasonable rates for the people of California.

19. CPUC’s Role and Responsibilities Key Role: Ensuring private utility customers have safe, reliable service at reasonable rates. Energy Regulate investor-owned electric and gas utilities (such as PG&E, SCE, SDG&E and SCG), which serve over two-thirds of electricity demand and over three-quarters of natural gas demand in the state. Communications Administer universal telephone service programs, issue video franchises, enforce customer service standards for telephone services, and regulate rates for basic phone service and rural carriers. Consumer Protection and Safety Enforce consumer protection laws and service standards, investigate fraud and illegal activity, and prosecute violators of the Public Utilities Code, CPUC orders, and utility tariffs. Inspect and audit power plant operation, natural gas and electric utility infrastructure, passenger carriers, household goods movers, freight railroads, and rail transit systems. Consumer Complaint Resolution Assist consumers in informally resolving billing and service disputes with utilities. Promotes efficient use of staff resources to resolve complaints informally, not in the more burdensome formal docketed process. Passenger Transportation License limousines and buses, and enforce statutes and regulations that apply to these carriers’ operations. Rail Safety Inspect freight railroad tracks, equipment, and facilities; evaluate and approve railroad crossings for safety; and verify the safety and security plans of rail transit agencies. Water Regulate investor-owned water and sewer utilities, which serve about 18 percent of the state’s residents.

20. CPUC Energy Goals For Next 3-5 Years • Reduce per capita energy use through efficiency and conservation • Ensure energy resources to meet demand • Promote renewable power • Decrease the impacts of California energy services on global warming

21. CPUC’s Role in Energy Issues • Set retail rates and requirements for utilities • Enforce compliance (include levy fines) • Establish safety standards • Site transmission lines and conduct environmental review

22. Low Income Programs Provide Bill Assistance and Energy Efficiency Improvements for Eligible Customers Two main programs for low income assistance: California Alternate Rates for Energy (CARE) Provides a 20% discount on electric and natural gas bills to more than 5 million households. Energy Savings Assistance Program (ESAP) Provides qualified low income households with energy efficient appliances, energy education and weatherization measures at no cost (formerly known as Low Income Energy Efficiency Program). Need for low income assistance expected to increase: Increased Reach*: Now treating 300,000+ homes/year with efficiency solutions, cumulatively reaching 1.2 million homes since 2006 With the CPUC’s goal of 90%+ penetration, as well as the economic downturn, CARE enrollments have risen to 5 million with an estimated statewide penetration of 94% Increased Budget**: ESAP will provide $320 million in efficiency services to low income homes in 2011, and employ approximately 110 contractor firms and Community Based Organizations in program delivery. CARE will provide approximately $877 million in bill discounts in 2011. The total combined efficiency and bill discount assistance provided to low income households in 2011 will amount to $1.2 billion, provided by all other ratepayers. *Data as of December 2010 **2011 Budget as approved in D0811031

23. Serving 30 million consumers in PG&E, SCE, and SDG&E and many municipal utilities Heat storm in 2006 with peak load of 50,270 MW on July 24,2006 43,000 MW of available generation capacity at peak after derates for hydro, wind and outages 9,260 MW net imports on peak hour

24. Overview of the Western Interconnection California dependent on imports to help meet peak demand • Includes 14 western states, British Columbia and part of Mexico • California has accounted for almost 40% of peak demand. This is declining. • All one interconnected system

25. California ElectricityRegulatory Structure

26. Regulatory Structure in Practice • For utilities under CPUC jurisdiction, state responsibility to ensure reasonable rates • CPUC governs resource portfolio decisions (and therefore cost impact to consumers) for each regulated utility • Federal requirements can sometimes override state rules – California usually goes beyond federal minimum requirements

27. Energy Action Plan I and II • Unprecedented collaboration by principal energy agencies in California • Summarizes California’s energy goals • Identifies specific actions to implement goals • Lays out the “loading order” • Addresses climate change, RD&D, and transportation

28. The Loading Order The “Loading Order” sets priorities for California’s procurement strategy Clean and Efficient Fossil-Fired Energy Renewable Energy Efficiency and Demand Response

29. Priority One: Energy Efficiency • Energy Efficiency is California’s highest priority resource to meet energy needs in a clean, low-cost manner and aggressively reduce greenhouse gas emissions. • In September 2009, the CPUC approved $3.1 billion for energy efficiency programs. • Innovative new framework of incentives and penalties to drive investor-owned utilities above and beyond California’s aggressive energy savings goals. • Set foundation for making energy efficiency an integral part of "business as usual" in California through the California Energy Efficiency Strategic Plan.

30. California’s Aggressive Energy Efficiency Program2004-2013 • Eliminates 9 million tons of CO2 emissions annually - equal to 1.8 million cars off the road • Eliminates need for 10 new power plants • $10 billion in net savings to consumers

31. Energy Efficiency Programs 2010-2012 Programs September 2009 Decision approved $3.1 billion for efficiency programs, and additional $750 million for low income home retrofits. Energy Efficiency is the least cost, most reliable, and most environmentally sensitive resource to meet growing demand and GHG reduction goals. Supports energy, greenhouse gas, and criteria pollutant savings equivalent to three new power plants. Estimated to save ratepayers $4.2 billion net.* Estimated 15,000 to 18,000 new or retained jobs.** Numerous innovative initiatives aimed at transforming the market. * Based on forecasted benefit-cost ratio of 1.36 in utility applications. **Job benefits calculated with a methodology from the Council of Economic Advisers’ May 2009 publication of “Estimates of Job Creation from the American Recovery and Reinvestment Act of 2009”.

32. Investor-Owned Utility 2010-12 Energy Efficiency Budget by Program Areas

33. 45,000 ~15% of Annual Electricity Use in California in 2003 40,000 35,000 30,000 25,000 Utility Efficiency Programs at a cost of GWh/year ~1% of electric bill 20,000 15,000 Building Standards 10,000 5,000 Appliance Standards 0 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 2003 1982 1975 1976 1977 1978 1979 1980 1981 1999 2000 2001 2002 Energy Efficiency ProgramsBoost Savings

34. U.S. Energy Use Grows While California Usage Remains Flat Energy Efficiency and Economic Growth: 1975-2005

35. Supply Side Benefits of Energy Efficiency • Generation Benefits • Saves capacity and energy • Lowers fuel costs • Reduces required reserves • Transmission and Distribution Benefits • Defers new investment • Improves reliability

36. The California Long Term Energy Efficiency Strategic Plan Making Energy Efficiency a Way of Life in California

37. Next Generation of Energy Efficiency On Oct. 18, 2007, the CPUC took action to make energy efficiency “business as usual” in California. • CaliforniaEnergy Efficiency Strategic Plan offers long-term (through 2020), statewide utility strategic plan for energy efficiency • All new residential construction in California will be zero net energy by 2020 • All new commercial construction in California will be zero net energy by 2030 • Heating, Ventilation, and Air Conditioning industry will be reshaped to ensure optimal equipment performance

38. Commercial New ConstructionGoal • Develop path to Zero Net Energy Building Design by 2030 • Leverage opportunities from emerging technologies initiatives,incentive programs, and local initiatives targeting commercial building/property developers • Plan “exit strategy” via California Energy Commissionstandards over next 6-10 years

39. Residential New ConstructionGoal • Residential new construction and major renovations exceed Title 24 standards by 35% by 2011 • Incorporate these into minimum 2011 Title 24 standards • Plan path to zero net energy homes by 2020

40. Implementing the Strategic Plan: 2010-2012 Programs September 24, 2009, CPUC Decision • Approves $3.13 billion for energy efficiency programs • Three Year Savings Potential:  7,000 GWH  1,500 MW  150 MMTherms 3 million tons of CO2e avoided • Equivalent to 3 large power plants

41. Goals and Budgets for the 2010-2012 Program Cycle

42. Economic Impact: 2010-2012 Snapshot • $3.1 billion invested in California • 15,000 – 18,000 new jobs • $122 million for workforce training • $260 million for local government programs • Additional $750 million for low income home retrofits and appliances *Job benefits calculated based on Council of Economic Advisers’ May 2009 publication of “Estimates of Job Creation from the American Recovery and Reinvestment Act of 2009”

43. 2008 DSM Clean Energy Revenue Requirements – All IOUs * 2008 Revenue Requirements for PG&E, SCE, SDG&E and SoCalGas. Actual level of spending varies based on availability of carry-over funding from prior years. ** Does not reflect actual amount paid on utility bills. Bill impact will vary depending on the tariff rate and usage.

44. Utility Budgets • IOUs Proposed Budgets = $3.7 billion • Approved Budgets = $3.1 billion • 42% higher than previous cycle • 20% lower than requested • Cost Caps and Targets • 10% cap on Administrative Costs (utility overhead, labor and general expenses) • 6% cap on Marketing and Outreach • 4% cap on EM&V • 20% target on non-incentive/rebate program costs

45. Program Highlights • 12 Statewide Programs • Statewide Education Campaign to Create Behavior Change • Web Portal for Efficiency Professionals • Continuous Energy Improvement Programs for Industry • Investment in Advanced Lighting Technologies • Review of Best Practices for Measurement and Verification

46. LONG-LASTING Energy Savings in Buildings • Cal SPREE (Statewide Program for Residential Energy Efficiency) • Commercial and Government Benchmarking and Retrofits • Comprehensive HVAC program • Commercial and Institutional On-Bill Financing • Training for Building and Appliance Contractors, Architects, Owners, Managers, and Inspectors • Zero Net Energy New Construction

47. California is Advancing All Cost-Effective Energy Efficiency • California Memo of Understanding has 16 signatories committed to National Action Plan for Energy Efficiency: • 10 public utilities • 3 large investor-owned utilities • 2 state agencies • 1 environmental Non-Governmental Organization • CPUC's current energy efficiency goals for utilities are through 2013, soon to be extended to 2020 • California Energy Commission’s Assembly Bill 2021 process will adopt 10-year statewide energy efficiency goals

48. Demand Response • Demand Response enhances electric system reliability, reduces power purchases and individual consumer costs, and protects the environment • Allows consumers to “respond” by lowering energy usage during periods of high “demand” • Examples: • Advanced Metering • Air Conditioning Cycling Program for PG&E • Interruptible programs • In 2009, the CPUC adopted a default dynamic rate (referred to as “Critical Peak Pricing”) for Edison’s largest customers (to begin in 2010), and opened a proceeding to do the same for PG&E’s largest customers (decision expected in February 2010). SDG&E implemented a default dynamic pricing rate for its medium and large customers in 2008 and continued the rate through 2009.

49. Demand Response Shaves the Peak California Independent System Operator Load Duration Curve

50. Resource Adequacy and Energy Procurement Programs Ensure Reliable Electric Service at Reasonable Cost Ensuring resource adequacy The CPUC’s Resource Adequacy program ensures that sufficient generation is under contract to meet short term needs (monthly and annually). The CPUC’s Long Term Procurement Program ensures sufficient new resources are constructed to meet long term needs (10 years out). 962 MW of new natural gas fueled generation came into operation in 2010 as a result of utility procurement activities. CPUC approved applications for the construction of 1,743 MW of new natural gas fueled generation in 2010. Analyses of Energy Efficiency programs, Demand Response programs, Renewable energy projects, and cost effective combined-heat and power projects are on-going to ensure that the use of fossil generation is minimized. CPUC is working closely with California agencies to eliminate once-through-cooling systems in electric power plants and meet air restrictions in the L.A. Basin while ensuring that electric reliability is not threatened. Implementing energy procurement policy to ensure reliable service at a reasonable cost Increased focus on integrating preferred renewable resourcesat lowest cost.