1. ©2015 Navigant Consulting, Inc. Confidential and proprietary. Do not distribute or copy. ENERGY DISPUTES & INVESTIGATIONS ECONOMICS FINANCIAL ADVISORY MANAGEMENT CONSULTING January 13, 2015 CPUC Potentials and Goals (PG) Study Update Webinar on Incorporating Industry Standard Practice (ISP) into the PG Study Navigant Reference: 174655

2. 1 ©2015 Navigant Consulting, Inc. Confidential and proprietary. Do not distribute or copy. ENERGY 2015 AIMS Update Scope 2015 Update Highlights Stage 1 Scope Key update is to more accurately account for industry standard practices (ISPs): ISPs inform Industrial, Agriculture, and Mining (AIMS) potential Stage 1 of the 2015 update will retain the Industrial Assessment Center (IAC) measures database; the core measure set Recently-completed and vetted ISP studies will be used to inform/refine market potential estimates PG modeling team is engaging with Energy Division Custom Ex-Ante Review Team to ensure consistency Other data sources reviewed for any significant updates include: Updates to the IAC database (data compiled in 2013-2014) Various measure parameters (e.g., installation cost updates) MASI studies (preliminary results) New IOU street lighting inventories Stage 1 Schedule January 13 – Stakeholder discussion regarding ISP incorporation into PG model January 16 – Receive any final input from stakeholders following meeting Email comments to: Aaron Lu, Matt O’Hare, Greg Wikler February 6 – AIMS inputs to model finalized March 13 – Draft model results/report released for stakeholder review May 15 – Revised model results/report released (based on stakeholder feedback)

3. 2 ©2015 Navigant Consulting, Inc. Confidential and proprietary. Do not distribute or copy. ENERGY 2015 AIMS Update Scope 2015 Update Highlights (continued) Stage 2 Scope (preliminary) The team will expand its view on data sources to augment the IAC data The team will also expand its view on ISP sources: This will include a review of IOU ISP studies and other efforts (e.g, SCE risk assessment efforts prepared by ASWB) The team will explore model changes and/or enhancements to better inform decision making (these are specific to the industrial model). For example: Represent existing baseline scenarios Assess additional measures not in current model (e.g., process efficiency measures, etc.) Stage 2 Schedule (preliminary and subject to change) May 18 – Begin assessment Late 2015/Early 2016 – Updated model results/report released for stakeholder review Early 2016 – Final model results/report released Stage 2 timeline ultimately depends on two things: Regulatory timeline for setting 2017 and beyond goals Timing of the release/finalization of new studies/data to inform Stage 2 update

4. 3 ©2015 Navigant Consulting, Inc. Confidential and proprietary. Do not distribute or copy. ENERGY 2015 AIMS Update Scope 2013 ISP Approach Recap End Use Measure Type Industrial Assessment Centers (IAC) EE Measure IAC ARC Code PGESCE ED Ex- Ante SCG Final value (informed by stakeholder input) Conventional Boiler Use O&M USE HEAT FROM BOILER BLOWDOWN TO PREHEAT BOILER FEED WATER 2.12430 1.00 Facility HVACEquipmentINSULATE GLAZING, WALLS, CEILINGS, AND ROOFS2.749100.5 0.500.38 Facility HVACEquipment USE PROPER THICKNESS OF INSULATION ON BUILDING ENVELOPE 2.749200.50.20.500.30 Facility HVACEquipment USE DOUBLE OR TRIPLE GLAZED WINDOWS TO MAINTAIN HIGHER RELATIVE HUMIDITY AND TO REDUCE HEAT LOSSES 2.749300.5 0.500.38 Facility HVACEquipment INSTALL PARTITIONS TO REDUCE SIZE OF CONDITIONED SPACE 2.74960.751 1.000.92 IAC Database: National level IAC data used to characterize California’s Industrial sector Navigant vetted the data to confirm applicability of National data to describe California See 2013 Study details: http://www.cpuc.ca.gov/PUC/energy/Energy+Efficiency/Energy+Efficiency+Goals+and+Potential+Studies.htm http://www.cpuc.ca.gov/PUC/energy/Energy+Efficiency/Energy+Efficiency+Goals+and+Potential+Studies.htm The 2013 study accounted for ISPs by asking IOU stakeholders to assign a multiplier indicating what percent of the market for a measure was an ISP. E.g. a multiplier of ‘0’ indicates that a measure is standard practice and has no market potential The final value for the multiplier was a roll up of all stakeholder ratings. The multiplier was applied to technical potential to yield a market potential number

5. 4 ©2015 Navigant Consulting, Inc. Confidential and proprietary. Do not distribute or copy. ENERGY 2015 AIMS Update Details This update will be informed by two tracks: Measure Densities: The portion of the subsector where a measure (as described by an IAC Assessment Recommendation Code (ARC)) opportunity exists; this will include an estimate of the current baseline saturation/density ISP Adjuster: A flag to designate measures that are standard practice; an adjuster of 0 indicates that the measure equals ISP Navigant is compiling an inventory of ISP Study efforts. Navigant has identified to-date about 60 ISP studies or other efforts (that can be used to indicate potential for ISP) from various sponsors. Final, vetted, and approved studies will inform Stage 1 efforts: CPUC:11 studies Stage 2 will explore the potential use of other studies and efforts: Non-final and pending studies, IOU studies, risk assessments, ISP Guidebook (version 1.2) flagged measures Example from ISP Source List: Ranging from sector-wide to specific applications (Stage 1; Only Finalized studies

6. 5 ©2015 Navigant Consulting, Inc. Confidential and proprietary. Do not distribute or copy. ENERGY 2015 AIMS Update Details 2015 ISP Approach ISP studies will be reviewed and each measure will be assigned a value between 0 and 1 indicating how closely the ISP study aligns with the measure (measures are described by an IAC Assessment Recommendation Code (ARC)) 1 indicates the ISP study and ARC measure are closely aligned, 0 indicates no relationship Measure Densities are estimated for each IAC measure. Defined as the portion of the subsector where a measure opportunity exists. This will include an estimate of Total Maximum Density and current Baseline Density An ISP Adjuster is then applied to those IAC measures that relate to an ISP (i.e., typically a 1 or 0 value that eliminates any ISP measures) Technical Potential for each measure is multiplied by the ISP Adjuster to derive an estimate of Market Potential

7. 6 ©2015 Navigant Consulting, Inc. Confidential and proprietary. Do not distribute or copy. ENERGY 2015 AIMS Update Details Measure Densities and ISP Adjustments The Navigant team’s analysis is informed by the ISP Study approach, the IAC data characteristics, and engineering judgment: Per the ISP Guidebook (Version 1.2A), information gathered during ISP study efforts will inform these inputs: Research on technology and measures cover baseline characteristics and density/stock estimates Other recent research activities and sources (i.e., ED input) will also inform density estimates Baseline Density Total Maximum Density Sector End Use Several sources inform the Measure Density estimate Why is the ISP adjuster needed? IAC savings data reflects baseline/existing equipment conditions: The IAC database defines an operating environment below ISP; existing equipment is at or below the baseline level Applying an ISP adjuster results in the IAC data reflecting the standard practice baseline

8. 7 ©2015 Navigant Consulting, Inc. Confidential and proprietary. Do not distribute or copy. ENERGY 2015 AIMS Update Details The Navigant team has developed a spreadsheet structure to expedite this effort: The exercise will result in a transparent and comprehensive table of ISP Factors for the 275 ARCs that inform the Industrial potential model. Navigant notes that any ARCs not assigned an updated ISP Factor will rely on the factors estimated in in the previous study. The previous effort was informed by stakeholders (IOUs, ED) and considered: Title 24/20 Specific ISP positions in 2013 Air District (i.e., AQMDs); AB32 OSHA NTG values reported within recent evaluation studies will also inform this effort. Subset of ARC list: ISPs applied to these Measures

9. 8 ©2015 Navigant Consulting, Inc. Confidential and proprietary. Do not distribute or copy. ENERGY 2015 AIMS Update Details ISP Factor development example Motors Review documentation: ISP studies related to motors (e.g., these might reference code/standards) Related measures (ARC): motor improvements (machine drive end use) Given ISP Study’s applicable subsectors: Petroleum (for this example) Measure Density Total Maximum Density: Estimate that 100% of sites have motors Baseline Density: Estimate that 75% of motors are baseline Measure Density = 75% (100% x 75%) ISP Adjuster Baseline/as-found motor efficiency: Estimated at 90% (estimated IAC baseline) ISP motor efficiency: Estimated at 96% (lowest efficiency available for purchase) Measure efficiency: Estimated at 96% (in consideration of NEMA Premium standards) ISP gross adjuster = 0% ISP Factor Measure density x ISP adjuster = 0% (75% x 0%)

10. 9 ©2015 Navigant Consulting, Inc. Confidential and proprietary. Do not distribute or copy. ENERGY 2015 AIMS Update Details 2015 Update: Agriculture, Mining, and Street Lighting The Navigant team relied on various secondary sources and the Industrial results for the Agriculture sector. The ISP roll-up from the Industrial effort will inform the Agriculture sector, similar to the 2013 approach Navigant will also review other secondary sources for any updates (mainly measures sourced from the Commercial potential effort) Sector % of IOU Electric Consumption% of IOU Gas Consumption Agriculture4%1% Industrial13%30% Mining2% Street Lighting1%0% Total20%33% The Navigant team will also address the other AIMS sectors that account for a smaller portion of consumption: Source: Previous Potential Study, CEC, http://ecdms.energy.ca.gov/, data is for 2010http://ecdms.energy.ca.gov/

11. 10 ©2015 Navigant Consulting, Inc. Confidential and proprietary. Do not distribute or copy. ENERGY 2015 AIMS Update Details 2015 Update: Agriculture, Mining, and Street Lighting The Mining sector will received specific updates to certain measure inputs. The Mining sector considers ISP. The Navigant team will update the ISP estimates with the applicable ISP studies and expert knowledge from our team. Updates will also be considered for certain inputs. These will be informed by the Navigant team’s expert knowledge (i.e., motor/pump sizes and efficiencies, boiler sizes and efficiencies, equipment costs, etc.). The Street Lighting sector will be updated with new inventories supplied by the IOUs. The potential results will also distinguish IOU-owned lamps from customer-owned lamps. Navigant will also conduct a cursory review for recent studies to inform any other updates.