Energy Efficiency

CPUC Energy Efficiency Programs

The CPUC has been focused on several issues in its energy efficiency proceeding in recent months: developing a statewide Strategic Plan through 2020, establishing incentives for utility shareholders, ruling on a utility request to revisit the methodology for cost-effectiveness calculations for energy efficiency programs, and initiating evaluation, measurement, and verification studies for the 2006-2008 energy efficiency programs.

Strategic Plan

The Strategic Plan process has been a primary focus for the LGSEC. Coming out of a series of workshops initiated a year ago on potential “Big, Bold Strategies” to catapult California’s energy efficiency savings, the Strategic Plan process has been broken into several market sector workshops (commercial, residential, industrial, and agriculture), as well as several topics that span all market sectors, such as marketing, education, and outreach; heating, ventilation, and air conditioning; and local government.

The LGSEC has been most active in the sessions focused on local government. After several months of deliberation, the utilities issued a draft Strategic Plan in early March. A review and comment process is ongoing, with the CPUC adopting a final Strategic Plan mid-year. It appears that CPUC staff and Commissioners recognize there is great value and opportunity for local governments to play an active role in energy efficiency programs. The LGSEC has submitted comments on how the current planning for the 20009-2011 energy efficiency portfolio can better reflect the Strategic Plan goals.

In the meantime, the utilities announced at the end of January that with the conclusion of the workshops on local government, they expect to adopt criteria for evaluating existing and potential local government partnerships in the near future. Local governments submitted abstracts for their 2009-2011 partnerships in early March. LGSEC representatives have been pressing the utilities to streamline the contract negotiation process, ideally by issuing amendments to existing contracts.

The utilities are supposed to submit their draft energy efficiency portfolio to the CPUC in mid-May.

Shareholder Incentives

In the last quarter of 2007, the CPUC granted utility shareholders the opportunity earn incentives when utility energy efficiency programs achieve 85% or greater of energy savings targets. The utilities quickly filed an application for rehearing of the decision, arguing that the CPUC had inadvertently created uncertainty by requiring that a percentage of the incentive be subject to repayment if evaluation, measurement, and verification studies performed after the conclusion of the program cycle reveal that the actual energy savings were less than reported. The utilities claim that financial rating organizations view this as too risky to actually book the incentives payments, which have the potential to be as high as $450 million if all savings are achieved.

The CPUC approved the utilities’ requested change in January (D.08-01-042).

Cost-Effectiveness Calculation

In the summer of 2007, the utilities asked the CPUC to reconsider how it had directed certain costs related to direct installation programs be included in cost-effectiveness calculations. (While this request came in a proceeding focused on how avoided costs of electricity are calculated, R.04-04-025, it has a direct relationship to energy efficiency programs.)  The CPUC denied this request in January (D.08-01-006).

In March, the CPUC called for comment on whether and how the cost-effectiveness metrics should be modified to meet the goals of the Strategic Plan. The LGSEC submitted comments April 1, 2008, that call for evaluating long-term local government programs with different criteria. Many of the local government initiatives, like code modifications or planning decisions, cannot be affected within a three-year time horizon.

Energy Efficiency in the GHG Implementation Proceeding (R.06-04-009)

As noted above, the March 14, 2008 Opinion highlighted the continuing importance of energy efficiency in the CPUC and CEC’s consideration of AB 32. For both the electricity and natural gas sector, the CPUC recommended that all retail providers in California be required to provide energy efficiency programs, and that CARB adopt mandatory minimum levels of cost-effective energy efficiency for all publicly-owned utilities, investor-owned utilities, community choice aggregators and electric service providers. According to the CPUC, CARB should set energy efficiency requirements at the level of all cost-effective energy efficiency in the State through a combination of utility and non-utility programs coordinated at the State level, with consistent requirements across all types of retail providers.

Federal Energy Block Grants

The Federal Energy Act of 2007 provides energy efficiency and conservation block grants to states for the purposes of reducing fossil fuel emissions, improving energy efficiency, and reducing total energy use. Not less than 60% of the funds allocated to a state must be used to provide sub-grants to local governments that are not eligible to receive block grants under the Act.Those local governments not eligible for direct grants include counties with less than 200,000 population and cities with less than 35,000 population. The U.S. Department of Energy is developing implementation guidelines for this provision of the Energy Act. Additionally, legislation in Sacramento (AB 2176, Caballero) would require the Energy Commission to administer the program in California. A link to the Federal Energy bill, as enacted.

Click here (PDF) to view a sample letter to congress.

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