Update: Publicly-Funded Energy Efficiency Programs

Over the last 30+ years, California has been able to maintain its per capita consumption of electricity in large part because of the efficiency programs offered by the utilities under the auspices of the California Public Utilities Commission (CPUC). Since electric industry restructuring in the late 1990s, at least part of the funding for these programs has come from a public goods charge (PGC). A similar public purpose program (PPP) surcharge has been collected for natural gas efficiency programs.

This year the California legislature took action on one of these programs, and no action on the other, both of which may reduce the funding available for these programs.

Natural Gas Funds

To help balance the State’s General Fund the legislature confiscated $155 million dollars of the $176 million the natural gas utilities expect to collect in PPP funds over the next year (Senate Bill 87). The gas funds are collected by the utilities but funneled through the State Board of Equalization before being authorized for expenditure. By contrast, the electricity PGC funds never rest in the State’s coffers.

To deal with this reduction in funds, the CPUC is currently deciding between two alternatives.

The Proposed Decision by Administrative Law Judge Farrar allows the utilities to use unspent gas energy efficiency funding from prior years, as well as a portion of unspent Evaluation, Measurement and Verification funding from prior years to back fill some of the $155 million loss. The shortage estimates vary but are in the $35 million range, requiring the end of some gas saving programs.

The Alternate Proposed Decision by Commissioner Ferron fills the $155 million gap from the same sources plus allows use of some unspent electric energy efficiency funds from prior years. This would allow for fully funding the gas programs for the next year.

This issue may be decided at the CPUC’s October 6, 2011 business meeting.

Electricity Funds

Authorization to collect the electric PGC funds expires on December 31, 2011. The legislature must pass new legislation to continue this collection. As of the end of the regular legislative session in September, no bill was passed. Now what happens? There are several possibilities.

First, the Governor may call a special session to deal with this issue in order to keep the authorization going past the end of the year. A couple of bills are ready to go if this should happen.

Or the CPUC could administratively authorize the utilities to continue to collect the PGC percentage from ratepayers, but call it something else. This would allow the programs to continue. On September 28th, Commissioner Mark Ferron issued a scoping ruling on addressing the probable loss of public goods charge funding for utility energy efficiency programs. Commissioner Ferron wrote:

"This ruling and scoping memo adds an additional issue to the scope of Phase III of this proceeding (Rulemaking 09-11-014) to address the fact that authorization to collect the Public Goods Charge (PGC) from energy utility customers in all probability will end on December 31, 2011…  Currently, the PGC funds approximately $250 million in annual EE program spending. Without passing judgment on whether EE programs will require this total level of funding going forward, I wish to ensure that—if necessary—the current level of EE spending may be maintained."

This sounds like a commitment to continue the programs at current funding levels, at least for this funding cycle.