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CPUC Approves Aggressive $2 Billion Energy Efficiency Effort for 4 Utilities

Facing natural gas retail price spikes exceeding 30% this winter, the five-member California Public Utilities Commission unanimously approved an aggressive energy efficiency/conservation effort for the state's four major private-sector energy utilities, carrying a price tag of nearly $2 billion over the next three years.

The action is intended to re-enforce the state Energy Action Plan's so-called "loading order" that places various energy-saving programs as first priority in the state's planning process to meet future energy demand.

The sponsoring regulator, CPUC Commissioner Susan Kennedy, called the 2006-08 utility energy efficiency programs the "largest, most aggressive energy-saving program in the nation." Kennedy cautioned the real value of the program is not the multi-billion-dollar effort to save electricity and natural gas, but the estimated 1,500 MW it will help save in avoided new generation capacity that would be needed over the period.

As part of the stepped-up statewide effort among private-sector utilities, the CPUC action allows the natural gas utilities to move up next year's budget to have programs in place for this coming winter when the two major gas utilities, Pacific Gas and Electric Co. and Southern California Gas Co., expect to raise retail rates more than 30% because of the projected continued increase in wholesale fuel prices.

CPUC President Michael Peevey, like Kennedy an unabashed advocate of energy efficiency programming, lauded his fellow commissioner and called the program a nation- and global-leading program, noting that a recent overseas agreement by the CPUC and the state energy commission (CEC) places California in the current position of helping China develop comprehensive energy saving/efficiency programs.

California's governor and leading environmental/energy efficiency leaders all have embraced the CPUC's expanded approach, and Kennedy said the state regulatory commission has joined in "full partnership" with the CEC in carving out this program. Peevey further said that Kennedy and the combined CPUC-CEC staff effort resulted in an unprecedented amount of collaboration and consensus among the utilities and state officials.

Under the program -- funded by part of a public goods surcharge on all private-sector utility customers' monthly bills -- the four utilities divide up $1.97 billion over the next three years. Current totals for the utilities are nearly $500 million for this year, and that bumps up to $580 million next year, $645 million in 2007 and $742 million in 2008.

The utility breakdown gives PG&E's utility and Southern California Edison the vast majority of the dollars, with Sempra's two utilities getting the rest: PG&E gets $867 million; Edison, $674 million; Sempra's San Diego Gas and Electric Co., $257 million; and Sempra's Southern California Gas Co., $168 million.

"As described in this decision, today's adopted portfolio plans reflect a mix of proven program designs and implementation strategies in combination with approaches to solicit new, innovative designs and savings technologies to enhance overall portfolio performance -- both in the short- and long-run," the summary to the 200-page report said.

The decision mandates that each utility take a more aggressive approach to energy-saving programs and that they assure their cost-effectiveness from what the CPUC called two perspectives: "(1) total resource cost, " meaning the value of the energy savings is greater than the total cost of installed measures and all program costs, and (2) "program administrator cost," meaning the value of energy savings outweighs the cost of utility financial incentives to customers and all other program costs.

Unrelated to the approval of the new utility programs, Peevey announced that at the commission's next business meeting, which will be Oct. 6 in Los Angeles, a public hearing will be held before the five commissioners to hear from each of the major private-sector utilities in the state on what programs they are putting in place this winter to mitigate against the high wholesale natural gas prices.

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