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Billion-Dollar California Efficiency Bet Scrutinized

October 5, 2009
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Skeptics and supporters alike agree that a key part of California's latest multi-billion-dollar, three-year energy efficiency initiative will be control of how the money is spent and measurement of verifiable energy savings that result. Both the California Public Utilities Commission (CPUC) and its independent consumer unit raised this issue during the debate leading up to the CPUC decision Sept. 24.

At stake is what some stakeholders have calculated are increases in utility efficiency funds approaching 70% compared with the three-year period concluding at the end of last year. And in the meantime, the consumer advocates contend that the CPUC is cutting the targets for energy savings. The major push contains too many "loopholes," according to skeptics.

The CPUC's Division of Ratepayer Advocates (DRA) praised the new three-year (2010-2012) efficiency programs for the state's four major energy utilities, but tossed in strong precautions about the need for more "accountability" on tracking spending and results. Even though California is the only state in the nation to boast a flat per capita energy growth in the past 40 years, while the national average has been 0.5% per capita annually, critics contend there is never a clear accountability for the massive funds utility ratepayers pay for these programs.

CPUC Commissioner Rachelle Chong said the utilities' longer-term benefits "won't immediately transfer into demonstrable energy savings, but it is a step toward assuring that the energy efficiency programs we approve are cost-effective. We have a duty to ensure that these programs meet the cost-effectiveness requirement, but we recognize that the task is harder now." She encouraged the utilities' senior management to "monitor these programs closely" and shift emphasis when necessary to the ones providing the most bang for the buck.

Despite acknowledged improvements, the DRA said "there is still a continuing need for stronger mechanisms to ensure transparency and accountability in the utilities' use of the billions of dollars of ratepayer money that is at stake."

Nevertheless, one of the four major private-sector utilities, Southern California Edison Co. (SCE), on Sept. 25 lauded the CPUC's action as the "largest commitment to energy efficiency" in the nation. SCE called the regulators' unanimous decision "innovative thinking and groundbreaking work" that ultimately will allow the Edison International utility to help its customers experience a triple-win situation -- saving energy, money and the environment.

SCE's Vice President for Customer Service Lynda Ziegler emphasized the collaboration and commitment with the utility that the CPUC has demonstrated.

Noting that the three-year spending program approved by the state regulators was developed by the major utilities, DRA said the CPUC has no analytical means itself "to demonstrate that [the utility] long-term comprehensive programs are viable and cost-effective." Thus, the consumer unit cautioned that ratepayers are investing billions of dollar essentially "on faith alone that actual energy savings will result from the programs."

There is a real concern by the DRA that utilities will get around the new limit of 10% of the efficiency dollars going to administrative costs by transferring some of those costs to their general rate cases.

Recommending that the CPUC "ramp up" its cost monitoring programs, DRA Director Dana Appling said the nearly doubling of budgets while "dramatically" reducing energy savings targets is the wrong course.

"California needs to ramp up energy savings to address climate change, and we need to be wary of ratepayer cost increases, which are not expected to help the state meet its energy goals," Appling said.

Nevertheless, SCE viewed its part of the efficiency decision -- $1.2 billion during the next three years -- as being a mandate to "implement the most aggressive energy efficiency portfolio to pursue the highest electricity savings goals of any utility in the nation."

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