CPUC Efficiency Funding Boon for Utility Programs

The California Public Utilities Commission is slated to disperse more than $800 million next month for selected energy-efficiency programs to prevent what one commissioner predicted would be a food fight that would stop the programs in their tracks. Most of the holiday repast will fill utility coffers. Despite outsiders? push for a bigger piece of the efficiency pie, investor-owned utilities (IOUs) would get more than two-thirds of the funding. A chunk of that allocation, $245 million, would be targeted at reducing utilities? procurement needs, a prospect embraced by the IOUs. With political momentum growing for energy efficiency, the debate over who should hold the purse strings takes on greater importance. Earlier this year, the ?energy action plan,? an interagency effort to coordinate planning, made energy efficiency a top priority. As part of his campaign, Governor Arnold Schwarzenegger endorsed energy savings. On the legislative front, AB 117 could fuel additional competition for funds by allowing ?any party,? including local governments, to apply for energy-efficiency funding. Utilities contend their economies of scale, familiarity with their customers, and technical systems make them more efficient than third-party contractors. Independent energy-efficiency providers and consumer groups argue that utilities charge exorbitant administrative expenses. According to The Utility Reform Network (TURN), overhead for some utility residential programs gobbles up between 15 percent and 45 percent of total costs. Another criticism is that utilities have risk-averse mind-sets that stifle development of innovative programs. In some cases, the CPUC agrees with that criticism. Pacific Gas & Electric was taken to task for ?excessive overhead costs? for local government partnership proposals. Its budget would be reduced in the proposed decision. The utility?s expenses in this area were about twice as high as those budgeted by Southern California Edison and San Diego Gas & Electric. Despite third-party concerns, commissioner Susan Kennedy pushed through a decision this summer issuing a request for proposals for the next two years that kept utilities? role as energy-efficiency program administrators largely intact. Kennedy said she backed off from initial inclinations to make policy changes because she had just inherited the case and needed more data on how some programs had performed. Before that plan was approved, Kennedy said there would probably be a ?food fight? over long-term policies, adding she was anxious to get funds out the door. The commissioner promised to hold meetings to iron out administration questions and have a decision by April 2004. ?If we get this funding out the door before the end of the year, it would be the first time in a long time that programs were approved before the end of the year.? She emphasized her priority was to keep programs running, which delayed funding threatens. As funds will be approved for a two-year cycle, Kennedy?s promise to nail down long-term administration issues next spring means that the earliest independent providers could see increased funding and program oversight is 2006. The exception would be about $50 million earmarked for utility partnerships with local governments. Kennedy said she is keenly aware that revisions need to be made to program oversight and evaluation. The CPUC?s Energy Division is so busy managing and reviewing programs that it doesn?t have time to consider policy changes, said Kennedy. ?We need that breathing space or we will never be able to make changes,? she added. ?This basically means that nothing will change for two years,? countered Marcel Hawiger, TURN attorney. Hawiger said the program selection plan will ?diminish the role of third-party providers? in energy efficiency. It will not stimulate innovative third-party programs, he added. When procurement-related funds are factored in, utilities? funding would almost double, while third parties will see about 13 percent of the pot, he noted. TURN has backed procurement-related programs, but Hawiger said independent providers should get their fair share. Kennedy sees local government partnerships with utilities as a potential ?vital source of energy savings.? Although certain independent providers were unhappy with the disparity in energy savings allocations, the government partnership with utilities was good news to a few. According to some local government officials, partnerships can have advantages although utilities submit the proposals and administer the programs picked by the CPUC. One big benefit of working together is that munis gain access to utilities? customers databases, which can help tailor programs to meet ratepayer needs, said Neal De Snoo, energy officer for the city of Berkeley. The draft decision on selection of energy-efficiency programs will be up for a vote at the CPUC?s December 18 meeting.

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CPUC Efficiency Funding Boon for Utility Programs

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