Consumer groups are concerned that California utility customers may soon face higher rates as utilities seek new management and shareholder incentives to increase energy efficiency. In addition, SoCal Gas and San Diego Gas & Electric are now downplaying potential savings from modernization plans. Utilities, however, maintain that they plan to share any savings from the programs with their customers. With energy efficiency, the issue is a California Public Utilities Commission incentive plan for utility shareholders. It would recognize that the companies may lose revenue as they help their customers save energy. If so, it would help them recoup those loses through incentive payments. The incentives could total as much as $656 million during the upcoming 2009-2011 utility energy efficiency program period, The Utility Reform Network charged June 18. The commission is seeking to dramatically increase energy savings through those years to help reduce energy costs and greenhouse gas emissions (Circuit, June 1, 2007). "How much green should be required," asked Bob Finkelstein, TURN executive director, for utilities "to live up to the green image they love to portray" TURN made a public issue of the incentive payments this week amid a Pacific Gas & Electric ?green energy? advertising campaign. The utility has been buying television commercial time for months, and recently stepped up its campaign with front page newspaper ads. TURN and other ratepayer advocacy groups do not contest that incentive payments are warranted, but want them to be much lower than under a formula proposed by utilities, explained Mindy Spatt, TURN spokesperson. The consumer groups would like to use an alternative formula that would provide $54 million in incentive payments if utilities fully met their efficiency goals. That would cut the incentive increase by more than 90 percent. However, the companies believe that the incentive payments should be comparable to what they would have earned had they invested in new power plants to supply the electricity the efficiency programs are designed to save. "Supply side comparability should be the relevant benchmark for establishing potential earnings," Pacific Gas & Electric attorneys Andrew Niven and Gail Slocum maintained in a brief filed with the CPUC June 18. Under the utility's formula, they said, customers would receive 77 percent of the over-$2 billion in savings expected from energy efficiency, while PG&E shareholders would receive the rest. Meanwhile, in the general rate case for San Diego Gas & Electric and Southern California Gas, TURN, the Utility Consumers' Action Network and other consumer groups are asking that the SoCal Gas and SDG&E include projected savings from a modernization plan. A CPUC administrative law judge agreed to examine the modernization plan. The utilities are seeking a combined annual revenue boost of $404 million a year. The groups contend that in 2005 the companies began implementing a modernization plan that could lead to significant staff cuts and hundreds of millions of dollars of savings through automation. The plan, they told the CPUC in a June 11 filing, is outlined in 2,500 pages of material the utilities released on a confidential basis to the groups in response to data requests in the rate case proceeding. The consumer groups want the commission to take into account the potential savings under the plan in setting new rates. "This game of hide the ball goes on in every rate case," said Finkelstein, speaking of the savings the groups say they have discovered, but which the utilities did not disclose to the CPUC. "The question is does it go to shareholders or to lower rates?" In response, the Sempra utilities told the commission that their "OpEx 20\/20" plan merely ties together in one strategy equipment replacement that in the past has been handled on a case-by-case basis. "In OpEx 20\/20 we are taking a 15-year look at our business and the investments that will be necessary to replace aged technology or invest in new enabling technologies," said Keith Melville, Sempra utilities attorney, in a brief filed with the commission last month after the consumer groups initially raised the issue. Melville also pointed out that any savings from the plan "would be shared with customers" through a proposed earnings sharing mechanism. Meanwhile, a Sempra utilities source told Circuit that the companies are not planning layoffs under the modernization blueprint, originally dubbed the "Utility of the Future" plan, but instead will reassign employees. The CPUC plans to revise rates for the two utilities by the end of this year. The new rates would be tested in 2008 before being finalized.