Policy Issues Cloud Utility 2009-11 Energy Efficiency Plans

A California Public Utilities Commission administrative law judge slowed consideration of a massive $3.7 billion three-year energy efficiency program proposed by the state’s investor-owned utilities. The delay in the proceeding to double utility efficiency program spending comes amid mounting controversies. In a ruling last month, judge David Gamson extended the comment period on utilities’ 2009-11 energy efficiency plans from April 2 to April 17. The ruling accommodated company requests to file plan amendments early this week. The delay also gives more time to address a growing list of what Gamson called “policy issues” on how to determine what energy efficiency measures are cost-effective and what activities should count toward energy savings goals. Gamson said he still intends to get a final proposed decision on the plans to the commission for action in August. In the interim, utilities are operating their state-mandated efficiency programs under “bridge” financing regulators authorized last fall. Plan approval is running late because the commission dramatically increased state energy efficiency goals last fall. This came just as utilities were finalizing their 2009-11 program plans. After doing so, the commission ordered utilities to redo their plans to meet the more ambitious energy efficiency goals, which eventually call for “net zero” energy homes and buildings (Circuit, Sept. 23, 2008). “This effort is of unprecedented scale, not only in terms of the proposed spending levels, but also the breadth of the ambitious goals” wrote The Utility Reform Network legal director Robert Finkelstein to Gamson last month. Finkelstein and the Division of Ratepayer Advocates want the commission to hold four public participation hearings around the state before Gamson drafts a final proposed decision on the plans. Meanwhile, the commission’s own Energy Division issued a white paper April 1 on the energy efficiency risk-reward incentive mechanism now in place. The mechanism provides monetary bonuses to utilities that come close to meeting their energy efficiency goals and penalizes them when they fall substantially short. The division is examining the mechanism after the commission’s decision to award $82 million in bonuses to utilities for their 2006-08 energy efficiency programs sparked controversy last year. The commission approved the bonus payments before its staff could actually verify claimed energy savings. In response to the controversy, the commission agreed to examine potential revisions to the mechanism for future awards. Unsatisfied, consumer advocates earlier this year asked for a rehearing on the payments (Circuit, Feb. 6, 2009). In the white paper, Energy Division staff recommends a wholesale change in the mechanism, saying the way it currently is constructed “acts to discourage the pursuit of strategic initiatives and market transformation activities” outlined in the commission’s long-range energy efficiency plan. In its place, the white paper advocates that the commission should allow utilities “a minimum base level of earnings” for managing their efficiency programs prudently. In addition, it says the commission should provide the chance to earn bonuses “based on the performance of selected programs.” Another issue that could complicate the plans is the expected influx of federal economic stimulus money for energy efficiency. For instance, when it comes to administering federal appliance funding, the California Energy Commission should coordinate carefully with utilities “to avoid customer overlap, customer confusion, and duplication of efforts,” Pacific Gas & Electric attorney Chonda Nwamu, told Gamson in a filing. Utilities also want substantial changes in the commission’s energy efficiency policy. For instance, in their new energy plans filed early last month, utilities said they should get credit for energy efficiency “motivated by federal or state policies or legislation, local codes and ordinances, or multiple sources of green messaging.” They also asked the commission to extend the useful lifetime for calculating the payback on some efficiency measures. Without such changes, utilities project the state-mandated energy efficiency programs are going to cost ratepayers more. For instance, San Diego Gas & Electric said in its latest plan that following the commission’s mandates would boost the cost of the average inland residential summer energy bill by 74 cents next year. The utility said that if the commission changed the policy as requested by the utilities the bill would rise only 16 cents.

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Policy Issues Cloud Utility 2009-11 Energy Efficiency Plans

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