Regulators Overhaul Utility Efficiency Program Guidelines

By Published On: May 11, 2012

The California Public Utilities Commission May 10 unanimously approved significant revisions to its parameters for upcoming investor-owned utility energy efficiency programs. “There is plenty of room to improve,” said commissioner Mark Ferron, author of the nearly 500-page tome revising guidelines for the three utilities 2013-14 energy efficiency portfolios. This “whopper of a decision” aims to increase the programs’ cost effectiveness by replacing short-lived measures with “comprehensive, deep and long lasting” energy reduction strategies, said Ferron. That includes redirecting the heavy emphasis on compact fluorescent light bulb programs to whole house energy efficiency building retrofits and less-costly financing options. “It is probably too prescriptive, too detailed and many aspects may not be workable,” Mike Peevey, CPUC president, warned about the ruling. In spite of his criticism, Peevey supported the “good faith” decision. Commissioner Tim Simon applauded the decision’s emphasis on workforce training targeting disadvantaged communities. This week, the usual multi-billion dollar utility three-year program cycle accompanied by a one-year funding bridge was reduced to a two-year program funding cycle. The stated purpose was to make way for broader energy efficiency portfolio changes in 2015. Utilities’ efficiency programs have been criticized because the ratepayer investments dedicated to curbing energy use have repeatedly fallen short of the mark. The “mark” is and continues to be an issue of contention at the commission. There have been years’ of hearings over how to better measure the effectiveness of efficiency strategies and measures, improve program modeling and better tailor assumptions. For years, stakeholders have pushed to have third parties run the energy efficiency programs to increase energy savings. Regulators continued to resist significantly expanding third-party efficiency programs. Instead, Pacific Gas & Electric, Southern California Edison, and San Diego Gas & Electric were directed to allocate about 20 percent of the portfolio funds towards third-party competitive bids. “We believe it prudent to move forward incrementally by extending existing, effective third-party programs, gathering information to better inform future decision making,” Ferron’s ruling states. The decision also approves limited pilot projects with local governments. “Many local governments are better positioned to administer energy efficiency programs than they were seven years ago,” according to the commission. There are 44 local government partnerships statewide. Greater emphasis on financing options to enable customers to deploy “more comprehensive energy efficiency measures in an affordable manner” was stressed. While regulators backed expanding commercial and other non-residential efficiency financing programs, they did not require utilities to offer residential ratepayers on-bill financing. Under those programs, utilities provide upfront financing for efficiency retrofits with customers repaying the loan via an added charge in their utility bills. Ferron noted that residential customers routinely finance home retrofits with their credit cards, paying a 15-20 percent interest premium. Thus, on-bill financing helps consumers reduce debt for efficiency investments. Utilities also were directed to do the following -Continue and improve on-bill financing programs currently in the utility 2010-2012 portfolios for non-residential customers. -Continue local government and California Energy Commission efficiency programs originally supported by American Recovery and Reinvestment Act stimulus funds. -Incorporate new approaches to spur more commercial efficiency installations. -Elevate the role of outreach, consumer education and marketing, although no specific financing targets were set. -Find new ways to decrease the energy intensity of water treatment and use. Although Ferron labeled the statewide utility-energy agency efficiency program, known as Energy Upgrade California, as a “flagship,” its role was limited to a “short-term resource acquisition program and a market transformation.” In the last three-year energy efficiency cycle, the commission approved $3.1 billion in ratepayer expenses. It approved spending $2.2 billion of customer funds to procure energy efficiency savings during the 2006-08 cycle. The ruling adopted this week directs the trio of investor-owned utilities to file applications by July 2, 2012, to establish energy efficiency programs and budgets for 2013 and 2014. The CPUC expects to vote on them by the end of this year.

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