Investor-owned utilities are set to receive almost $63 million in energy efficiency incentives for 2008, the last year of the three-year 2006-08 cycle for the state-mandated program. The California Public Utilities Commission approved the bonuses on a 3-2 vote Dec. 16. A competing CPUC proposal that would have given utilities no additional awards for claimed savings failed, garnering only two votes. In coming to a decision, regulators grappled with their lack of clearcut guidance for utility energy efficiency measures and acknowledged that utilities “could have done better,” according to commission president Mike Peevey. The overriding regulatory concern was that utilities could have been more responsible for innovating over the years. “It undermines the basic structure of energy efficiency” if utilities cannot adapt, said commissioner Dian Grueneich, voting against the bonuses. “Our responsibility is to clarify” and not rely on utilities to make their own on-the-fly decisions about what efficiency measures should be implemented, countered commissioner John Bohn. The action closed the docket on controversial utility energy efficiency bonuses for 2008. Previously, regulators approved $143.7 million in investor-owned utility bonuses for 2006 and 2007. This decision gives Pacific Gas & Electric another $29.1 million, Southern California Edison an additional $18.6 million, SDG&E a $5.1 million bonus, and SoCal Gas $9.9 million in energy efficiency awards. “The incentive mechanism reinforces our strong commitment to the goal of decreasing overall future per capita electricity consumption in California by the customers of the IOUs,” Peevey’s decision noted. About five years ago, regulators moved away from requiring meeting specific efficiency goals to offering utilities carrots to install energy efficiency measures. When utilities meet and exceed certain goals, their shareholders are rewarded. In this case, if investor-owned utilities reach 65 percent of energy savings goals their shareholders reap financial incentives. A majority of commissioners denied a proposal by administrative law judge Tom Pulsifer. It would have refused utilities additional awards for claimed energy savings in 2008 because the efficiency incentive program aims to “balance the goals of fostering energy efficiency achievements while protecting ratepayers from paying for incentives that have not been earned.” An alternate by commissioner Bohn was pulled off the agenda the day before the meeting. It would have awarded utilities $77 million in incentives. There has been considerable controversy over the CPUC Energy Division’s verification of the utilities’ claimed savings, as well as over the amount of the awards following a true up, particularly for PG&E. According to the Energy Division and ratepayer advocates, the utility should be penalized for falling short of energy efficiency goals. The Energy Division recommended slapping PG&E with a $74.9 million penalty. According to utility spokesperson Katie Romans, PG&E saved 5,444 million kWh and 72 million therms of gas, “achieving 167 percent of the goals set by the CPUC in the 2006-2008 program period.” The commission also put off voting on a related but separate action. The proposal by Bohn would “discontinue the linkage of incentive earnings to specific goal thresholds and discontinue penalties” for the 2010-12 efficiency cycle. Previously, regulators approved spending $3 billion in ratepayer funds to bolster implementing utility efficiency measures for the 2010-2012 cycle. The efficiency risk/reward system is on top of that, to ensure energy efficiency is a “core part of regulated operations,” according to Peevey. Bohn, who’s term is up at the end of this month, would have eased the way for incentive payments although his proposal notes that utilities go after short-lived efficiency measures and other “low hanging fruit.” This was also the final meeting for commissioner Grueneich.
