Utilities Win $61M in Efficiency Awards

By Published On: December 18, 2009

Investor-owned utilities are reaping millions of dollars in interim incentive payments for reaching energy efficiency targets. The money comes as part of a move by the California Public Utilities Commission to increase utility earnings rates on efficiency gains from 9 to 12 percent in the 2006-08 cycle. An administrative law judge had proposed a 9 percent rate for the three-year term. However, the approved alternate decision on December 17 by commissioner John Bohn calls for the higher rate. “The results are probably pleasing to no one,” said Bohn before the commission vote. He acknowledged that while the amount approved “is sizable, it is a reduction from the previous award of $81 million.” Bohn worked for years in the financial and banking sectors. Ratepayer advocates protested regulators’ awards, asserting the latest round is based on unverified energy savings numbers reported by the utilities. “The commission is twisting itself into a pretzel to justify huge rewards for mediocre programs,” said Mark Toney, The Utility Reform Network executive director. Ratepayer funded incentive payments are awarded in three rounds. This second round doles out $61 million to reward energy savings attributed to the program’s second cycle, covering 2006-08. The CPUC’s efficiency risk-reward incentive program is contentious. Utilities take issue with the CPUC Energy Division’s measurement and verification report and methodology. If utilities come within 80-85 percent of commission energy efficiency targets they win incentive payments. The rub is over how to measure and verify claimed energy savings. “Utilities have an inherent bias to over-report savings,” said commissioner Dian Grueneich. Commissioner Tim Simon added the evaluation and verification process must continue to be improved and be “as transparent as possible.” Under the new incentive program, Pacific Gas & Electric reaps $33.4 million--compared to $14.7 million under the unsuccessful proposal by administrative law judge Thomas Pulsifer. Southern California Edison won $21.4 million, contrasted with Pulsifer’s proposed $9.9 million award. The incentives to SoCal Gas were $1.2 million. San Diego Gas & Electric did not reap any award in this cycle These amounts do not factor in the 35 percent of the award amounts being held back until the savings are trued up next year. Thus, about $20 million could come on top of the $61 million after the efficiency program accounting is finalized. The commission also approved a feed-in tariff--a long-term and standard contract--for cogeneration facilities up to 20 MW. The approved tariff implements an enacted bill by Assemblymember Sam Blakeslee (R-San Luis Obispo) that aims to capture and turn into electricity waste heat from combined heat and power facilities. The tariff includes a 10-year term, with the price tied to the CPUC’s 2008 renewable benchmark price linked to renewable deals. Unlike the CPUC’s so called market price referent (MPR), the price paid to cogenerators would reflect the monthly price of natural gas. It would also be reviewed in two years to avoid the MPR’s “stale” price, said Peevey. In addition, combined heat and power systems located in areas where transmission is constrained would receive a 10 percent payment bonus. In other news, the regulators approved their “smart grid” parameters to comply with federal and state law--the latter being the recently passed SB 17 by Senator Alex Padilla (D-Pacoima). Lastly, this was commission Rachelle Chong’s final commission meeting. She was not given a requisite senate confirmation hearing. During this week’s meeting, she choked at the start of her farewell speech and left the dais. Peevey read her speech.

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