Utility Efficiency Plans Seek $1 B+ Rate Hike

By Published On: July 25, 2008

Rates would increase at least $1.3 billion to achieve energy savings under California’s investor-owned utilities’ three-year efficiency proposals filed with state regulators July 21 to cover the period 2009-11. The utilities say the added money will allow them to meet the California Public Utilities Commission’s recently lowered efficiency goals for 2011. A proposed CPUC decision issued July 1 would set the state goal for cumulative electricity savings investor-owned utilities are directly responsible for achieving at 1,584 MW by 2011. Cumulative natural gas savings would be set at 168 million therms. Under the previously adopted plan, technically still in place, the electricity savings goal was set at 3,789 negawatts for that same year. The change stems from allowing the utilities to take credit for savings that occur under a wide variety of programs that are not directly under their purview. The combined plans aim to cut the peak power demand in the state by 1,950 MW and meet the annual natural gas savings goal set by the CPUC. Combined, the utilities would spend $3.7 billion between 2009 and 2011 on a variety of energy efficiency measures–from better lighting to more efficient appliances and heating and air conditioning systems. The utilities say their customers will save more money in the long run. The California Air Resources Board’s draft plan for carrying out the climate change law to reduce carbon emissions by 30 percent designates energy efficiency as a key strategy for cutting greenhouse gases. Southern California Edison seeks a $553 million rate hike over the period of its plan. The increase would bring its total spending on energy efficiency to $1.3 billion over the next three years. Edison said its customers would enjoy $4.7 billion in benefits, mostly savings on monthly power bills. Pacific Gas & Electric plans to boost rates over the same period by $733 million. San Diego Gas & Electric and Southern California Gas plan to use existing revenues and funds on hand to cover their programs to the extent possible, but seek higher rates to make up any shortfall. The planned hikes for energy efficiency come on top of recent requests to hike rates to modernize the state’s grid and meet rising energy costs. Edison thinks its rates are likely to double over the next five years due to rising costs, observed Tamlyn Hunt, Community Environmental Council energy program director. This will make energy efficiency even more crucial to controlling energy costs, he said. The utilities say that their efficiency measures not only will cut energy bills more than they cost, but also help the state meet its greenhouse gas reduction targets under AB 32. The utilities jointly advocate that the CPUC amend its program requirements for the coming three years. They want to claim credit toward their goals for energy efficiency measures their customers install at their own expense based on utilities’ role in promoting energy efficiency in general. They also want the CPUC to exempt measures that do not “produce measurable, cost-effective savings” from being used to calculate bonuses and penalty payments under the commission’s efficiency policy. The proposed utility plans come after the CPUC last year dramatically ramped up its goals for efficiency as a way to meet future energy needs and minimize environmental impacts. The commission set up a system to pay bonuses to utilities that meet or exceed their targets and penalize those that fall short. Regulators also agreed to change their planning period for utility energy efficiency programs from three years to a longer term. After these plans are put in place, utilities are to begin preparing plans to cover the period from 2012 to 2020. The plans are to fit into the CPUC’s long-term, joint utility strategy that the CPUC is expected to vote on in the months ahead. In the interim, the three-year plans “provide the foundational elements to help achieve the long-term big, bold programmatic initiative,” wrote PG&E attorneys Lise Jordan and Chonda Nwamu. Yet, SDG&E energy efficiency administration and program manager Athena Besa noted that the utility’s plan is “uncomfortably close to being not cost effective.” Among many innovations, the plans would offer on-bill financing to customers for energy efficiency measures and target a wide variety of devices. Yet, as in the past, they remain heavily weighted toward improving lighting efficiency. For instance, more than half of SDG&E’s plan rests on better lighting. However, the utility noted that it is increasing its emphasis on light emitting diodes and dimmable compact fluorescent bulbs instead of relying largely on screw-in compact fluorescent lamps. The plans may come before the CPUC for approval before the end of the year.

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