Investor-owned utilities are concentrating too much in their efficiency programs on lighting while doing little to reduce peak electricity demand—driven largely by use of air conditioners on hot day—according to efficiency and consumer activists at a July 11 California Energy Commission workshop aimed at completing the agency's 2005 Integrated Energy Policy Report. Energy efficiency is becoming more economical and utility expenditures are rising again after stalling when the energy crisis ended in 2002, according to a CEC staff report. However, the programs may have to be reoriented to keep peak demand in check. Such a shift in emphasis is needed because peak load is increasing at 2.4 percent a year in California, compared to growth of just 2 percent a year in the state?s baseload power supply. Unless the growing discrepancy between peak and baseloads is addressed, said Cynthia Mitchell, The Utility Reform Network economist, California will have to build more expensive peaker plants—which will cause electric rates to increase?or become more vulnerable to price gouging by generators when the electricity supply is tight. "Constant energy per capita is basically the baseline," said commissioner Art Rosenfeld. "Here we are talking about how to reduce energy per capita." The cost of energy-efficiency measures per kilowatt-hour saved fell dramatically between 2000 and 2004, dropping from as much as 3.2 cents per kilowatt-hour saved in residential energy-efficiency programs to 1.1 cents\/kWh in 2004. Nonresidential energy-efficiency program costs fell from 1.7 cents\/kWh to 1.1 cents, and the cost of energy-efficiency measures in new construction has plummeted from 4.4 cents\/kWh to 1.8 cents. Energy-efficiency program costs averaged 2.9 cents per kilowatt-hour saved, half of the average 5.8 cents\/kWh cost to generate power during the same period. Falling costs are due to a number of factors, including greater use of compact fluorescent lighting. "In the early years, most of the savings was coming from nonresidential programs," said Mike Messenger, CEC energy-efficiency analyst. "By 2004, it was from residential, mostly due to lighting programs." The new bulbs and other efficiency measures are saving large amounts of energy. Savings as a result of the utility efficiency programs grew from a little less than 1,200 GWh\/year in 2000 to more than 1,800 GWh\/year in 2004. Peak-demand savings as a result of expenditures each year grew from less than 250 MW to more than 350 MW, but were highest in 2001 at 450 MW. Investor-owned utilities spent $1.4 billion to achieve those savings. In the coming years, the utilities are planning increases in energy-efficiency spending to attain 90 percent of the economically achievable energy savings, said Sylvia Bender, CEC energy-efficiency analyst. Together, they plan to save almost 7,000 GWh\/year between 2006 and 2008, she said. PG&E plans to boost energy-efficiency program spending by 83 percent to $240 million next year, increasing it to $345 million by 2008. Edison plans a 43 percent increase to $243 million next year and then level spending through 2008. San Diego Gas & Electric plans to boost spending by 107 percent next year to $81 million and then raise it to $106 million by 2008. Despite the planned increases, utilities have had a hard time spending their budgeted energy-efficiency program funding at times, the CEC report shows. PG&E spent 88 percent of its funds in 2000 and more than 100 percent in 2001, but its spending declined to 90 percent in 2004. Similarly, Edison spent 99 percent the first year, but its spending dwindled to 64 percent in 2002, then went back up to 98 percent last year. SDG&E started at 77 percent, went to 100 percent in 2003, and last year returned to 77 percent of its budget. CEC staff said that the utilities are likely to meet their energy-efficiency program savings goals through 2008 but that the outlook is less certain beyond that unless they make "significant changes . . . in program investments and approaches." The CEC also spent two days this week developing information on global warming for its Integrated Energy Policy Report. Companies and environmentalists testified that energy-efficiency programs are an important part of the growing movement to reduce emissions of carbon dioxide.