California is a long-time leading state for its utility-sector customer energy efficiency programs, which date back to the 1970s and have grown and evolved substantially over three decades. Its programs and related energy efficiency policies have had a significant impact on per capita electricity use, which has remained essentially constant over the past 30 years.
Investor-owned utilities administer energy efficiency programs with oversight by the California Public Utilities Commission (CPUC), which establishes key policies and guidelines, sets program goals, and approves spending levels. California's publicly owned utilities (POUs) also administer customer programs. For the 2006-2008 efficiency program cycle, California’s investor-owned utilities (IOUs) invested $2.1 billion in efficiency programs, saving 4,097 GWh in net electricity savings and 44 million Therms (MMTh) of natural gas.
All of the investor-owned electric and gas utilities in California have decoupling, which has been in place for many years in California and is an integral part of California's "big, bold" energy efficiency initiative. Utilities may also earn performance incentives for energy efficiency efforts.
California utilities are now operating within a 2010-2012 program portfolio period, which is predicted to produce electricity savings of almost 7,000 GWh and natural gas savings of approximately 150 MMTh (goals expressed in gross, not net savings).
Investor-owned utilities administer energy efficiency programs with oversight by the California Public Utilities Commission (CPUC), which establishes key policies and guidelines, sets program goals, and approves spending levels. Investor-owned utilities and third-party contractors implement the programs. A share of public benefits funding is designated to go to non-utility organizations to offer programs that supplement and complement those of the IOUs and POUs.
On September 24, 2009 the CPUC approved the 2010-12 portfolios and budgets for the IOU’s, which established the the current set of programs.
California's publicly-owned utilities (POUs), such as large municipal utilities serving Los Angeles and Sacramento, also administer and provide programs to their customers.
California electric utilities saved approximately 2,293,007 net MWh in 2009. This figure does not include a number of POUs, including Los Angeles Department of Water and Power.
In California, the Southern California Gas Company Home Energy Upgrade Financing program was developed to provide homeowners with an unsecured financing option for specified energy-efficient home improvements. There is also Sempra On-Bill Financing, which offers eligible customers 0% financing for qualifying energy-efficient business improvement. More information on the program can be found in the ACEEE report, Energy Efficiency Financing Programs.
California's utilities fund some of their programs and initiatives through resource procurement budgets and recover their costs through rate cases brought before the CPUC. California's utilities also collect a Public Goods Charge (PGC) on customer utility bills to fund utility energy efficiency programs. Public Goods Charge is California’s name for a public benefits fund established in Assembly Bill 1890 in 1996. The PGC on electricity consumption is about 0.48 cents/kWh and covers energy efficiency, renewable energy and R&D. About 0.3 cents of this charge support energy efficiency programs. AB 995, which became law in 2000, extended the electric PGC through January 1, 2012. A natural gas PGC was created by AB 1002 in 1999 which funds cost-effective energy efficiency and other public purpose programs.
For the 2006-2008 efficiency program cycle, California’s investor-owned utilities (IOUs) had budgeted $2 billion for three years of efficiency programs and reported spending $316 million in 2006, $670 million in 2007, and $932 million in 2008.
California utilities spent $756 million on electric efficiency programs in 2009. The Consortium for Energy Efficiency reports 2010 electric utility energy efficiency program budgets totaling $1.16 billion and natural gas program budgets of $338.8 million.
Reported budgets for energy efficiency programs for 2011 are in the State Spending and Savings Tables.
Summary: Electric: ~1% annual savings through 2020. Natural Gas: 150 gross MMTh by 2012.
Following California’s 2001 electricity crisis, the main state resource agencies worked together along with the state’s utilities and other key stakeholders and developed the California Integrated Energy Policy Report that included energy savings goals for the state’s IOUs. The CPUC formalized the goals in Decision 04-09-060 in September 2004. The goals called for electricity use reductions in 2013 of 23 billion kWh and peak demand reductions of 4.9 million kW from programs operated over the 2004–2013 period. The natural gas goals were set at 67 MMTh per year by 2013.
The California Legislature emphasized the importance of energy efficiency and established broad goals with the enactment of Assembly Bill 2021 of 2006. The bill requires the California Energy Commission (CEC), the California Public Utilities Commission (CPUC) and other interested parties to develop efficiency savings and demand reduction targets for the next 10 years. Having already developed interim efficiency goals for each of the IOUs from 2004 through 2013, the CPUC developed new electric and natural gas goals in 2008 for years 2012 through 2020, which call for 16,300 GWh of gross electric savings over the 9-year period. California’s current targets are embedded in the approved 2010-2012 program portfolios and budgets for the state’s IOUs, which calls for gross electricity savings of almost 7,000 GWh and natural gas savings of approximately 150 MMTh.
California initially implemented decoupling through the Supply Adjustment Mechanism (SAM) for gas utilities beginning in 1978 (Decision 88835). By 1982, similar mechanisms were in place for the three electric IOUs. As the gas industry restructured, gas utilities began to serve large customers under a straight fixed-variable rate design, which continues through today. The CPUC stopped the electric decoupling mechanisms in 1996 due to restructuring of the electric power industry.
In 2001, the Legislature passed Section 739.10, which required that the CPUC resume decoupling. Decoupling resumed for Pacific Gas & Electric, Southern California Edison, and San Diego Gas & Electric beginning with the 2004 revenue requirement. Currently, the revenue decoupling program is combined with performance incentives for meeting or exceeding energy efficiency targets. Revenue requirements are adjusted for customer growth, productivity, weather, and inflation on an annual basis with rate cases every three or four years, varying by utility.
Decoupling mechanisms have been developed and applied in individual cases with the IOU utilities. All of the investor-owned electric and gas utilities have decoupling. It has been in place for many years in California and is an integral policy for California's "big, bold" energy efficiency initiative. There have been no specific evaluations performed of the decoupling mechanisms as of March 2010 (CA Code Sec. 9 Section 739(3) and Sec. 10 Section 739.10 as amended by A.B. XI 29; Decisions 98-03-063 & 07-09-043).
California Public Utilities Commission docket search.
The California Public Utilities Commission defined a new Risk/Reward Mechanism for investor-owned utilities in the Energy Efficiency Proceeding (CPUC Rulemaking 06-04-010). Decision 07-9-043 (October 2007) establishes a minimum performance standard for the utilities under which incentive earnings accrue only if the IOU energy efficiency portfolio of programs achieves at least 85 percent of the CPUC’s goals. The incentive formula calls for utilities to receive 9% of net benefits if they achieve between 85-99% of savings goals, and 12% of net benefits if they meet or exceed savings goals up to the earnings caps established for each utility. In addition, utilities can earn a percentage of their incentive earnings before evaluation procedures verify their impacts.
California has established energy efficiency as its highest priority energy resource for procurement of new resources. Key legislation that established this priority are Assembly Bill 1890 (1996) and Assembly 995 (2000). Under this legislation, California has established a “loading order” that calls for first pursing all cost-effective efficiency resources, then using cost-effective renewable resources, and only after that using conventional energy sources to meet new load. The California Public Utilities Commission has established aggressive targets and associated funding for energy efficiency programs.
The evaluation of ratepayer-funded energy efficiency programs in California relies on regulatory orders (CPUC Decision 09-09-047). Evaluations are administered by both utilities and the California Public Utilities Commission. California has established formal rules and procedures for evaluation, which are stated in Decision 09-09-047. Evaluations are conducted statewide and for each of the utilities. California uses all of the five classic benefit-cost tests identified in the California Standard Practice Manual. These are the Total Resource Cost (TRC), Utility/Programs Administrator (UCT), Participant (PCT), Social Cost (SCT), and Ratepayer Impact Measure (RIM). The rules for benefit-cost tests are stated in CPUC Decision 05-04-051. California currently specifies the TRC to be its primary cost-effectiveness test. These benefit-cost tests are required for overall portfolio screening.