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State Energy Efficiency Policy Database

California

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Oversees the state's electric utilities and the energy efficiency programs they provide to the state's ratepayers.
California-based organization that assists local governments in implementing policies that help establish key elements of livable communities.

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Summary

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. 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. 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. 

The most recent budgets for energy efficiency programs and electricity and natural gas savings can be found in the State Spending and Savings Tables on the left.

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November 8, 2013


Customer Energy Efficiency Programs

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. California's publicly-owned utilities (POUs), such as large municipal utilities serving Los Angeles and Sacramento, also administer and provide programs to their customers.

Several utilities provide on-bill financing.  More information may 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 used to 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 (see R.09-09-047, section 11) was not reauthorized by the California Legislature in 2011, and Governor Brown directed the CPUC to pursue continuation of funding for these programs before the PGC expires.  About one-quarter of the utility energy efficiency portfolio budgets came through the PGC; the remaining majority of the energy efficiency portfolios is funded through utility procurement funds and is unaffected by the expiration of the PGC.

The most recent budgets for energy efficiency programs and electricity and natural gas savings can be found in the State Spending and Savings Tables on the left.

Links:

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November 8, 2013


Energy Efficiency Resource Standards

Summary:  Electric: ~0.85% annual savings through 2020.  Natural Gas: 619 gross MMTh between 2012 and 2020.

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 (see CPUC Decision 08-07-047). For 2010 to 2012 energy efficiency portfolios, see Decision 09-09-04. California’s current targets are embedded in the approved 2013-2014 program portfolios and budgets for the state’s IOUs, which calls for gross electricity savings of almost 4,000 GWh and natural gas savings of approximately 94 MMTh (see CPUC Decision 12-11-015).


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August 9, 2013


Alternative Business Models

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 (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).


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August 12, 2013


Reward Structures for Successful Energy Efficiency Programs

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.

  • Shareholder incentives (reward mechanisms) CPUC Rulemaking 06-04-010, Decision 07-9-043; 12-01-005 continues implementation of reforms to Risk/Reward Incentive Mechanism.
  • California Public Utilities Commission docket search.

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August 12, 2013


Energy Efficiency as a Resource

California has established energy efficiency as its highest priority energy resource for procurement of new resources. Under Assembly Bill 1890 (1996) and Assembly Bill 995 (2000), 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.


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August 12, 2013


Evaluation, Measurement & Verification
  • Cost-effectiveness test(s) used: TRC, UCT, PCT, SCT, RIM
  • Uses a deemed savings database: yes (DEER)

California is a national leader in EM&V. 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.


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August 9, 2013