Energy Efficiency Programs Continue, Controversy Remains

Utilities turn energy efficiency into a slush fund.

The California Public Utilities Commission’s president will push to continue fully funding energy efficiency programs, despite the Legislature’s recent failure to extend a special surcharge on utility bills.

In a letter dated Wednesday to Gov. Jerry Brown, commission President Michael Peevey said he is initiating a formal proceeding to consider alternate ways to pay for efficiency and renewable energy programs that had been funded by the surcharge.

But there also are possible changes brewing, with consumer advocates pushing for a fundamental restructuring of the program, which they say has been mishandled by utility companies that reaped millions of dollars in controversial incentive payments. With three of five commissioners newly appointed by Brown, the advocates see an opening.

The commission authorizes utilities to collect about $1 billion per year from consumers to pay for energy efficiency programs like rebates for efficient lightbulbs and appliances. The “public goods charge” on utility bills helps fund the efficiency programs, but will expire Jan. 1 after the Legislature failed to renew it.

Last week, Brown urged Peevey to continue funding the programs at current levels, something the commission could do by raising electricity rates to match the surcharge.

“I share your view completely on the importance of reauthorizing the Public Goods Charge (PGC), and the Commission will do all it can to ensure the programs funded by the PGC continue without a pause,” Peevey wrote to Brown.

PG&E, one of the utilities running the energy efficiency programs, also supports continued funding, said spokeswoman Lynsey Paulo.

Consumer advocates, meanwhile, are pushing for more profound changes. Both The Utility Reform Network, a San Francisco-based advocacy group, and the state commission’s independent Division of Ratepayer Advocates are calling for the billion-dollar energy efficiency programs to be run by an independent agency instead of utility companies.

“We don’t think they’ve done a good job running the program,” said Mark Toney, executive director of TURN. “They spend a lot of money bragging about how green they are.”

Paulo, of PG&E, said California utilities “lead the nation in energy efficiency programs.”

“Utility administration does ensure coordinated administration of the programs, and it’s proven over the years to be very effective,” she said.

Paulo said utilities rely on third-party contractors to “tell us what the community most needs when it comes to these programs.”

Both Toney and Dave Ashuckian of the Division of Ratepayer Advocates are critical of the program’s emphasis on rebates for energy efficient lightbulbs and appliances.

“People buy a new refrigerator because they wear out. They don’t buy it because of a $50 rebate,” Ashuckian said.

The advocates want to see more structural changes in the market to decrease energy consumption, something they say the utilities are not well equipped to pursue.

“We’re not getting the biggest bang for our buck,” Ashuckian said. “We think that we can do better in how we achieve energy efficiency.”

Gene Rodrigues, Southern California Edison’s director of energy efficiency, said in a statement that the utility “has partnered with its customers to exceed the most aggressive electricity savings goals in the country. Consistent with this level of performance, the US Department of Energy and Environmental Protection Agency have awarded SCE their national ENERGY STAR award ten times.”

Another controversy in the program concerns the incentive payments the commission awards utilities if they meet efficiency goals.

Last December, the commission’s majority awarded utilities $68 million in ratepayer funds, overruling an administrative law judge’s recommendation that the utilities’ performance did not merit any additional bonus payments. The commission already had given utilities $143.7 million in incentive payments for running energy efficiency programs from 2006 to 2008.

A commission staff report had recommended against any incentive payments in 2010, holding that PG&E actually should have to give back $75 million for its poor performance. Utilities argued at the time that the staff report was unreliable and lacked transparency and public review.

Ratepayer advocates oppose the incentive payments.

“We believe they shouldn’t have gotten anything,” Ashuckian said. “We’re paying the utilities to spend our money, and then we’re paying them a profit for spending our money faster and better.”

PG&E’s Paulo said the commission reached its bonus payment decision “based on the facts that it has in the record.”

“We believe that we’ve run the program effectively, and we’ll continue to do our part to encourage conservation,” she said.

Determining energy efficiency goals and the utilities’ performance continues to be contentious. As part of a commission proceeding in July, Brown-appointed Commissioner Mark Ferron wrote that the situation had grown “nasty and poisonous.” Ferron said he is “actively reviewing” the entire energy efficiency program, including incentive payments.

“I want to see this process ‘fixed’ so that the focus is on taking ACTION to improve Energy Efficiency, rather than to let it become a DISTRACTION where the emphasis is on creating the appearance of EE savings,” Ferron wrote.

Advocates are hopeful about Ferron’s review and Brown’s other appointees.

“There’s definitely an opportunity now for some change,” Ashuckian said.