San Diego Gas & Electric to Refund $51.6 Million, Institute Whistleblower Training

San Diego Gas & Electric (SDG&E) has reached a deal with consumer groups to refund $51.6 million to ratepayers and pay a $5.5 million fine in connection to an issue-laden energy-saving light bulb project. As part of the deal, SDG&E must also institute whistleblower training for employees as well as supplementary training about making timely reports of misconduct.

The deal was approved by the California Public Utilities Commission on September 9. It settles claims brought by two consumer groups, The Utility Reform Network (TURN) and the Public Advocates Office, an independent arm of the utilities commission.

The lightbulb project in question, an “upstream lighting program,” ran from 2017 to 2019 and was meant to encourage residential customers to buy energy-saving light bulbs. The project was launched in response to an energy efficiency program launched by the utilities commission and could have allowed SDG&E to earn incentives.

Beginning in 2017, the lightbulb program aimed to reach customers who may not otherwise typically purchase efficient light bulbs by stocking smaller independent stores. However, given the fact that these smaller stores often did not keep sales records that are as detailed as larger stores’ records, light bulb manufacturers were able to invoice for deliveries instead of sales.

According to the settlement, a 2019 evaluation of the program found that “approximately 95 percent of SDG&E’s program bulbs may not have been sold to customers and were likely overstocked or missing entirely.” Following this evaluation, SDG&E hired investigators to look into its program. These investigators found a multitude of issues with the program.

One of the major issues, according to the settlement, was that “[m]anufacturers falsified invoices to SDG&E, and SDG&E paid manufacturers for bulbs that they never delivered or simply ‘dumped’ on ‘hard to reach’ retailers.” Furthermore, the settlement details that “[t]the program rules required retailers to pay for inventory received from manufacturers. However, in many cases, retailers did not pay for or order bulbs, and SDG&E employees who were managing the program were aware of this program rule violation.”

Notably, employees reportedly raised concerns about the program repeatedly to superiors at SDG&E. And while SDG&E management was aware of the concerns, the company filed multiple reports to the California Public Utilities Commission that did not mention the issues.

The settlement reached between SDG&E and TURN and the Public Advocates Office “includes SDG&E’s acknowledgement of failure to prudently manage the upstream lighting program in 2017-2019 and admission of knowingly submitting inaccurate information, compliance documents, and other reports to the Commission.”

In addition to this admission of misconduct, SDG&E agreed to return $51.6 million to ratepayers. $45.44 million of this total stems from the money spent on the light bulb program, while the rest stems from the incentives SDG&E earned through the program. The company will also pay a $5.5 million fine for filing a false statement to the Commission.

“When ratepayers pay for energy efficiency programs through utility rates, they deserve to get the intended economic and environmental benefits of energy efficiency,” said TURN Executive Director Mark Toney. “When they don’t get those benefits because of the utility’s mismanagement, as in this case, it’s only fair to refund their money. While the outcome here doesn’t make up for the harm of missing out on EE benefits, it at least protects ratepayers from wasting their money.”

As part of the settlement, SDG&E will “provide whistleblower training to all SDG&E employees” and “provide supplemental training on… the importance of timely reporting of noncompliance issues.”

Toney believes whistleblowers can play an important role in ensuring that utilities operate fairly towards ratepayers. He suggests that “the California Public Utilities Commission should expand and better publicize its own whistleblower hotline.”

“The California Public Utilities Commission should explore the possibility of using the fine paid by one of the utilities under investigation to establish a whistleblower reward pilot program, Toney adds. “As explained by the National Whistleblower Center, ‘[T]he biggest barrier to whistleblowing is the long history of retaliation. For company insiders, the risk of losing one’s livelihood as a result of wrongdoing … is substantial. Encouraging them to come forward requires a financial safety net… Data shows that incentivizing whistleblowers is extremely effective in generating high quality tips.’”