A massively fouled up San Diego Gas & Electric energy efficiency program in which the utility could not account for millions of lightbulbs — paid for by customers — has resulted in a settlement agreement with a pair of consumer groups that would see SDG&E refunding $51.6 million to ratepayers, provided state regulators approve the deal.
Under the settlement, the utility would also pay a $5.5 million fine because it “knowingly submitted inaccurate information” about the mismanaged program in filings to the California Public Utilities Commission.
SDG&E officials hammered out the deal in a joint motion with The Utility Reform Network, a ratepayers advocacy group in San Francisco known as TURN, and the Public Advocates Office, the independent organization within the CPUC that works on the behalf of utility customers.
The proposed agreement will now go before the CPUC’s five commissioners, who will vote whether to approve the deal or not. A specific date has not yet been set.
“How do you pay for and then lose track of millions of lightbulbs?” TURN staff attorney Hayley Goodson said in a statement. “We’ve never seen such stark lapses in utility program oversight.”
In the proposed settlement, SDG&E admits mismanaging its Upstream Lighting Program from 2017 to 2019 and concedes an investigation revealed that concerns voiced by some employees about the program went unheeded.
“SDG&E has already taken steps to prevent this from ever happening again,” SDG&E spokeswoman Helen Gao said in an email to the Union-Tribune. “While we have a 30-year history of responsibly managing successful energy efficiency programs, we did not properly administer this particular program.”
Mike Campbell, program manager in the Public Advocates Office, said the settlement “appropriately addresses SDG&E’s imprudent management of the upstream lighting program.”
How did it happen?
SDG&E’s Upstream Lighting Program was part of a larger CPUC energy efficiency initiative aimed at getting the state’s big investor-owned utilities — using ratepayer funds — to encourage residential customers to purchase energy-saving lightbulbs. Under the program, SDG&E could earn a performance-based incentive.
In 2017, the program shifted focus and tried to reach customers who may not typically buy energy-efficient bulbs because they are more expensive than old-fashioned bulbs. In addition to big box stores, the updated program emphasized stocking bulbs at small independent grocery stores, drug stores and lower-income markets.
Since many of the smaller stores do not keep sales records that are as detailed as big stores, lightbulb manufacturers had the option to invoice SDG&E using shipment data instead of sales data. SDG&E’s Customer Programs department was assigned to review the invoices and other documentation from the manufacturers that supplied the bulbs.
Apparently, that’s where the problem occurred.
A report in April 2019 by consulting group DNV GL looked at the programs SDG&E and Southern California Edison operated. In SDG&E’s case, the report concluded that 95 percent of the bulbs purportedly delivered to “hard to reach” areas may not have been sold at all, were overstocked or missing entirely.
The report went on to say that in 2017 alone, 15 million lightbulbs in the SDG&E and Edison programs were unaccounted for.
Outside investigators hired by SDG&E in 2020 to look into what went wrong interviewed about 30 witnesses and reviewed thousands of documents. The investigators included PricewaterhouseCoopers.
- At least one manufacturer falsified invoices to SDG&E and the utility paid manufacturers for bulbs that were never delivered or simply dumped on retail stores at the “hard to reach” locales
- Despite rules that required retailers to pay for the bulbs received from manufacturers, in many cases retailers did not pay or even order bulbs and SDG&E employees managing the program were aware of this
- Members of the SDG&E team in charge of the program still processed and paid invoices even though they were not following correct procedures and did not conduct inspections to make sure manufacturers and retailers were not overstocking bulbs
- By March and April 2018, the team recognized the need for inspections but did not perform any
- SDG&E’s Customer Programs team was aware of violations by the manufacturers but did nothing to correct them
- Some SDG&E employees expressed concerns about the overstatement of the number of bulbs as early as 2017 but four people at the manager/director levels still filed reports with the CPUC without noting those concerns
- Several employees in early 2018 urged that inspections should be conducted but were ignored
The third-party investigators said the wrongdoing was “limited to a relatively small group of employees” and nobody outside the Customer Programs group knew about the violations, including SDG&E executives.
Citing privacy and legal concerns dealing with personnel issues, SDG&E did not provide details regarding the number of employees who were involved in its Upstream Lighting Program, how many were fired or how many remain with the utility.
The joint settlement agreement said only that “several employees had already left the company” and others had been let go. Those still at SDG&E “received significant and appropriate discipline” based on their roles.
The agreement did not mention the names of the lightbulb manufacturers or the retailers involved. SDG&E noted it is considering legal action against the manufacturers.
“The good news is that SDG&E agreed to be held accountable for their gross mismanagement and dishonesty,” TURN’s Goodson said.
As for Southern California Edison’s problems with the lighting program, the company has conducted its own independent investigation and is still dealing with the CPUC to get it resolved. TURN and the Public Advocates Office are also involved in the case.
Details of the settlement
The $51.6 million in refunds will come from shareholders, not from ratepayers. The package is made up of $45.44 million for the money SDG&E spent on the lightbulbs between 2017 and 2019 and $6.162 million the company will return from incentives it earned from the program.
If the settlement is approved, the refunds will not come to each of SDG&E’s 1.4 million customers in the form of a check but, the utility said, will be applied over a 12-month period to the Public Purpose Programs charge that can be seen on each customer’s monthly bill. The energy efficiency program makes up a portion of the Public Purpose Programs charge.
The $5.5 million fine is assessed for violating CPUC Rule 1.1 — filing a false statement to the commission. The fine will be paid by shareholders of Sempra Energy, the parent company of SDG&E. The money from the fine would go to California’s general fund.
In addition, SDG&E agrees to institute whistleblower training that will be paid with shareholder funds and conducted by a third-party contractor. The company also has to pay for the investigators hired to look into the matter.
“This is an isolated case, and we are dedicated to meeting the highest standards of accountability to our customers,” SDGE’s Gao said.
If CPUC commissioners approve the settlement, it appears this will be the last time SDG&E customers will hear about lightbulb transactions from their utility. SDG&E terminated its Upstream Lighting Program on Jan. 1 of this year.