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California rolls back energy efficiency goals for state's major utilities

The California Public Utilities Commission on Aug. 15 unanimously adopted energy efficiency goals that are lower than those the regulators adopted two years ago.

According to the commissioners, the steps that would have been required to reach the higher goals would have cost ratepayers too much since gas and electric utilities would have had to spend more to achieve diminishing returns in their roles as program administrators of the ratepayer-funded energy efficiency program portfolios.

But a statewide trade association representing companies that provide energy efficiency and demand response products and services insists the agency's action will result in a more than 40% reduction in incentive program energy savings over the 10-year period from 2020-2030.

In reaching its decision to lower the goals, the PUC determined that the costs must at least equal the benefits of energy efficiency efforts by the state's major electric and gas utilities, including PG&E Corp. subsidiary Pacific Gas and Electric Co., Edison International subsidiary Southern California Edison Co., and Sempra Energy subsidiaries San Diego Gas & Electric Co. and Southern California Gas Co.

Finding that the goals adopted two years ago for 2018 through 2030 would not meet that requirement, the commission reset them for the coming decade.

For example, the new savings goal for PG&E in 2023 is 1,024 GWh while its previous goal for that year was 1,197 GWh. SCE's 2023 goal now stands at 1,023 GWh while its previous target for that year was 1,157 GWh.

Energy savings from technologies that once needed utility program support, such as LED lighting, now are mandated by industry standards, building codes and state mandates, the PUC said. To reach the higher goals set by the PUC's previous decision, utilities would have had to deploy measures that are not cost-effective, the commission added.

Commissioner Liane Randolph, who led the standards update proceeding, said the overall targeted savings for 2020 and 2021 will decrease by 7% compared to the previous goals but still will reduce carbon emissions the equivalent of taking approximately 660,000 cars off the road.

"The proposed goals will have outsized negative impacts on California's energy efficiency industry," the California Efficiency + Demand Management Council commented shortly before the PUC voted on the change.

The trade group said lower goals for the major utilities will inhibit the state's ability to meet its long-term plan to become carbon neutral by 2045 as mandated with the passage of Senate Bill 100 in 2018. They also will jeopardize compliance with California's 2030 greenhouse gas emissions reduction target of 40% below 1990 levels, which was set in 2016 by S.B. 32, the group added.

State's goals conflict with ratepayer costs

On Aug. 12, Gov. Gavin Newsom announced that greenhouse gas emissions in California continued to fall ahead of schedule in 2017 even as the state's economy grew faster than the national average. The state reduces greenhouse gas emissions through an integrated set of regulations and programs designed to address sources from every sector, Newsom said.

The PUC said it updated its energy efficiency goals based on an assessment of cost-effective energy savings potentially available in the state's residential and commercial buildings, as well as in industrial, agricultural and mining sectors.

The PUC relied on an energy efficiency potential study Navigant Consulting Inc. prepared for the commission. Overall, the consultant's 2019 study showed a significant reduction in energy savings potential relative to its 2017 study. Implementing utility-administered programs with diminishing returns and large increases in projected expenditures would be inconsistent with the PUC's responsibility to authorize prudent long-term investments on behalf of ratepayers, the commission said.

"Adopting goals based on reduced potential should not be interpreted as a reduction in our commitment to energy efficiency," the PUC said in its decision.

However, the California Efficiency + Demand Management Council urged the commission to keep pace with the rapidly evolving energy efficiency industry by adopting a "rolling portfolio" of energy efficiency measures to avoid disruption of product and service providers. The commission should set goals that spur additional innovation and not reduce goals because previous technological advances are now standard, the council said.