California PUC Plans Incentives to Save Energy

The California Public Utilities Commission's ambitious plan would require investor-owned electricity and natural gas utilities to administer $1.97 billion of energy-efficiency incentives.

Published: 23-Sep-2005

 With Southern California's natural gas bills heading toward record winter highs, utility regulators today are expected to approve an aggressive conservation program that could slash energy costs for homes and businesses by more than $5 billion and eliminate the need to build three large power plants over the next three years.

The California Public Utilities Commission's ambitious plan would require investor-owned electricity and natural gas utilities to administer $1.97 billion of energy-efficiency incentives — substantial rebates for such things as buying high-tech refrigerators, adding home insulation and upgrading commercial boilers and air-conditioning systems — that would be paid for by ratepayers.

 "This is the most important thing we can do for long-term [energy] reliability in the state," said Susan Kennedy, the commissioner leading the efficiency proceeding. "The cost-effective thing for customers is to not spend money on electricity and gas."

Four years after the state's energy crisis ran up billions of dollars in electricity debts and plagued customers with rolling blackouts, meeting the growing demand for electricity and natural gas remains an expensive challenge. This summer, state grid operators repeatedly called on Californians to curtail power use as high temperatures caused power emergencies; this winter, skyrocketing natural gas costs will show up in heating bills and may eventually be reflected in electricity rates.

By committing to a 62% increase in annual spending through 2008, the state is making energy efficiency the first line of defense against power shortages.

"This plan will take us far in achieving our overall goals of reducing energy demand and lowering utility bills," said Bill Maile, a spokesman for Gov. Arnold Schwarzenegger.

Encouraging conservation, particularly of the natural gas used to heat homes and generate most of California's electricity, is the quickest way to save money and protect the environment, proponents said.

"It might take several years to build a new power plant, but we can start seeing the savings from energy efficiency almost immediately," said Devra Wang, a staff scientist with the Natural Resources Defense Council. Wang and the PUC staff estimate that the new initiative would save the equivalent of the output of a 500-megawatt, natural-gas-fired generating plant for each of the next three years, enough power to serve more than 1 million homes by 2008.

Energy-efficient appliances and buildings also could help reduce greenhouse gas emissions by pulling more than 3 million tons of carbon dioxide out of the air by 2008, the equivalent of taking 650,000 cars off California highways, the PUC said in a draft of today's expected decision.

Kennedy said the enlarged energy-efficiency program would make "tried and true" conservation measures available "to more families and businesses." The interest in such incentives is strong, she said, noting that heating and air-conditioning rebate programs administered by Pacific Gas & Electric Co. and Southern California Edison Co. ran short of cash earlier this year after being hit with unexpectedly high consumer demand.

Efficiency programs are urgently needed to counter California's voracious energy appetite, said V. John White, director of the Center for Energy Efficiency and Renewable Technology.

"Conservation is the best way to lower customers' bills at a time of rising energy costs," he said. "These investments are easily cost effective with the price of natural gas so high."

Southern California Gas Co.'s 5.5 million customers from Fresno to the Mexican border can expect their natural gas bills to jump 33% this winter, climbing to a record $110 per month from a current $83 for a typical home, a utility spokesman said. Pacific Gas & Electric Co.'s 3.9 million residential users will see a 40% jump from higher natural gas prices caused by growing fuel demand and recent hurricane-spawned supply disruptions.

The expanded energy-efficiency program will save ratepayers at four investor-owned utilities — Edison, PG&E, Southern California Gas and San Diego Gas & Electric Co. — $5.4 billion over three years, the PUC estimated. The savings would come from lower customer energy expenditures as well as the estimated cost of power plants and transmission lines that the utilities wouldn't have to build and electricity and natural gas that the utilities wouldn't have to buy. Those savings would be partly offset by utility spending of about $2 billion on rebates and other incentives. An additional $700 million would be paid by residential and business customers to upgrade appliances, lighting, central heating and air conditioning and structures.

Investments in energy efficiency will be financed by gas and electric utility customers as part of their general rates and through an existing 2.4% surcharge on their bills known as the "public goods charge." The monthly bill would increase by about 35 cents for the average Edison residential customer, by $1.18 for the average PG&E residential customer and by $1.23 for the average SDG&E customer. Southern California Gas said its residential bills wouldn't change.

The funding, $225 million annually in the case of Southern California Edison, should wind up helping customers to stabilize and even lower their total bills, said Gene Rodrigues, Rosemead-based Edison's director of energy efficiency. The money is about 50% more than the company originally budgeted for this year, he said.

Boosting efficiency will work only if utilities are held accountable by regulators for the billions of dollars of ratepayer money used for incentives, said Michael Shames, executive director of the Utility Consumers' Action Network in San Diego.

All utility rebate programs will be closely scrutinized by the California Energy Commission, peer review groups and outside auditors, the PUC's Kennedy said. "There's not going to be much abuse," she said.



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