Brief History & Key Documents 2001-2006

What is Energy Efficiency? "Energy Efficiency" refers to a variety of energy saving activities for homes and businesses such as installing or servicing efficient lighting and appliances, insulation, heating/ cooling equipment and industrial/ agricultural machinery; providing information to the public about these programs; and educating architects and contractors about energy efficient equipment and design. The California Public Utilities Commission makes a distinction between "energy efficiency" and "conservation" which it defines as changes in behavior such as turning off the lights or turning down the heat. It refuses to fund conservation information with Public Goods Funds. ( You may have noticed a big change in the "Flex Your Power" program. It focussed on conservation during the Energy Crisis when it had State funding. Now it is getting Public Goods funding and is only allowed to promote energy efficiency. Read more>)

(Note: Energy efficiency programs could — but currently do not — include solar water heaters or designs for buildings that use the sun for heating and cooling. However, they do not include alternate energy generators such as windmills and solar photovoltaics. Do you find this confusing and unnecessary? We think so too. Energy efficiency and alternate (or "renewable") energy programs became separated in the 1970s during the first Energy Crisis. The Legislature created a new agency, the California Energy Commission, to run both programs, but the CPUC fought to hang onto its turf, and this unfortunate split is the result.)

Why make a change? The Rulemaking was initiated by CPUC President Loretta Lynch in order to examine how energy efficiency (EE) programs will be administered through 2010. The Commission began to make changes to the system because of a history of problems with utility programs, and because the utilities’ monopoly over energy efficiency is anti-competitive.

The Grand Experiment: Non-utility Programs. For the 2002-03 program cycle, the CPUC set aside 20% of the funds for non-utility programs run by cities, non-profits and independent businesses. Utilities received 80% of the funds. The CPUC reviewed proposals, selected non-utility programs and provided broad oversight but retained the utilities to provide day-to-day “administrative” functions for non-utility programs. Many objected to putting the fox in charge of the henhouse, but Lynch felt it was best to get non-utility programs running to see how they would do, and fight the administration battle afterwards. An earlier attempt to establish independent administration of energy efficiency had been derailed by utility resistance after eighteen months of theoretical discussions. The utilities set up roadblocks that delayed the start of non-utility programs for months, but the Commission stayed firm, and independent programs finally got going in late October 2002. (See Non-Utility Programs Are Performing Much Better than Utilities)

Heads Roll. The following month, Gray Davis named Michael Peevey President of the Commission, demoting Loretta Lynch to Commissioner. Peevey immediately reassigned the Energy Efficiency proceeding to Commissioner Susan Kennedy, who was more sympathetic to utility interests. A new judge was also brought into the case. For the 2004-5 program cycle Kennedy proposed to replace most independent programs in the 2004-05 program cycle with utility “partnerships” with cities and other third parties (with the utilities in control).

Utilities' "Cozy Retreat" with Their Measurement Contractors. WEM crashed a two-day cozy retreat the utilities were holding at a Sonoma resort with their sweetheart consultants in 2002. The utilities hire the same sweethearts to measure their energy savings and to conduct statewide studies on which those measurements are based — compromising the credibility of the reports. WEM called for the CPUC to immediately remove measurement and statewide studies from utility control, and to conduct an independent financial audit of utility EE programs. The judge agreed, but Commissioner Kennedy decided to put off the question of independent measurement and left the utilities in charge. The audit was ordered, however its results have not yet been released.

Community Choice and Genuine Competition Wins the Day. WEM and its allies were instrumental in convincing the Commission to preserve funds for non-utility programs, which again received about 20% of the funds. Our arguments were based on the success of non-utility programs, and an important law WEM helped pass in 2002, Community Choice (AB117). Community Choice allows cities and counties or groups of cities and counties to become energy “aggregators” — i.e. become the default provider of energy supplies as well as energy efficiency to their communities. It is a form of public power without the hassle of buying the wires.

The Peculiar Story of the San Francisco “Pilot.” WEM became deeply involved in tracking a special $16.3 m EE program proposed by PG&E in “partnership” with the City and county of San Francisco. WEM focused attention on the San Francisco Peak Energy Program (“PEP”, or “Pilot”) because it is the prototype for the utility model of administration — and because it claimed to benefit the low-income people of color community of Bayview Hunters Point (BVHP) although it proposed to spend all the funds downtown.

Non-Utility Programs Are Performing Much Better than Utilities. Since 2002, non-utility energy efficiency providers have provided significantly more cost-effective programs in residential categories, and were at least tied with utilities in commercial/industrial programs. (Non-utilities were actually more cost-effective in commercial programs, if several unfair utility advantages are taken into account.) Several parties, notably WEM and SESCO, Inc., have analyzed utility vs. non-utility achievements and the many ways the utilities have “cooked the books” over the years to make their programs appear more effective than they are.

Now is the Time to Support Better Energy Efficiency Programs in California. In 2004-5, the CPUC is finally getting around to considering the long-term “administrative structure” for energy efficiency. The utilities are fighting to regain control of the funds, while non-utility program providers and public interest organizations are working to establish independent administration and open up all funds for genuine competition. WEM and its allies proposed the California Standard Offer system for administrative structure, which best fulfills these goals, and founded the California Coalition for Energy Efficiency to support the proposal.

During the holidays, December, 2004, with local and state officials on recess, the Commissioner in charge of the Energy Efficiency proceeding is trying to ram through a proposed decision that would turn over control of the energy efficiency system to utilities.

The proposed decision ignores the superior record of non-utility energy efficiency programs and suppresses the first-ever Audit of utility programs, which found exaggerated energy savings claims, excessive administrative costs, rampant favoritism and negligence. The proposed decision also suggests canceling energy efficiency funds for Community Choice cities, rather than allowing them to administer programs as the law requires.

WEM issued an alert asking our allies to contact Commissioners to request an alternate decision that creates a fair, independent and cost-effective administrative structure for energy efficiency — and ask them to delay the vote (currently planned for Jan. 13th).

• The California Standard Offer Proposal for Energy Efficiency
• WEM Comments on the CA Standard Offer Proposal. WEM discusses the features of the CA Standard Offer Proposal compared to other proposals.
• WEM Reply Comments. WEM answers questions from other parties about the CA Standard Offer proposal and summarizes some of the issues the Standard Offer addresses that remain unresolved in other proposals.
• Comments of Quality Conservation Services, Inc. QCS provides information about how the Standard Offer system works in Texas. QCS has first-hand knowledge from its work in Texas EE programs as well as in California. QCS is also active in New Jersey and Maine, where it has pioneered an alliance with labor unions including the Int’l Brotherhood of Electrical Workers (IBEW) to improve the quality of EE installations by utilizing well-trained union workers and to increase the union’s understanding of the opportunities for their members in this field. New Jersey is another state using a Standard Offer system.
• Reply Comments of Quality Conservation Services, Inc. This document replies to questions and comments about the California Standard Offer proposal. It compares the results of current EE programs in Texas vs. California, showing Texas achieves 40% more EE savings per dollar.
• Comments of TEDCO Energy Services. TEDCO describes its experiencing providing EE services to rural hard-to-reach customers under the Texas Standard Offer Systems. As a small business based in Amarillo, TX, it discusses the opportunities available in the Texas Standard Offer system to enter the EE market with a small-scale program and rapidly expand with larger contracts as those programs prove successful. TEDCO notes that before the Standard Offer began, utilities hired a few large out of state companies for all programs; now there are thirty local companies providing EE in just this one area, and hundreds more statewide. Texas provides only 1/10 as much funding for EE as California, but California has only approximately 50 non-utility programs and four large utility programs, statewide.
• Comments of SESCO, Inc. on the CA Standard Offer Proposal. SESCO, Inc. has over 20 years’ experience running EE programs in the US as a subcontractor to utilities, and currently runs independent non-utility programs in California, Texas and New Jersey. It specializes in residential and small business programs which are widely regarded as the best in the country. SESCO is one of the authors of the California Standard Offer proposal.

• The Myth of IOU Cost-Effectiveness I (August 8, 2003). This landmark report by SESCO, Inc. analyses the “cost-effectiveness” of 2002-3 utility programs compared to those run by non-utility third parties (such as cities, non-profits and independent businesses). (“Cost-effectiveness” is a ratio of energy-savings benefits — i.e., bill reductions — compared to the cost of the programs. The CPUC requires all EE providers to track cost-effectiveness in their reports, and requires the EE “portfolio” — all programs run by one entity, and all programs statewide — to be cost-effective. WEM and SESCO believe each program should be cost-effective.)
  
  Nearly all non-utility residential programs were more cost-effective than utility programs, many by large margins. Most utility residential programs were not cost-effective. In non-residential programs, utilities were about even with non-utilities. Note, however, that cost-effectiveness calculations do not reflect the considerable advantages utilities enjoy over non-utilities: (1) the utilities have had 30 years to perfect their programs and develop relationships with manufacturers, while this is the first time the CPUC chose non-utilities to run independent programs funded by the Public Goods Charge; (2) utilities should have had significant economies of scale, since their programs are much better funded and can operate anywhere in their territories while non-utilities are confined to small programs in specific local areas; (3) utilities benefit greatly from statewide marketing and information programs run by other parties which heavily promote utility programs and offer only the sketchiest information about non-utility programs. This means non-utilities must include all marketing costs within their “cost-effectiveness” data, while utilities’ marketing costs are largely off the books.
  (Note: this is the only comparison of utility vs. non-utility programs that has been done to date. No analysis has been offered by the CPUC staff nor the utilities — who are familiar with all the data because the CPUC placed them in charge of administrative services for non-utility programs run by their competitors).
  
• Myth of IOU Cost-Effectiveness II (May 8, 2004). SESCO expands and updates its analysis of 2002-3 programs.
  
• WEM wrote many comments over the two and a half years of the proceeding discussing why non-utility programs should be expanded, and how to accomplish this task. The comments also addressed other issues in the proceeding at the time. WEM’s Comments and Reply on the Draft Decisions Selecting 2004-5 programs contributed to a key victory for non-utility programs in the Commission’s August 21, 2003 Decision.

  (Note to readers: the multitude of filings in summer 2003 provide a sometimes entertaining glimpse of the new assigned Commissioner’s frantic schedule that seemed designed to leave public interest groups and other non-utility participants in the dust, but ended up by confusing even the utility regulatory departments. 7/16/03 WEM Comment, 7/23/03 WEM Reply.)

(See also the section above and the next section (the PG&E/San Francisco Pilot) for detailed examples of cooked books.)

• WEM Motion to Reduce Consulting/Auditing Conflicts of Interest and Increase Public Review of Statewide EE Studies. WEM describes the utilities' two-day cozy retreat with their sweetheart consultants and calls for the CPUC to establish an independent measurement system and to commission an independent financial audit of utility EE programs.
• Will Exaggeration by the Highest-Scoring Attribute? SESCO analyses proposals for 2004-5 programs, describing a tendency for nearly half of all proposers to greatly the energy savings expected from their programs.

• Ask Cher-EE, Advice for Healthy EE Partnerships. WEM’s comment for the February 2004 Partnership Workshop on why cities should avoid utility partnerships and partner with non-utilities instead is a spoof of “relationship advice” columns. It sums up many of the things we learned while investigating PG&E’s partnership with San Francisco.
• WEM has been monitoring the Pilot ever since PG&E first requested CPUC approval of the program in December, 2002. Beginning in February, 2003, WEM and the Community First Coalition of Bayview Hunters Point have coordinated our investigation, filed numerous comments at the CPUC and participated in many Pilot-related meetings, in our efforts to secure the promised energy savings and benefits for the BVHP community. SESCO, Inc. has provided technical analysis for us and has also filed separate comments. Its 7/29/03 Comment caused the judge to question PG&E/SFE's projected savings, especially its reliance on installing CFLs in commercial facilities. Our 10/23/03 Joint Motion contains a detailed proposal for modification of the Pilot in order to meet the energy savings goals and benefit the community. CFC/WEM's 2/18/04 Comment recaps the whole story, again asking the Commission to modify the Pilot. The judge's Draft Decision promised to address this question, but the final Decision postponed it. Nevertheless, our work has resulted in a lot more EE work in the Bayview Hunters Point community, and more attention on environmental justice for communities suffering from power plant pollution both in San Francisco and statewide.

• The Community Choice law provides for “any party to apply to administer cost-effective energy efficiency programs,” and required the CPUC to write rules to implement this law by July 15, 2003. Community Choice became a key battleground in the Future Energy Efficiency proceeding when the Commission chose to redefine “administer” as “implementer”  — which could allow utilities to administer Community Choice EE programs. WEM teamed up with Paul Fenn of Local Power (the original author of the Community Choice law) and others to fight these provisions. Our lawyer Dan Meek has taken the issue all the way to the California Supreme Court, where it currently awaits hearing. For the whole story and the legal questions pending, see WEM's 8/13/03 Application for Rehearing, our 2/13/04 Writ of Review and 5/20/04 Reply to Utility Response to WEM's Writ of Review.
  The “Community Choice” law, AB117, allows cities and counties or groups of cities and counties to become energy “aggregators” — i.e. become the default provider of energy supplies as well as energy efficiency to their communities. It is a form of public power without the hassle of buying the wires. The law contains key passages that support independent administration of energy efficiency programs by Community Choice Aggregators as well as other non-utility parties.
  WEM helped pass this bill in the Legislature with non-utility energy efficiency opportunities intact. WEM works closely with the originator of the law, Paul Fenn of Local Power, who created similar laws that were adopted in Massachusetts and Ohio (where 80% of the State is now Community Choice). The law is designed to give cities control over their energy future similar to “Direct Access,” which primarily allows large businesses to bypass monopoly utilities and buy cheaper energy elsewhere.