Issues: Oil & Energy

On September 23, 2004, the California Public Utilities Commission (CPUC) adopted the nation's most aggressive goals for saving electricity and natural gas through expanded investments in programs that assist customers in using energy more efficiently. Under the leadership of CPUC Commissioner Kennedy, CEC Commissioner Rosenfeld, and ALJ Gottstein, the CPUC's Decision 04-09-060 adopts energy saving targets for California's largest utilities that will more than double the current level of savings over the next decade. Combined, the electricity and natural gas savings will reduce carbon dioxide emissions by more than 9 million tons per year by 2013, equivalent to taking 1.8 million passenger vehicles (40% of Bay Area vehicles) off the road.

The CPUC's electricity saving goals will avoid the need to build 10 giant power plants over the next decade, saving Californians money and reducing pollution.

For more than half a decade, California has required a minimum level of investment in energy efficiency programs, funded through a small "public goods charge" (PGC) on utility bills. The Commission's recent decision will increase annual electricity savings by 150% above the savings achieved through the PGC-funded programs. By 2013, the cumulative savings from this expanded effort will total more than 23,000 GWh per year. In other words, by 2013 the energy efficiency programs will save more electricity than San Diego Gas & Electric currently supplies every year to its 1.3 million customers. The peak savings from the programs are expected reach nearly 5,000 MW by the end of the decade, equivalent to ten giant power plants.

The CPUC's savings goals will restore California's leadership on energy efficiency.

With the CPUC's new saving targets, California's annual electricity savings will reach 1% of total annual load by 2007. These goals will restore California's leadership role in energy efficiency, putting it ahead of the rest of the states' whose energy efficiency efforts deliver annual savings ranging from about 0.1% to 0.8% of load, according to a recent report by the American Council for an Energy-Efficient Economy (ACEEE).¹

Even in the context of California's historical achievements as a worldwide leader on energy efficiency, the CPUC's goals are appropriately aggressive. The savings targets will surpass California's historical peak demand savings in every year except for the extraordinary level of savings achieved during the state's mobilization to help calm the energy crisis in 2001. The CPUC's new goals will once again make California a worldwide leader on energy efficiency.

The electricity savings will cut California's growth in consumption and peak demand by more than half, and will reduce per capita electricity consumption.

The CEC's 2003 Integrated Energy Policy Report projects that energy consumption for the three regulated utilities will grow by nearly 33,000 GWh from 2004 to 2013.² This forecast assumes savings from the PGC programs continues, but does not include savings from any of the utility procurement programs. Without the PGC programs, consumption would be expected to grow by about 42,000 GWh over the decade. The energy saving goal set by the CPUC will result in savings of about 23,000 GWh by 2013, cutting the growth in consumption by more than half.

Similarly, the CEC expects demand to grow by about 6,100 MW over the next decade. Without the PGC programs, peak demand would be expected to grow by about 8,100 MW. During that period, the efficiency programs under the CPUC's new targets will save a total of nearly 5,000 MW, cutting demand growth by 60%.

Sources: U.S. Census Bureau, California Department of Finance, U.S. Energy Information Administration, Edison Electric Institute, California Energy Commission, California Public Utilities Commission

Utility plans to procure energy efficiency as a resource put them on target to meet the savings goals over the next five years.

California is already well on its way to achieving the CPUC's new targets. State policy has made energy efficiency the utilities' top priority procurement resource. The utilities have already increased program activity and are expecting to attain savings 80% above the PGC levels in 2004 and 2005. The utilities' 2004 long-term investment plans put them on target to meet the CPUC's new savings goals over the next five years; in the latter part of the decade, the CPUC's decision will encourage the utilities to continue to pursue energy efficiency even more aggressively.

Energy efficiency will continue to be a primary resource to meet Californians' energy service needs.

By 2013, the cumulative impact of the energy efficiency programs starting in 2004 will reach about 10% of load and peak demand, on top of the savings that have been accumulating from past programs. These savings will clearly make a substantial contribution to meeting Californians' energy service needs. In addition, these energy savings typically cost less than half of the cost of generating power. The Commission's electricity saving targets will provide a substantial resource, while at the same time saving Californians money and cutting air pollution.

The CPUC's natural gas saving goals will triple the annual gas savings by the end of the decade.

With natural gas prices rising sharply in recent years and the prospect of continued high prices this winter, the CPUC has taken a decisive step to lower customer gas bills. The Commission's recent decision calls for a rapid ramp-up in natural gas efficiency programs. The CPUC set a goal of doubling the annual natural gas savings achieved by the efficiency programs by 2008, and more than tripling the annual savings by the end of ten years.

With the new goals, by 2013 the cumulative effect of the programs will be annual natural gas savings of 444 million therms (MMTh), equivalent to the consumption of one million households. In other words, by 2013, the programs will save enough gas every year to serve a community the size of Orange County.

The gas savings will cut California's growth in end-use natural gas consumption in half.

The CEC's 2003 Integrated Energy Policy Report projects that end-use natural gas consumption for the three regulated utilities will grow by about 750 MMTh from 2004 to 2013.³ This forecast assumes savings from the PGC programs continues; without the PGC programs, consumption would be expected to grow by nearly 1,000 MMTh over the decade. The natural gas saving goal set by the CPUC will result in total savings of about 444 MMTh by 2013, cutting the growth in end-use consumption almost in half.

The Commission's decision puts natural gas efficiency programs on an equal footing with supply-side resources as a strategy to meet customers' needs.

The Commission's decision specifically directs the utilities to reflect the natural gas saving targets in any applications for supply-side procurement or pipeline needs. This will ensure that the savings properly offset traditional supply-side resources. And since the savings from the efficiency programs are cheaper than procuring natural gas, the Commission's decision is the first step to enable efficiency programs to compete for the utilities' procurement funding.

The utilities have already expanded the efficiency programs to bring relief to customers facing high gas bills this winter.

The Commission's leadership is bringing immediate benefits to California. The utilities requested and received approval to expand the natural gas energy efficiency programs to provide relief for customers facing high gas bills this winter. This accelerated efficiency effort will save customers money, strengthen California's economy, and help protect the environment.

Notes

1. Kushler, M., D. York, and P. Witte, "Five Years In: An Examination of the First Half-Decade of Public Benefits Energy Efficiency Policies," April 2004, p. vi.

2. California Energy Commission, "Integrated Energy Policy Report: Appendix A," December 2003.

3. California Energy Commission, "Integrated Energy Policy Report: Appendix E," December 2003.