Utility Low-Income Efficiency Programs in Need of Upgrade

The California Public Utilities Commission released a draft decision on California’s Energy Savings Assistance (ESA) program last week, marking the beginning of a stakeholder process to set the future of the program through 2026.

The guidance encourages new direction for a program that has long-struggled to produce savings and fully spend its budget. The ESA program, designed to help low-income households save money on their monthly energy bills through no-cost weatherization services while improving their health, comfort, and safety—hasn’t been saving as much energy as it could be, and hasn’t been reducing spending in quite the way envisioned: More than $580 million in funding authorized to improve efficiency in low-income households still hasn’t been spent.

Reform is needed. Low-income households face a disproportionate energy burden, spending up to three times as much of their income on energy as other households and up to 15 percent of their total income on energy alone. To help address this inequity, the California Public Utilities Commission for the first time established formal energy-savings targets for the ESA program in 2016, instructing the investor-owned utilities to achieve meaningful reductions in low-income household energy usage, which correlates directly with bill savings. 

Two years in—now halfway through the current program cycle—just how well are the utilities doing in achieving those targets? 

Coming Up Short on Savings

According to the most recent annual ESA program reports, PG&E and Southern California Edison met their electricity savings targets for both 2017 and 2018, while SDG&E achieved just around half to three-quarters of its target in both years. Meanwhile, none of the utilities met their gas savings targets in 2017, and all except PG&E achieved even lower savings for 2018.

And yet, despite the lackluster savings achievements, all utilities met or came much closer to achieving the required number of households they had to serve in each year. Rather than a measure of success, however, this statistic highlights a problem with the existing ESA program structure: the focus on installing lighter touch measures to reach the participation goal continues to detract from the accomplishment of meaningful energy and bill savings or improvements to household comfort, health, and safety.  

Hundreds of Millions in ESA Funds Left Unspent

Not only have utilities consistently fallen short of providing deeper savings for low-income households, but they’ve historically done so while failing to spend much of the money collected and authorized for these low-income programs. At the time of the Commission’s establishment of formal energy savings targets in 2016, over $400 million in unspent funds had accumulated among the utilities’ programs since 2009. As of 2019, even after programmatic modifications to prevent against future underspending and explicit directives from the Commission to spend down the accumulated funds, now over $580 million in funds meant to benefit low-income households has been left on the table.

While this isn’t necessarily the result of intentional or negligent underspending (programmatic limitations restrict the utilities’ allowable measure offerings and the amount of money they can spend), it’s clear that something more must be done to ensure that low-income households are able to realize the savings that this money was collected to provide. At a time when utility disconnections have been rising for the past several years, leaving this money unspent means higher bills for customers already struggling to keep the lights on.

More Is Possible: Turning the Dial on ESA’s Effectiveness

These results do not mean that the utilities’ programs have been complete failures, but they do clearly show that utilities need to—and were intended to—do more. In fact, a recent report shows the utilities could capture substantial energy savings if the policy rules allowed for it. The Energy Efficiency for All (EEFA) coalition recently conducted an analysis of the energy efficiency potential available in California, finding savings of more than 4 times those currently achieved by ESA are both feasible and cost-effective.

Not only are these increased savings possible, they’re currently being achieved by other low-income energy efficiency programs. The Low-Income Weatherization Program (LIWP), administered by the California Department of Community Services and Development, has achieved nearly thirteen times the average energy savings per home as compared to ESA.

While there are important distinctions between the programs that partially contribute to the differences, such as ESA’s per-unit spending cap, the gulf in reported achievements provides even further evidence that ESA programs could be achieving much more.

The EEFA analysis findings suggest that the existing savings targets, formulated based on past program performance and not actual potential, are just a fraction of what utilities could be doing for low-income households. Rather than lowering targets as some have proposed, the report demonstrates the need to maintain or even increase the existing targets to ensure that California’s low-income households benefit from the savings currently being left on the table.

Putting Savings Back on the Table for Low-Income Families – What’s Next?

Serious reflections on the success of the ESA program are overdue, and serious consideration into comprehensive program improvement is in order. Fortunately, with nearly two years left in the current ESA program cycle, there’s still time for utilities to retune their programs to achieve the benefits and savings envisioned by the Commission.

As for the next ESA program cycle, the Commission released its guidance for the 2021-2026 program years this week, expressly highlighting the need for a renewed focus on deeper energy savings and innovative program design (including third party administration of a multi-family whole building program).

As the Commission continues to consider modifications for the next program cycle, NRDC together with the Energy Efficiency for All Coalition—which includes the California Environmental Justice Coalition, Greenlining Institute, Association for Energy Affordability, and California Housing Partnership Coalition, among others—will be working to ensure that California’s low-income households are able to benefit from the full potential of the ESA program and that all available energy and bill savings are achieved.