California makes efficiency “business as usual”

California — already a leader in intelligent utility regulations — is taking aggressive steps to stay the leader. The California Public Utilities Commission (PUC) made the following remarkable proposal last month:

In adddition, the PUC established “a new system of incentives and penalties to drive investor-owned utilities above and beyond California’s aggressive energy savings goals.” Under this framework:

Earnings to shareholders accrue only when a utility produces positive net benefits (savings minus costs) for ratepayers. The shareholder “reward” side of the incentive mechanism is balanced by the risk of financial penalties for substandard performance in achieving the PUC’s per kilowatt, kilowatt-hour, and therm savings goals.

Kudos to the PUC for its aggressive strategy, which “puts energy efficiency on an equal footing with utility generation,” as Commissioner Timothy Alan Simon put it. “It will align utility corporate culture with California’s environmental values.”

Even though utility regulations seem mundane, they are a core climate strategy, so here are some more details of the PUC’s ground-breaking decision:

Earnings begin to accrue at a 9 percent sharing rate if the utility meets 85 percent of the PUC’s savings goals. If performance achieves 100 percent of the goals, the earnings rate increases from 9 percent to 12 percent. Each earnings rate is a “shared-savings” percentage. This means, for example, if the combined utilities achieve 100 percent of the 2006-2008 savings goals and the verified net benefits (resource savings minus total portfolio costs) at that level of performance is $2.7 billion, then $2.4 billion (88 percent) of those net benefits goes to ratepayers and $323 million (12 percent) goes to utility shareholders. If utility portfolio performance falls to 65 percent of the savings goals or lower, then financial penalties begin to accrue.

You can read more on what the PUC is doing here.

Want to stay in-the-know on all things climate? Subscribe to our RSS Feed!

5 Responses to California makes efficiency “business as usual”

  1. Sam W says:

    This link is broken:
    You can read more on what the PUC is doing here.

  2. Joe says:

    Fixed, thanks!

  3. juliana65 says:

    Mark Twain created some wonderful sayings – some of them very relevant to this project, such as: “Architects cannot teach nature anything”, and perhaps most pertinent of all: “Nothing so needs reforming as other people’s habits.” The reason I mention Twain is that the EEB project recently spent a valuable afternoon in the new (LEED certified) Mark Twain House & Museum in Hartford, Connecticut. Hartford is also the home of United Technologies, an EEB co-chair. The company hosted a meeting of the EEB group. An afternoon session in the museum brought together 17 “thought leaders” representing key stakeholders from the U.S. building sector. They included developers, architects, policy-makers, academics and NGOs.

    California Alcohol Addiction Treatment

  4. msn nickleri says:

    This link is broken:
    You can read more on what the PUC is doing here.