Susan Shelley: The folly of state energy policy

Your electricity bill is too high, and one of the reasons for this is so idiotic, even the California state auditor had to say something.

“The benefits of energy efficiency programs may not be worth their cost to ratepayers,” State Auditor Grant Parks wrote in a report released on March 18. “None of the utilities’ program portfolios met their annual goals in at least five of the seven years from 2016 through 2022, and none have met electric energy-savings goals since 2019.”

The California Public Utilities Commission (CPUC) requires the investor-owned utilities — Southern California Edison, Pacific Gas & Electric, San Diego Gas & Electric and Southern California Gas Company — to sign contracts with third-party providers of “energy efficiency” programs. The cost, about $1 billion annually, is billed to ratepayers.

To find out how well the CPUC was overseeing these programs, the state Legislature’s Joint Legislative Audit Committee directed the auditor to conduct a review. State law (Public Utilities Code Section 454.5), makes the CPUC responsible for ensuring that “electrical corporations” meet their “unmet resource needs through all available energy efficiency and demand reduction resources that are cost effective, reliable, and feasible.”

There’s no definition of “cost-effective, reliable and feasible.” It’s whatever they say it is.

Are you wondering why these extra costs are necessary at all? According to the auditor’s report, the energy savings from these programs “help the state meet its goals to reduce greenhouse gas emissions to 40 percent below 1990 levels by 2030.”

But there’s no energy savings.

“From 2012 through 2022, utilities’ program portfolios rarely achieved the CPUC’s current cost-effectiveness requirement, indicating that program portfolios’ costs outweigh their benefits,” the auditor reported.

Examples of programs like these can be found on the website of Southern California Edison. The company explains that the investor-owned utilities were “ordered” by the CPUC to procure energy efficiency programs, and as a result, “each IOU entered into contracts with certain vendors who were selected through competitive solicitation processes.”

They’re not vouching for any of it. SCE says the list is presented “for informational purposes only and as a convenience to customers,” and “SCE does not design,” “install” or “determine what measures are eligible or appropriate for customers,” “is not and shall not be deemed a party or guarantor” and “is not liable.” Further, SCE “does not recommend, endorse, qualify, guarantee or make any representations or warranties regarding the work, quality, financial stability or performance” of the third-party companies or any of their contractors.

If legal disclaimers saved energy, that one would cut your bill in half.

The various programs offer a “complimentary, comprehensive analysis” to identify “potential energy savings” in buildings, or rebates that equipment dealers can offer their customers. There’s also an “emerging technologies program” to “identify and resource ideas” and “test selected products.”

Nearly 20% of the investor-owned utilities’ customers are behind on paying their bills, and their bills included $812 million for these useless programs in 2022 alone.

Supporters of the programs say the main problem is too much success. All the “low-hanging fruit” of energy efficiency has already been achieved, they say, and now it’s not as easy as changing a light bulb, proving that the programs are needed more than ever.

The auditor’s report gently suggested that the CPUC could better protect ratepayers by “proactively identifying underperforming efficiency programs, and eliminating those that do not save sufficient energy or do not prove to be cost‑effective.”

The CPUC disagreed with that recommendation but said it “agrees with its spirit,” which may be the most California thing you’ll every pay for.

The auditor also recommended that the Legislature “consider amending state law to require the CPUC to eliminate funding for chronically underperforming programs.”

That’s a good idea just generally. They could start with the high-speed rail project.

As for protecting ratepayers, the CPUC has demonstrated repeatedly that it is in the business of sticking it to ratepayers. That’s because it has to balance the need to achieve the state’s unique climate targets with the need to keep the investor-owned utilities from going bankrupt.

You see, California’s government counts on the investor-owned utilities to invest in solar panels and windmills and grid upgrades and charging infrastructure and the cap-and-trade permits that help fund the bullet train. The utilities also have to procure natural gas, nuclear and hydroelectric electricity to back up the intermittent and insufficient renewable energy that state law requires them to buy.

Money is no object, as long as the utilities can pass the costs through to the ratepayers. That’s the CPUC’s job: find a way to approve the rate hikes. Because if the investor-owned utilities teeter on the edge of bankruptcy, if they cut their dividends and their stock prices crash, if their credit rating is hurt and their costs go up, then there’s nobody to pay for all the green energy infrastructure except taxpayers.

Politicians don’t want the cost to fall on taxpayers, because taxpayers will blame the politicians, whereas ratepayers will blame the utility companies. They’re the same people, but they get the bad news in different envelopes.

Wildfire costs are passed through to ratepayers the same way, and for the same reasons. State law makes the utilities liable for all the damage from a fire if a spark from their equipment started any of it. But it’s the state’s failure to do appropriate land management for fire mitigation that has caused wildfires to become massive and unstoppable. Then more bad news arrives in the insurance companies’ envelopes.

At the end of the auditor’s report on energy efficiency programs, there’s a note acknowledging that the basis for cost-benefit calculations was changed in 2024, after the report’s cut-off date. The CPUC invented a new metric called “Total System Benefit.” From now on, instead of counting only energy savings as an energy efficiency benefit, the CPUC will also count “equity” and “market development.”

It’s a slush fund. The Legislature should turn its lights out.

Write Susan@SusanShelley.com and follow her on X @Susan_Shelley