As part of a broader review and overhaul of its utility Efficiency Savings and Performance Incentive Mechanism (ESPI), the California Public Utilities Commission (CPUC) has issued a decision halting award payments to investor-owned utilities (IOUs) beginning with 2021 program year incentive payment claims. Decision 20-11-013 orders that the payment moratorium will remain in effect pending subsequent action to assess whether, how, or when a new version of ESPI or a new energy efficiency (EE) incentive mechanism can be devised and implemented. Notwithstanding the moratorium, the CPUC emphasized that its “commitment remains undiminished to prioritize energy efficiency as the first cost-effective resource in the loading order to meet California’s energy system needs.”
The CPUC noted that historically, performance incentive programs have been modified, terminated or replaced if found to be ineffective or unneeded. In the case of the ESPI, the CPUC found that the IOUs had not met the burden of proof to show that the ESPI remains necessary to ensure the achievement of energy savings. The decision found that while the IOUs argued that ESPI is required to motivate performance beyond statutorily required compliance levels for EE programs, the program also rewarded “below average performance” and “business as usual” performance levels. The CPUC specifically noted that the shift to third party and statewide administration of EE programs altered the efficacy of financial incentives, and that the IOUs did not expect or receive payment for the effective and safe performance of their utility obligations in other program areas. Further, the CPUC found that the moratorium would enable the redirection of funds previously allocated to awards toward “studies that examine how programs can be made more effective to increase future savings or to invest in innovative programs.
It is currently unclear when ESPI reforms will be considered or adopted, because Decision 20-11-013 indicates the CPUC intends to first complete review of energy efficiency program management and administration reform issues first. A July 3, 2020 Scoping Ruling initiated consideration of issues including a proposal to transition to a four-year portfolio filing process (in place of the current ten-year rolling filing process), and issues related to the identification of EE potential and setting of energy savings goals for program administrators.
For more information on EE programs and program review, contact: Lynn Haug or Ron Liebert