California Energy Efficiency Programs Energy Efficiency Section CPUC Energy Division April 23, 2008

Energy Efficiency - Definition A subset of Demand Side Management Typically refers to the permanent installation of energy efficient technologies or the elimination of energy losses in existing energy using systems, but there are gray areas and overlaps Energy efficiency aims at maintaining a comparable level of service while reducing energy consumption Broad categories of energy efficiency programs: Residential Commercial/Industrial/Agricultural New Construction Excludes: conservation, load management, renewables

Why Energy Efficiency? A cost-effective resource option in meeting growing energy needs of consumers Significant Environmental benefits from avoiding generation Paves the way for sustainable growth

Cost Effectiveness of 2006-2008 Energy Efficiency Programs The authorized $2 billion funding will: Cut energy costs for homes & businesses by more than $5 billion Avoid building 3 large (500 MW) power plants over the next three years Reduce global warming pollution by an estimated 3.4 million tons of carbon dioxide by 2008, which is equivalent to taking about 650,000 cars off the road Increase funding for the Governor’s Green Building Initiative (Executive Order S-20-04) to $230 million/year, which is a 36 increase in annual funding for climate change efforts Provide net resource benefits (value of savings benefits minus program and customer out-of-pocket costs) of estimated $2.7 billion, representing a benefit cost ratio (using Total Resource Costs or TRC test) of 2 to 1 return on the efficiency investment

California Global Warming Protection Act Signed into law by Governor Schwarzenegger on September 27, 2006 Requires reduction in greenhouse gas emissions to 1990 levels by 2020 Emissions covered Carbon dioxide Methane Nitrous oxide Hydrofluorocarbons Perfluorocarbons Sulfur hexafluoride

GHG Emission Reductions From EE & DR Programs – 23%+ of California Climate Action Goals for 2020 California Programs GHG Savings (Million Tons CO2) 2010 2020 IOU Energy Efficiency Programs through 2013 4 8.8 Additional IOU EE/Demand Response Programs (2014- 2020) NA 6.3 Municipal Utility EE Programs 1 5.9 Current Building & Appliance EE Standards 7 New Building & Appliance EE Standards TBD Green Buildings Initiative 0.5 1.8 Combined Heat and Power Initiative 1.1 4.4 Total: 10.6 34.2 Source: Climate Action Team Report to Governor Schwarzenegger and the Legislature, March 2006. www.climatechange.ca.gov

Electricity and Natural Gas Program Savings Goals CPUC Energy Savings Goals would cut growth in energy use by more than half by 2013. Electricity and Natural Gas Program Savings Goals   2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Annual Electricity Savings (GWH/yr) 1,838 2,032 2,275 2,505 2,538 2,465 2,513 2,547 2,631 Cumulative Savings (GWH/yr) 3,677 5,709 7,984 10,489 13,027 15,492 18,005 20,552 23,183 Peak Savings (MW) 379 757 1,199 1,677 2,205 2,740 3,259 3,789 4,328 4,885 Annual Natural Gas Savings (MMTh/yr) 21 30 37 44 52 54 57 61 67 Cumulative Natural Gas Savings (MMTh/yr) 42 72 110 154 206 260 316 377 444

California Compared to US Energy Efficiency

Annual Energy Savings from Energy Efficiency Programs and Standards 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 GWh/year Appliance Standards Building Standards Utility Efficiency Programs at a cost of ~1% of electric bill ~15% of Annual Electricity Use in California in 2003

Funding for CA Energy Efficiency Programs Two Sources: Public Goods Charge California’s energy efficiency programs are funded by electric Public Goods Charge and natural gas Public Purpose Program charge applied to each customer’s bill Surcharges approximately 1% (electric) and 0.7% (gas) of each customer’s bill and provide approximately $270 million annually to fund energy efficiency programs Procurement Energy efficiency is treated as a resource Utilities “purchase” energy efficiency as they purchase electric supply The procurement portfolio includes energy efficiency along with traditional supply What is the role of energy efficiency in energy planning and investment or procurement policies? What are the approaches to utility cost recovery, incentives, and related regulatory practices?

Funding for 2004-2005 Energy Efficiency Programs Increased to $823 Million Using Procurement Funds Funding Sources for 2004-2005 Programs Funding Sources Millions Electric Public Goods Charge (PGC) $460 m Procurement Funds $245 m AB 1002 Gas Surcharge $91 m Unspent/uncommitted PGC& Gas Funds (1998-2003 $24 m Interest for PGC & Gas Funds $3 m Total $823 m

2006-2008 Energy Efficiency Budget & Projected Savings per D.05-04-043

Total Annual California IOU EE Actual Spending (all IOUs rolled up) 2004-2007 source:  Utility Annual Reports for 2004 and 2005, Table 1.1 and 2006, Table 3.  Utility 2007 Monthly Reports, Table 1.1 posted to http://eega2006.cpuc.ca.gov

Energy Efficiency: 2006-2008 Statewide Programs Residential Commercial/Industrial/Agricultural On/Off-Bill Financing New Construction Codes & Standards Emerging Technologies Statewide Marketing and Outreach Third Party (EE Contractors) Programs Government Agencies Partnership Programs Information on CA utility EE programs: www.californiaenergyefficiency.com Energy Efficiency

Types of Energy Efficiency Programs Rebate – Customer purchases energy efficiency measure at lower cost with the difference paid for by the program Audit – Inspection of a home or business to identify energy efficiency opportunities Direct Install – Installation of energy efficiency measures at no cost to the customer Appliance Turn-In – Takes inefficient appliances out of circulation with free or rebated recycling services Education – Training for the general public as well as trade allies such as builders or building operators Performance Contracting – Typically nonresidential programs; provides rebate for equipment and building retrofit per unit of energy saved rather than per measure purchased or installed Energy Management Services – Typically Nonresidential programs. A combination of audit services, rebates and/or direct install, as well as load management and self-generation. What are the most common and successful utility energy efficiency programs and technologies? What types of consumers are targeted by different energy efficiency program designs?

Building Energy Efficiency Programs Codes and Standards Program Promotes energy savings through the identification, quantification, and substantiation of changes to building and appliance codes and standards that represent the best practices in energy efficiency. UC/CSU Schools Program Provides University of California and California State University schools incentives for building retrofit projects and monitoring based commissioning, and education and training for campus energy managers using the UC/CSU systems of communication and outreach channels to achieve board penetration of local campuses. Governmental Agency Partnerships Partners with governmental agencies to seek opportunities to bridge the activities of the agency with the energy efficiency resources of the utilities to deliver cost-effective long-term energy savings at agency buildings and facilities.

Building Energy Efficiency Programs (continued) Building Retro-Commissioning Program Applies a systematic process for improving and optimizing larger sized building operations. The process is intended to optimize how equipment operates as a system in large buildings to save energy. Building Operator Certification Program Provides training to building operators on how to run a building properly, and to identify opportunities that can save energy and reduce peak demand. Savings By Design Program Moves customers and design industry professionals to design their new or remodel buildings/facilities to integrate energy use and environmental considerations into their standard process of design to achieve cost-effective levels of energy and resource efficiency.

Evaluation Planning The Commission approved over $162 million of funding for EM&V and related projects Developed a methodology to (1) assess risks associated with the utilities’ programs, (2) determine impact evaluation priorities and rigor level requirements, and (3) Allocate funding to specific projects Currently preparing evaluation research plans and competitive bid documents

Can we go further…?

CPUC Sets Aggressive Energy Savings Goals through 2013 Goals adopted in D.04-09-060 consistent with Energy Action Plan Goals reflect importance of reducing energy use per capita in CA Electric goals expected to capture 70% of the economic potential & 90% of the maximum achievable potential savings Goals represent 116% increase in expected savings over the next decade Three-year cycle updating savings goals in concert with a three-year program planning & funding cycle for energy efficiency How much confidence is there in the energy savings and cost effectiveness of energy efficiency programs?

Commission Adoption of Decision 07-10-032 On October 18, 2007 Established a New Framework for EE Program Planning: Direct the utilities to prepare a single, comprehensive statewide long-term energy efficiency plan; Adopt three programmatic initiatives: All new residential construction in California will be zero net energy by 2020; All new commercial construction in California will be zero net energy by 2030; and Heating, Ventilation, and Air Conditioning (HVAC) industry will be reshaped to ensure optimal equipment performance; Develop the “next generation” of California utility energy efficiency programs for 2009-2011; Commit in the near term to adopting utility energy efficiency goals through 2020 and reaffirm our previously adopted 2009-2011 goals; and Establish new, collaborative processes with key business, consumer groups, and governmental organizations in California, throughout the West, nationally and internationally.

Additional Direction From D.07-10-032 In this decision the Commission required the utilities to: Engage in long-term strategic planning; Collaborate with others who engage in planning and delivery of energy efficiency related goods and services, or who receive such services; and Integrate customer demand-side programs, such as energy efficiency, self-generation, advanced metering, and demand response, in a coherent and efficient manner.

Why integrate? (coordinate) Avoid lost opportunities Achieve market transformation Big Bold Programmatic Initiatives Access efficiencies in delivery systems Access additional EE (& other DSM energy savings)

New Participants Alliance to Save Energy American Council for an Energy Efficient Economy Better Buildings Incorporated California Apartment Coalition California Building Performance Contractors Association California Natural Gas Vehicle Coalition Conservation Services Group Ecology Action Energy Coalition EP Investments Incorporated Global Energy Partners LLC Heller Manus Architects ICE Energy, Inc. Inland Empire Utilities Agency Northwest Energy Efficiency Alliance Quantum Energy Services & Technologies, Inc. Robert Mowris and Associates Sacramento Municipal Utility District Schweitzer and Associates Small Business California University of California, Davis Energy Efficiency Center Western Cooling Efficiency Center Here is a sample of just some of the new participants in the PUC process via this decision. Ultimately, it is going to take the type of Public-Private-Institutional effort represented here on a vast scale. We want to transform the way we do energy efficiency --to advance from programs that distribute free light bulbs to systematic efforts that make energy efficiency “business as usual” in California. Saving energy will be a lifestyle in California and not a program.

What to integrate (coordinate) in Calif. EE Strategic Plan: Full range of consumer demand side options Present systems approach for all measures, programs & activities Collaboratively engage market professionals and stakeholders www.californiaenergyefficiency.com

What level of complexity? Marketing, packaging & delivery (eg., outreach) Operational improvements (eg., audits) Optimization (eg., equipment recommendations) RD&D Market Transformation New partnerships, players & approaches

Areas for Integtration Integration requirements (D-07-32-01) Similar DR-EE program application filing schedules Describe programs, activities, and funding requests for combined or coordinated DR/EE activities Include specific proposals for implementing coordinated approaches to M & O Leveraging funds for joint marketing of DR/EE/DSM Consistent information in EE program Include iDSM pilot projects (ALJ Ruling, D. 07-01-041)

Defining Success: kW, kWh Saving $ Avoiding lost opportunities Reducing GHGs Water Sustainability

Big Bold Energy Efficiency Strategies Commercial New Construction All new commercial construction in California will be zero net energy by 2030. Residential / Small Commercial HVAC Heating, Ventilation, and Air Conditioning (HVAC) industry will be reshaped Residential New Construction All new residential construction in California will be zero net energy by 2020. Low-Income Energy Efficiency All eligible homes energy-efficient by 2020.

For Additional Questions Contact: Lisa Paulo Regulatory Analyst, Energy Efficiency California Public Utilities Commission 505 Van Ness Ave. SF 94102 415-355-5495 LP1@cpuc.ca.gov