THE *WEAKEST* LINK Utility–Administered Energy Efficiency Programs Center for the Study of Energy Markets CSEM Policy Conference December 9, 2008 Mark W. Toney, Ph.D., Executive Director TURN–The Utility Reform Network

Energy Efficiency: First Priority Resource for Utility Procurement Due to pressing need to reduce greenhouse gas emissions in a rapid and low–cost manner, there has never been a more important time for energy efficiency in California. California’s Long–Term Energy Efficiency Strategic Plan Adopted September 18, 2008 by CPUC

EE Measures of Success Minimize Harm to Environment Increase Energy Savings Meet Performance Benchmarks

What to Do if CFL Breaks (EPA) Open a window and leave room for 15 minutes. Shut off central heating or air conditioning. Do not use vacuum cleaner or broom. Place glass pieces and powder in sealed bag. Do not wash clothing contaminated with mercury. Dispose at local recycling/hazardous waste center.

Utility EE Programs Fail to Minimize Environment Harm Majority of Utilities’ 2006–08 energy savings come from 75 million CFLs. Each CFL contains 5 milligrams of environmentally toxic mercury. Utilities failed to educate consumers of home and environmental dangers.

CA Cumulative Energy GWh Savings: Utility EE Programs and Bldg/Appl Standards

Re-ordered CA Cumulative Energy GWh Savings: Utility EE Programs and Standards

Utility EE Programs Fail to Increase Energy Savings From 1995 to 2003 Utility EE programs failed to increase energy savings. Most state EE savings derive from appliance and building standards. IOU EE reliance on short-term solutions such as CFLs does not offset need to build additional power plants—as it should.

CA IOUs–Hooked on CFLs! IOUs’ EE portfolios upwards of 70% CFLs with free ridership rate of 60%. CFL market transformed; state and federal standards locking the savings in. CA can now meet 40% of its goals without IOU CFL program. IOUs should declare victory and move on. But, IOUs hooked on CFLs more than ever!

EE Performance Benchmarks for Shareholder Incentives 100%+ of Benchmark = 12% Earnings. 85–100% of Benchmark = 9% Earnings. 65–85% of Benchmark = 0% Earnings. Under 65% of Benchmark = 12% Penalty.

Utility EE Programs Fail to Meet Performance Benchmarks Utility EE Programs fell short of 85% of 2006– 07 goal = 0% incentives. Not expected to meet 2008 goals. Utilities are demanding that CPUC award them hundreds of millions anyway. Main argument of utilities is that they promised stockholder returns to Wall Street.

Utility EE Fails to Measure Up Over-reliance on CFLs damage environment. Contribution to Energy Savings is negligible. Demands incentives when none are earned. Reducing GHG is Too Important to Prolong Utility–Administration of EE Programs

Benefits of an Independent Energy Efficiency Utility in CA Most Green for the Least Green Exclusive focus on Energy Efficiency fosters innovation and performance. Increases ability to focus on long-term investments over short-term fixes. Redirects hundreds of million of dollars annually from administrative costs and shareholder incentives to EE program.