1. Overview of California’s Policy & Funding Resource Commitments to Energy Efficiency Reference material for October 12, 2012 Governor’s Office Energy Efficiency “Big Think” Forum

2. Comprehensive Policy Approach Clear Policy “EE is #1 in resource loading order” Linked to resource plans & procurement Firm Standards Statewide EE building codes & and appliance standards Adequate Utility Financial Motivators & Funding Decoupling sales from revenues Performance-based incentives/penalties Non-bypassable EE surcharge Rigorous Evaluation, Measurement, and Verification (EM&V)

3. California Energy Agency Roles 3 CPUC ROLE  Establish direction for investor owned utility (IOU) energy efficiency programs  Approve and monitor IOU’s implementation of the their efficiency programs  Independently evaluate IOU program energy savings and establish shareholder incentives based upon program performance CPUC ROLE  Establish direction for investor owned utility (IOU) energy efficiency programs  Approve and monitor IOU’s implementation of the their efficiency programs  Independently evaluate IOU program energy savings and establish shareholder incentives based upon program performance CEC ROLE  Regulate minimum standards for building energy efficiency and work with local building departments to oversee enforcement  Regulate minimum energy efficiency standards for appliances sold in California  Implement a comprehensive program to reduce energy consumption in existing buildings CEC ROLE  Regulate minimum standards for building energy efficiency and work with local building departments to oversee enforcement  Regulate minimum energy efficiency standards for appliances sold in California  Implement a comprehensive program to reduce energy consumption in existing buildings

4. 1 – 2% of electric bill Energy Savings Achieved both from Utility Efficiency Programs and CEC Standards

5. CPUC and CEC Coordination on EE Programs & Activities Codes & Standards (C&S) –C&S advocacy; Codes & Standards Enforcement (CASE) studies –Compliance Enhancement – Training, tools, outreach to building departments Emerging Technologies Program (ETP) –Commercialization focus; coordinate with PIER through Emerging Technologies Coordinating Council (ETCC) AB 758 –Financing assessment underway in anticipation of coordinating with CEC on program design Energy Upgrade California (EUC)* –IOU-administered activities funded by ratepayers - $110M “Whole-house retrofit” incentives, marketing, training, quality assurance –CEC-administered activities funded by ARRA / SEP - $52M Marketing, website, financing support, training, (limited) local government incentives –Local government-administered activities funded by ARRA block grants / DOE “Better Buildings” - $40M (Limited) local government incentives, innovative marketing ARRA appliance rebates & IOU rebates Evaluation coordinating group (CEC / CPUC staff) –Lending CPUC expertise / resources to CEC’s limited ARRA evaluation budget –Ensuring no double-counting of savings * Note: EUC is residential and commercial buildings retrofit program and brand. Initially, the program was focused mostly on single-family residential. $ figures are for residential sector only. Slide 5

6. CEC Role on Energy Efficiency Policies and Regulations  Appliance Standards: Title 20 Requires Minimum levels of energy efficiency for appliances and equipment sold or offered for sale in California SB 454 authorized Energy Commission to levy fines for violations  Building Standards: Title 24 Part 6 Standards for newly constructed buildings, additions and alterations Title 24 enforced by local building departments Up to 90% of HVAC retrofits fail to pull permits SB 454 (Pavley, 2011) directed IOUs to not provide rebates unless permits are pulled 6

7. Additional Legislative Action on Energy Efficiency Policies and Regulations Existing Buildings :  SB 1922 (Lewis, 1994): Home Energy Rating System (HERS) Regulations  AB 549 (Longville, 2001): Recommendations of energy use disclosure regulations  AB 1103 ( Saldana, 2007): Benchmarking and disclosure of EE for commercial buildings  AB 758 (Skinner, 2009): Comprehensive EE program for existing buildings (see next slide for detail) 7

8. AB 758 (Skinner, 2009)  Calls for a comprehensive program to achieve energy savings in California’s existing buildings  CEC must develop and implement program, in collaboration with all stakeholders, particularly the CPUC.  Proceeding open and underway 2012-2013.  Program Components:  Energy Assessments  Energy Use Disclosures  Building Energy Use Ratings and Labels  Financing Options  Cost Effective Efficiency Improvements  Public Outreach and Awareness Campaign  Workforce Development 8

9. CA Building Efficiency Standards and Appliance Efficiency Standards saved more than $65 billion in electricity, natural gas costs since 1978

10. Energy Efficiency is a Resource Generation Benefits – Saves capacity and energy – Lowers fuel costs – Reduces required reserves Transmission and Distribution Benefits – Defers new investment – Improves reliability Resource Benefits –Promotes Integrated Resource Planning Environmental Benefits –Paves the way for sustainable growth –Reduces GHG emissions

11. Decoupling for gas Deregulated market begins Utilities’ resume portfolio management; PGC takes effect Electricity Crisis Energy Action Plan makes EE top priority IOU decoupling restored; CPUC sets aggressive 10-year targets SB 1037 makes EE top priority and requires POU reporting IOU administration restored; new incentive mechanism; AB 2021 requires POUs to set targets California’s History of Energy Efficiency Action – Utility Program Perspective Decoupling for electric Source: Natural Resources Defense Council (NRDC), as modified by Energy Division 4/25/2011

12. Aggressive California EE/GHG Goals California Air Resources Board Scoping Plan EE Target (Nov, 2008): –32,000 GWh and 800 MMTherms/year –19.5 MMT CO 2 E in 2020 –Utility programs, codes & standards, voluntary action –EE and solar water heating 15% of AB32 Plan –(Cap and trade target is 20% of Plan) CPUC 2020 interim “Total Market Gross” EE goals (July, 2008): –16,000 GWh and 620 MMTherms/year –Equal to nine or ten power plants avoided

13. CPUC EE Goals Through 2020 Goals set for CPUC-regulated utilities from 2004 through 2020, in accordance with best available data on energy efficiency potential. Does not take into account potential within Publicly-Owned Utility Service Areas Based primarily on existing technologies and rates of adoption

14. The AB 32 Challenge While California efforts in EE have contributed to stabilized per capita emission levels, California’s long-term goals will require dramatically redoubled efforts and success.

15. Challenges to California’s EE Programs 2010-2012 Funding Source 3 yr total= $3.1 Billion Procurement Funds Benefit / Cost (TRC) Portfolio Cycle Declining IOU Portfolio Cost Effectiveness over time (excluding Low Income EE Programs) Public Goods Charge* * Replaced by utility procurement funds for 2012 due to sun-setting of PGC statutory authority

16. EE Potential by End Use (Illustrative) Source – Itron 2008 Potential Study as exhibited in Southern California Edison Testimony, Application for Approval of Low Income Assistance Programs and Budgets for Program Years 2009-2011, pg. 32.

17. Long-Term Energy Efficiency Strategic Plan In September 2008, Strategic Plan established a roadmap for energy efficiency through 2020 and beyond. Updated 2011. Features: A long term vision to achieve market transformation. Engaged wide-ranging stakeholders including builders and designers, operators & managers, manufacturers & distributors. Workforce development viewed as vital issue. Marketing, education and outreach effort recognized as critical to create demand for efficiency solutions.

18. Identifying Strategies to Fill in the “White Space”

19. 2010-2012 Investor-Owned Utility Planned Efficiency Resource Program Savings Slide 19

20. 2010-12 Investor-Owned Utility Energy Efficiency Budget by Program Local government partnerships ($233M); institutional partnerships ($95M) included Third-party programs + Local Government Partnerships ~ 1/3 of portfolio spending by non-utility entities

21. Statewide Programs [63%] Residential Commercial Industrial Agricultural Heating, Ventilation, Air Conditioning New Construction Emerging Technologies Codes & Standards Marketing, Education & Outreach Workforce Education & Training Integrated Demand-side Management Lighting Market Transformation PG&E (7) SCE (4) SDG&E (6) SCG (5) PG&E (50) SCE (31) SDG&E (14) SCG (18) PG&E (25) SCE (30) SDG&E (14) SCG (17) Composition of 2010-12 IOU Efficiency Programs Portfolio [%] = Percent of total portfolio budget ($3.1 billion) (#) = Number of individual programs Utility “Local” Programs [3%] Third-Party Programs [20%] State & Local Gov’t Programs [10%] Note: Evaluation, Measurement & Verification is 4% of total portfolio budget

22. Looking Ahead…Issues for EE Market Transformation –Need to distinguish market transformation (MT) from “resource acquisition.” Consider statewide administration of MT approaches? Innovation –Many promising technologies. How to bring to market and scale-up faster? –New business models for EE program deliverers. How support these to flourish? Competition –Increase competition for highly effective programs to access ratepayer funds in some way? –Utilize 3 rd -party program solicitations to drive new program approaches and scaling? Financing –California needs to find market-specific solutions for EE financing. CPUC is guiding ratepayer $ involvement and support. –Need solutions that allow cost repayment by successor owners or tenants (“transferability” or “tied to meter”. Solutions, structures, risk TBD. Slide 22

23. EE Market-Place Challenges Market strategies need to extend beyond utility programs, leverage private resources, capture economic value Promote the business potential, capital investment opportunities Mobilize bold action and create a "movement" for EE and other demand-side actions, behavior, investment: –Achieve deeper action – 20%, 40 %, 70% efficiency gains –Pull consumer and business demand; call on comparative benchmarks –Marketing to reflect understanding of market segments, motivations,... Expand knowledgeable and trained providers who can successfully sell and deliver results Innovate effective financing mechanisms – long amortization terms and transferable to successive owners/occupants (OBF, PACE,...)