And who pays the bonuses? The customers.
The so-called energy efficiency shareholder bonus scheme is just one example of how the state’s utility regulator, the California Public Utilities Commission, ties itself in knots trying to appease the big electricity suppliers and ends up with policy that has only a weak impact on emissions, and displeases the public - giving energy efficiency a bad name in the state.
It's small wonder "energy efficiency" policies are unpopular with the public at large because they mean higher utility bills, when they should save money for ordinary people. Public revolt over smart meters is just one example.
California was the first state to introduce “decoupling” in the energy industry in the 1980s, and removed the link between revenue and sales to encourage companies to improve energy efficiency. The shareholder bonus scheme was introduced to compensate companies for loss of revenue caused by lower sales of energy.
PG&E’s ratepayers already pay for energy efficiency schemes, such as subsidized CFLs, under the public goods charge which is clearly marked as a surcharge on bills. However, the amount that consumers are charged, for using less electricity under the shareholder bonus scheme is simply added to the bill. How much individuals pay for the scheme is opaque. This double dipping in the cookie jar of ratepayer’s pockets keeps consumer organizations such as The Utilities Reform Network very busy.
Mark Toney, its executive director, said. “The CPUC should require more from the utility companies. Commission laxity is turning energy efficiency into a windfall for the utility companies. Rewarding inadequacy with millions in unearned bonuses sends the wrong message, not only to the companies but to the public as well.”
The CPUC's watchdog, the Division of Ratepayer’s Advocates has called for the bonuses to be repaid in the form of reduced energy bills and made a hue and cry before the meeting, claiming that the utilities had missed targets set by the regulator, and should pay back all the bonuses it had received over the past two years. There is, of course, a snag. These dividends have already been paid out.
Before last week, PG&E's shareholders, mostly current and former employees, had already received $74.9m, Southern California Edison shareholder were $50.4m better off, San Diego Gas & Electric's $11.1m and Southern California Gas' $7.3m.
In its annual report, PG&E does not even list this sum as revenue, and as far as I can make out having spoken to their press team, it is not subject to taxation.
But PG&E claims that it has every right to its bonuses and that the DRA's calculations are not based on the criteria set at the time the scheme began. A spokeswoman said:
"Through the 2006-2008 energy efficiency portfolio, PG&E delivered the highest energy savings in our history, totaling 899 MW (a large power plant is around 500 MW); 5,444,378,342 (or 5,444 million) kWh and 72,445,158 (or 72 million) therms of energy savings, acheiving 167% of the goals set by the CPUC in the 2006-2008 program period. This helped save customers more than $650 million on their energy bills."
The CPUC’s Energy Efficiency Evaluation Report seems to suggest the programme has been a success:
Program participants achieved over 6,000 GWh, 80 million therms, and over 1000 MW in annual energy savings impacts for the three‐year program cycle. Nearly two thirds of the electric savings were the direct result of the program interventions. Over the life of the technologies installed, the savings for program participants will be over 66,000 GWh and over 1,000 million therms. These estimated first‐year savings are equivalent to the avoided construction of two power plants (based on the average‐sized power plant of 500MW) and have resulted in 4 million tons of avoided CO2 emissions, and the equivalent of 760,456 cars being removed from California’s roads.
But those savings, according to the CPUC's own energy data, do not meet the energy savings required hit the targets. In fact, the DRA said that the utilities hit only between 63% and 78% of their targets, even though bonuses were only meant to kick in after 85%. Even the CPUC's own administrative law judge ruled that the criteria were not met for the bonuses.
And in the past week, the CPUC has given the go-ahead for a new PG&E power station. Would that really be necessary if the utility was making the effective energy efficiency savings it claims?
In the short three weeks that I have been working here, many themes keep cropping up in different contexts. And how to use energy efficiently, or how to avoid using as much of it through energy conservation, are recurrent themes.
The CPUC has set itself a goal (ie, non-binding) of reducing per capita electricity use by 0.3% per year over the next decade from 7145 kWh per capita in 2003 to 6930 kWh per capita in 2013. Californians tend to consume less energy per capita than people in other states, thanks partly to its mild climate - Wyoming, Alaska and Louisiana are the highest consumers thanks to cold winters or hot summers. So the average person in San Francisco will consume 6753 kWh per year, but per capita consumption in Dallas soars to 16,116 kWh.
But in a global context, energy efficiency in the state takes on greater significance. California's total net emissions in 2008 in California amounted 473.76m tonnes of GHGs, which puts the state on a par with Spain which has around 10m more people living, working, driving in it than the golden state and whose climate is also as diverse.
The CPUC's own website helpfully provides tips on how to save energy. But its suggestions are typical of the attitude to energy policy in this country: let's not turn our thermostat down a few degrees or, let's buy a new boiler, fridge, windows or solar panels. In other words, let's buy more stuff and pay our way out of this problem with shiny new gadgets.
Compare also the user-friendliness of the California Energy Commission's Consumer Energy Center, with ACT on CO2 in the UK, which includes such (cost free) quick tips as hang out clothes in good weather, boil as much water as you need, take shorter showers, switch off appliances. The Consumer Energy Center advises people to cook in a microwave, keep their fridges full and upgrade your boiler.
This consumerist attitude is endorsed by politicians such as outgoing Governor Arnold Schwarzenegger, who talk a lot about "greening the economy" to create "green collar jobs". Schwarzenegger talks more about 1m solar roofs than than the unsexy topic of insulation, or how exciting electric cars are rather than how useful a decent public transport network would be in the state.
This is a mistake. But it's understandable given how the US's retail economy depends on tax revenues from how much consumers spend. It's small wonder the Average Joe is being encouraged to put solar panels on his roof so he can continue to run his new Energy Star tumble drier throughout the hottest months of the year when it will save him increased burdens to his conscience or bills.
Governor-elect Jerry Brown is expected to replace at least a couple of the commissioners on the CPUC and given his "green" credentials during his tenure as California's attorney-general, let's hope he appoints people who can develop clear policies that aren't so tied up in knots.
If California seriously wants to lead in the green economy, bodies like the CPUC need good policies to persuade those who can't afford an electric car or "eco-remodelling" of their home that energy efficiency benefits them, not just the utilities. Americans care less about the climate in 50 years' time, and more about the cash in their pocket after all the bills are paid.