Originally posted by Energy Central


September 19, 2005 | By Stephen Heins

Now that California is in the last stages of adopting its Energy Action Plan II, it is an opportune time to discuss the comprehensive solutions being enacted there. First and foremost, California has been able to conduct a thorough discussion of energy policy and legislation without sounding like a house divided. It is for these reasons that I celebrate California as a leader in “best practices” for state energy policy.

While there are many areas of energy where California has been able to adopt a leadership role, the single greatest achievement must be the spirit of cooperation permeating the entire process. Unlike the old “business model” for getting energy policy done, California has stopped the name-calling and the public displays of discord between stakeholders.

This means that the important issues surrounding California energy policy are now being decided by the California Public Utility Commission, the CA Energy Commission, the CA EPA, the California Legislature, the Business, Transportation and Housing Agency, the Resources Agency, the State and Consumer Services Agency, the California Independent System Operator (CAISO), the CA Investor Owned Utilities (IOU), the CA municipal utilities, the state consumer groups, the state environmental groups like the Natural Resource Defense Council, Governor Schwarzenegger and his Cabinet, the California Climate Registry, the California Lighting Technology Center, the CA educational community and the private sector without the usual politicization. In addition, the well-respected Lawrence Berkeley Laboratory has provided analysis, information, research studies and policy recommendations to California decision-makers.

There are several reasons for this development. However, the over-riding fact is that California has come through the gut-wrenching problems caused by the Energy Crisis of 2001. Some people liken that experience to having viewed one’s own hangman. In fact, it could be argued that California did not need any other reason to get its energy policy affairs in order.

There is a “perfect storm” of forces that have helped create this new spirit of cooperation. The single most important reason for the sanity of energy policy in California has to be the quality of leadership and economic maturity being exhibited throughout the process. One could argue California has a world-class roster of energy people ready for the challenge.

With apologies to those not mentioned, some obvious names and their credentials come to mind: Mike Peevey, President of California Public Utilities Commission (CPUC) and 2005 Charles H. Percy Award winner; Dr. Arthur Rosenfeld, Commissioner of California Energy Commission and co-founder of the American Council for an Energy Efficiency Economy (ACEEE), the University of California’s Institute for Energy Efficiency (CIEE), and the Washington-based Center for Energy and Climate Solutions (CECS); Joe Desmond, Chairman of the California Energy Commission and former energy consultant; Susan Kennedy, a Commissioner of CPUC and the CPUC’s Assigned Commissioner for energy efficiency; Dian Grueneich, a Commissioner of the CPUC with more than 25 years of experience in energy efficiency and environmental policy and law; Diane Wittenberg, President of California Climate Action Registry; Dr. Sev Borenstein, Director of the University of California Energy Institute; Dr. Michael Siminovitch, Director of California Lighting Technology Center; Gene Rodriquez, Director of Energy Efficiency for Southern California Edison Company, Steve McCarty and Roland Risser, who share EE responsibilities at PG&E; and Patty Wagner and Michelle Mueller for the Sempra companies; and Sheryl Carter, Natural Resources Defense Council’s (NRDC) Director of Western Energy Programs and Devra Wang, NRDC’s staff scientist.

Certainly, it is worth reviewing how California has been able to accomplish so much including the completion of the Energy Action Plan II, whose “overarching goal was for California’s energy to be adequate, affordable, technologically advanced and environmentally-sound.”

First, some of the sacred cows of energy and energy policy had to be amended. In the case of public benefits for electricity, free-ridership (i.e. providing a rebate for products or services that the customer would buy anyway) is still tracked but it does not hinder achievable energy efficiency savings. In essence, California is providing open-ended rebates for all prescribed acts of measurable energy efficiency. With significantly expanded budgets and energy efficiency goals, California has chosen not to choose winners and losers. For electricity, a kilowatt saved is a kilowatt saved, period.

Also, California has adopted a “loading order” for new sources of electricity. The loading order prioritizes all new sources, with the most environmentally-friendly source being the first options and the least friendly being the last. Therefore, California’s first response to meeting growing energy needs is energy efficiency and demand response; then, renewable sources and distributed generation will be deployed; and lastly, clean and efficient fossil-fired generation will be utilized. This emphasis on clean power allows the CPUC to play an active role in California’s emission reduction efforts and Greenhouse Gas reporting being spearheaded by the California Climate Action Registry.

In addition, California is using a two-pronged attack to distribute rebates for energy efficiency, with a combination of utility administered public benefits programs and energy efficiency procurement programs mandated by the CPUC and run by the utilities are both being used to reduce overall electrical consumption. The other benefits of these energy efficiency programs are that they come with technical and design assistance along with energy education and product information. In fact, it could be argued that this combined approach is more powerful than either program is alone, especially now that the resulting energy savings can be strictly measured and verified.

Finally, other innovations proposed in the Energy Action Plan are as follows:

1. allowing utilities the same return-on-investment for energy efficiency, demand response and new power plants using a shared saving formula;

2. integrating energy efficiency programs with demand response programs so that there are no disincentives for doing both;

3. transforming Research, Development & Demonstration (RD&D) projects into energy efficiency tools and standards;

4. restructuring the IOU rate-making process to reduce the number of proceedings, create more transparency, adopt rates based on clear cost-causation principles and identify opportunities to reduce electricity costs;

5. creating a sense of regulatory certainty and a long-term planning process capable of flexibility.

California should be honored for the orderly process it has used to advance its best ideas into the Energy Action Plan II, which offers one of the most comprehensive roadmap for energy policy in the U.S. As importantly, California has become the leader in developing energy efficiency and demand response programs that will be a formidable tool for the demand-side of the energy market in the future.

Combining economic development and environmental stewardship, California has done its best work with collegiality and consensus. While each state has its own requirements and constraints, California deserves to be studied for its process, planning and innovation.

California’s Energy Action Plan: