CSEM Policy Conference
Panel Discussion
Utility Incentives and the Strategic Plan
December 9, 2008
William C. Miller
Manager, CEE Strategic Issues
Pacific Gas and Electric Company
Utility Energy Efficiency Incentives Overview
• Designed to induce maximum effort by IOUs to
– Achieve CPUC adopted KW, KWH, therm goals
– Reward for providing net benefits = value to customers
• Two part mechanism
– Achieved unit savings determine rate of earnings
• Share (9% or 12%) of net benefits, if minimum performance
standards met, or
• No earnings for savings levels 65% to 85% of goal, or
• Penalties if savings fall below 65%
– Level of earnings determined by net benefits
• Benefits: the value of CPUC measured savings
• Costs: all IOU costs plus a mix of rebate/customer costs
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The California Long Term Energy Efficiency Strategic
Plan (CLTEESP) part I
The CPUC Plan envisions
• Maximum energy efficiency (EE) in California in 2009 and beyond
• All cost-effective, reliable, and feasible EE is implemented (often in a
whole-buildings approach)
• Strategies, Programs and Institutions add a focus on providing long-
term savings
• EE will greatly reduce GHG emissions
The centerpiece is four Specific “Big Bold Strategies”:
• New construction will be zero net energy
– Residential by 2020
– Commercial by 2030
• The HVAC industry will be transformed and optimized for California’s
climate
• All low-income customers will have meaningful opportunity to participate
and be provided all cost-effective measures by 2020
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The CLTEESP Part II
The plan:
• Describes actions in all major sectors
• Includes actions by many entities: IOUs, POUs, state agencies,
private firms, etc.
• Presents near- and medium-term actions leading to long term
change
The plan envisions starting processes to transform EE markets:
• Does not quantify savings (KWH, KW, therms) or costs
• The ZNE (and HVAC ?) Strategies are not currently
technologically feasible at reasonable cost
• Will require ceaseless innovation, trial (and error)
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Linking The Two: The IOU Proposal For 2009-2011
The IOUs
• Must file their 2009-2011 energy efficiency proposals on February 2,
2009,
• Don’t know how the CPUC will “score” CLTEESP activities in terms of
savings,
• Expect developing savings measurement methods for CLTEESP
activities will neither be quick, simple or straightforward, and
• Want to support the CLTEESP but without undo risk to shareholders.
So They Proposed
• All costs (including CLTEESP costs) be included in computing portfolio
cost-effectiveness (statutory requirement), and
• Costs of CLTEESP activities be excluded from incentive calculations for
2009-2011 (in parallel to the absence of CPUC measurable savings).
This approach allows suitable metrics could be in place for 2012 +
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Linking The Two: Metrics for Market Transformation
Nothing on this page reflects the positions or opinions of PG&E – only Bill Miller
Determining the correct metrics requires deep understanding of the important
elements of supply and demand in each market.
This will not be easy
Examples:
• High performance windows in CA
• Manufactured housing in the Pacific NW
Proposed definition:
A market is transformed when its conditions of supply and demand will realize its
remaining potential EE savings in an acceptable time frame without further
intervention
Focus on underlying characteristics: demand behavior, production cost, etc.
Ensures savings are realized (or at least considered)
Allows that market’s EE potential to be realized and removed from future goals
Codes and Standards remove the least efficient products and may be the only way
for most markets to be at least (partially) transformed.
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