Pacific Gas & Electric Co. is poised to receive millions in shareholder bonuses for successfully administering a statewide energy-efficiency program designed to curb customers’ energy consumption. But consumer advocates have sounded the alarm that the utility doesn't deserve it.
 Although PG&E claims it earned the cash because it achieved the targets of the energy-saving program, the utility’s findings are unverified. In fact, an independent California Public Utilities Commission (CPUC) evaluation found that instead of the A+ grade PG&E claims it achieved by meeting the goals of the program, the utility’s performance actually amounts to a D.

The cycle for the incentive program spans 2006 to 2008, and PG&E was already awarded $76.2 million for savings the utility said it achieved, even though its progress had yet to be measured against the findings of the independent report. The matter will be revisited at a Dec. 16 CPUC meeting, when commissioners decide how to handle the “final true-up” of the program for all four investor-owned utilities. PG&E and the three other utilities could be awarded millions more in bonuses.

The program was crafted as a way to bring energy companies on board with a prospect that normally wouldn’t make sense for their bottom line – encouraging customers to use less of the electricity they sell. In exchange for participating in a program that attempted to slash energy use by getting energy-efficient appliances, light bulbs, and information into the hands of consumers, the CPUC offered utilities a carrot for stepping up to the plate.
 
If the companies managed to hit 85 percent of the energy-savings targets or better, the state’s investor-owned utilities could be awarded cash bonuses that would get progressively larger with their degree of success. If the companies reached just 65 to 85 percent of the goals, they wouldn’t realize any gains or suffer any losses. And, if they fell below the 65 percent threshold, they would have to pay a penalty.

Although PG&E found in its own results that it met the targets handily, the CPUC report offered a different picture. Released in April 2010, after the first incentive award had been granted, the report found that PG&E achieved 71 percent, 60 percent, and 63 percent of their targets in three energy-saving categories. Basically, it flunked two out of three.

Now that the CPUC faces a decision on whether to award an additional bonus, and how much should be granted, no one seems to agree on just how the energy savings ought to be calculated. Several proposed options are on the table, based on different sets of numbers and the correspoding calculations. The question of how much energy PG&E actually saved is extraordinarily complex, and there seem to be multiple answers. The reward money, by the way, comes from ratepayers.

Commission President Michael Peevey is proposing that PG&E and the three other utilities receive additional incentive rewards totaling $62 million, based on numbers that push the utilities into the higher-scoring categories. Meanwhile, a proposed decision by an Administrative Law Judge recommends that commissioners neither penalize the utilities nor grant them any extra money.

However, the Division of Ratepayer Advovcates (DRA), an consumer-protection arm of the state agency, noted in a recent press statement that PG&E should have to give back the $76.2 million it already received, and face penalties for not meeting its goals. “Why would you give them bonuses for unverified savings?” asks Cheryl Cox, policy advisor for the DRA.

According to a DRA statement, “A comprehensive CPUC staff report released in April 2010 found that from 2006 to 2008, PG&E and the state’s other three major utilities (Southern California Edison, San Diego Gas and Electric Company, and Southern California Gas Company) did not make enough progress to trigger bonus payments; in fact, the report found that all four of the state’s largest investor owned utilities failed to meet the performance threshold set by the CPUC, and based on the CPUC’s bonus mechanism three utilities, including PG&E, should owe penalties.”

The whole debacle highlights a good question: Why are California energy companies in charge of running programs that encourage people to use less energy, anyhow? Cox noted that she sees an inherent conflict-of-interest in the mechanism, and believes that ratepayer dollars for energy-savings programs might be better spent in a state-administered program that could use market leverage to get manufacturers to offer more efficient products.

The whole point of the energy efficiency program is to reduce the need to build new power plants, she pointed out, but utilities’ performance so far calls into question whether it’s really been effectively reducing energy consumption. After all, PG&E is seeking to construct a new power plant in Oakley. As things stand, “We’re creating the illusion of getting energy efficiency savings,” Cox said.

Barbara George, director of Women’s Energy Matters, noted that PG&E had mis-used energy efficiency funds by directing some of the money into campaigns to thwart a fledgling Community Choice Aggregation program in Marin County.

“Each proposed decision jumbles the inputs differently, with mind-numbing complexity, but the purpose is the same -- to avoid the penalties they owe for failing to meet their targets, and to justify the profits CPUC already gave them,” George said. “The proposed decisions can’t agree on exactly how to justify screwing the public, because the record supports none of them.”