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California DSM: A Pyrrhic Victory for Energy Efficiency?

Fortnightly Magazine - October 1 1995

is lower than the national average because of its temperate climate, the expenditure trend is also negative. In 1983 California's bill was 60 percent of the U.S. average; by 1992 that fraction had climbed steadily to 90 percent.* *CEC, 1994 Electricity Report: Draft Final, June 1995, p. 4.

1 While there are some difference between energy-efficiency and DSM programs, the terms are used synonymously here, since load building and fuel substitution are relatively minor.

2 DSM expenditure information from 1980 through 1993 was provided by Mike Messinger, California Energy Commission.

3 CPUC Decision 93-09-078, Sept. 17, 1993, p. 24, 51 CPUC 2d 371, 381.

4 Seymour Goldstone, "California Utility DSM at the Crossroads," (California Energy Commission, January 1995), p. 2.

5 CPUC, Status Report on Restructuring California's Electric Services Industry and Reforming Regulation, 2 vols. (San Francisco: CPUC, January 24, 1995), vol. 1, p. 11.

6 This estimate is computed from rate and usage statistics reported in various issues of the Energy Information Administration, Electric Power Annual.

7 See Patricia Herman, "The Value Test: Its Context, Description, Calculation, and Implications," Paper Prepared for the California Energy Commission, May 3, 1994, pp. 3-1 to 3-7, 7-8. See also, summary of the CVT by CEC, Energy Forecasting and Planning Division, "In Response to the ER 94 Committee Order Relating to DSM Uncertainty and Competitive Effects, April 15, 1994," Docket 93-ER-94, August 11, 1994, pp. 3-4.

8 The rate charged by SoCalGas to transport gas for utility electric generation (UEG) is approximately 49 cents/MMBtu. With a short-run marginal cost (fuel, essentially) of below 5 cents/MMBtu, the foregone revenue is the difference, or a figure somewhat over 44 cents/MMBtu. (Conservation with Earl Takemura, SoCalGas, August 23, 1995.) If, for example, utility DSM has produced a UEG transportation loss of 75 MMcf/d, then the yearly loss to ratepayers of SoCalGas ratepayers of SoCalGas ratepayers is $12 million, PG&E and SDG&E could perform similar calculations to cover the entire state.

9 California's two largest electric utilities, Pacific Gas and Electric (PG&E) and Southern California Edison (Edison), announced electric DSM cutbacks from planned 1995 levels of $100 million (46%) and $106 million (68%) respectively. PG&E Letter to All Interested Parties on the Demand-Side Management Service List, Sept. 2, 1994; Arthur O'Donnell, "1995 DSM Spending Will Fall Below 1991 Levels," California Energy Markets, Dec. 16, 1994, pp. 5-6.

10 Comments of Toward Utility Rate Normalization on Equity/Social and Environmental Policies," CPUC Blue Book Hearings, June 24, 1994, pp. 15-17.

11 "Second Round Opening Comments of the California Manufacturers Association," CPUC Blue Book Hearings, June 23, 1994, p. 9.

12 Ralph Cavanagh, "Opening Comments of the Natural Resource Defense Council and Comments on Balancing Public Policy Objectives in a Competitive Environment," CPUC Blue Book Hearings, June 7, 1994, pp. 8, 10.

13 Southern California Edison Co., "Application for Off-System Power Sales Incentive Mechanism (OPSIM)," Aug. 2, 1993, p. 1. This application was later withdrawn due to regulatory barriers.

14 One estimate is that gas is the marginal fuel over 80% of the time. See "Comments of California Utility Employees on Balancing