California regulators Thursday unveiled a plan to produce 1.5 gigawatts of carbon-free energy by not building three massive power plants. Instead, they will tap “nega-watts” through an energy-efficiency program that will reward the state’s big utilities for saving electricity and penalize them for missing targets set by the California Public Utilities Commission. "Energy efficiency is the best choice for meeting the energy needs of California’s citizens and its economy, while protecting the environment," wrote utilities commissioner Dian Grueneich and administrative law Judge Meg Gottstein wrote in a ruling detailing the plan. "Producing ‘nega-watts’ … of energy by using limited energy supplies more efficiently is smart business, smart for California’s ratepayers and the least-cost way to address climate change."
The emphasis on energy efficiency has kept California’s per-capita electricity usage flat over the past three decades despite an explosion in the state’s population and an economic boom that made it the world’s eighth-largest economy. Now with a state cap on greenhouse gas emissions, regulators are upping the ante on energy efficiency as a way to avoid building new carbon-emitting power plants while renewable energy sources are put in place. If the state’s energy efficiency targets are met, regulators said that California would eliminate 3.4 million tons of carbon dioxide in 2008.
In a mind-numbingly complex 212-page ruling that has kept legions of lawyers and analysts employed, regulators laid out a formula for determining how PG&E (PCG), Southern California Edison (EIX) and San Diego Gas & Electric’s (SRE) energy efficiency programs will count toward meeting targets. If a utility meets 85 percent of the energy efficiency goals, for instance, it will earn a 9 percent rate of return on its investment, ratcheting up to 12 percent if all the targets are met. If the Big Three utilities’ energy efficiency performance falls below 50 percent of the target, then they would be penalized a collective $238.5 million, according to the plan.
Regulators said the plan was intended to steer the utilities away from the “steel-in-the-ground” mindset that building new power plants was the best way to make money. By focusing efforts on energy efficiency, utilities could avoid financing and capital costs associated with constructing new power plants, and California consumers would save an estimated $2.7 billion between by 2008. What the plan did not do was identify specific energy efficiency measures the utilities must take to meet the targets. But in the past, programs have included everything from handing out compact fluorescent light bulbs to giving rebates to data center operators that cut electricity use by using more efficient computers. One hope is that interactive "smart meters" capable of monitoring household appliances energy use will encourage conservation by allowing utilities to vary the price of electricity according to demand.