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Incentives/Policies for Energy Efficiency

Printable Version
Energy Efficiency Resource Standard   

Last DSIRE Review: 11/13/2014
Program Overview:
State: California
Incentive Type: Energy Efficiency Resource Standard
Eligible Efficiency Technologies: Custom/Others pending approval
Applicable Sectors: Investor-Owned Utility, Gas Utilities
Electric Sales ReductionVaries by utility (see below)
Electric Peak Demand ReductionVaries by utility (see below)
Natural Gas Sales ReductionVaries by utility (see below)
Web Site:
Authority 1:
CA Public Utilities Code § 9615
Authority 2:
CA Public Resources Code § 25310
Authority 3:
Date Enacted:
CPUC Decision No. 08-07-047
Authority 4:
Date Enacted:
CPUC Decision No. 09-09-047
Authority 5:
CA Public Utilities Code Section § 739.10
Authority 6:
Date Enacted:
CPUC Decision No. 07-09-043
Authority 7:
CPUC Decision 13-09-023
Authority 8:
CPUC Decision 12-11-015


The California Legislature emphasized the importance of energy efficiency and established broad goals with the enactment of Assembly Bill 2021 of 2006. The bill calls for a 10% reduction in forecasted electricity consumption within 10 years. The bill also requires the California Energy Commission (CEC), the California Public Utilities Commission (CPUC) and other interested parties to develop a statewide estimate of all cost-effective electricity and natural gas savings and to develop efficiency savings and demand reduction targets for the next 10 years. This study must be updated every three years.

Having already developed interim efficiency goals for each of the utilities from 2004 through 2013, the CPUC developed new goals in 2008 for years 2012 through 2020. The goals consist of separate electricity savings and demand reduction requirements for each of the three investor-owned electrical utilities and energy savings requirements for the state's three gas utilities.

Electric Energy Reduction Standard (in Gigawatt-Hours (GWh)

  2012 2013 2014 2015 2016 2017 2018 2019 2020


853 832 765 787 797 814 


SCE 1,093 922 924 750 778 789 802 805 808
SDGE 158 221 212 154 156 159 162 162 163
Total 2,365 1,997 1,968 1,669  1,720 1,745 1,778 1,783 1,788 
*As Revised in CPUC Decision 12-11-015

Annual Electric Demand Reduction Standard (in Megawatts (MW))

  2012 2013 2014 2015 2016 2017 2018 2019 2020
PG&E 251 145* 132* 241 257 258 270 270 269
SCE 239 181* 177* 193 213 215 222 222 223
SDGE 31 43* 41* 38 40 40 41 42 42
Total 521 370* 350* 472 510 514 533 533 534
*As Revised in CPUC Decision 12-11-015

Annual Natural Gas Energy Reduction Standard (in Millions of Therms (MMTh))

  2012 2013 2014 2015 2016 2017 2018 2019 2020
PG&E 17.1  21.0* 20.9* 32  32 31 32 32 33
SoCal Gas 32 24.1* 23.2* 35 34 33 34 34 34
SDGE 4.1 2.2* 2.2* 6 6 6 6 6 6
Total 53.2 47.4*
73 73 70 72 73 73
*As revised in CPUC Decision 12-11-015

The required energy savings will be primarily met through incentive programs for utility customers, but utilities can also count the energy savings resulting from these other policies:

  • State building code
  • Federal and state appliance standards
  • Statewide market transformation efforts

Publicly-owned utilities in California are not regulated by the CPUC. Still, Assembly Bill 2021 requires them to pursue energy efficiency as well. The law required them by June 1, 2007 to identify all cost-effective energy efficiency and demand reduction possibilities, and to establish energy reduction goals for the next 10 years. Public utilities are required to update these studies every three years and to submit them to the CEC.

Program Administrator Type

California's investor-owned utilities directly administer the energy efficiency and demand-side management programs intended to meet the standard.

Cost Effectiveness and Program Evaluation

To evaluate the cost effectiveness of its efficiency and demand reduction activities, California utilizes the Total Resource Cost test (TRC) (one of the five "California tests" from the California Standard Practice Manual) as its primary test for measuring the cost-effectiveness of energy efficiency programs. California also uses all four of its other namesake tests on a secondary basis in evaluating energy efficiency and DSM programs. 

Utility Cost Recovery Provisions (for Investor-Owned Utilities)

Under Section 739.10 of California Public Utilities Code, California's investor-owned electric and gas utilities (Pacific Gas & Electric, Southern California Edison, San Diego Gas & Electric and the Southern California Gas Company) are required to have the revenues they earn from customers fully decoupled from their sales.

In addition, California's investor-owned utilities are eligible to receive incentive compensation for their programmatic spending on energy efficiency and DSM goals through a mechanism known as the Efficiency Savings Performance Incentive (ESPI). The ESPI mechanism is based on four areas of savings achievement performance categories, which are 1) programs producing verified or "life-cycle" energy efficiency resource savings, 2) programs producing "ex ante review" (EAR) savings, which reward utilities for setting higher (but unverified initial goals, 3) programs by utilities influencing more aggressive statewide energy codes and standards-related savings and 4) "non-resource" programs that do not result in directly attributable and cost-effective energy and demand savings, but tend to support the goals of other forms of cost-effective energy conservation.

Program Performance Category

Basis for Incentive Payment (Less Administrative Costs) Incentive Amount
Resource Programs Annual Resource Program Budget  9%
Ex Ante Review (EAR) Annual Resource Program Expenditures 3%
Codes & Standards (C&S) Advocacy Annual Approved C&S Program Budgets "Management Fee" of 12%
Non-Resource Programs

Annual Approved Non-Resource Program Budgets

"Management Fee" of 3%


  Terrie Prosper
California Public Utilities Commission
State Building
505 Van Ness Avenue
San Francisco, CA 94102
Phone: (415) 703-2160
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Disclaimer: The information presented on the DSIRE web site provides an unofficial overview of financial incentives and other policies. It does not constitute professional tax advice or other professional financial guidance, and it should not be used as the only source of information when making purchasing decisions, investment decisions or tax decisions, or when executing other binding agreements. Please refer to the individual contact provided below each summary to verify that a specific financial incentive or other policy applies to your project.

While the DSIRE staff strives to provide the best information possible, the DSIRE staff, the N.C. Solar Center, N.C. State University and the Interstate Renewable Energy Council, Inc. make no representations or warranties, either express or implied, concerning the accuracy, completeness, reliability or suitability of the information. The DSIRE staff, the N.C. Solar Center, N.C. State University and the Interstate Renewable Energy Council, Inc. disclaim all liability of any kind arising out of your use or misuse of the information contained or referenced on DSIRE Web pages.

Copyright 2014 - 2015 North Carolina State University, under NREL Subcontract No. XEU-0-99515-01. Permission granted only for personal or educational use, or for use by or on behalf of the U.S. government. North Carolina State University prohibits the unauthorized display, reproduction, sale, and/or distribution of all or portions of the content of the Database of State Incentives for Renewables and Efficiency (DSIRE) without prior, written consent.