California PUC Recommits to Efficiency as a Resource

July 5, 2023

On Thursday, the California Public Utilities Commission (CPUC) adopted D. 23-06-055,  endorsing meter-based quantification and the market access model with an energy efficiency plan anchored in accountability and visibility of the resource. As a market leader and champion of these approaches, Recurve enthusiastically supports this decision and looks forward to continuing our role in helping to advance these critical strategies for scaling demand-side resources. 

After a year-long proceeding, the CPUC has adopted the latest 4-year cycle of energy efficiency programs offered by utilities, community choice aggregators, and regional energy networks in the state. The comprehensive portfolio includes a Resource Acquisition segment explicitly intended to position energy efficiency as a tangible resource — first in the loading order.  

In this decision, the Commission reinforced the need for transparency and consistency by establishing meter-based quantification, or NMEC, as the default approach for measuring energy efficiency impacts within the resource acquisition portfolio. They also extended the use of the market access program model, by requiring that each of the investor-owned utilities and MCE include this model in their portfolios. 

" . . . this decision includes guidance for continued emphasis on the market access approach, the use of normalized metered energy consumption methods for estimating energy savings, and the integration of demand-side management opportunities beyond energy efficiency into the portfolios." p. 3

The market access model provides a streamlined pathway to engage vendors by paying them directly for the demonstrated energy system benefits they deliver.  This decision aligns with the state's new Total System Benefit goals for tracking progress on efficiency.  Instead of just monitoring energy savings goals for kWh, kW, and therms, goals are set based on the grid value, greenhouse gas reductions, infrastructure avoided costs, and other benefits recognized by the CPUC's Avoided Cost Calculator.  

CPUC Cites Benefits of Quantifying Impacts at the Meter

In section 6.2. Expanding Use of Normalized Metered Energy Consumption, the Commission calls out the intent of enabling legislation from 2015 (SB350 and SB802) and their commitment and preference for NMEC in the intervening years, and a need for this next push to make NMEC a requirement for the Resource Acquisition portfolio.  In the decision, they highlight the core benefits of NMEC for accuracy, feedback, accountability, and streamlined implementation.

"There are many potential benefits to the NMEC [meter-based quantification] approach that are in the interest of the Commission and ratepayers, including accuracy, shortened program learning cycle, pay-for-performance options to optimize for measured grid benefits, and the ability to enable the market access program pathway." p. 41 

Resource programs that meet the basic criteria of being a residential or commercial downstream retrofit program must be tracked and monitored based on the verified changes in energy consumption quantified using the utility meter, rather than deemed or fixed estimates from a technical reference manual. Program administrators may identify exceptions, but by reinforcing its commitment to NMEC in this way, the CPUC demonstrated the urgency of utilizing advanced metering infrastructure (AMI) to assess the tangible impacts of this resource on the grid and for customers.

CPUC Expands Access to the Market 

Related to the Commission's commitment to NMEC in the resource portfolio, they also committed to a core innovation by extending (again) the market access model. In section 8.1. Market Access Programs (MAPs) and Approaches the Commission highlights the core elements of this model that advance regulatory oversight, accountability, innovation, and lower barriers of entry for service providers.  

"The market access approach describes a set of programs that are generally characterized by uniform rules for aggregator eligibility and project qualifications, as well as uniform payment terms for aggregators based on the TSB value of their savings, as measured using population-level NMEC methods" p. 74

The multiple advantages that the Commission acknowledged are things we have experienced directly in working with our clients and market allies on the implementation of Demand FLEXmarkets around the state and as we prepare to deploy them in other jurisdictions. 

"The market access approach also allows for incorporating innovative measures into energy efficiency programs, since this approach allows experimentation with measures and customer offerings without going through lengthy solicitation processes. Also, the market access approach can be used to enable integrated demand side management (IDSM) opportunities. Other benefits to the energy efficiency portfolio of the market access approach include:  

- Providing a streamlined pathway for energy efficiency aggregators to participate in energy efficiency portfolios and deliver projects, especially enabling smaller aggregators to participate more easily;  
- Allowing for market innovation that can be fast-paced and implemented quickly by aggregators;  
- Rewarding aggregators based on the benefits their projects deliver to the grid (based on TSB), thus encouraging aggregators to maximize the TSB of their projects;
- Encouraging market competition, because aggregators compete for customers, which will result in continuous improvements to the program delivery and customer experience;  
- Minimizing ratepayer risk because aggregators are only paid based on measured savings; and  
- Minimizing risk of portfolio underperformance, acting as a hedge against underperformance by programs and implementers outside of MAP." p. 74-75

The Commission also noted how this streamlined model is particularly suited to enabling synergies with funding from the Inflation Reduction Act — an advantage many states could potentially replicate:  

"The market access approach represents a particular opportunity in the residential and commercial downstream retrofit markets because those markets include project types targeted by the federal Inflation Reduction Act (IRA) of 2022, making it possible to leverage federal funds. If IRA funding becomes available directly to PAs, the PAs may be able to use both IRA and ratepayer funding in a market access-style program, without impacting the cost effectiveness calculations of the program. Instead, the PAs may be able to simply add extra funds to the budgets seamlessly." p. 74

California's energy efficiency program portfolio has continually evolved and adapted over the years. Embracing NMEC and the market access model represents an important milestone for ensuring the state’s $4.3 billion investment in energy efficiency over the next four years will yield tangible results. 

The Golden State's commitment to efficiency is a testament to the scale and ambition of California's energy efficiency initiatives. Congratulations again to the CPUC for its leadership and forward-thinking approach to ensuring efficiency delivers as a reliable resource.


June 29, 2023, Voting Meeting Recording at 1h27m Energy Efficiency Item Discussion

CPUC Press Release: CPUC Adopts Milestone Investment in Energy Efficiency To Expand Ghg Reduction and Equity Inclusion Efforts

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