Energy Efficiency Resource Standard

May 25, 2016



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.

The CPUC has revised the energy savings targets over time, most recently in October 2015 with Decision 15-10-028. While previous Decisions established targets from 2004 – 2020, Decision 15-10-028 revised the targets for 2016 – 2020, and established new targets for 2021 – 2024. 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 2021 2022 2023 2024


853 832 980.5 1,236 1,144 916 


900 850 836 812821
SCE 1,093 922 924 983.0 1,3041,216949955946879863835840
SDGE 158 221 212 239.7 324304236238236223220214214
Total 2,365 1,997 1,968 2,203.2  2.8642,6641,1852,1052,0821,9521,9191,8611,875

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

  2012 2013 2014 2015 2016 2017 2018 2019 2020 2020 2020 2020 2020
PG&E 251 145 132 241 226193172173173169170171173
SCE 239 181 177 193 267231206210211201201200203
SDGE 31 43 41 38 575044444543434344
Total 521 370 350 472 550474422427429413414414420

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

  2012 2013 2014 2015 2016 2017 2018 2019 2020 2020 2020 2020 2020
PG&E 17.1  21.0 20.9 15.4  18.418.620.921.121.721.822.423.223.9
SoCal Gas 32 24.1 23.2 25.3 29.130.329.430.630.628.628.528.228.1
SDGE 4.1 2.2 2.2 2.5
Total 53.2 47.4
40.9 50.752.254.255.656.354.154.655.255.8

The required energy savings can be met through:

  • Incentive programs for utility customers
  • 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%

Program Overview

Implementing Sector: State
Category: Regulatory Policy
State: California
Incentive Type: Energy Efficiency Resource Standard
Web Site:
Start Date:
Eligible Renewable/Other Technologies:
  • Custom/Others pending approval
Electric Sales Reduction: Varies by utility (see below)
Electric Peak Demand Reduction: Varies by utility (see below)
Natural Gas Sales Reduction: Varies by utility (see below)


Name: CA Public Utilities Code § 9615
Name: CA Public Resources Code § 25310
Name: CPUC Decision No. 08-07-047
Date Enacted: 7/31/2008
Name: CPUC Decision No. 09-09-047
Date Enacted: 10/01/2009
Name: CA Public Utilities Code Section § 739.10
Name: CPUC Decision No. 07-09-043
Date Enacted: 9/20/2007
Name: CPUC Decision 13-09-023
Date Enacted: 09/05/2013
Name: CPUC Decision 12-11-015
Date Enacted: 11/08/2012
Name: CPUC Decision 14-10-046
Date Enacted: 10/16/2014
Name: CPUC Decision 15-10-028
Date Enacted: 10/22/2015


Name: Terrie Prosper
Organization: California Public Utilities Commission
Address: State Building
San Francisco CA 94102
Phone: (415) 703-2160

This information is sourced from DSIRE; the most comprehensive source of information on incentives and policies that support renewables and energy efficiency in the United States. Established in 1995, DSIRE is operated by the N.C. Clean Energy Technology Center at N.C. State University.