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)
Annual Electric Demand Reduction Standard (in Megawatts (MW))
Annual Natural Gas Energy Reduction Standard (in Millions of Therms (MMTh))
The required energy savings can be met through:
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%|
Annual Approved Non-Resource Program Budgets
|"Management Fee" of 3%|
|Incentive Type:||Energy Efficiency Resource Standard|
|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|
|Name:||CPUC Decision No. 09-09-047|
|Name:||CA Public Utilities Code Section § 739.10|
|Name:||CPUC Decision No. 07-09-043|
|Name:||CPUC Decision 13-09-023|
|Name:||CPUC Decision 12-11-015|
|Name:||CPUC Decision 14-10-046|
|Name:||CPUC Decision 15-10-028|
|Organization:||California Public Utilities Commission|
San Francisco CA 94102
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.
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