Putting California Back on Energy-Efficiency Track: A Tortuous Story : Conservation: The Natural Resources Defense Council fights it out with the Big Four utilities and the PUC.

Last month, the California Public Utilities Commission approved a far-reaching array of programs that give consumers and the Big Four utility companies incentives to conserve energy. But it took a battle royal to get it done, with the Natural Resources Defense Council, the utilities and the commissioners fighting it out.

The two-year, $560-million program doesn’t require citizens to turn down the heat or forgo the dishwasher. Its remedies for energy gorging will rely on proven construction techniques, efficient factory motors, retrofitting California’s drafty and poorly insulated homes, sunlight-controlling window glass, fluorescent bulbs that don’t flicker and a range of other long-ignored methods and devices whose aggressive use could save consumers many billions of dollars between now and the year 2000.

Consumers will get rebates for embracing the innovations. In most cases, the products will pay for themselves in two or three years of significantly reduced energy bills. Renters, homeowners and building owners can then look forward to permanently lower bills. Utilities will be allowed to keep part of that savings as profit, a reward for enticing consumers to get involved.

In the early 1980s, California led the nation in pursuing energy efficiency. Five years later, it had a competitive edge over states whose industries had stayed inefficient. Although we retain some of that edge due to permanent installations of conservation equipment, California is in a slide. Starting in 1985, utilities began quietly slashing their consumer rebate programs and promotional efforts that had popularized energy efficiency. According to the NRDC, when conservation programs began to disappear, energy waste skyrocketed.

No politicians in Sacramento led the call for a turnaround, since energy efficiency is not a sexy issue. While the utilities were arguably failing to build on gains made in the ‘80s, politicians were getting headlines by focusing on such issues as the 1987 tax rebate. Today, politicians are howling about the steep increase in a gallon of gas, another issue they can snarl over, change nothing and come off as good guys.

In truth, Californians have needlessly been burning up more of their disposable income on utility bills than has been snatched away at the gas pump. While politicians whine about our overextended pocketbooks, few seem to care that every state taxpayer has already spent his or her 1987 rebate, several times over, on pointless energy waste in the home and workplace. According to the NRDC, California consumers are throwing away about $1 billion a year.

To understand the problem, a good place to start is with the state’s Big Four utilities--Southern California Edison Co., Pacific Gas & Electric Co., San Diego Gas & Electric Co. and Southern California Gas Co. Each is issuing statements to take credit for the sweeping energy-efficiency programs approved by the PUC in late August.

Actually, environmental critics charge, the utilities would still be promoting increased energy use had the NRDC not embarrassed them on the front pages of California newspapers last year.

When accused of fueling a new era of waste, utility executives insisted energy had become so cheap that consumers would not save money by installing state-of-the-art motors in factories, office-tower lighting systems that slash bills by 50% or extensive insulation in drafty homes. Such actions, they claimed, were just not cost-effective in an era of cheap energy.

But energy-efficiency experts claimed to have caught the utilities in a bit of a lie. Conservation proponents trotted out one of their most prominent experts, Amory Lovins, director of the Rocky Mountain Institute. The institute employs about 24 people dedicated to conservation research. The whole place--complete with computers and Xerox machines--generates energy bills of just $5 per month. Lovins gets a big kick out of explaining that the alterations made to his mountain complex paid for themselves through dramatically lower energy bills in just one year--as he explained last year to the PUC members.

Surely, Lovins has pointed out, the utility executives knew what he has known all these years. Yet, according to the NRDC, the utilities were laying off top talent in their conservation programs while bolstering their marketing staff, which specializes in finding ways to sell more energy. One obvious explanation is that these executives were after profits. The apparent truth, conservation advocates say, is something else.

In an arrangement unique to California, the PUC decided several years ago to decouple the utilities’ profits from the amount of energy they sold. The idea was to guarantee the utilities a profit, regardless of how much energy was or wasn’t used by consumers, so that the utility companies wouldn’t make policy decisions based on the demands of their stockholders, who, critics charge, put profits before consumers.

But something went wrong. As energy prices eased and energy became more plentiful in the mid-1980s, the utilities, some critics charge, began dreaming up new ways to sell more energy--even as conservation efforts were scaled back. Ralph Cavanagh, the mind behind the NRDC’s victory, theorizes that the Big Four executives equated idle generating capacity with economic decline and powerlessness. These highly competitive people simply could not stand the emotional letdown of running an industry whose best possible goal is to shrink, not to grow.

The utilities attributed their decisions to waning interest in conservation among consumers. One executive explained that “social engineering” was not an appropriate activity for utilities. But Howard P. Allen, outgoing chairman and president of Southern California Edison, conceded that mistakes were made, saying, “How do you motivate Joe Sixpack when it’s not one of his higher priorities? . . . The utilities and regulators have not done as much as we should, as good as we should. Well, we’re like Joe Sixpack.”

As David Morse, a spokesman for the PUC’s Division of Ratepayer Advocates, complained last year, the utilities, given their guaranteed profits, should not have needed any further monetary incentives “to do the right thing.”

This is something to remember as the the four utilities embark upon the most sweeping energy conservation program undertaken in the nation.