Edison Wins PUC Approval for $90-Million Pilot Program : Energy: The two-year project will allow the utility to finance big customers' purchase of efficiency equipment.

TIMES STAFF WRITER

Southern California Edison Co. won approval Wednesday from the California Public Utilities Commission for a $90-million pilot program that makes the company a key player in the region's fledgling energy efficiency industry.

Edison will finance the purchase of energy efficiency equipment by its big customers, who will then use the savings to pay back the utility.

The two-year program, which expands Edison's current programs for controlling energy demand, will be financed by up to $75 million from shareholders and up to $15 million in ratepayer funds.

Edison said the program--which is aimed at industrial and commercial customers--will mitigate electricity demand, reduce the need for new generating plants, stimulate the efficiency industry and cut air pollution.

"We believe this is a completely new and innovative way to help break down the market barriers that exist for our customers today, preventing them from maximizing their chances to install energy-efficient equipment," said Edison Vice President Pam Bass.

But critics--including some providers of energy efficiency equipment as well as consumer advocates--attacked the program as anti-competitive and risky.

Equipment providers said the program will use ratepayer money to give Edison a stranglehold on the industry, with the power to choose which companies will install energy efficiency equipment around the region.

"They will totally control the marketplace, determine which pieces of equipment are installed where," said Douglas Ames, president of Transphase Systems Inc., a Huntington Beach-based provider of energy efficiency systems. "I have no ability to compete against Edison."

Transphase is suing Edison and San Diego Gas & Electric Co. in federal court in Santa Ana, accusing the firms of illegally monopolizing the energy efficiency industry.

To forestall other lawsuits, Edison had sought antitrust protection in energy legislation sponsored by Assemblyman Joe Baca (D-San Bernardino). But lobbying by Transphase led to the removal of that provision before the Legislature approved the measure last month. Instead, the PUC was required to monitor and approve Edison's demand-side management programs.

Bass denied that the new program is anti-competitive. While it is true Edison will pre-qualify equipment suppliers, Bass argued that the program will actually stimulate competition for such business.

Meanwhile, consumer advocates argued that the program--by allowing Edison to finance the purchase of equipment--in effect puts the utility in the position of a banker, leaving ratepayers potentially liable for bad loans.

"It's not clear that this company ought to be in the banking business, which is what this is really," said Eugene Coyle, economist at Toward Utility Rate Normalization, a San Francisco-based consumer group. "If Edison is left holding the bag, electric customers will be left holding the bag for Edison."

Bass denied that ratepayers face any risk from the pilot program. Financing of equipment is only part of the undertaking, she said. Compared to current Edison efforts, she said, the program may actually reduce the use of ratepayer funds by using shareholder money and requiring repayment by participants.

Bass said the new program, which will begin immediately, will not result in a rate hike for Edison customers, nor will it represent an increase in the use of ratepayer funds for demand-side management.

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