Dive Brief:

• California regulators have ordered Southern California Edison to credit ratepayers a little over $76 million after finding that the company mismanaged its energy efficiency upstream lighting program between 2017 and 2019.
• The California Public Utilities Commission concluded that the utility “failed to ensure that efficient light bulbs were tracked and sold as intended by the program design.” In addition, it ordered the utility to refund ratepayers $6.8 million in shareholder incentives, and pay the state a little over $19 million in fines.
• “Southern California Edison is disappointed with the decision and believes it provided evidence in the proceeding that should have produced a more proportionate remedy to reflect SCE’s accountability for upstream lighting program management deficiencies,” spokesperson Ron Gales said.

Dive Insight:

The upstream lighting program was part of a broader state initiative to incentivize utilities to encourage customers to switch to energy-efficient light bulbs. It was discontinued in 2020. 

Concerns about the upstream lighting program were raised in a 2017 evaluation report on the program’s performance, which was published in 2019. The report found that unusually large volumes of light bulbs had been shipped to small stores in the service territories of SCE and San Diego Gas & Electric. 

The reported number of light bulbs shipped to these stores was more than the total reported sales of light bulbs in California as per other sources of data, leading to its conclusion that the program’s numbers – and energy savings claims – were too high.

A CPUC administrative law judge took up the issue in 2020, and SCE detailed corrective actions it took in response such as limiting shipments of bulbs to small retailers. However, in April 2020, the agency issued the 2018 evaluation of the program, which once again found unusually large volumes of bulbs being sent to discount and grocery stores in the utility’s footprint. 

In July 2020, the CPUC’s Public Advocates Office and The Utility Reform Network, both ratepayer groups, jointly urged the commission to order a shareholder-funded independent investigation of the program. The groups said SDG&E’s approach to the 2017 evaluation report differed widely from SCE, which they said was “woefully incomplete.”

SCE informed the commission in November 2020 of the outcome of an external investigation that found discrepancies in the information provided by participating manufacturers.

This May, the CPUC launched an official process requiring SCE to address the issue, leading the utility to propose a refund to ratepayers of $8.8 million in program incentive costs, $4.3 million in administration costs and $6.8 million in shareholder incentives. 

In a presiding officer’s decision issued in September, however, the commission opted for a higher refund of $76.1 million in incentive and administrative costs. It concluded that ratepayer funds had paid for unaccounted-for light bulbs that were supposed to have gone to grocery and other stores, yet energy savings could not be verified. It noted that investigations had indicated that some SCE employees were aware of the issues in 2017, but procedures were not changed.

“In addition, SCE failed to follow its own oversight and quality control procedures, even without inspections, and failed to report the overstocking of light bulbs or take any corrective action,” the decision noted. 

SCE appealed the decision but in an updated decision filed in November, the commission concluded that none of the issues raised by the utility reflect legal errors with the original decision that would require correction. 

In a statement responding to the original decision in September, Matt Baker, director of the CPUC Public Advocates Office, said SCE was “appropriately held accountable for its continued attempts to mislead the public on energy efficiency cost savings at the expense of ratepayers, the very people programs like this are designed to help.”

In terms of how to prevent issues like this from occurring in the future, Mary Flannelly, spokesperson with the office, told Utility Dive in an email that the third-party evaluation after the fact was helpful in determining the wrongdoing that occurred.

“It is our hope that cases like this, in which the utility was held accountable and penalties were incurred, could be a useful deterrent going forward,” Flannelly added.