Dive Brief:

• The California Public Utilities Commission's (CPUC) Public Advocates Office and environmental advocates want regulators to fine Southern California Gas Company (SoCalGas) about $255 million for using ratepayer funds to oppose energy efficiency codes and standards for buildings and appliances.
• In a brief filed with the CPUC on Thursday, the advocates office said that SoCalGas has been involved in "a concerted effort" to undermine California's energy efficiency goals since at least 2014, in an attempt to preserve its business model and profit shareholders.
• The codes and standards advocacy program is just one of several energy efficiency programs that utilities run and the CPUC regulates, said Sara Gersen, clean energy staff attorney with Earthjustice — but it stands out because of its effectiveness in unlocking savings. "There's just no better way to realize the promise of energy efficiency than by putting strong standards in place," Gersen explained. 

Dive Insight:

Energy efficiency standards and codes are generally set by the California Energy Commission, the U.S. Department of Energy as well as local governments, Gersen explained. 

The CPUC, meanwhile, authorizes ratepayer funding for regulated utilities to advocate for stronger codes and standards, for instance, by providing technical assistance to the state and federal agencies that actually determine the codes. 

But according to the CPUC's ratepayer advocate office, SoCalGas has opposed these codes and standards as a business strategy, in contrast to California's energy efficiency goals. The Sierra Club echoed these concerns in a separate brief filed with the commission, saying that SoCalGas has been "gaming out" how increasingly stringent efficiency standards would lead to a shift towards electrified appliances — and squeeze the utility's revenue — for the last six years. 

"SoCalGas saw the threat California's efficiency and climate policies posed to its business and launched sophisticated campaigns to water down proposed standards to keep gas appliances competitive or even create regulatory carve outs for inefficient gas appliances," attorneys for Sierra Club — including Earthjustice's Gersen — said in the group's filing.

SoCalGas spokesperson Chris Gilbride said in an emailed comment that the Public Advocates Office and Sierra Club's claims are "demonstrably wrong" and their request for penalties without merit. 

"SoCalGas should not be discouraged from raising concerns about the affordability of proposed rules that would disproportionately drive up costs for our customers," Gilbride said.

The advocates office disagrees.

SoCalGas' use of ratepayer money to advocate for weaker energy efficiency standards is not only illegal and unethical, but undermines California's goal of decreasing on fossil fuels, Mike Campbell, program manager at the Public Advocates Office, said in an emailed comment.

"The CPUC has an unprecedented opportunity to take action to deter SoCalGas gas from future misconduct," Campbell added.

One of the examples highlighted by the advocates office involved using ratepayer funds to push for delaying a CEC rulemaking on residential instantaneous water heaters, as part of a 2016 update to building energy efficiency standards. A presentation made by senior management at SoCalGas in 2014 indicated that these standards could cause the utility to lose revenues and face opportunity costs of up to $17 million annually by 2020, the office said.

In another instance outlined by the office, SoCalGas used ratepayer funds to draft comments for the Department of Energy, arguing against new efficiency standards for residential furnaces, which the advocates office said would threaten the utility's profits by raising the cost of some gas furnaces and encouraging a transition away from natural gas. 

In addition to the $255 million fine, the advocates office asked regulators to make SoCalGas refund any shareholder incentives it received related to the energy efficiency programs, and prohibit it from implementing any further codes and standards programs until independent audits demonstrates that it is "fit" to do so.

The bulk of the recommended $255.3 million fine — around $230 million — is for using ratepayer funds for advocating against stricter state and federal energy efficiency codes from 2014 to 2017, while about $24.7 million is for advocating against local reach codes in the last couple of years. Last week, SoCalGas' parent company, Sempra Energy, reported third-quarter earnings of $351 million.

Replies to the groups' briefs are due in December, after which the commission is expected to put out a proposed decision on the matter, Gersen said.