2023-127 The California Public Utilities Commission
Without Improving Its Oversight, the Benefits of Energy Efficiency Programs May Not Be Worth Their Cost to Ratepayers
Published: March 18, 2025
Audit Recommendations Disclosure
When an audit is completed and a report is issued, auditees must provide the State Auditor with information regarding their progress in implementing recommendations from our reports at three intervals from the release of the report: 60 days, six months, and one year. Additionally, Senate Bill 1452 (Chapter 452, Statutes of 2006), requires auditees who have not implemented recommendations after one year, to report to us and to the Legislature why they have not implemented them or to state when they intend to implement them. Below is a listing of each recommendation the State Auditor made in the report referenced and a link to the most recent response from the auditee addressing their progress in implementing the recommendation and the State Auditor’s assessment of auditee’s response based on our review of the supporting documentation.
Recommendations to the Legislature
Recommendation 1
To better ensure that energy efficiency funds are either used prudently or returned to ratepayers, and to ensure that the CPUC does not continue to authorize programs that do not meet energy-savings goals and cost-effectiveness measures, the Legislature should consider amending state law to require the CPUC to eliminate funding for chronically underperforming programs. For example, the Legislature could set the expectation that the CPUC will eliminate funding for certain programs that consistently fail to meet energy‑savings goals and are not cost-effective over a three-year period.
Agency response status:
pending
Recommendations to the California Public Utilities Commission
Recommendation 2
To improve its oversight of the effectiveness of utility program portfolios and individual efficiency programs, the CPUC should begin monitoring the actual performance of utilities’ program portfolios and individual efficiency programs. Specifically, the CPUC should do the following:
- Annually evaluate the performance of each utilities’ program portfolios to determine whether they are achieving energy‑savings goals and are cost-effective.
Agency response status:
Not fully implemented
Date of implementation:
3/31/2026
State Auditor assessment status:
Pending
60-Day Agency Response
The CPUC’s Evaluation and Analytics team is establishing an annual portfolio performance diagnostic exercise. This diagnostic exercise will take place in March 2026, following the Program Administrator’s (PA’s) Q4 data submission deadline. The evaluation team will develop a portfolio spreadsheet to assess each program’s energy savings, Total System Benefit (TSB), and cost-effectiveness. This process will also build on the existing bi-monthly PA check-in meetings, which already highlight risk areas identified by both the PAs and the CPUC.
Recommendation 3
To improve its oversight of the effectiveness of utility program portfolios and individual efficiency programs, the CPUC should require utilities to create corrective action plans when their program portfolio does not meet energy‑savings goals or are not cost-effective.
- Require utilities to create corrective action plans when their program portfolios do not meet energy savings goals or are not cost-effective.
Agency response status:
Not fully implemented
Date of implementation:
12/31/2025
State Auditor assessment status:
Pending
60-Day Agency Response
The CPUC’s Energy Efficiency Branch is implementing a process for analyzing 2024 performance of IOU energy efficiency portfolios. Once 2024 reporting is complete, the portfolio management team will develop a memo regarding overall 2024 program performance. After we issue a memo, the CPUC will proceed with next steps (discussion at bi-monthly meetings, and requests for corrective action plans if needed).
Recommendation 4
To improve its oversight of the effectiveness of utility program portfolios and individual efficiency programs, the CPUC should begin monitoring the actual performance of utilities’ program portfolios and individual efficiency programs. Specifically, the CPUC should do the following:
- Formalize, such as through a CPUC commission decision, its plans to hold bi-monthly meetings with utilities and specify the information utilities must provide regarding the performance of their program portfolios. At a minimum, this information should include the progress utilities make in meeting energy savings goals and cost-effectiveness of their program portfolios.
Agency response status:
Not fully implemented
Date of implementation:
9/31/2025
State Auditor assessment status:
Pending
60-Day Agency Response
Energy Efficiency Branch management held bi-monthly meetings with each of the four large IOUs in April 2025, and discussed plans to implement this recommendation starting at the next bi-monthly meetings (Summer 2025). We will discuss improving the information provided by the utilities to include program specific reasons for underperformance and not meeting cost effectiveness. CPUC staff have created an internal share point folder to store the agenda and materials for each of these bi-monthly meetings.
Recommendation 5
To improve its oversight of the effectiveness of utility program portfolios and individual efficiency programs, the CPUC should begin monitoring the actual performance of utilities’ program portfolios and individual efficiency programs. Specifically, the CPUC should do the following:
- Annually review the data utilities submit about energy savings and cost-effectiveness for all efficiency programs to identify those that are underperforming, including those that consistently fall short of goals.
Agency response status:
Not fully implemented
Date of implementation:
10/31/2025
State Auditor assessment status:
Pending
60-Day Agency Response
See status update for Recommendation 2 above. We will assign staff to develop a spreadsheet or visualization tool that compiles all programs in the portfolio, grouping the programs according to segmentation, and developing data fields and quality control checks for the expected values in the data fields. We will utilize the most recent data on the California Energy Data and Reporting System (CEDARS) website and continue with the 2025 quarterly claims.
To improve its oversight of the effectiveness of utility program portfolios and individual efficiency programs, the CPUC should begin monitoring the actual performance of utilities’ program portfolios and individual efficiency programs. Specifically, the CPUC should do the following:
- Work with utilities to determine why efficiency programs may be underperforming and propose corrective actions to address the causes of underperforming programs.
Agency response status:
Not fully implemented
Date of implementation:
10/31/2025
State Auditor assessment status:
Pending
60-Day Agency Response
The CPUC’s Energy Efficiency Branch is planning to assign staff resources efficiently to underperforming programs or sectors, if this is needed based on the memo described in the status update for Recommendation 2.
To improve its oversight of the effectiveness of utility program portfolios and individual efficiency programs, the CPUC should begin monitoring the actual performance of utilities’ program portfolios and individual efficiency programs. Specifically, the CPUC should do the following:
- End efficiency programs that consistently fail to meet cost-effectiveness or energy savings goals, such as by issuing a CPUC decision prohibiting utilities from using such programs in their program portfolios.
Agency response status:
Not fully implemented
Date of implementation:
3/31/2026
State Auditor assessment status:
Pending
60-Day Agency Response
Consistent with our initial response, the Commission must fairly make its decision based on the arguments and record made by parties in the proceeding. Subsequently, in April 2025, the Commission opened proceeding R.25-04-010 and scoped the proceeding to include issues related to oversight in response to the State Audit.
Recommendation 8
To ensure that it tracks the timeliness and status of utilities’ implementation of EM&V recommendations and to improve efficiency program performance, the CPUC should do the following by September 2025:
- Develop and implement a process to track and follow-up on the timeliness of utilities’ 60-day responses to recommendations. This tracking should include the EM&V publication date, the due date of the 60-day response, the date the CPUC received the response, and the follow-up that the CPUC took to ensure timely responses.
Agency response status:
Not fully implemented
Date of implementation:
9/30/2025
State Auditor assessment status:
Pending
60-Day Agency Response
The CPUC Evaluation and Analytics team is establishing an enhanced respond-to-recommendations protocol. Under this protocol, CPUC staff will maintain a recommendation tracker on the CPUC website. After each evaluation, the staff will add the recommendations to the tracker, provide the Program Administrators with a specified time frame to submit an initial response, follow up on that response, and proactively track and address the response.
To ensure that it tracks the timeliness and status of utilities’ implementation of EM&V recommendations and to improve efficiency program performance, the CPUC should do the following by September 2025:
- As part of this process, track the status of utilities’ implementation of the recommendations. This tracking should include a utility’s proposed corrective actions and the CPUC’s assessment of the adequacy of the utility’s implementation of the recommendation.
Agency response status:
Not fully implemented
Date of implementation:
9/30/2025
State Auditor assessment status:
Pending
60-Day Agency Response
Per the enhanced response-to-recommendations protocol, the CPUC’s Evaluation and Analytics team is developing a standardized evaluation recommendation tracker to be hosted on a CPUC website by September 2025. After each evaluation study, recommendations will be added to the tracker. Program Administrators (PAs) will have a specified amount of time to provide an initial response and 60 days to develop a corrective action plan. CPUC staff will document their assessment of the utility’s response to ensure that the PA has sufficiently addressed and implemented the recommendation.
To ensure that it tracks the timeliness and status of utilities’ implementation of EM&V recommendations and to improve efficiency program performance, the CPUC should do the following by September 2025:
- Memorialize this new tracking process in policies and procedures that detail how and when utilities should respond to recommendations and the actions the CPUC will take to follow-up on those responses.
Agency response status:
Not fully implemented
Date of implementation:
9/30/2025
State Auditor assessment status:
Pending
60-Day Agency Response
The CPUC Evaluation and Analytics team is documenting the enhanced response-to-recommendations protocol with a procedural checklist for both internal and external staff. The CPUC will post this checklist, along with the updated recommendations tracker, to a related CPUC website.
By March 2026, using guidance from best practices and stakeholders, the CPUC should begin revisiting its consideration of participant non-energy benefits and costs in the TRC calculation, such as by including or excluding both factors in the calculation.
Agency response status:
Not fully implemented
Date of implementation:
3/31/2026
State Auditor assessment status:
Pending
60-Day Agency Response
In April 2025, the Commission opened proceeding R.25-04-010 and scoped the proceeding to include certain issues related to application of energy efficiency cost-effectiveness requirements.
Recommendations to the Energy Commission
To ensure that utilities use ratepayer funds effectively, the Energy Commission should by May 2025 create a plan to use all remaining CalSHAPE funds before the deadline in state law, such as by finding additional applicants or requesting that the Legislature change state law to allow the Energy Commission to return the leftover funding to utilities—and ultimately ratepayers—immediately.
Agency response status:
pending
