Analyst Says State Spent $700 Million on Energy Research, With No Significant Benefit to the Public

The legislative analyst recently reported that the state has spent $700 million in funds paid by utility consumers, and there is little to show for the spending.

The analyst reviewed Public Interest Energy Research (PIER) program at the State Energy Resources Conservation and Development Commission (CEC). The program was created in 1996 as part of the "energy deregulation" bill, AB 1890 (Brulte). That legislation authorized the collection of a surcharge on electricity bills from investor-owned utilities in order to fund a public interest energy research, development, and deployment program.

"Since the program's inception, PIER has funded nearly $700 million in public interest research and development," the analyst wrote. "While the amount invested by the state in these activities is easy to track, it is by no means clear that the investment has resulted in a payoff to the state's electricity ratepayers who provided these resources."

The analyst also found that the commission responsible for the money has attempted to skew data to support its existence. The analyst wrote:

"While the CEC has estimated that the program has resulted in billions of dollars in savings to ratepayers, we believe that there are serious problems with the way the CEC has calculated these benefits. In its calculations, CEC attributes to the PIER program the entirety of the substantial ratepayer savings that have resulted from the state's adoption of energy-related building and appliance standards. While it is true that some of the research used to develop these standards has been fostered by PIER, our analysis indicates that it is not reasonable to directly attribute all resulting cost savings to PIER. For example, CEC is implicitly counting as a benefit from PIER savings from some tighter building and appliance standards adopted as early as the 1970s, long before PIER ever existed.

"It is fair to attribute some credit to the PIER program, in that some changes were made to these energy efficiency standards as the result of PIER-supported research. In addition, CEC has been able to document how the PIER program has helped to bring to market such innovations as floor cooling technology and cool roofing. But CEC's calculations of benefits to ratepayers often overstate the impact of these changes, in our view." (Source: Legislative Analyst's Office letter to Senator Alex Padilla, January 18.)

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