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Last Updated May 24, 2024

Program Overview


Regulatory Policy



Incentive Type:

Energy Efficiency Resource Standard



Start Date:


Expiration Date:


Web Site:

Applicable Sectors:


Eligible Renewable/Other Technologies:




The California Legislature emphasized the importance of energy efficiency and established broad goals with the enactment of Assembly Bill 2021 of 2006. The bill called for a 10% reduction in forecasted electricity consumption within 10 years. The bill also required the California Energy Commission (CEC), the California Public Utilities Commission (CPUC) and other interested parties to develop a statewide estimate of all cost-effective electricity and natural gas savings and to develop efficiency savings and demand reduction targets for the next 10 years.

The CPUC has revised the energy savings targets over time, most recently in August 2023 with Decision 23-08-005. While previous Decisions established separate targets for energy savings and peak demand savings, Decision 21-05-031, adopted a new Total System Benefit (TSB) goal metric to replace the two separate targets. The TSB metric reflects the lifecycle energy, capacity, and greenhouse gas benefits of a measure in dollar terms.

Annual Total System Benefit (TSB) Goals 

  2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035

$212 Million

$212 Million $212 Million$217 Million $227 Million  $238 Million  $223 Million  

$228 Million

$245 Million $262 Million $265 Million $282 Million
SCE $113 Million$117 Million $128 Million $142 Million $155 Million $166 Million $123 Million $130 Million $135 Million $137 Million $139 Million $144 Million 
SDGE $45 Million$45 Million$46 Million$48 Million$54 Million$55 Million$47 Million$50 Million$54 Million$60 Million$60 Million$65 Million
 SoCalGas $164 Million$189 Million$203 Million$215 Million$227 Million$237 Million$209 Million$219 Million$237 Million$254 Million$269 Million$294 Million

Annual Electric Demand Reduction Targets from Codes and Standards (in Megawatts (MW))

PG&E 201.9 184.7 180.7 165.9157.8132.0123.2118.3110.0104.394.089.5
SCE 186.5172.4168.9154.7147.1121.9113.3108.7101.095.885.981.6
SDGE 38.235.634.931.930.325.023.322.320.719.617.516.6

The required energy savings can be met through:

  • Incentive programs for utility customers
  • State building code
  • Federal and state appliance standards
  • Statewide market transformation efforts

Publicly-owned utilities in California are not regulated by the CPUC. Still, Assembly Bill 2021 requires them to pursue energy efficiency as well. The law required them by June 1, 2007 to identify all cost-effective energy efficiency and demand reduction possibilities, and to establish energy reduction goals for the next 10 years. Public utilities are required to update these studies every three years and to submit them to the CEC.

Program Administrator Type

California's investor-owned utilities directly administer the energy efficiency and demand-side management programs intended to meet the standard.

Cost Effectiveness and Program Evaluation

To evaluate the cost effectiveness of its efficiency and demand reduction activities, California utilizes the Total Resource Cost test (TRC) (one of the five "California tests" from the California Standard Practice Manual) as its primary test for measuring the cost-effectiveness of energy efficiency programs. California also uses all four of its other namesake tests on a secondary basis in evaluating energy efficiency and DSM programs. 

Utility Cost Recovery Provisions (for Investor-Owned Utilities)

Under Section 739.10 of California Public Utilities Code, California's investor-owned electric and gas utilities (Pacific Gas & Electric, Southern California Edison, San Diego Gas & Electric and the Southern California Gas Company) are required to have the revenues they earn from customers fully decoupled from their sales.

In addition, California's investor-owned utilities are eligible to receive incentive compensation for their programmatic spending on energy efficiency and DSM goals through a mechanism known as the Efficiency Savings Performance Incentive (ESPI). The ESPI mechanism is based on four areas of savings achievement performance categories, which are 1) programs producing verified or "life-cycle" energy efficiency resource savings, 2) programs producing "ex ante review" (EAR) savings, which reward utilities for setting higher (but unverified initial goals, 3) programs by utilities influencing more aggressive statewide energy codes and standards-related savings and 4) "non-resource" programs that do not result in directly attributable and cost-effective energy and demand savings, but tend to support the goals of other forms of cost-effective energy conservation.

Program Performance Category

Basis for Incentive Payment (Less Administrative Costs) Incentive Amount
Resource Programs Annual Resource Program Budget  9%
Ex Ante Review (EAR) Annual Resource Program Expenditures 3%
Codes & Standards (C&S) Advocacy Annual Approved C&S Program Budgets "Management Fee" of 12%
Non-Resource Programs

Annual Approved Non-Resource Program Budgets

"Management Fee" of 3%