PacifiCorp will suspend its California energy efficiency programs under a proposed settlement after the California Public Utilities Commission’s Public Advocates Office concluded the programs “historically not provided cost-effectiveness benefits to ratepayers and, indeed, show a decline in performance in recent years.” The move marks a rare instance of a major utility formally walking away from state-mandated efficiency offerings rather than redesigning them, and it spotlights a growing tension between California’s decarbonization mandates and the cost-effectiveness tests that govern ratepayer-funded programs.
PacifiCorp’s California Footprint and the Programs at Stake
PacifiCorp, a Berkshire Hathaway Energy subsidiary, serves roughly 46,000 electric customers in northern California under the Pacific Power brand – a fraction of its six-state, 2.2-million-customer territory. Despite its small California footprint, the utility has long participated in the state’s ratepayer-funded energy efficiency portfolio, which is among the largest in the nation. In program year 2023, California’s investor-owned utilities collectively spent approximately $1.1 billion on efficiency programs approved by the CPUC, with PacifiCorp’s share typically running in the low tens of millions of dollars annually.
The programs now slated for suspension include residential rebates for heat pumps, insulation, and efficient appliances; non-residential lighting and HVAC incentives; and the utility’s share of statewide initiatives such as the Energy Savings Assistance program for low-income households. Under the proposed settlement, PacifiCorp would cease new enrollments and wind down existing commitments over a transition period, while continuing to collect and remit public purpose program surcharges that fund the broader statewide portfolio – money that would be redirected to other program administrators or returned to ratepayers through the CPUC’s annual budget cycle.
The settlement stems from a 2023 application in which PacifiCorp argued its California programs had failed the Total Resource Cost (TRC) test – the primary cost-effectiveness metric the CPUC uses – for multiple consecutive years. The Public Advocates Office, an independent arm of the CPUC charged with representing ratepayer interests, concurred in its response, citing “a decline in performance in recent years” and recommending suspension rather than further modification. That agreement between utility and advocate is unusual; more often, the Public Advocates Office pushes for program redesign or stricter delivery requirements.
Why Cost-Effectiveness Is Eroding Across the Portfolio
The PacifiCorp outcome reflects a structural shift that has been building across California’s efficiency portfolio for at least five years. As building codes and appliance standards have tightened – Title 24 updates in 2019 and 2022, federal lighting standards that effectively phased out incandescent and halogen bulbs – the “baseline” against which savings are measured has risen sharply. A heat pump water heater installed today displaces a far more efficient minimum-standard unit than it would have a decade ago, so the attributable savings per measure have shrunk even as measure costs have risen with supply-chain inflation.
At the same time, the CPUC’s 2021 decision to adopt a more stringent avoided-cost calculator – incorporating higher renewable penetration, lower marginal emissions, and time-varying energy values – reduced the credited value of each kilowatt-hour saved, particularly during midday hours when solar generation is abundant. For a utility like PacifiCorp, whose California service territory sits in climate zones with relatively mild heating and cooling loads, the combination of higher baselines and lower avoided costs pushes many measures below the 1.0 TRC threshold. The utility’s 2023 filing showed portfolio-level TRC ratios falling from roughly 1.15 in 2019 to below 0.85 in 2022, a trajectory the Public Advocates Office characterized as “persistent and worsening.”
That points to a broader implication: the traditional efficiency program model – rebates for discrete measures with deemed savings – is becoming structurally misaligned with a grid that is both cleaner and more time-dependent. If this trend holds, other small or rural California utilities with similar load profiles – Liberty Utilities, Bear Valley Electric Service, or even the smaller municipal utilities that opt into the statewide framework – could face comparable pressure to suspend or drastically reshape their portfolios.
Electrification Goals Collide with Efficiency Accounting
The suspension also exposes a fault line between California’s efficiency framework and its electrification strategy. The state’s 2022 Scoping Plan calls for 6 million heat pumps deployed by 2030, and the CPUC’s recent fuel-substitution rules now allow efficiency funds to support gas-to-electric conversions – but only if they pass the same TRC test. In PacifiCorp’s territory, where natural gas is not widely available and many homes already heat with electric resistance or wood, the incremental savings from upgrading to a heat pump are often insufficient to clear the cost-effectiveness hurdle, especially when the avoided-cost calculator assigns low value to winter peak reductions.
By comparison, the Sacramento Municipal Utility District (SMUD) and the Los Angeles Department of Water and Power – both publicly owned and not subject to CPUC cost-effectiveness rules – have aggressively used efficiency budgets to buy down heat pump costs without a strict TRC gate. Their portfolios report higher participation but are not directly comparable because they use different accounting frameworks. The PacifiCorp settlement effectively concedes that under current CPUC rules, efficiency funds cannot be the primary vehicle for electrification in its service area.
If this dynamic persists, the state may need to decouple electrification incentives from the efficiency portfolio entirely – creating a separate, decarbonization-funded budget with a different cost-effectiveness metric, such as a societal cost test that includes carbon value and health co-benefits. The CPUC’s ongoing “Fuel Substitution Technical Working Group” has discussed this, but no rulemaking has been opened.
Who This Affects
- Utility planners at multi-state IOUs: Expect heightened scrutiny of California-specific program filings; the PacifiCorp precedent means the Public Advocates Office will likely demand portfolio-level TRC trajectories in future applications, not just measure-level screens.
- Energy efficiency program implementers and trade allies: Contractors in PacifiCorp’s California territory (Siskiyou, Modoc, Shasta counties) will lose a steady stream of rebate-backed projects; they should pivot to federal Inflation Reduction Act rebate programs (HOMES and HEAR) once state implementation launches, likely late 2025.
- CPUC policy staff and commissioners: The settlement creates pressure to reform the avoided-cost calculator or adopt a dual-metric framework before the next program cycle (2026-2027), or risk a cascade of similar suspensions from other small utilities.
- Ratepayer advocates in other states: The “advocate-utility alignment on suspension” model may be cited in Oregon, Washington, and Utah – where PacifiCorp also operates – to challenge underperforming programs, though those jurisdictions use different cost-effectiveness tests.
What to Watch Next
- CPUC approval timeline and conditions: The settlement requires a Commission vote; watch for dissenting commissioners who may demand a redesign alternative rather than suspension, which would delay resolution into 2026.
- Redirection of unspent public purpose funds: Approximately $3-5 million annually in PacifiCorp surcharges will need reallocation; the CPUC’s Energy Division will propose a mechanism in the 2025 budget cycle – likely shifting funds to the statewide administrator (ICF) or to neighboring IOUs’ programs.
- Federal IRA rebate rollout in California: The state’s application for HOMES/HEAR funding is pending DOE approval; if approved before PacifiCorp’s wind-down completes, low- and moderate-income customers in the territory may have a replacement incentive stream.
- Next avoided-cost calculator update (2025): The CPUC’s scheduled recalibration could raise the value of winter peak savings if resource adequacy modeling incorporates more firm capacity needs; that would directly improve TRC ratios for heat pumps in northern California climate zones.
Bottom line: PacifiCorp’s suspension is not an isolated utility decision – it is the first formal acknowledgment that California’s efficiency portfolio, as currently structured, cannot simultaneously satisfy strict ratepayer cost-effectiveness tests and the state’s electrification ambitions in low-load, mild-climate territories. The fix lies not in better program design but in changing the accounting rules that define what counts as a benefit.
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Note: facts and figures attributed above to Utility Dive reflect that outlet's original reporting. Broader context, cross-sector connections, and forward-looking scenarios reflect independent analysis by our editorial team.
About this article: Drafted by Energy Ai with AI-assisted research and writing based on public reporting, then reviewed under our editorial process before publication.
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