As the new year kicks off, California's utility regulators must decide what to do about San Diego Gas & Electric Co.'s and Southern California Edison Co.'s acknowledgment that they may have claimed credit for the dissemination of millions of energy-efficient light bulbs that never were sold.

California's investor-owned utilities administer ratepayer-funded energy efficiency programs under which they receive incentives for arranging shipments of energy-efficient light bulbs to retail outlets for resale to end-use customers. But a document prepared by a consulting firm under contract to the California Public Utilities Commission showed that San Diego Gas & Electric, or SDG&E, and SCE reported extraordinarily high numbers of light bulb sales in 2017 and 2018 that did not hold up under close scrutiny, commission spokeswoman Terrie Prosper said in an email.

The consultant's report was published in April 2019 and later included as part of CPUC Administrative Law Judge Julie Fitch's Jan. 9 ruling launching a formal inquiry into the issue. The consulting firm, DNV GL Energy Insights USA Inc., determined that about 95% of SDG&E's program bulbs and 80% of Edison International subsidiary SCE's program bulbs may not have been sold to customers and likely were overstocked or missing entirely, Fitch recalled.

"The reported number of light bulbs shipped to stores was higher than the number of total California light bulb sales determined from other data sources, according to the evaluators," Fitch said.

The consulting firm said SDG&E reported a dramatic increase in its lighting rebate program, discounting more than four times as many light bulbs in 2017 as in 2015 with a total of more than 8.7 million light bulbs in 2017 compared to just over 2 million in 2015. SCE reported more than 15.1 million light bulbs distributed under the program in 2017, compared to 10.2 million bulbs in 2015.

"The 2018 evaluations will further investigate what has been happening to unsold stock in discount and grocery stores in SCE and SDG&E service territories," the report said.

Fitch in her ruling invited both utilities to propose remedies "to address the findings" of the consultant's report. She noted that the problem with unaccounted-for shipments does not appear to have affected PG&E Corp. subsidiary Pacific Gas and Electric Co.'s light bulb program, which reported a considerably lower volume of sales.

In response, SDG&E and ratepayer advocates on Dec. 9 asked the CPUC to approve a proposed settlement (Rulemaking 13-11-005) under which SDG&E parent Sempra Energy's shareholders would pay a $5.5 million fine. Including the fine and refunds, SDG&E would be responsible for a package of remedies totaling $58.6 million under the settlement, which the utility reached with the CPUC's independent Public Advocates Office and The Utility Reform Network.

"SDG&E acknowledges its failure to prudently manage the upstream lighting program in 2017-2019 and that SDG&E knowingly submitted inaccurate information, compliance documents, and other reports to the commission," the settling parties said.

The settling parties also cited certain mitigating factors, including SDG&E's hiring of an independent investigator to look into the matter, self-reporting of misconduct when it came to light, and subsequent initiation of corrective measures. They further noted that SDG&E proposed to refund ratepayers approximately $11.267 million in shareholder incentives awarded, or to be awarded, through the Efficiency Savings and Performance Incentive, or ESPI, mechanism for 2017-2019.

For its part, SCE proposed to refund $6.1 million in earnings it received associated with its upstream lighting program, according to a response that the utility filed with the CPUC on Nov. 30. SCE said the refunds are in addition to $13.3 million in prior reductions to its earnings under the ESPI mechanism.

Public Advocates Office spokeswoman Maya Chupkov in a Dec. 15 email said her office is continuing to evaluate SCE's lighting program activities, noting that comments are due Jan. 20, 2021.

Trouble started with change in sales strategy

The upstream lighting program was one of a number of ratepayer-funded energy efficiency programs managed by the utilities, the consultant's report explained. The programs were designed to produce cost-effective energy efficiency savings in the utilities' service areas for which those utilities could earn rewards for their shareholders based on performance. The lighting program was designed to encourage electricity consumers to buy and install energy-efficient light bulbs with discounts and rebates.

Strategy for those sales was shifted starting in 2017 to focus on hard-to-reach retail locations, such as independent grocery stores and discount shops that serve customers who might not typically purchase energy-efficient bulbs. However, those retailers were unlikely to maintain sales records in the same manner and detail as larger chain stores.

As a result, manufacturers were provided with the option to invoice the utilities using their own shipment data, rather than sales data collected from retailers. That lack of manufacturer-to-retail-customer tracking resulted in the problems at issue, according to the consulting group.

CPUC Commissioner Liane Randolph recently proposed to impose a moratorium on the ESPI program. "We find evidence lacking that ESPI currently remains effective in achieving all of its originally intended purposes," she wrote.

And Commissioner Martha Guzman Aceves on Dec. 17 placed a hold on a CPUC resolution that would have approved $28.21 million in ESPI awards to SDG&E, SCE and Pacific Gas and Electric for implementing ratepayer-funded energy efficiency programs for 2018 and part of 2019. The resolution will be up for consideration during the agency's Jan. 14, 2021, meeting.