In Energy Conservation, Calif. Sees Light

"What's dirt cheap tends to get treated like dirt," Rosenfeld says.

The District, also a wasteful user of energy, has a rate of 10.70 cents a kilowatt hour, only after recent rate increases. Virginia charges average 6.78 cents, and Maryland is at 10.03 cents.

Besides high prices, California has long-standing mandates. In 1974, the state enacted its first building standards for energy efficiency.

In 1976, the governor, Jerry Brown, was looking for a way to make good on his pledge to stop the construction of the proposed one gigawatt Sundesert nuclear plant in Southern California. The answer turned out to be refrigerators -- more efficient refrigerators.

Brown learned, in a meeting with Rosenfeld, who by that time had turned his full attention toward promoting energy efficiency, that California's refrigerators were using the equivalent of five Sundesert plants. A modest improvement in their efficiency would more than offset the need for new power plants, Rosenfeld told him. So the state adopted stringent appliance standards -- before the federal government did -- and staved off construction of the Sundesert plant. The change in California's refrigerators has saved energy equal to all the hydroelectric power produced nationwide, Rosenfeld says.

Next, California adopted an innovative approach to utility regulation called decoupling so that the utilities' profits were no longer linked to simply increasing sales.

Before then, electric utilities made more money when people bought more electricity. So a Midwest utility gave away energy guzzling light bulbs; in California and elsewhere, electric utilities promoted electric stoves or electric water heaters, appliances that run more cleanly and efficiently on natural gas. In December 1973, Rosenfeld had called Pacific Gas & Electric to challenge a newspaper ad the utility was running that said: "Don't mess with the thermostat. You'll use more gas heating your house in the morning than you'll save overnight." Rosenfeld asked the company's research head if he kept his coffee on the stove all night to avoid reheating it in the morning.

In 1982, the state Public Utilities Commission came up with the decoupling idea that would allow utility profits to grow while sales declined. It set separate targets for utility revenue and electricity usage; excess revenue would be returned to consumers; a shortfall in revenue would be added to the next year's consumer bills. Greater efficiency could boost profit margins. Rates are now reviewed every six to 12 months instead of every three years. (A similar approach for natural gas utilities had been adopted in 1978.)

The power companies quickly altered their focus. Now, Rosenfeld says, the state and the utilities spend $700 million a year to promote energy efficiency. "It's cheaper than building power plants," he says. At the moment, the program has expired but is up for renewal.

California remains the only state to have adopted decoupling, though proposals are pending in seven states.

"There's an element of stability of revenues that is very attractive," said Steve Kline, a vice president at Pacific Gas & Electric. "We don't have those huge swings that other companies do if there is an incredibly cold or hot winter." And that, he added, "is viewed favorably in the financial community."

Some utilities that favor decoupling are getting support from their traditional foes: environmentalists. Ralph Cavanagh, senior attorney for the Natural Resources Defense Council in California, has filed written testimony on behalf of Idaho Power Co., which is asking that state's Public Utilities Commission to implement the practice.