This paper addresses the nexus between the evaluation of energy-efficiency programs and incentive payments based on performance for program administrators in California. The paper describes problems that arise when evaluators are asked to measure program performance by answering the counterfactual question, what would have happened in the absence of the program? Then the paper examines some ways of addressing these problems. Key conclusions are 1) program evaluation cannot precisely and accurately determine the counterfactual, there will always be substantial uncertainty, 2) given the current state of knowledge, the decision to tie all of the incentive to program outcomes is misguided, and 3) incentive programs should be regularly reviewed and revised so that they can be adapted to new conditions.

The restructuring of the electric utility industry in the US created a crisis in the administration of ratepayer-funded energy-efficiency programs. Before restructuring, nearly all energy-efficiency programs in the US were administered by utilities and funded from utility rates. Restructuring called these arrangements into question in two ways. First, the separation of generation from transmission and distribution undermined a key rationale for utility administration. This was the Integrated Resource Planning approach in which the vertically integrated utility was given incentives to provide energy services at least cost. Second, questions were raised as to whether funding through utility rates could be sustained in a competitive environment and most states that restructured their electricity industry adopted a system benefits charge. The crisis in administration of energy-efficiency programs produced a variety of responses in the eight years since restructuring in the US began in earnest. These responses have included new rationales for energy-efficiency programs, new mechanisms for funding programs, and new mechanisms for program administration and governance. This paper focuses on issues related to program administration. It describes the administrative functions and some of the options for accomplishing them. Then it discusses criteria for choosing among the options. Examples are given that highlight some of the states that have made successful transitions to new governance and/or administration structures. Attention is also given to California where large-scale energy-efficiency programs have continued to operate, despite the fact that many of the key governance/administration issues remain unresolved. The conclusion attempts to summarise lessons learned.

The restructuring of the U.S. electricity industry created a crisis for ratepayer-funded energy-efficiency programs. This paper briefly describes the reasons for the crisis and some of its consequences. Then the paper focuses on issues related to program administration and discusses the relative merits of entities-utilities, state agencies, and non-profit corporations-that might be administrators. Four criteria are developed for choosing among program administration options: Compatibility with public policy goals, effectiveness of the incentive structure, ability to realize economies of scale and scope, and contribution to the development of an energy-efficiency infrastructure. We examine one region, the Pacific Northwest, and three states, New York, Vermont, and Connecticut, which have made successful transitions to new governance and/or administration structures. Attention is also given to California where large-scale energy-efficiency programs have continued to operate, despite the fact that many of the key governance/administration issues remain unresolved.We observe that no single administrative structure for energy-efficiency programs has yet emerged in the US that is clearly superior to all of the other alternatives. We conclude that this is not likely to happen soon for three reasons. First, policy environments differ significantly among the states. Second, the structure and regulation of the electric utility industry differs among the regions of the US. Third, market transformation and resource acquisition, two program strategies that were once seen as alternatives, are increasingly coming to be seen as complements. Energy-efficiency programs going forward are likely to include elements of both strategies. But, the administrative arrangements that are best suited to support market transformation may be different from the arrangements that are best for resource acquisition.

This paper aims to provide an objective history of electricity restructuring in California from the mid-1990s to the immediate end of the "California Energy Crisis" in June 2001. We discuss the restructuring debate that led to the restructuring law (AB1890), and describe how the new structure worked after it took effect in April 1998. We discuss the course of events during the crisis, and factors contributing to it, including the supply-demand balance in California and in the West, rising gas prices, the complexity of the market design, market power, and the regulatory decision to cap retail but not wholesale prices.

The key finding of an influential paper that received the International Association for Energy Economists' Best Paper Award (2004) is that utilities have been overstating electricity savings and underestimating costs associated with energy efficiency demand side management (DSM) programs. This claim is based on point estimates of average DSM-related savings and costs implied by an econometric model of residential electricity demand. In this response we first argue that the choice of test statistics, by not weighting estimated savings and costs by utility electricity sales and DSM expenditures respectively, biases results in favor of rejecting the null hypothesis that utility-reported electricity savings reflect true values. We also note that utility estimates of average program savings and costs are rejected based on point estimates alone; no attempt is made to evaluate the uncertainty surrounding these estimates. We use the same data and econometric model to estimate the appropriate test statistics. We then construct nonparametric bootstrap confidence intervals. We fail to reject the average electricity savings and DSM program costs reported by utilities using both the weighted and unweighted test statistics. Our results suggest that the evidence for rejecting utility estimates of DSM savings and costs should be re-interpreted.