Southern California Gas offers a special rate designed to incentivize Distributed Generation, including CHP. CHP is also part of its Energy Efficiency program. San Diego Gas and Electric offers a special rate schedule designed to incentivize CHP. Pacific Gas and Electric offers a CHP program as part of its Energy Efficiency program. All utilities are required to charge CHP systems the same price for natural gas that they charge electric utilities. On June 11, 2015, The California Public Utilities Commission (PUC) established a schedule for four competitive solicitations for combined heat and power (CHP) facilities between now and 2020 for Southern California Edison Co. and San Diego Gas & Electric Co. The Commission also laid out procurement targets based on greenhouse gas reduction targets. The PUC set a new target of 2.72 million metric tons of emissions reductions from CHP facilities by 2020. The PUC stated that Pacific Gas and Electric Co. will not be required to hold CHP-only solicitations during this period as the company has already procured emissions reductions in excess of its service territory's potential for CHP. On September 21, 2015, The California Public Utilties Comission (CPUC) issued a proposed decision in Southern California Gas Company’s (SoCalGas) application for a Distributed Energy Resources (DERS) Tariff. This decision, if adopted, would establish a DERS Tariff by which SoCalGas will facilitate the adoption and use of combined heat and power (CHP) energy systems for its customers. The CPUC anticipates that providing SoCalGas customers an opportunity to employ Distributed Energy Resources, will make more widely available a service that reduces the health and environmental impacts from air pollution, reduces greenhouse gas emissions, and provides operational efficiencies, consistent with current California environmental goals. The proposed decision also denies the Joint Settlement Agreement entered into by SoCalGas and the Office of Ratepayer Advocates and modifies SoCalGas’ Application to establish a DERS Tariff. With the modifications the proposed decision features the following terms: • Combined heat and power systems provided through the DERS Tariff will meet all requirements of the California Public Utilities Commission’s Self-Generation Incentive Program (SGIP), including efficiency and greenhouse gas emission standards. • SoCalGas will only install combined heat and power facilities that are fueled wholly by natural gas, biogas, or other gaseous fuels such as hydrogen or hythane. • The nameplate capacity of the installed combined heat and power system will be less than or equal to 20 Megawatts (MW). If SoCalGas installs multiple systems on one customer’s premises, the total nameplate generating capacity built on that premises must be less than or equal to 20 MW. • The combined heat and power systems installed through the DERS Tariff will adhere to the SGIP electricity exports limits. • The program will have a 10-year sunset provision A final decision, approving this program, was issued on October 22, 2015.

Via legislative mandate, the California Energy Commission is required to submit an Integrated Energy Policy Report on trends and issues concerning electricity, natural gas, transportation, energy efficiency, renewables and public interest energy research every two years. The 2013 report places energy efficiency and demand response as top priorities for meeting California’s energy needs and lessening the impacts of climate change. The natural gas section of the IEPR includes a discussion about pipeline safety remaining a critical concern in the wake of San Bruno. As well, the report discusses the need to harmonize the natural gas and electricity generation industries and to support increasing the use of natural gas facilities to help integrate renewable energy. LNG exporting and CHP are also included. Recommendations relating to natural gas include: Continuing to monitor and better integrate pipeline delivery of natural gas with electric system reliability needs; Monitoring he national interest in LNG and its implications for the state; Staying abreast of changing revenue dynamics for natural gas in light of shale abundance, generation shifts away from coal and the implications of expiring pipeline contracts for maintaining necessary supply into the state. The transportation section of the report includes a recommendation to develop a multi-year strategy to fund electric, hydrogen and natural gas vehicle rebates and incentives for related infrastructure and to evaluate options to use state, federal or other mechanisms to structure incentives to increase private sector financing.

California has had utility-sector customer energy efficiency programs dating back to the 1970s which have grown and evolved substantially over three decades. In 2001, the main state resource agencies - along with the state’s utilities and other key stakeholders - developed the California Integrated Energy Policy Report that included energy savings goals for the state’s Investor owned utilities. The CPUC formalized the goals in Decision 04-09-060 in September of 2004. The natural gas goals were set at 67 MMTh per year by 2013. Current targets are embedded in the approved 2013-2014 program portfolios and budgets for the state’s IOUs, which calls natural gas savings of approximately 94 MMTh. The CPUC defined a Risk/Reward Mechanism for investor-owned utilities in Decision 07-9-043. This decision establishes a minimum performance standard for the utilities under which incentive earnings accrue only if the Investor owned utility’s energy efficiency portfolio of programs achieves at least 85 percent of the CPUC’s goals. The incentive formula calls for utilities to receive 9% of net benefits if they achieve between 85-99% of savings goals, and 12% of net benefits if they meet or exceed savings goals up to the earnings caps established for each utility. In addition, utilities can earn a percentage of their incentive earnings before evaluation procedures verify their impacts. On November 14, 2013, the CPUC opened a rulemaking proceeding to set long-range “rolling portfolios” of energy efficiency programs in an effort to avoid disruptions due to stops and starts that result from the current triennial program approval process. The CPUC feels that long-term authorization and planning (roughly 10 years) will allow administrators to focus on longer-horizon projects and investments in long-term business plans. The key goals of the rulemaking are to achieve greater funding stability for those implementing energy efficiency programs, reduce transaction costs, and coordinate demand forecasts, procurement planning and transmission planning. The CPUC aims to have the "rolling portfolios" in place for 2016 and beyond. It should be noted that Southwest Gas is considered a small and multijurisdictional utility in California for its energy efficiency efforts and therefore its requirements vary from the state's large IOUs. In June of 2014, Southwest Gas received approval for a California Conservation and Energy Efficiency (CEE) Plan, which consists of CEE programs designed to provide and encourage opportunities for residential and commercial customers to experience reduced energy consumption and lower utility bills. The CEE Plan will result in cost-effective energy savings and advance market transformation, thereby reducing the need for future market interventions. Southwest Gas received approval for a $5 million budget for the CEE Plan ($1 million per year for 5 years), which will be recovered through a CEE surcharge. On October 16, 2014, the CPUC authorized nearly $1B in "bridge funding" for energy efficiency programs. This money funds the state's energy efficiency programs while the Commission works to revamp them.

In December 2010, San Diego Gas & Electric filed a request with the California PUC for a gas base rate increase. In its filing, the utility also proposes a post-test-year ratemaking mechanism for the three-year period 2013 through 2015, under which the company’s revenue requirement would be adjusted to reflect increases in capital-related and other expenses. The CPUC approved the mechanism in May 2013. Also in December 2010, Southern California Gas filed a request with the CPUC for a gas base rate increase. As part of that filing, the utility proposes a post-test-year ratemaking mechanism for the three year period 2013-2015, which under the company’s revenue requirement would be adjusted to reflect increases in capital-related and other expenses. The company did not request specific rate increases under the mechanism. The CPUC approved the mechanism in May 2013. As part of its recent GRC in California, Southwest Gas (Southwest) proposed an Infrastructure Reliability and Replacement Adjustment Mechanism (IRRAM) that is designed to facilitate and complement projects involving the enhancement and replacement of gas infrastructure. In June of 2014, southwest received approval for an IRRAM mechanism. Southwest’s approved IRRAM, applies to infrastructure replacement and other non-revenue producing infrastructure projects. The PUC will allow SWG to assess a surcharge to collect the first year IRRAM budget of $232,665 in Southern California, $48,345 in Northern California, and $58,942 in South Lake Tahoe. The first phase of this program will be limited to surveying leaks on Customer Owned Yard Lines (COYL) on school properties. Southwest will also continue with its Early Vintage Plastic Pipe (EEVP) replacement plan, which it began in 2007. Southwest had proposed to accelerate this program in order to complete replacement of the replacement of Aldyl-A pipe by 2018, however, the Commission denied this proposal. The company will adhere to its current EEVP schedule, which is due to be completed in 2026.

Southern California Gas Co. (SoCal Gas) has a tariff that allows it to design, construct, own, operate and maintain CNG facilities to serve the natural gas vehicle (NGV) refueling station and sell compressed gas according to a Compression Services Tariff. SoCal Gas also has a rate schedule for home refueling of NGVs. PG&E owns and operates multiple CNG refueling stations in California and has multiple NGV rate schedules in its tariff. San Diego Gas and Electric Co. owns and operates multiple CNG refueling stations in California and has multiple NGV rate schedules in its tariff, including a schedule (Rate Schedule G-NGVR) applicable to natural gas procurement service for individually metered residential customers who have an installed natural gas vehicle home refueling appliance. Integrys Energy Group subsidiary Trillium CNG owns and operates stations in Tulare, Sacramento and Rancho Cucamonga. Through its subsidiary, Questar Fueling Co, Questar Corp. gas built CNG stations in Bakersfield and Fontana.

California initially implemented decoupling through the Supply Adjustment Mechanism (SAM) for gas utilities beginning in 1978 (Decision 88835). Pacific Gas and Electric decoupled natural gas sales in 1978. In 2004, Southwest Gas was granted the authority to implement a decoupling mechanism for all customer classes. The decoupling mechanism utilizes a balancing account that protects customers if base revenues exceed authorized levels and shareholders if base revenues are less than authorized levels. All other gas utilities operate under decoupling mechanisms that modify rates annually to reflect changes, from any cause (such as weather, conservation, changes in customer count) in sales and throughput from levels utilized to establish rates.