Environmental activists at the Sierra Club and elsewhere say an outdated rule from the California Public Utilities Commission is preventing consumers from accessing incentive funds to replace old gas appliances with newer, more efficient electric models. They're petitioning for a change in the guidelines, but San Diego-based Sempra Energy, parent of San Diego Gas & Electric and SoCalGas, which supplies natural gas service (but not electricity) to a large swath of Southern California, is leading the opposition.

"The issue is that, say you have a natural gas water heater in your home and you want to get a more efficient heater when your existing one dies," the Sierra Club's Rachel Golden explained. "You want to get the most efficient one, which would be an electric heat pump that's much more efficient than a gas tankless or any other type of gas product on the market. Even though it's more efficient, you can't get an incentive for that.

"Right now the Home Energy Upgrade program is pretty outdated, and it's not allowing for fuel switching, so we're trying to update the policy to help California achieve its climate and air quality goals," she continues. "The 1990s were when the public utilities commission really formed their energy efficiency policies. Back then, they were concerned about "fuel wars" between [So Cal Edison, an independent supplier of electricity] and SoCalGas – that the utilities would use energy efficiency incentive funds to poach customers from one another. So they created a policy called the three-prong fuel substitution test, which makes it very difficult, basically impossible, to use efficiency funds for any upgrades that involve fuel switching.

"Maybe that made sense in the nineties, but fast forward to today when the electric grid is a lot different — it's not based on coal, and we're phasing out of gas use. And we have incredibly efficient electric technology like those heat pumps that weren't around back then."

According to Energy Upgrade California's website, owners of homes built prior to 2001 can qualify for up to $5500 in rebates on efficiency upgrades — the average rebate is about $2300, or 15 percent of the cost of improvements which can include things like insulation and duct replacement in addition to appliance replacement.

Last month the Sierra Club, in partnership with the Natural Resources Defense Council and the California Energy Efficiency Industry Council, submitted their request to consider changes to the substitution test. So Cal Edison and Pacific Gas & Electric, which provides both gas and electric service to a bulk of Northern California, also offered support for the change.

"San Diego Gas & Electric has remained silent — Sempra's their parent company – and So Cal Gas has come out in opposition, saying we shouldn't change the test," Golden continued. "I'm not sure how SDG&E feels internally, but externally they're certainly not supporting any changes to the test."

Sempra's SoCalGas responded with an opposition statement that Golden described as "very antagonistic and aggressive."

The utility's position is that while potentially more efficient, electrifying formerly gas-fueled devices is neither cost effective nor necessary to meet climate goals as currently laid out by the state legislature.

After SoCalGas mounted an opposition to the change, supporters started to fall away. The Industry Council has since withdrawn its support for review of the three-prong test.

"They're going after potential supporters and trying to intimidate or weaken supporters of policy change," Golden says.