EE Regulatory Roundup | Our February Guide to Navigating California’s EE Landscape

Welcome to our new (ish) series, EE Regulatory Roundup! This quarterly blog series, which launched in December of 2025, will provide updates on what’s happening with the entities that are responsible for setting EE regulations and program requirements for the entire state: the California Public Utilities Commission (CPUC); the utilities and Regional Energy Networks (RENs); and the Legislature. This is a busy time for EE programs and providers because the CPUC recently adopted new EE goals for 2026-2037 and is considering whether utilities can step back from their roles as EE program providers. 

2026 is off to a busy start, with a wide range of new and proposed EE regulatory requirements. 

EE Updates to the California Energy Code
The newest version of California’s Energy Code went into effect on January 1, 2026.  The updated code increases the energy efficiency of new single-family homes, multifamily housing, and non-residential and commercial buildings, as well as additions and alterations to existing buildings.  The California Energy Commission (CEC) develops and approves new codes every three years to incorporate technological innovations and to reflect updated cost and emissions savings.  The code update process involves input from the public, builders, and other stakeholders.  The Energy Code is part of California’s Title 24 Building Standards Code.

The CEC estimates that the updates will save approximately $4.8 billion in energy costs over 30 years and reduce greenhouse gas emissions by about 4 million metric tons, which is equivalent to the annual energy consumption of over half a million homes.  The CEC estimates that Californians will save nearly half on their energy bills by building homes to the new Energy Code standards.  Builders can also voluntarily implement even higher building efficiency standards through a specific portion of the Energy Code known as “CALGreen.”  

The new Energy Code requirements apply to new buildings and major alterations or additions to existing buildings:

For single-family homes:

  • Use of heat pumps for home heating and cooling air, and for water heating, is encouraged.

  • HVAC efficiency and control requirements are updated, including use of smart thermostats to allow residents to automatically take advantage of lower-cost rate periods.

  • Efficiency of exterior walls and windows in increased, making homes more comfortable.

For Multifamily homes:

  • Use of heat pumps for home heating and cooling air, and for water heating, is encouraged for buildings with a maximum of three stories.

  • Establishes electric-ready requirements to make it easier and cheaper to install electric water heating and cooking appliances if residents want to.

  • Strengthens ventilation standards to improve indoor air quality.

  • Expands electric vehicle charging access through dedicated circuits and parking spaces with chargers.

  • Increases building envelope efficiency through measures such as wall and slab edge insulation, to keep residents more comfortable.

 For businesses and non-residential buildings:

  • Use of heat pumps for space heating and cooling air is encouraged in some new buildings.

  • For alterations to stores, schools, offices, and libraries, certain end-of-life rooftop HVACs must be replaced with high-efficiency systems, such as heat pumps.

  • Establishes electric-ready requirements for commercial kitchens for easier transition to electric appliances in the future.

  • Updates HVAC efficiency and control standards.

  • Increases building envelope efficiency through improved ceilings, exterior walls, and windows, to keep occupants more comfortable.

The new Energy Code requirements are temporarily inapplicable to repair, restoration, demolition, or replacement of structures damaged or destroyed in the 2025 Los Angeles wildfires, in accordance with the Governor’s Executive Order N-29-25.

Additional Phase-Out of Natural Gas Incentives for Builders
In December 2025, California Public Utilities Commission (CPUC) staff issued a proposal to phase out ratepayer-funded EE incentives for most natural gas measures over the next decade.  These phase-outs would be in addition to the CPUC’s 2023 order directing the phase-out of EE ratepayer-funded incentives for gas uses in new residential and commercial construction. 

The staff proposal would:

  • Require builders to use climate zone-specific measures, such as heat pumps as the baseline for water heating and space conditioning, to be eligible for EE incentives for HVAC, water heating, clothes drying, and stovetop measures.  The is designed to limit performance-based measures that allow builders to install gas appliances but offset them with other higher-efficiency measures elsewhere in the project.

  • Establish criteria for determining the availability of Viable Electric Alternatives for gas appliances.  Staff favor using a Participant Cost Test metric, which accounts for up-front and ongoing customer costs to install electric appliances, as well as cost or bill savings to the customer.

  • Establish a methodology for tracking the costs of fuel substitution infrastructure installation or upgrades.

  • Phase out EE incentives for gas appliances in new construction where cost-effective Viable Electric Alternative exist.  The phase-out would go into effect on January 1, 2027.    

  • Require EE Program Administrators to submit proposals for greenhouse gas pilot programs targeting refrigerant emissions and leakage reduction, including worker training programs and refrigerant disposal programs. 

 Stakeholders submitted opening and reply comments on the staff proposal in January 2026.  The CPUC will review the comments and issue a proposed decision on the staff proposal in the coming months. 

February 2026Megan SomogyiEE Reg Roundup, regulatory, CPUC