This story was originally published by CalMatters. Sign up for their newsletters.
In 2020, California gave schools an enticing opportunity: A ratepayer-funded grant program would let them assess the condition of their heating and cooling systems, then pay for upgrades based on that review.
But in 2024, the California Energy Commission, which administers the California Schools Healthy Air, Plumbing, and Efficiency, or CalSHAPE program, decided to cut it short two years earlier than planned. As a result, only 172 of more than 4,500 schools whose assessments turned up heating and cooling systems in disrepair actually got money to upgrade them.
A 2025 audit by the California Public Utilities Commission found that the energy commission’s own overly complicated funding process forced it to stop accepting applications. That process, the audit said, left school districts at risk of failing to finish their grant-funded improvements before key deadlines tied to the commission’s legal obligation to return any unspent funds to utilities once the program ends. The audit recommended that the energy commission find a way to spend all the money or that the Legislature pass a law to let ratepayers have the money back early.
Neither happened. For two years, school advocates have pressed the state to release the program’s leftover $200 million. Now, lawmakers are weighing whether to spend just the interest on the original funds, $70 million, to pay for an unrelated virtual power plant energy program.
The energy commission, in its June 2024 notice pausing the program, pointed to budget constraints. Later that year, in October, the governor signed an executive order directing the commission to examine ratepayer funded programs “whose funding might more appropriately come from a source other than ratepayers.”
The energy commission declined an interview for this story.
“The CalSHAPE funding was initially collected by the utilities from ratepayers,” said Elaine Kahan, a spokesperson for the commission in a statement. “It is assumed that when the funds are returned to the utilities that they could be returned to ratepayers or offset the collection of additional funds from ratepayers.”
As schoolchildren bear the burden of more intense heatwaves fueled by climate change, districts are left with limited funds to fix or replace old air conditioning systems. Even if remaining funds returned to customers, energy rates have been rising, driven by wildfire expenses; rebates to customers would total only from 2 to 24 dollars, divvied up and paid out over a year.
As of now, there’s no guarantee ratepayers will see a refund; by the text of the law, the program’s leftover money reverts to utilities at year’s end.
“This was money that was pulled back unjustifiably,” said Keith Butler, deputy superintendent of Torrance Unified School District. “This is a good use of funds that has been set aside already – we just wanted it to go back out to finish the work.”
Protecting children from extreme heat
In the late summer and early fall, as students return to school, high temperatures often push HVAC systems to their limits. Limited staff work round-the-clock to fix them. Teachers move students to cooler classrooms. School officials buy portable air conditioners to keep classes in session.
“There are periods of the school year where it’s pretty much baking all day long, and some of the older units can’t keep up,” said Greg Page, energy management specialist for the Temecula Valley Unified School District. “Our team is working by emergency pretty much nonstop during those hot times.”
Temecula Valley Unified received $4.6 million in phase one funds, the assessment stage of the program, meant to pay for HVAC inspections and minor repairs. With that money, the district surveyed the needs of 30 schools, replaced some air filters and thermostats, and fixed a handful of HVAC systems.
Page said the school district’s assessment revealed that around a third of its heating and cooling systems are reaching their end of life and need to be upgraded. But Temecula Valley Unified was unable to apply for phase two funds – the upgrade stage – to replace those systems before the energy commission closed applications.
Torrance Unified ran into the same wall: The $2.4 million it received helped the district identify 300 air conditioning units beyond their useful life, but it, too, missed the window to apply for upgrade money.
The CalSHAPE program started in 2020 to improve the learning environment for California students and create jobs without touching the state general fund or raising energy rates.
The funding came through Senate Bill 841, which required utilities – including Southern California Gas Company, Pacific Gas & Electric, Southern California Edison and San Diego Gas & Electric – to direct a share of their energy efficiency budgets between 2021 and 2023, including some unspent funds, to school plumbing and HVAC upgrades. In total, the utilities contributed nearly $1 billion; $191 million remains unspent.
The bill’s author, former assemblymember and San Francisco Democrat Phil Ting, did not respond to interview requests.
Research has shown that high heat makes it difficult for students to learn. One study from 2020 estimated that an increase in the average temperature of 1 degree leads to 1% less learning, measured by changes in test scores.
“We need ways to make sure that we can keep students and staff safe in a changing climate, and HVAC is one of the best ways that we can do that,” said Stephanie Seidmon of UndauntedK12, a nonprofit that advocates for healthy school environments. “CalSHAPE is the primary funding source that schools have to do that right now.”
A controversial program
The program’s funding source has been controversial since before its passage.
The state Department of Finance opposed it in 2020, because of potential costs to ratepayers. The department projected cost increases of $11 for PG&E customers and $19 for SCE customers.
CalMatters gave investor-owned utilities until Wednesday afternoon to answer questions about the funding for this program. PG&E and Southern California Edison said they will use any funds returned to them to offset rising bills.
San Diego Gas & Electric said it plans to return unspent CalSHAPE funds to customers through bill relief. “We have urged the California Energy Commission to expedite the return so families and small businesses can feel the benefit sooner, at a time when affordability matters most and every dollar back in customers’ pockets makes a difference,” spokesperson Anthony Wagner wrote.
The state’s major utilities have posted record or near record profits in recent years. In California, the Public Utilities Commission determines a utility’s guaranteed rate of return, a key part of its profits. The energy commission sets energy policy more generally.
Edison International, the parent company overseeing Southern California Edison, reported $4.6 billion, a number inflated by one time wildfire settlements. On an adjusted basis its core earnings were $2.25 billion. PG&E made $2.59 billion in core earnings in 2025, up from $2.48 billion the year before.
A 2023 energy commission report assessing the CalSHAPE program found it had in fact added $1 billion in ratepayer costs.
The debate about whether ratepayers should fund this kind of program comes as ratepayers costs are climbing. In the last five years, rates have increased by 39% for PG&E customers, 57% for Southern California Edison customers and 43% for SDG&E customers, according to a report by the utilities commission public advocate. Utility spending on wildfire mitigation projects accounts for much of that increase.
Mark Toney is executive director of the Utility Reform Network, a policy group that advocates for ratepayers. He argues ratepayer money shouldn’t pay for this kind of program at all.
“The fact that schools need new HVAC systems has nothing to do with producing electricity, delivering electricity, or generating electricity,” Toney said.
School advocates counter that students’ wellbeing shouldn’t come at the cost of the government’s poor decision making.
“We’re going to kneecap this program out of some philosophical argument about how programs should be funded?” said JuNelle Harris, founder of Clean Air Allies, a nonprofit that advocates for healthy air in schools.
“That just seems to me like bad government. If the money is there and the program is working, why would we not use that money and try to make the program as successful as possible?”
School and ratepayer advocates debate
While the law states utilities should get leftover CalSHAPE funds, it doesn’t guarantee the utilities will refund ratepayers. In 2024, assembly member Cottie Petrie-Norris, an Orange County Democrat, introduced a bill to get ratepayer refunds sooner – but critics said the payout would be too small to matter.
A legislative analysis put the refund between $2 and $24 for just one year depending on their electricity provider: $2 a month San Diego Gas & Electric ratepayers, $1.25 a month SoCal Edison ratepayers, and 20 cents for Pacific Gas & Electric ratepayers.
Petrie-Norris did not respond to interview requests. She told the Orange County Register in April that “the things that are on people’s utility bills should be the cost of delivering electricity to your house, not a bunch of other programs or pet projects.”
The bill was never heard in committee.
Last year, Assembly member Al Muratsuchi, a South Bay Democrat, proposed expanding the program to 2030 but the Assembly’s utilities committee declined to even hear the bill.
David Evans of the Department of Finance has said that schools can turn to other funding sources, including Proposition 2, a statewide $10 billion bond for facilities, though demand for the funds already exceeds the funding amount.
Muratsuchi, who authored the proposition, said it can’t replace CalSHAPE’s role: The law requires 25% of all awards to go to underserved communities, and a 2024 report found that the program had actually delivered 45%.
“Those dollars can continue to be a source of funding to improve HVAC and energy efficiency projects, but we knew from the get go that it doesn’t come any close to meeting all of the statewide demand.”
The program’s future is up for negotiation
The state is now considering a budget proposal to spend the roughly $70 million in interest earned on CalShape’s leftover funds on a virtual power plant program instead.
Virtual power plant systems link home solar, batteries and smart thermostats so utilities can draw on them during high-demand periods, automatically adjusting participating customers’ thermostats to avoid blackouts during extreme heat.
Lawmakers are weighing whether that interest should go to the utilities commission’s Emergency Load Reduction Program or the energy commission’s Demand Side Grid Support program.
School advocates are using the proposal to make one last push, to re-open CalSHAPE applications and spend the unused funds.
The senate seems to agree; senate staff have recommended the CalSHAPE program be extended.
But CalSHAPE’s fate will now depend on closed-door negotiations between the Legislature and the governor expected to continue through August. Anthony Martinez, a spokesperson for the governor, declined to comment.
For districts like Torrance, the wait isn’t abstract. “We’ve been band-aiding what we have,” Butler said, “but there will be a point where they are not working in the not too distant future.”
