States and Utilities Rethinking Customer-funded Energy Efficiency Programs?

By Matthew Rose, Enerdynamics Instructor 

The level of spending and activity in customer-funded energy efficiency programs is rising. With the increase in state-level energy efficiency resource standards (EERS) and compliance targets, funding for energy efficiency programs reflects an increasing commitment.  At last count there are 26 states with various forms of directives requiring utilities or independent state administrators to spend ratepayer dollars on energy efficiency programs that meet specified savings targets[1].

Despite this forecast growth in spending, there exists a small but growing undercurrent of utilities and state regulators looking at retrenching demand-side management expenditures and accompanying program impacts. The move to reconsider efficiency targets reflects a confluence of industry issues and trends that, in some cases, counter the presumed growth in customer-funded energy efficiency.

Following are examples of states or utilities that are reexamining relevant energy efficiency spending and impacts to business operations. Examples of goal setting that have been impacted by changing market conditions are also noted. (For a more in-depth explanation on why this is happening, read the article in our latest issue of Energy Insider.)

Colorado: Xcel Energy filed for Commission approval on its 2014 Energy Efficiency Plan that includes reduced savings goals for some traditional energy efficiency programs[2]. The filing is based on a recent market potential analysis that indicated an inability to capture enough cost-effective savings to meet previously established goals. The study identified the advancement of appliance standards as a key element in the goal shortfall. The filing calls for a proposed $6.9 million in electric DSM budget cuts across 10 programs.

Iowa: The Iowa Utilities Board recently approved Alliant Energy’s Interstate Power and Light Company energy efficiency plan[3]. Under the new goals, Alliant plans to save energy reflecting 1.1% of retail sales each year over the next five years. This is less than the utility’s current goal of 1.3% and its recent performance of 1.4%. The Board also allowed the company to suspend its incentive program for renewable energy installations, which has been in place for about five years. The Iowa Utilities Board is considering a similar proposal by MidAmerican Energy, with a final order expected before the end of the year.

Ohio: A recent Senate Bill (SB 58) was filed that would overhaul Ohio’s energy efficiency and renewable energy law[4]. SB 58 would nix the requirement that half of the renewable power come from Ohio-based projects[5]. SB 58 also allows large industrial consumers to opt out of state-mandated programs. The Bill would also allow utilities to count upgrades they might have made anyway — such as equipment replacement or power plant upgrades — to count for increases in energy efficiency. The bill is currently stalled in committee.

Maryland: The State of Maryland (and its statewide Empower Maryland Program) has not met expected interim savings targets and is in jeopardy of falling short of its “15 x 15” energy efficiency targets (15% reduction by 2015)[6]. The state is trying to accelerate savings, and the Maryland Energy Administration anticipates a near doubling in impacts in 2013-2015 (as compared to 2010-2012), but overall the savings have a strong possibility of falling short.

Arizona: Arizona Corporation Commissioner (ACC) Gary Pierce recently filed a letter requesting the Commission reevaluate the state’s EERS rules. Arizona Public Service has informally noted that, given changes in the marketplace and the economy, it may be difficult to meet the current 22% reduction by 2020. No imminent changes are expected in the short term as the ACC is focused on addressing issues of restructuring and net metering[7].

In addition to the above states, there is anecdotal evidence suggesting other utilities are closely monitoring the impact of energy efficiency on their operations and trying to determine the ability and costs for complying with savings targets.  Whether these are isolated exceptions or the origins of a larger movement is not yet clear. It is clear, however, that utilities are carefully measuring the impacts of delivering energy efficiency and looking for ways to reduce risks and limit exposure.

References:

[1] American Council for an Energy Efficient Economy, York, Kushler, Hayes, Sienkowski, Bell and Kihm, Making the Business Case for Energy Efficiency: Case Studies of Supportive Utility Regulations, December 2013

[2] Xcel Energy filing, Colorado-Docket Number 13A-0686EG

[3] Iowa Environmental Council, Iowa Utilities Board Approves Cuts to Alliant Energy’s Efficiency Efforts, December 2, 2013

[4] As Pending in the Senate Public Utilities Committee-130th General Assembly 2013-2014 Regular Session- Sub S.B. No. 58

[5] Ohio considers: Is energy efficiency worth the money? by Chrissie Thompson, Cinncinnatti.com, December 4, 2013

[6] Maryland ninth on energy efficiency, may fall short of goal; Two reports on efficiency say utility programs must ramp up, by Jamie Smith Hopkins, The Baltimore Sun, November 06, 2013

[7] Source: American Council for an Energy Efficient Economy, webinar presentation. Energy Efficiency in the States: 2013 Outlook, March 2013

About Enerdynamics

Enerdynamics was formed in 1995 to meet the growing demand for timely, dynamic and effective business training in the gas and electric industries. Our comprehensive education programs are focused on teaching you and your employees the business of energy. And because we have a firm grasp of what's happening in our industry on both a national and international scale, we can help you make sense of a world that often makes no sense at all.
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