The State Current

The State Current offers succinct analysis of energy efficiency policy and program developments affecting the prospects for energy efficiency at the state level.

ACEEE values regular feedback from states on current policy and program developments. In order to stay abreast of policy and program developments for its state policy work, ACEEE has established a network of state-level contacts. Throughout the year, members of the Network and readers of the State Current are strongly encouraged to review the State Energy Efficiency Policy Database and ensure the information is accurate and up-to-date. The policies listed in the database are used to rank the states for the State Energy Efficiency Scorecard.

To get involved in the state network, or to receive this newsletter via e-mail, please contact Michael Sciortino: 202-507-4028.

Raising the Standard: Utility Targets in the Southwest

New Study Explores Efficiency in Appalachia

ACEEE State Policy News:

New ACEEE Paper Details Local Efficiency Efforts
The newest ACEEE report profiles 40 municipal energy efficiency programs as a guide for cities and counties preparing to implement federally-funded energy efficiency and conservation plans. Cities and counties have long been active developers of successful energy efficiency programs, and with the release of EECBG funds, local governments are poised to further their critical role. The new report, Energy Efficiency Program Options for Local Governments under the American Recovery and Reinvestment Act of 2009 examines a number of innovative energy efficiency programs implemented by American towns and cities prior to the passage of ARRA. The EECBG program will dispense more than 3 billion dollars to cities and states, creating jobs while improving U.S. energy efficiency through a variety of initiatives, including building retrofits, incentives, and audit programs. Download the report here: http://aceee.org/pubs/e09x.htm

ACEEE Develops State Technical Assistance Toolkit
ACEEE has worked with over 10 states, identifying energy efficiency potential and making recommendations on how to achieve lasting energy savings. Clean energy advocates in many of these states have since approached ACEEE, looking for concrete information on how to implement recommendations. ACEEE has also received a number of requests from states for which an energy efficiency potential study has not been done that seek assistance in crafting proactive energy efficiency policies. The Toolkit developed in response to these requests, and continues to evolve as we identify additional state needs. It currently includes links to general information and technical documents on a portfolio of programs and policies currently being implemented at the state level. This is an evolving project and we encourage state-level stakeholders to take a look and make suggestions for new tools. Click this link to access the Toolkit.

Updates to the State Energy Efficiency Policy Database
Congratulations are in order for Indiana and Arizona. Both states recently passed aggressive energy efficiency resource standards, which will save 12 percent of cumulative electricity sales in Indiana and 20 percent in Arizona by 2020.  For more information about these and other energy efficiency policies, visit the ACEEE State Energy Efficiency Policy Database.

Utilities in the southwest are making major strides in energy efficiency, quickly raising the region’s status as a leader in utility-run demand-side management (DSM) programs. A number of the region’s investor-owned utilities have incorporated aggressive DSM program plans into the integrated resource planning process, which allows utilities to carefully plan and establish energy efficiency savings and spending goals. Parallel to the efforts taken by utilities are strong mandates from state legislatures known as energy efficiency resource standards, which requires the state or utilities to achieve an energy savings target.

Of course, energy savings targets should act in concert with other complementary policies not mentioned here, such as decoupling and performance incentive mechanisms, which enhance the economic desirability of energy efficiency for utilities. For more information on the full portfolio of utility-sector policies relating energy-efficiency, visit the ACEEE State Energy Efficiency Policy Database. 

The latest round of utility plans have revealed a strong emphasis on energy efficiency across the region, in no small part due to the efforts of the Southwest Energy Efficiency Project (SWEEP), which has been a key stakeholder advocating for energy efficiency in forums large and small. The compiled information below comes from SWEEP and the ACEEE State Energy Efficiency Policy Database.

Utah

The Utah legislature adopted a resolution in 2009 (HJR-9) that urges the Utah Public Service Commission (PSC) approve energy efficiency programs that will save at least 1% of the utilities’ annual retail sales for regulated electric utilities and at least 0.5% per year for gas utilities. The PSC is now considering the targets and a range of other DSM policies addressed in the resolution, including decoupling and performance incentives. In Utah, utilities file biennial integrated resource plans which include demand-side resources and associated programs.

In September 2009, the PSC approved Rocky Mountain Power’s (RMP) request to increase its utility bill surcharge to pay for demand-side management (DSM) programs to 4.6%. RMP is Utah’s main electric utility, serving approximately 800,000 customers. RMP plans to spend about $65 million on cost-effective DSM programs in 2009, which is projected to customers save over $150 million on their utility bills and 260 million kWh per year, equivalent to about 1.2% of the utility's retail electricity sales and about 45% more than savings achieved through programs implemented in 2008. For a copy of RMP's request to the Utah Public Service Commission, click here. For a copy of the Commission's order, click here.

Nevada

In Nevada, a renewable portfolio standard is set at 25% by 2025. The contribution of energy efficiency is capped at a quarter of the total standard in any particular year. Utilities in the state achieved 0.9% energy savings in 2007 and about 1.3% savings in 2008 (first year energy savings as a fraction of retail electricity sales). Nevada Administrative Code §704.934 directs each regulated utility to submit a plan for conservation and load management as part of its resource plan. The plan must include, among other things, an assessment of savings attributable to technically feasible programs for conservation and load management, a list of proposed programs for reducing energy and demand, a determination of the reduction in the use of energy and the demand for energy that would result from the proposed programs, an assessment of the costs of the proposed programs and the savings in the utility’s costs produced by the proposed programs, and an assessment of the impact on the utility’s load shapes of proposed and existing programs for conservation and load management.

The Nevada Power Company, which serves around 825,000 customers in the state, is in the process of crafting a new demand-side management plan for 2010-2012 as part of its upcoming integrated resource plan.  It is anticipated that this new plan will increase funding for DSM and demand response programs, but not necessarily energy savings as the utility will rely less on CFLs for energy savings in the next three years than it did in the past few years. 

New Mexico

Currently, New Mexico has an energy efficiency resource standard that requires its IOU’s to achieve a 5% reduction from 2005 electricity sales by 2014, and a 10% reduction by 2020 as a result of DSM programs implemented beginning in 2007. In New Mexico, the Public Regulation Commission approved a settlement agreement regarding Public Service Company of New Mexico’s (PNM) DSM programs. Starting in July 2009, PNM will spend $14 million per year on nine DSM programs designed to save 59 million kWh of electricity per year. This is equivalent to about 0.63% of PNM's retail electricity sales and more than doubles the amount of electricity savings achievable through PNM’s previous set of DSM programs. For details regarding PNM's new DSM plan, click here.

Legislation adopted in 2008 directs PRC to provide utilities with an opportunity to profit from implementation of cost effective DSM programs. The utilities and other stakeholders met throughout 2009 to develop a consensus proposal for shareholder incentives and removal of disincentives. This consensus proposal was waiting for final action by the PRC as of October, 2009.
 
Arizona

Arizona utilities have developed diverse resource portfolios that include energy efficiency programs. To address anticipated demand increases, Arizona Public Service Company (APS) plans to continue to expand already successful energy efficiency programs to reduce use by 3,100 GWh by 2025. On December 16th, the Arizona Corporation Commission (ACC) approved a rate case settlement agreement for APS, setting energy savings goals of 1% in 2010, 1.25% in 2011, and 1.5% in 2012. The settlement also includes new performance-based shareholder incentives of up to 10% of DSM program net economic benefits, with a cap on the incentive equial to 20% of total DSM expenditures. SWEEP estimates that these goals will increase APS energy efficiency funding from about $25 million in 2009 to at least $75 million by 2012. The settlement will now be reviewed and acted upon by the ACC. In addition, APS already submitted a 2010 DSM budget of about $50 million to ACC. APS supplies electricity to about 1.1 million customers in Phoenix and nearby areas. For a copy of the settlement agreement, click here.

The latest news coming out of Arizona shows the state is serious about efficiency. On December 18th, the ACC ordered that all investor-owned utilities and rural electric cooperatives achieve 2% annual savings beginning in 2014. By 2020, the state should reach 20% cumulative savings, plus up to a 2% credit for peak demand reductions from demand response programs, for a total standard of 22%. The new EERS is one of the most ambitious in the country. For a copy of the approved ruling, click here.

Colorado

In Colorado, state law requires the Colorado Public Utilities Commission (PUC) to establish energy savings goals for retail electric and gas utilities. In late 2008, the PUC adopted savings targets for Xcel Energy that begin at 0.53 percent of energy sales reduced in 2009, increasing to a cumulative 11.5 percent of energy sales reduced in 2020. Although incentive mechanisms are in place to encourage achievement of planned goals, there do not appear to be any penalties for not reaching goals. In December 2008, the PUC approved the 2009-2010 DSM program plan submitted by Xcel Energy and other parties to a Settlement Agreement filed with the PUC in October. In 2007, Xcel Energy spent close to $20 million on electric energy efficiency programs. The utility plans to ramp up its investment in DSM programs to $63 million in 2009 and $80 million in 2010. Xcel Energy estimated that its customers will gain $450 million in net economic benefits from these programs. For details on the Settlement Agreement approved by the PUC, click here.

In May 2009, a settlement agreement approved for Black Hills Energy, the other major IOU operating in Colorado, with the utility agreeing to the same energy savings goals and performance incentives established for Xcel Energy. Black Hills has agreed to spend $10 million over three years implementing 12 different energy efficiency and load management programs for its residential and business customers. For details on the Black Hills settlement agreement approved by the PUC, click here.

Wyoming

In October 2009, Rocky Mountain Power (RMP), which supplies over half of Wyoming’s electricity sales, received approval from the Wyoming Public Service Commission (PSC) to implement six DSM programs for residential, commercial and industrial customers over four years beginning January 1, 2009. RMP anticipates spending about $25 million on these programs and saving 138 million KWh per year by the end of the four-year effort. This is equivalent to 1.7% of RMP's 2006 electricity sales in Wyoming.  For more details on the programs and PSC decision, click here.

A quick glance at ACEEE’s State Energy Efficiency Scorecard over the past few years will reveal some distinct regional divides. States on the east and west coasts and in the upper Midwest occupy the most spots at the top of the list, while the Southeast consistently ranks low in energy efficiency. Considering the region’s economic reliance on fossil fuels, it is no surprise that the concept of saving energy is met with skepticism. The region’s reliance on fossil fuels and the status of Appalachia as the historical epicenter of coal production and cheap electricity in America have contributed to the region’s lack of investment in energy efficiency.  It is critical for stakeholders in the region to understand that the economics of energy efficiency are sound and efficiency policies can be used to meet the energy needs of the region.

A recent report prepared by the Southeast Energy Efficiency Alliance (SEEA), the Georgia Institute of Technology, ACEEE, and the Alliance to Save Energy details the potential for energy efficiency in Appalachia. Commissioned by the Appalachian Regional Commission (ARC), Energy Efficiency in Appalachia assesses the energy efficiency resource in the region, how fast it can be deployed, potential policies and programs to implement, and their impact on the region’s economy. The report’s findings illustrate that energy efficiency is an economically sound way to meet the region’s energy needs.

Sub-Regions of Appalachia
(Source: Appalachian Regional Commission)

According to the report, a bold investment in energy efficiency could cut consumption by between 9 and 12 percent in 2020 and by 23 to 28 percent in 2030. Broken down by sector, the greatest opportunities for cost-effective energy efficiency lie in commercial buildings, which constitute 42 percent of the savings by 2030. Industrial sector savings make up 25 percent, transportation savings 18 percent, and residential savings 15 percent.

To achieve these savings, the report calls for the region to adopt a portfolio of policies beginning in 2010.  Most of the recommended policies require authorization from state legislatures, but municipal governments and utility commissions will also play significant roles in crafting the policies.  Recommended policies include:

• Commercial buildings: Commercial Building Energy Codes with Third Party Verification and Compliance Incentives; Support for Commissioning of Existing Commercial Buildings; Efficient Commercial HVAC and Lighting Retrofit Incentive; Tightened Office Equipment Standards with Efficient Use Incentives
  
  
• Residential buildings: Improved Building Energy Code with Third Party Verification and Compliance Incentive; Expanded Weatherization Assistance Programs; Residential Retrofit Incentive with Resale Energy Labeling and Incremental Cost Incentives; Super-Efficient Appliance Deployment
  
  
• Industry: Expanded IndustrialAssessmentCenters; Increasing Energy Savings Assessments; Supporting Combined Heat and Power (CHP) with Incentives
  
  
• Transportation: Pay-as-You-Drive Insurance; Clean Car Standards; SmartWay Heavy Truck Efficiency Loan Program; Speed Limit Enforcement

The economic impact of such a robust energy efficiency initiative would be transformational for the Appalachian region. Currently the energy industry directly generates approximately 150,000 jobs and indirectly supports thousands more producing and distributing energy products and services. Change, no matter how positive, is always difficult and a shock to the current system will certainly not be palatable to many entrenched in the current infrastructure of the energy industry. Understandably, the region resists such an aggressive push to conserve the very resource central to its economic prosperity. Reducing energy consumption, however, will not leave this energy-producing region in the cold. Energy efficiency initiatives entail substantial job creation and consumer savings, more than compensating for any job losses in the energy sector.

The report estimates that annual consumer outlays of $1 billion in 2010, $4.5 billion in 2020, and $6.2 billion in 2030 would bring about $5 billion in annual net consumer savings in 2020 and $21bn in 2030. These energy efficiency investments would also create more than 15,000 net jobs each year during the first five years, with an estimated average of 60,000 net jobs each year over the last decade of the analysis. Net jobs are the gain in jobs due to energy efficiency minus job losses in the energy-related sectors.

The report has generated interest across the region and SEEA will be working with the states on implementation of the strategies in 2010. The American Recovery and Reinvestment Act of 2009 (ARRA) pushes the states forward on energy efficiency, directing unprecedented levels of funding to the Weatherization Assistance Program, the State Energy Program, and the Energy Efficiency and Conservation Block Grant Program. The funding will enable the Southeast to aggressively pursue energy efficiency and to make energy efficiency a central strategy in meeting the energy needs of the region.

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