May State Bulletin

Guest Highlight
Energy Efficiency First! Judith Iklé of the California Public Utilities Commission Discusses California's Unique "Loading Order."

Alliance to Save Energy Column
The Reemergence of Demand-Side Management in Georgia.

State Updates
Legislative and Regulatory News from Arkansas, Colorado, Connecticut, Georgia, Hawaii, Maine, Minnesota, New York, North Carolina, Texas, Vermont, Washington.

RECA Report
Get the latest on the work of the Responsible Energy Codes Alliance (RECA).

Efficiency: The Core of California’s Energy Future.

By Judith Iklé,
Branch Manager, Energy Division
California Public Utilities Commission

California is pioneering an efficient, sustainable course of action to address the state’s energy needs. Efficiency is now the core of California’s energy future. In May 2003 the state released its joint agency Energy Action Plan, which seeks to guarantee resource adequacy, reliability of service, and reasonable pricing to California ratepayers. Under the plan, utilities must first attempt to meet their load requirements with energy efficiency and demand-side resources, including demand response. This new “loading order” is the first of its kind in the nation.

The California Public Utilities Commission (CPUC) is now implementing several bold new initiatives in support of the Energy Action Plan. The Commission has set ambitious quantifiable energy savings goals for the four large investor-owned utilities: Pacific Gas and Electric Co., Southern California Edison, San Diego Gas and Electric Co., and Southern California Gas Co. To help the utilities implement their energy efficiency programs, the state is allowing them to use procurement funds Further, the energy efficiency program cycles have been extended from the original one-year period to three years in order to foster greater program effectiveness.

In support of these objectives, there is a dramatic increase of money flowing to energy efficiency. The 2004-2005 program cycle will see a 41% jump in spending from the previous cycle, to a record $823 million. This includes $578 million of Public Goods Charge funding, and $245 million from electric utilities’ procurement funds.

For the purposes of implementation, the CPUC has established a new administrative structure for the 2006-2008 program cycle. Utilities will be expected to play the lead role in developing program plans and managing their efficiency portfolios. Advisory groups with public participation will now play a role in shaping efficiency portfolios and programs. The CPUC will play a far greater role in their monitoring and evaluation. Under the new requirements, Utility Program Administrators are expected to file their first energy efficiency portfolios for the new cycle on June 1, 2005 for CPUC approval.

We are optimistic that the goals set out in these efficiency programs will result in dramatic energy savings and make a material contribution to meeting load. The target for Investor Owned Utility (IOU) peak savings is nearly 5,000 MW by 2013. The cumulative savings over this period could total more than 23,000 GWh. This is projected to meet 55% to 59% of utilities’ incremental electricity needs. Over the same period the CPUC has a cumulative savings goal of 444 MMTh of natural gas.

Following the energy crisis, the CPUC directed utilities to include energy efficiency programs in their procurement portfolio mix. This had the effect of opening up a major source of new funding for efficiency. In May 2005 the CPUC approved Southern California Edison’s request for a $57 million increase in energy efficiency program funding, which we expect will generate about 40 MW of peak demand reduction this summer. Thus, action to further the deployment of energy efficiency will play an integral role in alleviating potentially tight summer supplies.

The CPUC, along with its sister agency the California Energy Commission, is developing monitoring and verification protocols Rigorous program evaluation is critical if California expects to attain its energy efficiency goals and to incorporate program results into resource planning and load forecasting.

Responsible energy procurement will reduce overall ratepayer costs, benefiting California’s economy and competitiveness. California is again taking the lead in increasing efficiency through a combination of innovative program design and fresh funding sources.

For more information about the loading order, or other CPUC energy efficiency programs, please contact Judith Iklé at jci@cpuc.ca.gov.

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The Reemergence of Demand-Side Management in Georgia

By Harry Misuriello, Director of Buildings and Utilities Program, Alliance to save Energy

Last year, Georgia utilities-- Georgia Power and Savannah Electric-- were required to submit their triennial Integrated Resource Plans (IRP) to the Public Service Commission (PSC). The IRP, a document that lays out a utility’s plan for meeting the electricity demand of their customers, raised concerns in the energy efficiency community. The utilities’ proposal included almost NO demand-side management (DSM) options to reduce demand, but rather called for an increase in power generation.

Along with several other stakeholders, I participated on behalf of the Alliance to Save Energy in the IRP process, submitted testimony, and publicly voiced concerns about the un-balanced approach laid out in the IRPs. In response to our concerns, in July 2004 the PSC unanimously decided to create a “Demand-side Management Working Group” to put together a set of recommendations for increasing energy efficiency in the IRPs. My fellow working group members and I spent the next several months researching, negotiating and writing a detailed report outlining our top recommendations.

On Tuesday May 17, after almost a year of Working Group deliberations, the PSC voted 5 to 0 to unanimously accept the recommendations of our working group! In the near future, the Commission will require Georgia Power and Savannah Electric to offer four new energy efficiency programs to their residential customers. This is the first time in over a decade that these two investor-owned utilities have offered such energy efficiency programs to their customers. The four new energy efficiency programs include:

• A statewide “fuel neutral” Energy Star Home Program. This program will focus on high load growth areas as it applies to new residential construction, and will require the utilities to implement consumer awareness campaigns to educate their customers about Energy Star Homes, as well as to offer incentives to cover the cost of Energy Star certification. The goal is to build 1,050 Energy Star homes in the first two years. Natural gas distributors also are expected to participate in the program.

• The Energy Star Appliance Program. This educational program requires the utilities to educate retailers and consumers on the energy bill savings associated with more efficient appliances. The overall goal of the program is to develop the manufacturer and retailer infrastructure and consumer demand to increase the availability and sales of Energy Star appliances.

• The Duct Sealing and Infiltration Control Program. Under this program the utilities will partner with certain affinity groups to implement a marketing strategy designed to minimize cost while maximizing effectiveness. The goal of the program is educate a target audience of homeowners whose homes are at least 10 years old about the benefits of duct sealing and infiltration control.

• The Home Inspector Pilot Program: The goal of the pilot project is to use home inspectors as a vehicle to promote energy efficiency in existing homes and to increase the penetration of Energy Star appliances. The utilities will partner will a few home inspection companies for the two-year test period to convey energy efficiency recommendations to potential homebuyers at the time of home purchase as part of regular home inspections.

In addition, the approved report also provides a new procedure to screen and analyze proposed demand side management (DSM) programs for future IRP proceedings. This new procedure includes:

• Setting an “analytical cap” for DSM expenditures; that is, the amount of money the Commission is willing to spend on DSM over the 3-year IRP period. The caps proposed in the report range from $10 million/year (suggested by Georgia Power) to $40-$50 million/year as proposed by efficiency advocates. The upper range is about 1.5% of the revenue derived from residential and commercial sector electricity sales.

• Reporting program economics and cost effectiveness using both the Rate Impact Measure (RIM) and Total Resource Cost (TRC) tests, showing program costs, program savings and potential impacts on rates up to the analytical cap amount. This is a big move forward because the RIM test now is no longer the exclusive test for program cost effectiveness. This was one of our major policy goals.

• Establishing a new stakeholder participation process in the DSM planning that involves interested parties during different stages of the planning process -- 18 months, 12 months and 6 months before the IRP is filed with the PSC. For the 2007 IRP, this means we’ll be back at the table to discuss new programs with the lead utility, Georgia Power, later this summer.

The report also proposed some legislative initiatives for the Commission to consider and support. These include:

• A sales tax holiday for energy efficient appliances.
• State appliance standards.
• A Georgia state energy policy plan.
• Energy conservation goals for state facilities.

A final order by the Commission that incorporates these recommendations is expected in about two weeks. After the order is issued, the Alliance will continue to work with Georgia Power and local stakeholders to help insure that these programs are successful.

For more information, contact Harry Misuriello at hmisuriello@ase.org.