Demand Side Management & Conservation

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1 Demand Side Management Demand Side Management & Conservation & Conservation Brian Horii Energy & Environmental Economics, Inc. (E3) Presented to: Presented to: Conservation Subcommittee Conservation Subcommittee Boise, Idaho Boise, Idaho August 23, 2006 August 23, 2006

description

Demand Side Management & Conservation. Brian Horii Energy & Environmental Economics, Inc. (E3) Presented to: Conservation Subcommittee Boise, Idaho August 23, 2006. You are here. Roadmap for Developing the Energy Plan. Understand where we are today. Decide where we want to go tomorrow. - PowerPoint PPT Presentation

Transcript of Demand Side Management & Conservation

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Demand Side Demand Side Management & Management & ConservationConservation

Brian HoriiEnergy & Environmental Economics,

Inc. (E3)

Presented to:Presented to: Conservation SubcommitteeConservation Subcommittee

Boise, IdahoBoise, IdahoAugust 23, 2006August 23, 2006

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Roadmap for Developing Roadmap for Developing the Energy Planthe Energy Plan

UnderstaUnderstand where nd where

we are we are todaytoday

Decide Decide where we where we want to want to

go go tomorrotomorro

ww

Figure Figure out the out the

best best ways to ways to

get thereget there

Implement Implement the the

approved approved measuresmeasures

NegotiatNegotiate e

through through legislativlegislative processe process

You are

here

RepeaRepeatt

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Goals for The Morning Goals for The Morning SessionSession

Get a good understanding of how DSM lines Get a good understanding of how DSM lines up with the Committee’s draft Policy up with the Committee’s draft Policy ObjectivesObjectives

Understand the what and how DSM is Understand the what and how DSM is currently being undertaken in Idahocurrently being undertaken in Idaho

Understand what and how DSM is currently Understand what and how DSM is currently being undertaken in other statesbeing undertaken in other states

Understand what can be done, from a policy Understand what can be done, from a policy standpoint to accelerate the acquisition of standpoint to accelerate the acquisition of DSM in IdahoDSM in Idaho

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AgendaAgenda

Review of the Draft Policy ObjectivesReview of the Draft Policy Objectives Is there a need for DSM in the Energy Is there a need for DSM in the Energy

Plan?Plan? Does DSM line up with Draft Policy Does DSM line up with Draft Policy

Objectives?Objectives? Is DSM promotion needed in the Energy Plan?Is DSM promotion needed in the Energy Plan?

What can the legislature do?What can the legislature do? Briefing on WGA RecommendationsBriefing on WGA Recommendations Straw proposal Straw proposal

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Review of Draft Review of Draft Policy ObjectivesPolicy Objectives

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Conservation Priorities Conservation Priorities from from

7/11 Committee Meeting7/11 Committee Meeting Maintain Idaho’s low cost energyMaintain Idaho’s low cost energy Conserve resourcesConserve resources Air, waterAir, water Maintain adequate energy supplyMaintain adequate energy supply DependabilityDependability Don’t arbitrarily preclude any Don’t arbitrarily preclude any

resourceresource Don’t discourage production with Don’t discourage production with

regulationregulation Reduce dependence on foreign Reduce dependence on foreign

energy sourcesenergy sources Reduce dependence on non-Reduce dependence on non-

renewable energy sourcerenewable energy source Reliability to meet peak demandsReliability to meet peak demands Diverse portfolio of resources Diverse portfolio of resources Energy as a local industryEnergy as a local industry Increase the tax baseIncrease the tax base Grow the Idaho economyGrow the Idaho economy Appropriate use of water and Appropriate use of water and

other resources/competing usesother resources/competing uses

Recognize environmental impact Recognize environmental impact of various technologiesof various technologies

Reliable transportation/delivery Reliable transportation/delivery of energyof energy

Incentives for production & Incentives for production & conservationconservation

Protect the environmentProtect the environment Energy independenceEnergy independence Position the state for possible Position the state for possible

carbon regulationcarbon regulation Promote the most efficient use of Promote the most efficient use of

Idaho’s energy resourcesIdaho’s energy resources Fluid and flexible energy policyFluid and flexible energy policy Promote rural economic Promote rural economic

development/agricultural development/agricultural involvement in energy productioninvolvement in energy production

Access to energy for ALL Access to energy for ALL Idahoans (limited income)Idahoans (limited income)

Best practices from other nationsBest practices from other nations Protection of public health & Protection of public health &

safetysafety

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Categories of Policy Categories of Policy ObjectivesObjectives

1.1. Reliability, Stability:Reliability, Stability: Ensure a secure, reliable and Ensure a secure, reliable and stable energy system for the citizens and businesses stable energy system for the citizens and businesses of Idahoof Idaho

2.2. Low-Cost, Affordability:Low-Cost, Affordability: Maintain Idaho’s low-cost Maintain Idaho’s low-cost energy supply and ensure access to affordable energy supply and ensure access to affordable energy for all Idahoansenergy for all Idahoans

3.3. Environment, Conservation:Environment, Conservation: Protect Idaho’s public Protect Idaho’s public health, safety and natural environment and conserve health, safety and natural environment and conserve Idaho’s natural resourcesIdaho’s natural resources

4.4. Jobs, Economy:Jobs, Economy: Promote sustainable economic Promote sustainable economic growth, job creation and rural economic development growth, job creation and rural economic development through investments in Idaho’s energy infrastructurethrough investments in Idaho’s energy infrastructure

5.5. Flexibility:Flexibility: Provide the means for Idaho’s energy Provide the means for Idaho’s energy policy to adapt to changing circumstancespolicy to adapt to changing circumstances

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Is There a Need for Is There a Need for DSM in the Energy DSM in the Energy

Plan?Plan?Policy ObjectivesPolicy Objectives

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DSM in Draft Policy DSM in Draft Policy ObjectivesObjectives

Objective 1: Reliability and StabilityObjective 1: Reliability and Stability DSM provides enhanced reliability to the DSM provides enhanced reliability to the

energy system by reducing overall energy system by reducing overall demand through energy efficiency and by demand through energy efficiency and by reducing peak demand through reducing peak demand through dispatchable programs.dispatchable programs.

It also reduces transmission and It also reduces transmission and distribution costs relative to a supply side distribution costs relative to a supply side resourceresource

DSM increases diversity of energy sources DSM increases diversity of energy sources

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DSM in Draft Policy DSM in Draft Policy ObjectivesObjectives

Objective 2: Low Cost/AffordabilityObjective 2: Low Cost/Affordability The cost of DSM is technology specific and The cost of DSM is technology specific and

varies relative to other supply side varies relative to other supply side resources resources

Dispatchable DSM programs can be called Dispatchable DSM programs can be called when their cost is lower than alternative when their cost is lower than alternative market purchasesmarket purchases

Cost-effective resource planning can ensure Cost-effective resource planning can ensure that DSM is only procured up to the point that DSM is only procured up to the point where it is cheaper than supply alternativeswhere it is cheaper than supply alternatives

DSM can also help low-income customers DSM can also help low-income customers reduce their energy costsreduce their energy costs

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DSM in Draft Policy DSM in Draft Policy ObjectivesObjectives

Objective 3: Environment, ConservationObjective 3: Environment, Conservation DSM is the most environmentally friendly DSM is the most environmentally friendly

resource availableresource available It conserve resourcesIt conserve resources It reduces the dependence on foreign energy It reduces the dependence on foreign energy

sourcessources It reduces dependence on non-renewable It reduces dependence on non-renewable

energy sourcesenergy sources It positions the state for possible carbon It positions the state for possible carbon

regulationregulation It protects the public health and safetyIt protects the public health and safety

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DSM in Draft Policy DSM in Draft Policy ObjectivesObjectives

Objective 4: Jobs/EconomyObjective 4: Jobs/Economy DSM can increase job levels and tax DSM can increase job levels and tax

base with increased investment in the base with increased investment in the DSM industryDSM industry

DSM can be administered in Idaho and DSM can be administered in Idaho and create a local industrycreate a local industry

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DSM in Draft Policy DSM in Draft Policy ObjectivesObjectives

Objective 5: FlexibilityObjective 5: Flexibility Recognizing DSM as an energy Recognizing DSM as an energy

resource would provide additional resource would provide additional flexibility to resource planningflexibility to resource planning

With the correct approach DSM can be With the correct approach DSM can be incorporated into planning without incorporated into planning without precluding other resources or precluding other resources or unnecessary regulationunnecessary regulation

DSM can be implemented relatively DSM can be implemented relatively quicklyquickly

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Is DSM Promotion Needed Is DSM Promotion Needed in the Energy Plan?in the Energy Plan?

Historical Conservation Achievements as a Share of 2003 Load

20%18%

15% 15% 15%

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Planned Conservation Planned Conservation Investments of Idaho Investments of Idaho

Utilities by 2015Utilities by 2015Planned Conservation Investments vs.

Power Council Target, 2015

0

20

40

60

80

100

120

140

Idaho Power Avista PacifiCorp

aMW

Planned Conservation Investment

Power Council Target

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What Can the What Can the Legislature Do?Legislature Do?

Sample Policy LanguageSample Policy Language

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1982 Idaho Energy Plan1982 Idaho Energy Plan High priority on conservation, renewables, and high High priority on conservation, renewables, and high

fuel efficiency generation before others. High fuel efficiency generation before others. High priority to hydroelectric projects.priority to hydroelectric projects. Carefully consider impacts on agricultureCarefully consider impacts on agriculture Favor conversion to natural gas heatingFavor conversion to natural gas heating Review and update curtailment plansReview and update curtailment plans Consider coal and nuclearConsider coal and nuclear Promote cogeneration and wood fuelPromote cogeneration and wood fuel Encourage development of municipal solid waste powerEncourage development of municipal solid waste power Identify potential for wind developmentIdentify potential for wind development

Promote petroleum and gas conservation, explorationPromote petroleum and gas conservation, exploration Encourage and support local governments in their Encourage and support local governments in their

efforts to promote energy awareness, efficiency and efforts to promote energy awareness, efficiency and resource development.resource development.

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Policy Language: EPA National Policy Language: EPA National Action Plan for Energy Efficiency Action Plan for Energy Efficiency

RecommendationsRecommendations Recognize energy efficiency as a high-priority

energy resource. Make a strong, long-term commitment to

implement cost-effective energy efficiency as a resource.

Broadly communicate the benefits of and opportunities for energy efficiency.

Promote sufficient, timely, and stable program funding to deliver energy efficiency where cost-effective.

Modify policies to align utility incentives with the delivery of cost-effective energy efficiency and modify ratemaking practices to promote energy efficiency investments.

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Policy Language: California Policy Language: California Energy Action Plan IIEnergy Action Plan II

“As stated in EAP I and reiterated here, cost effective energy efficiency is the resource of first choice for meeting California’s energy needs. Energy efficiency is the least cost, most reliable, and most environmentally-sensitive resource, and minimizes our contribution to climate change.”

“With the implementation of well-designed dynamic pricing tariffs and demand response programs for all customer classes, California can lower consumer costs and increase electricity system reliability. To achieve this transformation, state agencies will ensure that appropriate, cost-effective technologies are chosen, emphasize public education regarding the benefits of such technologies, and develop tariffs and programs that result in cost effective savings and inducements for customers to achieve those savings.”

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Policy Language: 2005 Policy Language: 2005 Nevada Energy Status Nevada Energy Status

ReportReport““The NSOE is responsible for supporting and The NSOE is responsible for supporting and

encouraging policies that improve the efficiency of encouraging policies that improve the efficiency of electricity and natural gas use.” electricity and natural gas use.”

Energy Efficiency and Conservation Program PlanningEnergy Efficiency and Conservation Program Planning Adopt energy savings standardsAdopt energy savings standards Increase funding to support demand side management programs,Increase funding to support demand side management programs, Support updated building codes and energy codes,Support updated building codes and energy codes, Establish natural gas demand side management programs,Establish natural gas demand side management programs, Increase funding for low income weatherization programs and Increase funding for low income weatherization programs and

stimulate demand for consumer investment in home weatherization,stimulate demand for consumer investment in home weatherization, Study the benefits of a residential energy conservation ordinance to Study the benefits of a residential energy conservation ordinance to

assist renters,assist renters, Review state energy conservation program and establish updated Review state energy conservation program and establish updated

energy savings targets for state agencies,energy savings targets for state agencies, Investigate more aggressive load management strategies to reduce Investigate more aggressive load management strategies to reduce

Nevada Power’s needle peak.Nevada Power’s needle peak.

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What Can the What Can the Legislature Do?Legislature Do?

Action ItemsAction Items

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Action Items Action Items

Funding levelsFunding levels Resource treatment and loading orderResource treatment and loading order

Goal settingGoal setting Incentive mechanisms & DecouplingIncentive mechanisms & Decoupling Aligning policy objectives with DSM Aligning policy objectives with DSM

conservation policyconservation policy

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Funding LevelsFunding Levels Currently Idaho IOU’s have tariff rider charges Currently Idaho IOU’s have tariff rider charges

between 0.5% and 1.95% of customer bills. The between 0.5% and 1.95% of customer bills. The amount of investment in DSM is constrained at amount of investment in DSM is constrained at some level by these tariff collections.some level by these tariff collections.

Investment in DSM conservation could be Investment in DSM conservation could be accelerated by increasing these tariff levels. This accelerated by increasing these tariff levels. This would impose an immediate economic burden on would impose an immediate economic burden on customers but could be offset by efficiency customers but could be offset by efficiency investment support from conservation programs.investment support from conservation programs.

Investment in DSM can also be accelerated by Investment in DSM can also be accelerated by changes in the treatment of DSM conservation as changes in the treatment of DSM conservation as a resource and by pre-specified IOU loading a resource and by pre-specified IOU loading orders. orders.

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Resource Treatment and Resource Treatment and Loading OrderLoading Order

In current Idaho IRP’s DSM conservation is treated as a In current Idaho IRP’s DSM conservation is treated as a load reduction resource. The IOU treatment of load reduction resource. The IOU treatment of “conservation” is dictated by IPUC Order 22299:“conservation” is dictated by IPUC Order 22299:

    IT IS HEREBY ORDERED that the electric utilities under our jurisdiction that are party IT IS HEREBY ORDERED that the electric utilities under our jurisdiction that are party to this case shall, in compliance with the terms of this Order: to this case shall, in compliance with the terms of this Order:

    1. Give balanced consideration to demand side and supply side resources when 1. Give balanced consideration to demand side and supply side resources when

formulating formulating resource plans and when procuring resources.  resource plans and when procuring resources.     Other states such as Arizona, Hawaii, and Montana, also Other states such as Arizona, Hawaii, and Montana, also

require IOU’s to consider DSM conservation as a resource require IOU’s to consider DSM conservation as a resource equal to generation resources in the IRP least cost equal to generation resources in the IRP least cost procurement processes.procurement processes.

California, in addition to treating DSM conservation as a California, in addition to treating DSM conservation as a resource in IRP processes also specifies a preferred resource in IRP processes also specifies a preferred loading order for IOU resource acquisition that prioritizes loading order for IOU resource acquisition that prioritizes DSM conservation.DSM conservation.

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Resource Treatment Action Resource Treatment Action Item: California Energy Item: California Energy

Action Plan IIAction Plan IIKEY ACTIONS:KEY ACTIONS:1. Require that all cost-effective energy efficiency is 1. Require that all cost-effective energy efficiency is

integrated into utilities’ resource plans on an equal integrated into utilities’ resource plans on an equal basis with supply-side resource options.basis with supply-side resource options.

2. Adopt 2006-2008 energy efficiency program 2. Adopt 2006-2008 energy efficiency program portfolios and funding by late 2005.portfolios and funding by late 2005.

3. Expand efforts to improve public awareness and 3. Expand efforts to improve public awareness and adoption of energy efficiency measures.adoption of energy efficiency measures.

4. Promote a balanced portfolio of baseload energy, 4. Promote a balanced portfolio of baseload energy, demand, and peak demand reductions to obtain demand, and peak demand reductions to obtain both reliability and long-term resource benefits of both reliability and long-term resource benefits of energy efficiency for both electricity and natural energy efficiency for both electricity and natural gas.gas.

5. Integrate demand response programs with energy 5. Integrate demand response programs with energy efficiency programs.efficiency programs.

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Goal SettingGoal Setting

Currently there is no overarching DSM Currently there is no overarching DSM conservation goals set forth for the Idaho conservation goals set forth for the Idaho IOU’s.IOU’s.

Other states such as California, Illinois and Other states such as California, Illinois and Texas, and Oregon have set DSM Texas, and Oregon have set DSM conservation goals based on per capita conservation goals based on per capita energy use, specific portfolio percentage energy use, specific portfolio percentage targets, and energy unit targets.targets, and energy unit targets.

Goal setting could hinder flexibility and least Goal setting could hinder flexibility and least cost policy objectives if it is not considered in cost policy objectives if it is not considered in cost-effectiveness termscost-effectiveness terms

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Goal Setting Action Item: State Goal Setting Action Item: State of Oregon Energy Plan 2005-of Oregon Energy Plan 2005-

20072007“The NPCC’s Plan calls for the region to

acquire more than 500 average megawatts of conservation from 2005 through 2009. Oregon’s share of this target is roughly 150 average megawatts. Accomplishing the NPCC’s targets will require the commitment of every energy stakeholder. ODOE will work with all Oregon utilities to determine their share of the target and move quickly to acquire those shares.”

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Need For Decoupling and Need For Decoupling and Incentives to Implement Incentives to Implement

DSMDSM Current regulatory structure rewards Current regulatory structure rewards

utilities for increasing sales & rate baseutilities for increasing sales & rate base Revenue tied to sales volumesRevenue tied to sales volumes Return earned on rate base assetsReturn earned on rate base assets

Utility DSM activities do the oppositeUtility DSM activities do the opposite Reduce sales volumesReduce sales volumes Program costs generally expensed, not Program costs generally expensed, not

capitalizedcapitalized Need BOTH decoupling and incentives to Need BOTH decoupling and incentives to

encourage utilities to promote DSMencourage utilities to promote DSM

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Cost Mismatch Generates Cost Mismatch Generates Need for DecouplingNeed for Decoupling

Utility costs are fixed and variableUtility costs are fixed and variable Utility rates have fixed and variable components, Utility rates have fixed and variable components,

but often fixed costs are allocated to variable ratesbut often fixed costs are allocated to variable rates Residential and small commercial customers generally Residential and small commercial customers generally

have a large component of fixed costs recovered through have a large component of fixed costs recovered through variable ratesvariable rates

Otherwise, customers with small consumption would pay Otherwise, customers with small consumption would pay large fixed charges large fixed charges

This mismatch of fixed costs and variable charges This mismatch of fixed costs and variable charges makes utilities vulnerable to fluctuations in salesmakes utilities vulnerable to fluctuations in sales Creates disincentive to reduce sales for any reason, Creates disincentive to reduce sales for any reason,

including DSM measuresincluding DSM measures Decoupling removes the reduced sales disincentive Decoupling removes the reduced sales disincentive

by keeping the utility neutral to sales fluctuationsby keeping the utility neutral to sales fluctuations

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Examples of Revenue Examples of Revenue Decoupling MechanismsDecoupling Mechanisms

Sales Volume DecouplingSales Volume Decoupling Keeps utility profit neutral to sales fluctuations due Keeps utility profit neutral to sales fluctuations due

to energy efficiency via true-up to forecast amountsto energy efficiency via true-up to forecast amounts Must carefully allocate risk from fluctuations due to Must carefully allocate risk from fluctuations due to

weather, economic growth, demand elasticity weather, economic growth, demand elasticity sometimes risk borne by customers through poor regulatory sometimes risk borne by customers through poor regulatory

policy – can create decoupling backlash (i.e., Maine)policy – can create decoupling backlash (i.e., Maine) Per Customer DecouplingPer Customer Decoupling

Keeps utility profit per customer neutral to customer Keeps utility profit per customer neutral to customer growth via application of average per customer growth via application of average per customer profitprofit

Lost Revenue AdjustmentLost Revenue Adjustment Restores revenue lost due to qualifying efficiency Restores revenue lost due to qualifying efficiency

programsprograms

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Idaho Power Docket Idaho Power Docket TimelineTimeline

In May 2004, the Idaho Public Utilities Commission (IPUC) determined In May 2004, the Idaho Public Utilities Commission (IPUC) determined that a proceeding to assess financial disincentives inherent in Idaho that a proceeding to assess financial disincentives inherent in Idaho Power (IP) sponsored Energy Efficiency programs should proceed by Power (IP) sponsored Energy Efficiency programs should proceed by informal workshopsinformal workshops

Five Workshops were held with Idaho Power Company, Idaho Public Five Workshops were held with Idaho Power Company, Idaho Public Utilities Commission, Industrial Customers of Idaho Power, and Utilities Commission, Industrial Customers of Idaho Power, and Northwest Energy Coalition participatingNorthwest Energy Coalition participating

Workshop recommendations were provided in February 2005:Workshop recommendations were provided in February 2005: Fixed Cost True Up Mechanism: Fixed Cost True Up Mechanism:

For agricultural and industrial sectors adjusted per same rate of increase or decrease in For agricultural and industrial sectors adjusted per same rate of increase or decrease in retail sales in the load forecast section of IP’s IRP, orretail sales in the load forecast section of IP’s IRP, or

For commercial and residential customers, the fixed cost revenue requirement should be For commercial and residential customers, the fixed cost revenue requirement should be adjusted per annual changes in customer count. adjusted per annual changes in customer count.

Incentive Mechanism: Incentive Mechanism: Incentive payment if savings from its Energy Star homes northwest (residential new Incentive payment if savings from its Energy Star homes northwest (residential new

construction energy efficiency program) exceeds 100% of target (1070 MWh annually). construction energy efficiency program) exceeds 100% of target (1070 MWh annually). Simulation calculation based on 1994 and 2004 rate cases, with 0.5% energy Simulation calculation based on 1994 and 2004 rate cases, with 0.5% energy

savings annuallysavings annually In January 2006, IP filed an Application with IPUC requesting a “Fixed In January 2006, IP filed an Application with IPUC requesting a “Fixed

Cost Adjustment” rate adjustment mechanism (see next slide for details)Cost Adjustment” rate adjustment mechanism (see next slide for details) February 2006, IPUC recommended that the Commission issue a Notice of February 2006, IPUC recommended that the Commission issue a Notice of

ApplicationApplication

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Idaho Power DocketIdaho Power Docket Idaho Power is requesting a Fixed Cost Adjustment Idaho Power is requesting a Fixed Cost Adjustment

(FCA) applicable only to Residential Service and (FCA) applicable only to Residential Service and Small General Service Small General Service These customer classes have large percentage of fixed costs These customer classes have large percentage of fixed costs

recovered through variable ratesrecovered through variable rates FCA recovers difference between authorized fixed FCA recovers difference between authorized fixed

costs and recovered fixed costs for these two costs and recovered fixed costs for these two customer classes customer classes Fixed costs per customer rate in each class multiplied by Fixed costs per customer rate in each class multiplied by

actual number of customers in each classactual number of customers in each class Adjustment will be positive or negative, depending on Adjustment will be positive or negative, depending on

number of customers and actual fixed costs recovered number of customers and actual fixed costs recovered annuallyannually

Actual fixed costs weather normalizedActual fixed costs weather normalized 3% cap on adjustment3% cap on adjustment

FCA proposed to commence 01 Jan 2006 with first FCA proposed to commence 01 Jan 2006 with first adjustment on 01 June 2007.adjustment on 01 June 2007.

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Implications of Proposed Implications of Proposed FCAFCA

Actual fixed cost revenues are only weather Actual fixed cost revenues are only weather normalized before FCA is calculatednormalized before FCA is calculated IP will continue to bear risk of weather-induced revenue IP will continue to bear risk of weather-induced revenue

fluctuationsfluctuations IP will benefit if consumption decreases due to poor IP will benefit if consumption decreases due to poor

economic conditions, reduced demandeconomic conditions, reduced demand In Maine, this risk allocation led to repeal of decoupling In Maine, this risk allocation led to repeal of decoupling

program because rates rose during economic downturnprogram because rates rose during economic downturn There appears to be no implementation of an There appears to be no implementation of an

incentive mechanism to complement the FCAincentive mechanism to complement the FCA May reduce IP’s incentive to promote energy efficiencyMay reduce IP’s incentive to promote energy efficiency

No rate design changes implemented to motivate No rate design changes implemented to motivate consumer-driven reductions in energy consumer-driven reductions in energy consumptionconsumption

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Expense Treatment of Costs Expense Treatment of Costs Creates Need for IncentivesCreates Need for Incentives

DSM program costs are not treated as DSM program costs are not treated as capital assetscapital assets Recovered as annual expense, not capitalizedRecovered as annual expense, not capitalized This is correct treatment: returns should not be This is correct treatment: returns should not be

earned on DSM costs – they are not capital assetsearned on DSM costs – they are not capital assets Supply-side costs associated with capital Supply-side costs associated with capital

assets are capitalized and do earn an annual assets are capitalized and do earn an annual returnreturn

This differing treatment costs creates This differing treatment costs creates disincentive for utilities to pursue DSMdisincentive for utilities to pursue DSM

Implementing shareholder DSM incentives Implementing shareholder DSM incentives can keep the utility neutral to supply-side can keep the utility neutral to supply-side optionsoptions

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Incentive MechanismsIncentive Mechanisms

Currently Idaho IOU’s do not receive performance Currently Idaho IOU’s do not receive performance incentives for DSM conservation program incentives for DSM conservation program performanceperformance

To spur the most efficient administration of DSM To spur the most efficient administration of DSM conservation programs some states such as conservation programs some states such as Massachusetts, Minnesota and Nevada, offer Massachusetts, Minnesota and Nevada, offer incentive mechanisms to program administrators incentive mechanisms to program administrators based on program performancebased on program performance

Program performance can be evaluated by:Program performance can be evaluated by: Net program benefits, evaluated using cost/benefit testsNet program benefits, evaluated using cost/benefit tests Energy savings goals (aMW, therms)Energy savings goals (aMW, therms) Rate of return on investmentRate of return on investment Program milestone goals (# of CFL’s installed, # of Program milestone goals (# of CFL’s installed, # of

building operators trained)building operators trained)

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Customer Rate Design Customer Rate Design Incentives for Encouraging Incentives for Encouraging

ConservationConservation Conservation is strongly driven by consumer Conservation is strongly driven by consumer

decisionsdecisions Customers can receive powerful signals to curtail energy Customers can receive powerful signals to curtail energy

use through proper rate design use through proper rate design Rate designs that encourage efficient consumption Rate designs that encourage efficient consumption

include:include: Time of Use Time of Use Inclining block Inclining block Real Time Pricing, Critical Peak PricingReal Time Pricing, Critical Peak Pricing

Some rate designs shift consumption to non-peak Some rate designs shift consumption to non-peak periods, versus eliminating consumption altogetherperiods, versus eliminating consumption altogether

Effective rate design should be incorporated to Effective rate design should be incorporated to support any DSM programsupport any DSM program

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Straw ProposalStraw Proposal

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Straw Proposal: Policy Straw Proposal: Policy LanguageLanguage Conservation, energy efficiency, and demand response provide several Conservation, energy efficiency, and demand response provide several

important benefits to the citizens of Idaho. These benefits may include important benefits to the citizens of Idaho. These benefits may include but are not limited to; environmental protection, stabilized energy but are not limited to; environmental protection, stabilized energy costs for consumers, resource diversity, a reduced reliance on energy costs for consumers, resource diversity, a reduced reliance on energy imports, the mitigation of supply shortages and energy price spikes, imports, the mitigation of supply shortages and energy price spikes, and lower transmission and distribution system costs. and lower transmission and distribution system costs.

In the context of least cost reliable resource acquisition, Idaho utilities In the context of least cost reliable resource acquisition, Idaho utilities should give priority to: (1) Conservation, energy efficiency and should give priority to: (1) Conservation, energy efficiency and demand response; (2) renewable resources; (3) clean coal, and high-demand response; (2) renewable resources; (3) clean coal, and high-efficiency thermal generation; and (4) All other resources.efficiency thermal generation; and (4) All other resources.

In the context of least cost reliable resource acquisition, Idaho In the context of least cost reliable resource acquisition, Idaho consumers should give priority to conservation and energy efficiency. consumers should give priority to conservation and energy efficiency. Consider the point about informing customers of the true cost of powerConsider the point about informing customers of the true cost of power

Idaho utilities should acquire all conservation that is cost-effective Idaho utilities should acquire all conservation that is cost-effective from the perspective of Idaho consumers, with a goal of 20% from the perspective of Idaho consumers, with a goal of 20% [number [number subject to further discussion]subject to further discussion] electricity savings by 2020 and a goal of electricity savings by 2020 and a goal of X% natural gas savings by 2020.X% natural gas savings by 2020.

Add a bullet point re: conservation of natural resources, such as water Add a bullet point re: conservation of natural resources, such as water (or incorporate above)(or incorporate above)

The IPUC should remove any disincentives for Idaho utilities to achieve The IPUC should remove any disincentives for Idaho utilities to achieve the above State goals for conservation, energy efficiency, and demand the above State goals for conservation, energy efficiency, and demand response resources.response resources.

The State of Idaho should strengthen the compliance with the The State of Idaho should strengthen the compliance with the International Building Energy Code.International Building Energy Code.

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Straw Proposal: Action Straw Proposal: Action ItemsItems

1.1. The IPUC should require Idaho utilities to fully incorporate The IPUC should require Idaho utilities to fully incorporate conservation, energy efficiency, and demand response as the conservation, energy efficiency, and demand response as the priority resources in their IRP planning. The Idaho utilities priority resources in their IRP planning. The Idaho utilities should clearly report on how this requirement is integrated into should clearly report on how this requirement is integrated into their IRP’s. their IRP’s.

2.2. The Idaho utilities should continue to support NWPP Market The Idaho utilities should continue to support NWPP Market Transformation Programs.Transformation Programs.

3.3. The State of Idaho should adopt international building codes as The State of Idaho should adopt international building codes as a minimum for building energy efficiency standards and a minimum for building energy efficiency standards and should fund or establish a department to provide energy code should fund or establish a department to provide energy code compliance support. Funding shall be via a surcharge placed on compliance support. Funding shall be via a surcharge placed on all Idaho electricity and natural gas bills. all Idaho electricity and natural gas bills.

4.4. The IPUC should remove all barriers and disincentives to The IPUC should remove all barriers and disincentives to effective utility acquisition of conservation, energy efficiency, effective utility acquisition of conservation, energy efficiency, and demand response resources and additional incentives for and demand response resources and additional incentives for utilities for highly effective acquisition of these resources should utilities for highly effective acquisition of these resources should be considered.be considered.

5.5. Tax incentivesTax incentives6.6. Building code implementation (and funding)Building code implementation (and funding)7.7. System benefits charge for all fuels and all energy entities (Co-System benefits charge for all fuels and all energy entities (Co-

ops etc)ops etc)

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Review of DSMReview of DSM

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Review of DSM Review of DSM ConservationConservation

Types of DSM conservation Types of DSM conservation programsprograms

Value of DSM conservation Value of DSM conservation programsprograms

DSM conservation delivery DSM conservation delivery mechanismsmechanisms

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Types of DSM Conservation Types of DSM Conservation ProgramsPrograms

1.1. Energy EfficiencyEnergy Efficiency• Efficiency equipment upgrades that provide long term Efficiency equipment upgrades that provide long term

energy savingsenergy savings• Can provide peak demand reductions but not Can provide peak demand reductions but not

dispatchable during peak hoursdispatchable during peak hours

2.2. ““Peak Shaving” ProgramsPeak Shaving” Programs• Resource resulting from participant load reductions Resource resulting from participant load reductions

during peak hours or whenever supply/demand during peak hours or whenever supply/demand margin is tightmargin is tight

• Includes interruptible/curtailable load which can be Includes interruptible/curtailable load which can be called upon when needed or demand response which called upon when needed or demand response which relies on voluntary load reductions in the face of high relies on voluntary load reductions in the face of high energy pricesenergy prices

• Not a persistent resource of energy savingsNot a persistent resource of energy savings

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Value of Energy Efficiency Value of Energy Efficiency Programs Depends on Timing of Programs Depends on Timing of

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Sun. Mon. Tues. Wed. Thur. Fri. Sat.

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““Peak-Shaving” Programs Peak-Shaving” Programs Aimed at Reducing Peak Aimed at Reducing Peak

DemandDemandPeak-Shaving Program

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url

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Sun. Mon. Tues. Wed. Thur. Fri. Sat.

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Energy Efficiency Delivery Energy Efficiency Delivery MechanismsMechanisms

1.1. Program Delivery TypesProgram Delivery Types Market TransformationMarket Transformation Codes and StandardsCodes and Standards Low interest rate loansLow interest rate loans On-bill financingOn-bill financing Direct install and incentivesDirect install and incentives

2.2. Delivery Agents Delivery Agents IOUIOU State Agency (NYSERDA, IDWR)State Agency (NYSERDA, IDWR) Private Companies (Efficiency Vermont)Private Companies (Efficiency Vermont)

46

““Peak Shaving” Delivery Peak Shaving” Delivery MechanismsMechanisms

1. Program Types1. Program Types Dispatchable/Curtailable programs that Dispatchable/Curtailable programs that

incent customers to drop load upon incent customers to drop load upon requestrequest

Demand Response programs that shape Demand Response programs that shape retail rates to wholesale rates to retail rates to wholesale rates to encourage energy usage reduction during encourage energy usage reduction during high price periodshigh price periods

2. Delivery Agents2. Delivery Agents IOU, System OperatorIOU, System Operator