The Colorado (Regulatory)Approach to DSM

Jeff Ackermann

DSM Advisor to the CommissionersDSM Advisor to the Commissioners

CO Public Utilities Commission

Disclaimers…(they’re everywhere)

My Disclaimers…• Ackermann speaks for… (Ackermann)

• The Liberal Arts approach…– License to speak in broad generalizations

• Avoiding Open Dockets: 08A-366EG; Gas DSM

In the next ~26 minutes:

• Brief History of (DSM) Time

• The Colorado Experience Thus Far

• Insights As Colorado Moves Forward(IOUs, Munis and REAs)

Externally-Initiated Change withinCorporate America: A Case Study

• Circa 1955:

• “McNamara (Ford) is selling safety, but Chevrolet isselling cars.”– (quote attributed to Henry Ford II)

Safety & the Auto Industry

• 1950’s: Voluntary Safety Devices:– restraints; padded dashboards

• Met with ridicule by others in the industry;caught on with the public.

• By 1964, Most U.S. automobiles sold with• By 1964, Most U.S. automobiles sold withstandard front seat belts; 1968: rear seat beltsmade standard.

• Public Messaging:

"Buckle Up for Safety“ jingle

first heard in the 1960s

Instigating More ComprehensiveChange

• 1965:

– The

infamous

CorvairCorvair

Study

The Scientific CommunityWeighs in:

• National Academy of

Sciences; Sept. 1966:

Legislation & Regulations

• 1966: Congress holds highly publicizedhearings regarding highway safety;

– legislation passed making installation of seat– legislation passed making installation of seatbelts mandatory

• The NHTSA was officially established in1970 by the Highway Safety Act of 1970

Research and Innovation Takes Off

• Regulationpushesinnovation

Today’s Automobile SafetyFeatures

Back Up Sensing SystemsCrumple ZonesImpact Absorbing InteriorsTraction Control

AirbagsAutomatic Locking Traction Control

Antilock Braking SystemsChild Safety Seat TethersElectronic Stability SystemsIntegrated Child Booster

Seats

Automatic LockingSeatbeltsCrash Resistant DoorPillarsHead RestraintsNight Vision / Heads UpDisplayAirbag Shut-Off Switch

Safety: From Requirements toProduct Marketing Features

Brief (U.S.) History of DSM*

• 1970’s Energy Crisis Era– Help customers cope; residential/gas focus

• IRP Era (circa 1984-1995)– Response to exponential growth in system costs;– Integrating energy efficiency as a system resource

• Restructuring/Public Benefits Era (circa 1995-2001)– Preserve public good of energy efficiency (vs. system resource)– Preserve public good of energy efficiency (vs. system resource)– Emphasis on market transformation

• Resource Procurement Era (circa 2001 – present)– Return to EE as a system resource– Corollary objectives: environmental; economic development

• * Source: ACEEE (Kushler) presentation to PUC:2/8/07

The Colorado DSM Story:Ch. 1: Settling the Frontier

1996: IRP Settlement

$10M – 4 yrs.

1999: IRP Settlement

$75 M (max); 6 yrs.$75 M (max); 6 yrs.

124 MW goal

2003 LCP (Comanche 3) Settlement

$196 M; 8 yrs.

320 MW; 800 GWh

Instigating More ComprehensiveChange

2006:

The Scientific Community Weighs In - 2007:

Ch. 2: Spreading the Good Word(The Conversion to Conservation?

Efficiency Evangelicals?)

• DSM equated to a “social do-gooder program” (Brunetti interview;PSCo employee magazine; circa 1997)

• “Public Service officials…saythe effectiveness of suchprograms isn't clear and thatelectricity costs - not utility

» Historic church inSan Luis -Photo byMark Wolfe, DeputyState Historicelectricity costs - not utility

programs - are the bestconservation incentives.…Brunetti acknowledged theutility had pulled back fromsome of its conservationprograms.‘It is this company's philosophythat the market should drive(conservation efforts),’ saidPublic Service spokesmanMark Severts. Those programshad some impact, but it wasnot dramatic.”

(Rocky Mountain News, 7/26/98)

State HistoricPreservation Officer

CO Legislative Advocacy re: DSM

• 2005: passed & vetoed

• 2006: passed & vetoed

• 2007: passed & enacted(HB 07-1037)

Ch. 3: “Civilizing” DSM(Implementing HB 07-1037)

• Fall 2007 – Summer 2008:– Gas DSM Rules– Gas DSM Rules

• Implementing public policy re: resource usage

– PSCo “Enhanced Electric DSM” Application• General DSM framework: goals; cost recovery;

incentives; M&V

• DSM as a resource

– DSM/DR & System Planning: Ft. St. Vrain

ColoradoRegulatoryApproach:

• Establishing goals & parameters:– Gas: Goals set by expenditures & cost-effectiveness

• Minimum = 2% base revenues

– Electric (PSCo): GWh (& MW) – growing toward a1.2% reduction in sales by 2019 (from .53% in 2009)

• About half of projected growth

• Performance Expectations & Measurement:– Modified TRC

• Avoided Costs: Gas - commodity; Elec: fuel & capital

• Non-Energy Benefits: Gas: 5%; Electric 10% (20% low-income DSM)

Colorado Regulatory Approach,continued

• Incentives:– Statute: “opportunity to make more

profitable”– Sharing of net economic benefits– Accelerated recovery– Accelerated recovery– Focus on energy & effectiveness,

not expenditures

• Timetables for DSM design & implementation:– Gas LDC’s – Sept filings; 2009 implementation– PSCo: combined gas/electric

• 2009-2010 Plan (Docket No. C08-366EG)

Xcel and EE/DSM Leadership

Best Practices acknowledgment (2003):Energy Design Assistance; Lighting Efficiency; Custom Efficiency

“Xcel Energy announces Colorado EnergyEfficiency awards”10 organizations collectively saved 28 million kilowatt-hours ofelectricity(News Releases, 02/20/2008 8:00 AM ) (xcelenergy.com)

DSM/EE andToday’s UtilityMarketing(Xcel, Sept. 2008)

“As an environmental leader, Xcel Energyconsiders energy conservation our firstline of defense in protecting theenvironment and addressing issues suchas climate change and rising energy costs.

We've been helping our customers

(from the Xcel brochure:)

We've been helping our customersconserve energy and manage its use fortwo decades, and have saved more than3,030 megawatts of power-the equivalentof 12 medium-sized power plants.“Dick Kelly, XcelEnergy Chairman, President and CEO

On the Horizon…

Energy Efficiency/DSM & the traditional IOUbusiness modelbusiness model

– $$ Incentives: How much is enough to change?

– Inherent internal conflicts?

EE/DSM & Responding to Climate Change

– CO2 policies/goals and high EE expectations• What is the full potential of DSM?

Envisioning DSM’s Full Potential

• Connecticut: projecting decline inpeak demand (2007: 6,900 MW; 2018:6,300)

• Vermont: 1.75% of resourcerequirements via DSM (2007); 2008:projecting 2%– Projecting decline in peak demand– Projecting decline in peak demand

• Setting DSM goals via Statute:– Iowa; Illinois; New York: 2% of sales

targets

United States

California

Kw

h/p

ers

on

Source: A. Rosenfeld, CEC 2006; as printedin CA Long Term Energy Efficiency StrategicPlan

Also onthe Horizon…

EE/DSM & Human

Behavior– Effective market segmentation

– Marketing: messaging, partnering & growing demand

– Short & long term EE strategies• market transformation, pilot projects

Accurate and Meaningful M&V

– Giving credit where credit is due

Insights for Colorado:

+ Attributing Benefits & Costs

- Who is best suited to implement DSM/EE?

+ Trusting DSM as a Resource

– Full part of resource planning

+ DSM “Field of Dreams”?

– Banking on technology

– Responding to policy pressure

• “Some people see thecup as half empty.

• Some people see thecup as half full.

• I see the cup as toolarge.”

– George Carlin