Energy Efficiency and Colorado Utilities:

How Far We’ve Come; How Far We Need to Go

Jeff Ackermann, Advisor to the Commissioners

Colorado Utility Exchange

October 21, 2009

PUC Policy Paper: Released Oct. 20, 2009

(Available via PUC website)

How Far We’ve Come; How Far We Need to Go

Regulated Electric & Gas Utilities: Significant Accomplishments over 2 Years

Anticipated Electric DSM Savings(Megawatt-hours of energy and Megawatts of demand)

Utility2009

Anticipated Savings

2010Anticipated

Savings

Total

Black Hills:Energy Savings

(MWh)

8,123 12,399 20,523

Black Hills:Demand Savings

(MW)

2.2 4.0 6.2

Public Service Co: Energy Savings

(MWh)

175,835 237,465 413,300

Public Service Co: Demand Savings

(MW)

56.5 66.9 123.4

TOTALS: 183,958 MWh58.7 MW

249,864 MWh70.9 MW

433,822MWh129.6 MW

BLACK HILLS ENERGY ELECTRIC PROGRAMS, 2009 – 2011

Comm Res

BUILDING COMMISSIONINGX

CUSTOM REBATE PROGRAMX

NEW CONSTRUCTION & LEEDX

PRESCRIPTIVE REBATEX

INDUSTRIAL ENERGY-EFFICIENCY

LOW-INCOME ASSISTANCEX

HIGH EFFICIENCY COOLINGX

HIGH EFFICIENCY LIGHTINGX

SCHOOL-BASED ENERGY EDUCATIONX

PUBLIC SERVICE COMPANY ELECTRIC DSM PROGRAMS,2009 - 2010

Comm Res

COMPRESSED AIR EFFICIENCY X

COOLING EFFICIENCY X

CUSTOM EFFICIENCY X

DATA CENTER EFFICIENCY X

ENERGY MANAGEMENT SYSTEMS X

ENERGY STAR NEW HOMES X

ENERGY STAR RETAILER INCENTIVE X

EVAPORATIVE COOLING REBATES X

HOME LIGHTING & RECYCLING X

HOME PERFORMANCE WITH ENERGY STAR X

LIGHTING EFFICIENCY X X

LOW-INCOME EASY SAVINGS ENERGY KITS X

LOW-INCOME MULTI-FAMILY WEATHERIZATION X

LOW-INCOME NON-PROFIT WEATHERIZATION X

LOW-INCOME SINGLE FAMILY WEATHERIZATIONX

PUBLIC SERVICE COMPANY ELECTRIC DSM PROGRAMS, continued

2009 - 2010

Comm Res

MOTOR AND DRIVE EFFICIENCYX

NEW CONSTRUCTIONX

PROCESS EFFICIENCYX

RECOMMISSIONINGX

REFRIGERATOR RECYCLINGX

SAVER'S SWITCHX

SCHOOL EDUCATION KITSX

SEGMENT EFFICIENCYX

INDUSTRIAL SELF-DIRECT (also available to large commercial customers)

X

SMALL BUSINESS LIGHTINGX

STANDARD OFFERX

Anticipated Gas DSM Savings (in dekatherms)

Utility 2009 2010 Total

Atmos Energy 13,503 19,385 32,888

Black Hills Energy 372,277 482,831 855,108

Colorado Natural Gas

17,782 8,974 26,756

Eastern Colorado Utility

271 426 697

Public Service Co. of Colorado

318,141 402,808 720,949

SourceGas 18,565 23,643 42,208

TOTAL: 740,539 dkt 938,067 dkt 1,678,606 dkt

ATMOS ENERGY CORPORATION

GAS DSM PROGRAMS, 2009 – 2010AUDITS

EFFICIENT FURNACES AND FILTERS

EFFICIENT NATURAL GAS WATER HEATERS

INSULATION AND INFILTRATION MEASURES

LOW-INCOME KITS (self-install devices and educational information)

LOW-INCOME MULTIFAMILY WEATHERIZATION

LOW-INCOME SINGLE FAMILY WEATHERIZATION

PROGRAMABLE THERMOSTATS

PROPER SIZING OF FURNACES AND BOILERS

GAS DSM PROGRAMS, 2009 - 2011AUDITS (Commercial and Residential)

CUSTOM REBATES (site-specific; for commercial customers)

ENVELOPE MEASURES RETROFIT (residential insulation and air leakage reduction)

LOW-INCOME AFFORDABLE HOMES (new construction)

LOW-INCOME WEATHERIZATION

LOW-INCOME WEATHERIZATION TEAMS (volunteer-delivered low-cost retrofits)

NEW CONSTRUCTION INCENTIVESPRE-SET REBATES (heating systems; water heaters; appliances) – Commercial & Residential

SCHOOL-BASED ENERGY EDUCATION (self-install devices and related education)

BLACK HILLS ENERGY

GAS DSM PROGRAMS, 2009 - 2010ENERGY AUDIT

INSULATION: CEILING, WALL AND ATTIC

APPLIANCE REBATES (heating systems; water heaters; appliances) –Commercial & Residential

PROPER SIZING AND MAINTENANCE OF FURNACES AND BOILERS

MISCELLANEOUS MEASURES: water heater and water pipe insulation; hot water efficiency devices (showerheads; aerators); programmable thermostats

INFILTRATION – various air leakage reduction measures

LOW-INCOME: all of the above DSM programs, targeted to income-eligible customers

COLORADO NATURAL GAS, INC.

EASTERN COLORADO UTILITYGAS DSM PROGRAMS, 2009 - 2010

HIGH EFFICIENCY FURNACES

LOW-INCOME HIGH EFFICIENCY FURNACES AND BOILERS

LOW-INCOME INSULATION AND INFILTRATION

LOW-INCOME PROFESSIONAL ENERGY AUDIT

LOW-INCOME PROGRAMABLE THERMOSTATS

LOW-INCOME WATER HEAT MEASURES

PROGRAMABLE THERMOSTATS

PUBLIC SERVICE COMPANY GAS DSM PROGRAMS, 2009 – 2010

BOILER EFFICIENCY (commercial customers); rebates for new boilersCUSTOM REBATES (site-specific; for commercial customers)ENERGY EFFICIENT SHOWERHEADSENERGY MANAGEMENT SYSTEMS (rebates for on-site control systems)ENERGY STAR NEW HOMES (incentives to home builders)HEATING SYSTEM REBATES (commercial & residential)

“HOME PERFORMANCE WITH ENERGY STAR” – (vendor partnership promoting comprehensive efficiency upgrades for existing homes)INSULATION REBATES (attics and walls. residential)LOW-INCOME EASY SAVINGS ENERGY KITSLOW-INCOME MULTI-FAMILY WEATHERIZATIONLOW-INCOME NON-PROFIT FACILITY WEATHERIZATIONLOW-INCOME SINGLE FAMILY WEATHERIZATION

NEW CONSTRUCTION: incentives to include efficiency in design of commercial propertiesPROCESS EFFICIENCY: site-specific rebates; targeting large industrial customersRECOMMISSIONING: incentives to include efficiency when re-engineering existing buildingsSCHOOL EDUCATION KITSSEGMENT EFFICIENCY: targeting unique needs of various commercial market segmentsSELF-DIRECT: customer-initiated efficiency improvements

“STANDARD OFFER”: bundled packages of efficiency improvements; targeting commercial facilities; delivered via energy service companiesWATER HEATER REBATE (residential)

PUBLIC SERVICE COMPANY GAS DSM PROGRAMS, 2009 – 2010,continued

SOURCEGAS DISTRIBUTION LLCGAS DSM PROGRAMS, 2009 - 2010

PROFESSIONAL ENERGY AUDIT

CUSTOM REBATES (site-specific; for commercial customers)

APPLIANCE REBATES: furnaces; boilers; water heaters

PROPER SIZING AND MAINTENANCE OF FURNACES AND BOILERS

INFILTRATION - VARIOUS MEASURES

INSULATION: Ceiling/attic and wall

LOW-FLOW SHOWERHEAD AND FAUCET AERATORS

LOW-INCOME: all of the above DSM programs, targeted to income-eligible customers

MISCELLANEOUS MEASURES: water heater and water pipe insulation; hot water efficiency devices (showerheads; aerators); programmable thermostats

WHOLE FACILITY EFFICIENCY EVALUATION

Estimated Cost Effectiveness

• For each $1 invested in gas DSM, $1.65 in benefits will result.

• For each $1 invested in electric DSM, $3.38 in benefits will result .

PUC Question: How is Colorado DSM doing,

relative to the Climate Action Plan?

Allocation of CAP Energy Efficiency Goals

Updated Builiding Codes, 16%

Utility DSM Programs, 41%

Lighting Efficiency Improvements,

25%

Greening State Government, 3%Industrial

Efficiency Measures, 15%

Major electric providers in Colorado (90% of total) – proportionate share of CAP goal (in GWh), compared

with DSM commitments; out through 2020

CAP Goal vs. DSM Goal, By Utility Sector

-2000

-1000

0

1000

2000

3000

4000

5000G

Wh

CAP Goal 244 605 190 210 3708 1002 600DSM Goal 202 450 220 57 3769 104 0Gap -42 -155 30 -153 61 -898 -600

Black Hills Energy

Colorado Springs

Ft. Collins/ PRPA

Other PRPA

Municipals

Public Service

Co.

Tri-State G&T

Members

Non-Tri-State REAs

Electric DSM - StatewideDSM Expenditures per MWh of Sales; Top 6 Electric Providers in Colorado

$0.00

$0.50

$1.00

$1.50

$2.00

$2.50

FortCollins/PlatteRiver Power

Public Service Black Hills ColoradoSprings

Tri-Statemember co-

ops

IntermountainRural Electric

$ DS

M/M

Wh

Other Concurrent (or Trend-setting) Developments

• Tri-State: DSM Market Potential Assessment – anticipated by March 2009

• Rate Design as an Energy Conservation/ Efficiency Strategy –– Inclining Blocks

Assessment: As of 2009, we’re well on our way,

as long as nothing changes…

“We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten.

Don't let yourself be lulled into inaction.”Bill Gates

American Recovery & Reinvestment Act

Challenge/Opportunity #1:

• Utility and GEO financial incentives:– Targeting same appliances & same

consumers– Determining the best incentive value:

• maximum behavior change for minimum cost

State to apply for appliance rebate funding July 14, 2009

Gov. Bill Ritter’s energy office plans to apply for a portion of the $300 million available for home appliance rebates from the U.S. Department of Energy. Colorado will be eligible for $4.7 million from the American Recovery and Reinvestment Act that will be used to provide rebates for residents who purchase new ENERGY STAR-qualified home appliances, such as furnaces and refrigerators. To qualify for the funds, each state must submit a plan that specifies which ENERGY STAR appliance categories will be included in its rebate program, the rebate level for each product type, how the rebates will be processed and a plan for recycling old appliances. States must file an initial application by Aug. 15, followed by a full application by Oct. 15. The appliances that will eligible for rebates and the size of the rebate for each appliance has not been determined.

Presenter

Presentation Notes

Not including ARRA ($47M) direct to local governments

Assessment:

• At issue is the need to balance regulatory objectives:– assuring that ratepayer funded DSM is cost-

effective– AND– achieving ARRA objectives: incenting

increased economic activity

Challenge/Opportunity #2:

• Government-initiated Market Transformation strategies:

– Changing the assumptions underlying DSM:

• Amount of naturally occurring energy efficiency• Non-DSM removal of market barriers

Federal Lighting Standards:

• Standards take effect 2012• Anticipate phasing out incandescent bulb

New Lighting Standards Announced

Changes Could Save Up to $4 Billion Each Year, Energy Department Says

Tuesday, June 30, 2009

Percent of Residential Savings Anticipated From Lighting (CFL) Conversions

Responses From Other Utilities: Nevada Power Co.

Program Portion of 2012 Energy Savings (%)

Commercial retrofit 35.2

Commercial new construction 10.9

Demand response 10.4

Residential lighting[1] 9.4

Residential high efficiency AC 9.1

Energy Plus new homes[2] 6.0

Second refrigerator recycling 5.2

In home energy displays 4.6

Other 9.2[1] The 2012 lighting program will promote specialty CFLs, next generation CFLs, and LED lamps[2] New homes that are at least 15% more efficient than ENERGY STAR homes

• Nevada Power Co. – DSM goal: about 1.3% of sales; 2010- 2011– 2012: still expects to save ~ 1.0% of sales;

DSM portfolio will no longer provide CFL incentives.

• Arizona Public Service Co.– Goals:

• 2010 = 1% sales; 2011 = 1.25%; 2012 = 1.5%• CFL’s = 40% of savings (65% of savings 2005-07)

Assessment:• “Traditional” DSM (rebates) likely to be

insufficient in the long term• What works in Colorado re: quantifying

Market Transformation (making it viable as a DSM investment)? CA approach:– Ultimate indicators: structural changes– Proximate indicators: pre-conditions

Colorado approach?

Challenge/Opportunity #3:

• Effective marketing/communications:– Multiple sources– Multiple messages– Changing market dynamics

Understanding Consumer Decision Making

Source: McKinsey Quarterly 2009, Number 3

The Consumer Decision Journey

Updated Understanding

“Marketers must move aggressively beyond purely push-style communication and learn to influence consumer-driven touch points.”

The Rapidly Changing World of Marketing Communications

Implications for utility (and governmental) marketing of energy efficiency?

For video, go to:

http://www.youtube.com/watch?v=sIFYPQjYhv8

Rate Design & DSM…

• 5% usage reduction via Inclining Blocks?– Ahmad Faraqui, Brattle Group

• 7% (or greater) usage reduction through awareness/feedback? 15% with incentives?– British study

Rate Design and Colorado:

“Encouraging the efficient use of energy is an appropriate objective of rate design.”

Colorado Public Utilities Commission, Oct. 20, 2009

- Various REA’s and municipals exploring or implementing Inclining Block rates

PUC’s Recommended Actions• Regulated Utilities:

– Coordinate with GEO – 2010: begin testing GEO collaboration of

incentives, marketing and rebate processing – 2011-2013: update market assessments (re:

GEO $$); show how program strategies (incentive levels, marketing, administrative collaboration) were revised accordingly

Recommended Actions, cont.

• Regulated Utilities, continued:– Market Transformation:

• Increased portion of portfolio• Proposal(s) for measuring/evaluating• Include financing strategies

– Low-Income Single-Family (Weatherization)• 2010-2011 deferral & post-ARRA transition

– Electric: show factoring in of reduced CFL’s; show continued goal attainment (out to 2018)

• Xcel: Wisconsin plug load study

Recommended Actions, cont.

• PUC Regulatory Procedures:– Incorporate DSM into CPCN* deliberations– Invite Tri-State to present market assessment

findings– Review rules (gas DSM) & decisions (electric)

re: impediments to fully pursuing GEO coord.– Research Market Transformation procedures

& rules – measurement/evaluation/crediting

* CPCN: Certificate of Public Convenience and Necessity

Recommended Actions, cont.

• GEO:– Anticipate utility DSM plan adjustments (2011

and beyond) re: rebate levels– Collaboration opportunities re: Market

Transformation?– With PUC, convene Working Group re: DSM

collaboration

Recommended Actions, cont.

• State Legislature:– Proper forum to address statewide DSM plan

(goals; incentives; impediments)– Acknowledge unique business models (IOU;

Muni; REA), and need for unique approaches– Draw from PUC experiences, and those further

down the road in experimenting with/implementing DSM: Ft. Collins; Colo. Spgs; Tri-State & some co-ops.

In Conclusion:

• IOU’s: Implementing 2010 while focusing on 2011 and beyond…

• All utilities: Greater “cross-pollination” between utility sectors… accelerate adoption

• DSM: inter-disciplinary approach– Core principles: cost-effective; business center; etc.

– Fluid/adaptable: understanding/responding to change

Thank you!