Energy Efficiency Budget

August 6, 2008 CLF / VPIRG1

Energy Efficiency Budget

Justification for Significant Increase in Energy Efficiency

Utility Budget


Recommendations

Current Spending – $30.75 million / year

Increase to $52.5 million in 2009

Transition to $85 million / year by 2011


Vermont Law

Budget Must Capture All Reasonably Available Cost Effective Efficiency Savings as Rapidly as Possible

Statutory Standards 30 V.S.A. § 209

“As circumstances and programs evolve, the amount of the charge shall be reviewed for unrealized energy efficiency potential and shall be adjusted as necessary in order to realize all reasonably available, cost-effective energy efficiency savings.” 209(d)(4)

“Provide for delivery of these programs as rapidly as possible, taking into consideration the need for these services, and cost-effective delivery mechanisms.” 209(e)(9).


Need for Increased Energy Efficiency Investment

Statutory Standards “Ensure that the energy efficiency programs implemented under this

section are designed to make continuous and proportional progress toward attaining the overall state building efficiency goals established by 10 V.S.A. s. 581, by promoting all forms of energy end-use efficiency and comprehensive sustainable building design.” 209(e)(15).

PSB Decisions Docket #5270 (1990) (potential of efficiency) Docket #5980 (1999) (Energy Efficiency Charge) Docket #6777 (2002) (Value of efficiency measures) Docket #6860 (2005) (Efficiency in transmission expansion) Docket #7081 (2007) (Efficiency in transmission planning)


Need for Increased Energy Efficiency Investment

2006 EEU Budget Order Recognized higher budget level justified “It would have been reasonable to increase

the budget further” (EEU Budget Order at 39) Concern regarding short term rate impacts

Recent Vermont Energy Legislation


DPS Avoided Cost Study Supports Increased Budget

All energy efficiency resources that cost less than the avoided cost should be acquired. (EEU Budget Order at 18)

2007 Cost of Energy Efficiency: 2.6 cents/kWh saved

DPS Avoided Costs: 5.8 cents/kWh to 8.9 cents/kWh

Avoided costs of comparable electric supply as reported by Efficiency Vermont: 10.7 cents/kWh


Rising Energy Costs Justify Increase in Efficiency Budget

Rapidly rising fuel costs affect wholesale energy costs

Price of oil has nearly doubled since 2006 when previous budget was approved

Between 2006 and 2007, wholesale price of electricity in New England increased 20% from 6.8 to 8.2 cents/kWh


Rising Electric Supply Costs


Volatility of Electric Costs Support Increase in Efficiency Budget

Expiration of contract with Hydro Quebec Uncertain extension of Vermont Yankee license

Reliability problems Concerns about decommissioning funds, radiation

levels and corporate restructuring Volatility would be mitigated by proposed

efficiency budget Recommended budget of $85.5 million would supply

equivalent to 6% of Vermont’s annual power at less than half the avoided cost of supply


Increased Avoided Costs

Winter Peak Winter Off Peak

Summer Peak

Summer Off Peak

AESC 2005 0.064 0.052 0.061 0.045

Change from 05-07

0.032 0.018 0.040 0.025

Percent Change

49% 34% 65% 55%


Energy Efficiency Costs Have Been Decreasing

0

20,000

40,000

60,000

80,000

100,000

120,000

2000 2001 2002 2003 2004 2005 2006 2007

MW

h

0

10

20

30

40

50

60

Yie

ld

Incremental annual MWh savings Yield - MWh savings per $10,000 invested

Year 2005 2006 2007

Avg. cost/kWh 0.035 0.037 0.026


0

10

20

30

40

50

60

70

0.0% 0.5% 1.0% 1.5% 2.0% 2.5%

Annual Incremental Savings as % in Annual Sales

20

06

$/M

Wh

CT IOUs 2000-2005

MA IOUs 2003-2005

Efficiency Vermont2000-2006SMUD 2000-2006

Seattle 2000-2005

PG&E 2000-2005

SDG&E 2000-2005

SCE 2000-2005

Mass. Electric 2000-2002W. Mass. Electric 2000-2002Boston Ed/Nstar 2000-2002Cambr. Elec. 2000

Com. Elec. 2000

Fithb. G&E 2000-2002

Energy Efficiency Costs Have Been Decreasing


More Efficiency Resources Available

Higher reductions may be achieved in targeted areas Increased investments in targeted areas are

providing additional efficiency savings and still costing below avoided costs

Majority of state untapped New opportunities & technologies


Change in Federal Efficiency Standards

A significant portion of efficiency savings in 2007 came from CFLs

New standards not in place until 2012 New technologies available and costs declining Many remaining efficiency measures still below

avoided costs Even if CFL’s were replaced with measures that cost

4 times more, they would still be cost effective


Environmental Benefits

Environmental Need 2007 efficiency investments produced a 661,500 ton reduction in

carbon dioxide, 562 tons in nitrogen oxides, and 1,103 tons in sulphur dioxides that would have otherwise been emitted by conventional electric generation.

These also resulted in a savings of 4.7 million gallons of propane, 242 million gallons of natural gas, 3 million gallons of oil and 283 million gallons of water.

PSB decisions have placed an economic value on environmental externalities of about 5% (Docket #5270 (1990) and $7.86 MWh for natural gas (Docket #6290 (2003).


Scale of Investment

Higher level of investment is justified $52.5 million investment supported by

previous recommendation. $85 million investment provides ramp up

similar to past experience Investments made earlier will have greatest

benefit as power contracts expire. Expanded scope of EEU services creates

new opportunities


Conclusion

All cost effective investments are required, reasonable and prudent

Efficiency resources continue to provide savings at 1/3 to 1/2 the cost of supply resources

EEU Budget should be set at $52.5 million for 2009 and transition to $85 million for 2011

Documents

Energy Efficiency Budget