August 6, 2008 CLF / VPIRG1
Energy Efficiency Budget
Justification for Significant Increase in Energy Efficiency
Utility Budget
August 6, 2008 CLF / VPIRG2
Recommendations
Current Spending – $30.75 million / year
Increase to $52.5 million in 2009
Transition to $85 million / year by 2011
August 6, 2008 CLF / VPIRG3
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).
August 6, 2008 CLF / VPIRG4
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)
August 6, 2008 CLF / VPIRG5
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
August 6, 2008 CLF / VPIRG6
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
August 6, 2008 CLF / VPIRG7
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
August 6, 2008 CLF / VPIRG8
Rising Electric Supply Costs
August 6, 2008 CLF / VPIRG9
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
August 6, 2008 CLF / VPIRG10
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%
August 6, 2008 CLF / VPIRG11
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
August 6, 2008 CLF / VPIRG12
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
August 6, 2008 CLF / VPIRG13
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
August 6, 2008 CLF / VPIRG14
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
August 6, 2008 CLF / VPIRG15
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).
August 6, 2008 CLF / VPIRG16
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
August 6, 2008 CLF / VPIRG17
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