CUB Monitors Additional Energy Efficiency Investments

Oregon’s landmark Renewable Energy Standard, passed earlier this year, contains a provision allowing for additional electric utility revenues to be collected from customers to fund energy efficiency and low-income weatherization programs. PacifiCorp and PGE have just made Advice Filings with the Public Utility Commission; both utilities are requesting permission to make additional investments in energy efficiency, PacifiCorp an additional $8.5 million and PGE an additional $16.7 million. The additional investment is great, since the cheapest, greenest power is the power you don’t have to produce.

Both utilities have requested keeping a certain amount of money to facilitate enrollment in energy efficiency programs managed by the Energy Trust of Oregon, and the low-income weatherization programs managed by the State’s Community Action Partnership organizations. This makes sense, due to the fact that most customers have regular contact with their utility but don’t necessarily know about all the great programs they might be eligible for to save energy. Account managers and customer service representatives at PGE and PacifiCorp can help connect residential and business customers with programs that will both save them money and reduce our overall energy usage. PGE, however, has requested an amount beyond what we feel is necessary to achieve energy efficiency goals.

PGE is asking to retain a greater share of the increased funds for purposes that, we believe, stretch the parameters of the law. PGE plans to spend part of the increased funding on initiatives related to conservation; however, PGE has not explained how these initiatives are cost-effective. For example, PGE is designing a curriculum to teach public school students about energy. While energy education is a laudable activity, PGE provides no analysis that this reduces usage in a cost-effective manner. Just as we opposed the Legislature giving money to OMSI from the 3% “public purpose” funds designated to obtain real energy savings goals, we also object to PGE’s lack of focus in this current filing.

Furthermore, PGE claims that a reduction in energy usage cuts into their revenues to pay for fixed costs of the system (i.e., poles and wires), and that the Commission should therefore approve a “lost revenue recovery mechanism” to reimburse them 4 cents for each kilowatt hour (kwh) of power which is not produced due to energy savings (the current price per kwh is about 8 cents). To which our response is a great big “WHOA!” Even assuming that PGE’s theory is correct, and that they are losing money due to energy usage reduction, our analysis is that the amount lost would be no more than about 2 cents/kwh.

But we don’t believe that PGE’s theory is correct. Due to continual load growth (the Oregonian reported just today on a steady stream of people moving to the Portland area - 102,000 last year), we actually think that PGE is not losing money, that those fixed costs are being paid for quite adequately out of customer revenues.

PGE always has the option of filing a rate case to request a rate hike, if they are indeed losing revenues that should be covering fixed costs. That would require analysis of a great many numbers that PGE has not, in this filing, put on the table. We currently have no evidence to support PGE’s argument that they need an additional incentive to invest additional money in energy efficiency.

Most importantly, Oregon’s Integrated Resource Planning (IRP) process, which occurs through the PUC as well, already requires utilities to make the “least cost” and “least risk” investments. And the rising cost of fossil fuels and inevitability of carbon regulation costs makes energy efficiency more and more cost-effective all the time. This means that Oregon’s utilities should be doing more energy efficiency, even without extra incentives (that may or may not be justified).

Utilities have always had a bit of a conflict of interest in doing effective energy efficiency. And our experience throughout much of the 1980s and 1990s was that utilities would often try to maximize the public relations benefit to the company of energy efficiency programs, rather than maximizing the actual energy savings. That’s why it was such an important policy step to create an independent non-profit with the mission of getting the biggest bang for the consumer’s buck in savings from energy efficiency. The Energy Trust has been averaging a savings of about 25 average megawatts of electricity every year for the past 3 years (and with a lower overhead cost than the utilities used to have to provide the same service). Pretty impressive.

We happily support the utilities upping their investments in these programs that help clean the system and lower rates for everyone. We just want to make sure it’s done right.

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