Transcript Slide 1

Regulatory Policy on Energy
Efficiency Programs
Kansas Corporation Commission
General Investigation Docket
Presenter: James Sanderson
Senior Research Economist
KCC
Commission
General Investigation
• In the Matter of a General Investigation
Regarding Energy Efficiency Programs
• Docket No. 07-GIMX-247-GIV
Brief History
• May 2005: Commission defers consideration of
a low-income weatherization program until it had
the opportunity to examine the appropriateness
of proposed evaluation methodologies for
weatherization and demand side management
programs generally.
• Docket 05-AQLG-367-RTS
Brief History
• August 2005: Commission accepts the Report
and Recommendation of the Commission Staff
concerning special rates for electricity and gas
service to low-income ratepayers.
– Part of Staffs recommendation called for further
inquiry into the potential for low-income
weatherization programs and demand side
management (DSM) initiatives.
• Docket No. 04-GIMX-531-GIV
Brief History
• August 2006: Commission sponsored an
workshop on energy efficiency conducted
by Richard Sedano with the Regulatory
Assistance Project.
• The Commission had held a similar
workshop in January 2006 with a more
limited audience.
Brief History
• September 2006: Commission opens
general investigation docket
– In the Matter of a General Investigation
Regarding Energy Efficiency Programs
– 07-GIMX-247-GIV
– Call for comments
• May 2007: Staff Report and
Recommendation
Threshold Question
• The threshold question is the extent to
which the Commission has legal authority
to require or encourage electric and
natural gas utilities to offer energy
efficiency programs.
Commission Statutory Authority
• K.S.A. 66-101b, 66-117
– Authority to ensure that utilities provide reasonably efficient and
sufficient services and facilities at just and reasonable rates.
• K.S.A. 66- 101 and 66-1,201
– The Commission has full power, authority and jurisdiction to supervise
and control the electric and natural gas public utilities and is empowered
to do all things necessary and convenient for the exercise of such
power.
• K.S.A. 66- 101g and 66- 1,207
– The provisions of the Kansas Public Utilities Act and all grants of power,
authority, and jurisdiction made to the Commission should be liberally
construed, and all incidental powers necessary to carry into effect the
provisions of the act are expressly granted and conferred upon the
Commission.
Statutory Provision for Incentives
• K.S.A. 66-117(e)
– the Commission may allow a return of an
extra ½% to 2% on investments that can be
reasonably expected:
• to produce energy from a renewable resource
other than nuclear for the use of its customers.
• to cause the conservation of energy used by its
customers.
• to bring about the more efficient use of energy by
its customers.
Commission Statutory Authority
• If programs fall under the above statutes,
Commission clearly has authority.
• If not, Commission role may be limited.
• New legislation may be necessary.
Commission Questions
• We therefore seek comments on the
Commission's legal authority with regard
to energy efficiency programs, especially
in light of K.S.A. 66-117(e).
Commission Questions
1. Are there limitations on the Commission's authority to
require utility companies to offer energy efficiency
programs to customers?
2. Are there any limitations on the kind of "incentives" that
the Commission may offer to utilities for energy efficiency
programs?
3. May the Commission authorize a "decoupling" of
revenue requirements from usage in order to remove
disincentives for energy efficiency programs?
Commission Questions
4. What are the legal parameters for KCC adoption of
benefit-cost tests for efficiency programs?
5. Can the Commission consider societal benefits, such as
external environmental benefits, in balancing interests to
decide whether it should approve energy efficiency
programs?
6. If the Commission's legal authority is unclear, should the
Commission seek clarifying legislation?
Commission Questions
7. Is there a need for the Commission to establish the
“rules of the game” with regard to energy efficiency?
– What areas need to be addressed in order to
establish such "rules"?
– Should the Commission promulgate administrative
rules and regulations?
– Whatever the form of the "rules," how detailed do they
need to be?
Different Approaches
1. Require that utilities periodically submit and
implement least cost integrated resource plans
that treat energy efficiency programs as potential
alternatives to traditional supply resources.
2. Utilities could be required to assess and screen
potential energy efficiency efforts according to
benefit-cost tests adopted by the Commission.
Different Approaches
3. Rely on the utility companies to propose
programs that would presumably earn the extra
return allowed by K.S.A. 66-117(e) or be given
some other beneficial rate treatment.
4. Require utilities to offer specific types of
programs such as those that have proven to be
most effective in other states or those that are
targeted toward low-income consumers who
might not otherwise be able to install energy
efficient measures.
Different Approaches
5. Require utilities to offer a net positive cash flow
type program in which only participating
customers repay the costs of energy efficiency
measures with the savings achieved from
reduced energy bills
6. Require utilities to implement demand side
management programs, including time of use
pricing, or a combination of strategies
Different Approaches
7. Require certain limited efforts on a trial basis
while studying the question of whether more
comprehensive efforts are warranted
8. A third-party administrator, similar to Efficiency
Vermont, could be designated to administer
programs?
Staff Report and Recommendation
• Staff sets forth a view of the threshold
legal issues and recommends an interim
approach that the Commission may wish
to adopt until further conclusions may be
reached based on potential future
proceedings.
Staff Report and Recommendation
• Staff believes that the Commission
generally has the authority to not only
approve but also to require energy
efficiency programs if it finds that such
programs are reasonable and necessary
in order to ensure that utility acts,
practices and services are just,
reasonable, and reasonably sufficient and
efficient
Staff Report and Recommendation
• With regard to requiring a third-party
administrator, Staff is not sure it would be an
improper delegation of Commission authority.
• Staff suggests that the Commission conduct
further proceedings on these issues before
attempting to determine whether a third-party
administrator should be mandated and whether
legislation is needed to support such a mandate.
Staff Report and Recommendation
• Because energy efficiency programs do relate to
service characteristics and effects on the utility
system, Staff believes that the manner of
allocating and recovering the costs of such
programs is really a rate design function. The
courts have repeatedly found that policy
considerations have a valid place in rate design
and that a rate structure that imposes different
rates on different customer classes will be
upheld if there is reasonable basis to support it.
Staff Report and Recommendation
• Staff does not believe judicial opinions compel
the Commission to apply any particular benefitcost test.
• Staff agrees with the majority of commenters
that the Commission likely has the discretion to
consider "externalities," such as environmental
consequences, as part of the overall benefit cost
testing and analysis.
Staff Report and Recommendation
• Staff agrees with the consensus that the
Commission has the authority to provide utilities
with incentives to offer energy efficiency
programs in addition to an increased rate of
return
• Staff agrees with the consensus among the
commenters that the Commission's broad
authority extends to an ability to "decouple"
revenue requirements from usage.
Staff Report and Recommendation
• Staff suggests that the Commission either
require or encourage electric and natural gas
utilities to evaluate and offer energy efficiency
programs to their customers in order to comply
with obligations to provide efficient services.
• Staff suggests that more extensive discussions,
workshops or hearings are desirable in order for
the Commission to make informed decisions.
Other KCC Actions/Activities
• The KCC has approved four energy
efficiency programs and two major
demand response programs for KCPL, the
state’s second largest electric utility.
• The KCC has authorized Westar, the
state’s largest electric utility, to implement
a pilot real time pricing tariff.
Other KCC Actions/Activities
• The KCC has approved a request by
Midwest Energy, a regulated electric and
gas cooperative, to implement a pilot
program that allows ratepayers to finance
cost-effective energy conservation
improvements through an additional
tariffed charge on their utility bill.
Other KCC Actions/Activities
• Westar recently created an energy
efficiency division with plans to roll out an
employee pilot thermostat program in first
quarter 2008 with residential/commercial
and medium/large commercial demand
response programs scheduled for
implementation in the second quarter
2008.
Other State Activities
• The Kansas Energy Council, a 35-member
energy policy advisory group, is funding a
statewide energy efficiency potential study of
residential, commercial, and industrial sectors
that will be completed no later than July 2008.
• The Kansas Energy Office, at the KCC, has
applied for a $1.2 million DOE grant to fund
implementation of a statewide energy
conservation education project, in partnership
with the state’s jurisdictional utilities, as well as
munis and coops.
Other State Activities
• In response to Governor Sebelius’
January 2007 Executive Directive (#07373), State of Kansas agencies have
implemented or are implementing the
following initiatives:
– Survey of state employees for energy savings
practices and suggestions.
– Require energy audits on all facilities being
considered as leased space and require
landlords to make necessary improvements.
Other State Activities
• Governor Directives continued:
– Collect energy data on all state facilities to
identify those using excessive energy.
– Raise average state fleet EPA mileage 10%
by 2010.
– Assure compliance or increase existing
energy efficiency purchasing requirements for
appliances, light bulbs, and computers, using
Energy Star as a minimum.
Other State Activities
• Governor Directives continued:
– Use Facilities Conservation Improvement
Program (FCIP) to implement cost-effective
conservation and efficiency measures in all
state-owned buildings by 2010.
– Accelerate marketing of FCIP to local school
districts and units of government.
Conclude
• Visit the KCC website at:
– www.kcc.ks.gov
• All filings in the 07-GIMX-247-GIV docket
may be downloaded from that location.
• Thank you for your participation.