Third-Party Administrators for Energy Efficiency: Funding & Contract Design Considerations

Transcription

1 Third-Party Administrators for Energy Efficiency: Funding & Contract Design Considerations National Governors Association Retreat for Puerto Rico, January 19, 2016 Janine Migden-Ostrander RAP Principal The Regulatory Assistance Project 50 State Street, Suite 3 Montpelier, VT Phone:

2 About RAP US RAP provides technical and policy support at the federal, state and regional levels, advising utility and air regulators and their staffs, legislators, governors, other officials and national organizations. We help states achieve ambitious energy efficiency and renewable energy targets and we provide tailored analysis and recommendations on topics such as ratemaking, smart grid, decoupling and clean energy resources. RAP publishes papers on emerging regulatory issues and we conduct state-by-state research that tracks policy implementation. 2

3 Outline of Presentation The Regulatory Landscape in Puerto Rico The Importance of Energy Efficiency Goals and Considerations for Effective Third Party Administration The Four Approaches to Third Party Administrators 3

4 The Regulatory Landscape in Puerto Rico 4

5 Declaration of the Public Policy on Electric Power The Commonwealth of Puerto Rico shall become an efficient and responsible energy consumer and shall promote energy conservation and efficiency in all its branches and instrumentalities; The sensible, responsible, and efficient use of energy resources in Puerto Rico shall be promoted among residential, commercial, and industrial customers; Source: Act 57, Section 1.2 5

6 Government Energy Efficiency In complying with the public policy of the Commonwealth of Puerto Rico, all agencies, instrumentalities, and public corporations of the Executive Branch and all the offices of the Judicial Branch shall take measures and initiatives directed to reducing or eliminating those activities, practices, or uses in their facilities, buildings, and offices that result in the waste or inefficient use of energy resources For such purposes, the agencies, public corporations, and instrumentalities of the Executive Branch and the offices of the Judicial Branch shall execute and implement those measures and initiatives that reduce the total annual electric power consumption to a minimum average saving of forty percent (40%) during the next eight (8) years after the approval of this Act. (emphasis added). Section 4.1 of Act 57 6

7 IRP Regulations of the Energy Commission of Puerto Rico Section 401 (D) Within ninety (90) days of a Commission decision on this IRP, PREPA shall competitively bid for a third-party administrator to plan for and implement the energy efficiency and demand response programs: The third-party administrator would utilize ratepayer funds to implement all aspects of the energy efficiency and demand response programs, in lieu of PREPA implementation, consistent with the requirements of these regulations. 7

8 Commission Suggested EE Ramp Rate for Modeling in IRP Year Ramp Rate % % % % % % % % 2025 and thereafter 1.5% Commission IRP Proceeding, No.CEPR-AP , IRP Compliance, 12/8/15 8

9 The Importance of Energy Efficiency 9

10 Long Run Cost of Energy Lazard (2014) 10

11 Goals of Energy Efficiency Programs Resource Acquisition including reliability avoid G&T&D and other investment that costs more than EE Market Transformation change the way people make choices Environmental Compliance and Quality Economic Development and local jobs 11

12 Goals and Considerations for Effective Third Party Administration 12

13 Cornerstones of an Effective EE Administrator Clarity especially about the mission Consistency market strategies develop and evolve over time Consensus around the mission and the process Leadership and commitment from political authorities and public acceptance are important 13

14 Other Important Features Transparency How are decisions made? Programs (screening, targets, strategy, etc.) Evaluation Innovation Funding How is money collected? Stakeholder input through a collaborative process 14

15 Accountability and Oversight How is budget set? Who participates in program development (opportunity for public participation)? Are measurement and evaluation metrics an integral part of program design? Program evaluation Process evaluation How are results verified? Frequency of reporting Protocols and capabilities for periodic program review Can the effort be successfully managed and overseen at large scale (All islands)? 15

16 Administrative Effectiveness Efficient, non-redundant administrative costs Budget competency Ability to acquire and retain high quality staff, experts and contractors create local jobs Flexibility to adapt programs to evolving market conditions/opportunities Ability to target funds geographically Local options for program design Ability to facilitate timely payment of incentives to customers and trade allies 16

17 The Four Approaches to Third Party Administrator 17

18 Options for EE Administration Independent, non-government, thirdparty (statewide) organization Utility administration (ownership by investors, cooperative, public) Government administration at both state and local level Hybrid responsibility divided between or among multiple administrators 18

19 Independent Non-Government Administration Purpose-built organization for energy efficiency Statewide brand, scale Does not have utility conflict between energy efficiency and sales; decoupling as an added tool. Examples include: Wisconsin Focus on Energy, Hawaii Energy, Efficiency Maine Trust, Efficiency Vermont, Energy Trust of Oregon Expert and sole focus is on energy efficiency programs less distractions Can employ and train local workforce 19

20 Utility Administration Most utilities want to maintain control of energy efficiency programs Connection to resource planning and investment Relationship with customers Financial (profits, lost margins) Corporate outlook enterprise-wide? Oversight can address many concerns, as with the formal panels in CT and MA or with standing collaboratives elsewhere Incentives and lost revenues (decoupling) need to be addressed. 20

21 Government Administrators State in the market as a competitor to generators and ESCOs providing EE services States need to assure adequate revenue to support staff infrastructure (system benefit charges). Importance of developing expertise of staff. Hiring rules can also be limiting. Results in often using contractors managed by the state. Fiscal rules and procurement rules may limit management and financial flexibility. Examples include: NYSERDA (Energy $mart), DC Sustainable Energy Utility*, Delaware SEU, New Jersey Office of Clean Energy 21

22 Hybrid Divides administration among multiple entities, such as utility and government, including communities Can be segmented for EE to specific groups like Low- Income (MI) Division of responsibilities need to be clear with accountability by each actor group Examples include: California, NYSERDA, Michigan 22

23 Conclusion EE Administrator can be an effective mechanism to ensure development of EE o Ensure focus on cost-effectiveness EE o Provides for training and employment locally Important Attributes for EE Administrator include: o Accountability o Consistency o Consensus o Strong oversight 23

24 Other Publications and Resources Who should deliver ratepayer funded EE: A 2011 update, by Rich Sedano, Energy Efficiency Program Administration, by Charles Goldman, E.O., Lawrence Berkeley National Laboratory, February, 2007, _admin.pdf Assessment of experiences with third party approaches, by Chuck Goldman from 2000, 24

25 Other Publications and Resources Third Party Provision of Energy Efficiency Programs, Hay, Implementing Energy Efficiency: Program Delivery Comparison Study, IEE, Transition from Utility Administered to Third-Party Administered Energy Efficiency Programs in Hawaii: Success through Flexibility, ACEEE summer study,

26 About RAP The Regulatory Assistance Project (RAP) is a global, non-profit team of experts that focuses on the long-term economic and environmental sustainability of the power sector. RAP has deep expertise in regulatory and market policies that: Promote economic efficiency Protect the environment Ensure system reliability Allocate system benefits fairly among all consumers Learn more about RAP at jmigden@raponline.org

27 Appendix Additional Slides 27

28 See 28

29 Decoupling Decoupling is designed to address the throughput incentive by breaking the link between utility sales and revenue With decoupling, the Commission in a rate case proceeding determines the distribution revenue requirements which become the basis for determining the revenue the utility will receive in rates. At the end of an agreed upon period, the utility s authorized revenue requirements are measured against actual revenues Rates are then reconciled to allow the utility to recover (positive or negative) the difference between revenues authorized and revenues received 29

30 How Decoupling Works Periodic Decoupling Calculation From the Rate Case Target Revenues $10,000,000 Test Year Unit Sales 100,000,000 Price $ Post Rate Case Calculation Actual Unit Sales 99,500,000 Required Total Price $ Decoupling Price "Adjustment" $