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HomeMy WebLinkAboutBack-Up DocumentsEnergy Efficiency: Time to Tap Florida's Vast Potential for Energy Savings FEECA: an opportunity for action The 2019 Florida Energy Efficiency and Conservation Act I (FEECA) proceedings present a once in every -five-year opportunity to reset and improve the energy conservation goals for the state's largest utilities. FEECA emphasizes reducing the growth rates of weather -sensitive peak demand, reducing and controlling the growth rates of electricity consumption. The Public Service Commission (PSC) is charged with setting appropriate goals for each of the seven electric utilities subject to the Act.' The goals are expressed as annual electric peak demand and energy savings over a ten-year period. These utilities must submit for Commission approval cost- effective demand-side management (DSM) plans and programs designed to meet the goals. As part of the FEECA proceeding, the utilities file proposed goals based on internally produced technical, economic and achievable potential analysis for energy savings (reduction in energy consumption). Unfortunately, the energy savings potential produced from the analysis has been historically depressed due to the utilities' use of a very restrictive cost-effectiveness test and other screening techniques, that are unique to Florida.3 This eliminates the lowest cost, highest impact energy efficiency measures from consideration. The result, as seen above, is that Florida continues to leave vast amounts of energy savings "on the table" relative to other states. This has a particularly negative impact on low to middle income customers and those on fixed incomes. SACS can provide a technical briefing of the FEECA potential analysis process at your request. The Department of Agriculture and Consumer Affairs is statutorily designated as a party to the FEECA proceeding.' The PSC dockets have been opened at scheduling orders will be issued shortly. We encourage DACS to engage and advocate for meaningful conservation goals — that will place Florida among the leaders in capturing energy savings for the state's energy consumers. ' §§366.80-85, 403.519, Fla. Stat. z Florida Power and Light Co., Duke Energy Florida, Tampa Electric Co., Gulf Power Co., OUC, JEA, and Florida Public Utilities Co. 3 For instance, the Rate Impact Measure (RIM) cost effectiveness test is the primary test that has historically been used in Florida (except for 2009) despite the fact that it excludes high impact, low cost measures. Florida stands virtually alone in use of this test, which has been rejected by the vast majority of states in favor of the Total Resource Cost Test and Program Administrator Cost Test, which evaluate efficiency against energy supply alternatives. Likewise, Florida is the only state in the country to eliminate any efficiency measure with a 2 -year or less payback. a §377.6015(2)(8), Fla. Stat. Efficiency: helping consumers reduce energy use; save money on bills Energy efficiency is often referred to as the "least cost resource," meaning that it is the most cost- effective tool we have in a state energy portfolio. Energy efficiency is simply using less energy to provide the same or better services. Energy efficiency measures reduce energy use for electricity customers and saves money on bills. In addition, because energy efficiency reduces the amount of energy that gets wasted, it offers many important benefits to the state, including: • The opportunity to defer or eliminate the need to build costly new electric power generating and transmitting facilities and capacity, which keeps electric rates lower; • The opportunity to reduce electricity bills for utility customers who participate in energy efficiency programs and rebates AND lower rates for all customers; • The opportunity to address electric grid constraints, and enhance grid reliability, especially during peak hours; • Reduced environmental impact; • Local job creation and economic growth; • Improved health, comfort and productivity for all customers.' Florida: a laggard on energy savings for consumers Florida's largest utilities badly trail leading utilities in the Southeast and throughout the nation in delivering energy savings to customers. As a percentage of annual electricity sales in 2017 (the most recent year for which there is data), Florida had the second to worst performance in the Southeast region (beating only Alabama), according to Southern Alliance for Clean Energy's (SAGE) 2018 Energy Efficiency in the Southeast. In the same year, the national average was five times higher than Florida, and efficiency savings in California, Massachusetts, Rhode Island, and Vermont were 15-25 times higher. In American Council for an Energy Efficiency Economy's (ACEEE) 2018 State Scorecard, Florida scored only 2 of 20 possible points, ranking 36' in the nation for utility programs and policies.6 Rhode Island, Vermont, and Mass. I > 2.50 % California 1 1.97% 1 NORTH CAROLINA 1 0.75% s Southeast Energy Efficiency Alliance, at httos://www.seealliance.org/about/energy-efficiency/ G Southern Alliance for Clean Energy, 2018 Energy Efficiency in the Southeast, at httDs:Hcleanenergv.org/bloW2018-energy-efficiencv-southeast-report/ ; American Council for an Energy Efficiency Economy, 2018 State Scorecard, Chapter 2, at httt)s://aceee.org/research-rei)ort/ul808 NATIONAL AVERAGE 0,72 % SOUTH CAROLINA ! 0.46% GEORGIA 0.31 % FLORIDA 0.13 .......... _....... _.._._.._............. ...... ....... G__...... ----- DUKE ENERGY PROGRESS 0.79% NATIONAL AVERAGE 0.69% GEORGIA POWER 0.46% SOUTHEAST REGIONALAVERAGE 0.29% TENNESSEE VALLEY AUTHORITY 0.21% DUKE ENERGY FLORIDA 0.20% MISSISSIPPI POWER 0.19% ENTERGY MISSISSIPPI 0.16% FLORIDA POWER AND LIGHT 0.08% GULF POWER 0.04% ALABAMA POWER 0.02% Contact: Susan Glickman susan,!cecleanenerev.ora 727-742-9003 ACEEEEArne+can Counc foran Energy -Eff€c=ent Economy 52914th Street, N. W., Suite 600 d Washington. O.C. 20045 0 202.5074000 0 202.429.2248 0 www.aceee.org Utility -Sector Energy Efficiency Performance in Florida Electric utilities play a critical role in delivering energy efficiency programs to Florida's families and businesses, but require support from state regulators to enable these investments. The Florida Energy Efficiency and Conservation Act (FEECA) calls on utilities to set goals every five years, but recently plans for energy efficiency programs have shrunk to almost nothing, depriving customers of the programs needed to manage electric bills and lower system costs.i Fair application of cost-effectiveness tests, elimination of unnecessary payback screens, and a focus on delivering programs to low income customers would enable greater levels of energy savings across the state. ELECTRIC EFFICIENCY PROGRAM PERFORMANCE Energy and demand savings are the ultimate goal of utility energy efficiency investment, and both savings and spending are strong indicators of a utility and state's energy efficiency performance. As shown in the chart below, Florida utilities' historic energy efficiency spending falls well below both national and Southeastern averages. Florida utilities also fall behind their Southeastern and national peers for savings. The investor-owned utilities subject to FEECA rules saved on average only about 0.22% of retail sales in 2015 compared to a national average of 0.89%, about 4 times greater. Further, only five states saved less electricity than Florida in 2017.ii 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% Duke Energy Florida Power Florida Public Gulf Power Jacksonville Orlando Tampa Electric Florida, LLC & Light Utilities Company (Gulf) Electric Utilities Company (DEF) Company (FPL) Company Authority (IEA) Commission (TECO) (FPUC) (OUC) Utility 2015 National Average Spending as a % of Revenue 2017 Southeast Average Spending as a % of Revenue This pattern worsens in the utilities' recently proposed electricity savings targets for the for 2020-2029 period. For this cycle, FEECA utilities propose 594,023 X4Wh in savings from electric efficiency programs, only 41% of 2017 achieved savings. Further, three FEECA utilities set electricity savings goals of zero, claiming that no programs pass the RIM test, which is a measure of already -sunk utility system costs rather than economic efficiency. 600,000 -- - _._._...._-._... -_ MWh 500,000 - — +� r;n Proposed Savings v o 400 000 Target 2020 2029 LU a -a >. 300,000 a>i v 200,000 Q= cn 100,000 - ---- w 2006 2008 2010 2012 2014 2016 Year ELECTRIC EFFICIENCY REGULATORY POLICIES Florida Electric Efficiency Goals. FEECA requires seven Florida utilities to establish cost-effective energy efficiency programs and conduct energy audits. Energy savings targets set at the state or utility level are important to achieve high energy savings. But in Florida, the FEECA framework doesn't push utilities to deliver energy savings. FEECA 2015-2024 savings goals are just 13% of 2010-2019 targets, and the 2020-2029 goals shrink even more. FEECA utilities are currently required to educate low-income customers on energy efficiency opportunities, but the Commission does not require them to meet spending or savings levels - and utilities that offer few or no programs are certainly not serving these customers. Cost Effectiveness Testing. Florida uses three of the cost-effectiveness tests in the California Standard Practice Manual: the total resource cost test (TRC), participant cost test (PCT), and ratepayer impact measure test (RIM). However, in practice, the Sunshine State is one of the only states to still rely heavily on the RIM test which looks at rate impacts rather than the complete costs and benefits of energy efficiency. This test treats lost sales revenue as a cost and is not a good indicator of a program's cost effectiveness in terms of reducing total future costs. The RIM test is inconsistent and unfair in testing energy efficiency programs, failing to capture the complete costs and benefits of energy efficiency for both the utility and the customer. It is not applied to other supply side investments, which would also fail the RIM test because they require utilities to account for the additional costs of infrastructure investments by increasing rates.iv Lastly, Florida utilities apply a two-year payback screen to eliminate efficiency measures with a financial payback of two years or less on the assumption that customers will adopt such measures on their own. Utility Business Model. Florida's utility business model discourages utilities from investing in energy efficiency. State regulators can better align utility business models and energy efficiency with three types of tools: program direct -cost recovery, decoupling mechanisms, and performance incentives. While Florida utilities may request decoupling or a lost revenue adjustment, they have not done so and Florida regulators have not developed mechanisms for utilities to earn a financial incentive for investing in energy efficiency. Opportunities to Expand Energy Savings Florida policymakers, regulators, and utilities have several opportunities to deliver electric savings and other benefits to customers. State and local policies could establish clear energy savings targets and incentives that promote energy savings with provisions that include low-income customers. To expand on current low-income customer education programs, FEECA utilities could also propose new or expanded low-income programs, and the Commission could enact spending or savings carveouts for low- to moderate -income programs in their portfolios to encourage participation from these community members. In addition, the Commission could eliminate the RIM test as it is flawed in terms of cost-effectiveness testing for electric efficiency programs. It could modernize cost-effectiveness testing by focusing on the entire utility system through the utility cost test (UCT) or by using tools like the NSPM to ensure cost- effectiveness testing aligns with state policy. Lastly, the Commission could eliminate the two-year payback screen as it blocks low-cost, easy to implement energy efficiency measures. This unnecessary screen discourages low-income participation and investment in energy efficiency. Florida Power & Light, Duke Energy Florida, Tampa Electric Company, Gulf Power Company, Florida Public Utilities Company, Jacksonville Electric Authority, and Orlando Utilities Conurdssion. Berg et al. 2018 2018. "State and Local Policy Database: Florida." httos://database.aceee.orsi/state/florida. 2018. "ACEEE Comments to the Arizona Corporation Commission." httos://aceee.ore/ sites/ default/ files /comments-acc-rim.vdf. Ibid.