Less than three years after it began offering substantial rebates to customers for investing in certain energy-efficiency improvements, a Missouri utility is proposing to throttle back on its efforts.
In late December, Ameren Missouri filed with state’s Public Service Commission (docket #EO-2015-0055) a proposed three-year efficiency plan to take effect on Jan. 1, 2016. Compared to the 2013-2015 efficiency plan, the budget would be about 8 percent lower, and the energy-savings goal would be just 54 percent of the current goal.
“Ameren has left substantial amounts of savings on the table and is not close to performing at the level of leading utilities,” said John Hickey, director of the Missouri chapter of the Sierra Club. “Ameren can, and should, make energy efficiency a larger part of its resource portfolio.”
Rebecca Stanfield, deputy director for policy with the Natural Resources Defense Council, said Ameren is being “extremely conservative about how much efficiency is possible.” She believes that in the next few years, Ameren could do twice as much efficiency as it is doing at present. She wonders whether Ameren sees potential profit in lowering its efficiency projections.
Missouri’s efficiency law encourages utilities to pursue more efficiency – and, by extension, reduced electricity sales – by rewarding success with a bonus.
If it reaches at least 70 percent of its efficiency goal, a utility can keep a percentage of the efficiency benefits that accrue to its customers. (That’s the variable part of the bill, which mostly reflects the cost of fuel.) If a utility achieves 70 percent of its efficiency goal, it may keep 12.8 percent of customers’ variable costs. The percentage increases steadily and tops out at 17 percent of variable costs if a utility can reach 130 percent of its goal.
And who sets the goal? The utility itself.
“Performance incentives are a good thing, but if you are able to game them, it can become a perverse incentive to do less than you would otherwise do,” Stanfield said. “I’m not accusing them, but one wonders when their potential studies are so much lower than everyone around them … KCP&L, Com Ed, all of the Michigan utilities.”
Pointing out that, in 2012, Ameren filed the most generous suite of efficiency benefits in Missouri history, the company’s efficiency director, Dan Laurent, identified a couple of factors that prompted the company to lower its efficiency goals for 2016-2018.
“Everything we do in efficiency is driven by the integrated resource plan,” he said. The plan, which must be filed every three years with the PSC, indicated that efficiency would save the company less money in coming years than it has in recent years, according to Laurent.
The cost of power purchased from other generators, for example, has fallen “substantially” of late, as have the costs of transmission, distribution and avoided capacity, he said. And that, in turn, “reduces the amount of cost-effective energy savings we can get from efficiency programs.
“Because we have to justify efficiency as cost-effective, there is much less opportunity.”
Laurent also placed some of the responsibility for falling efficiency goals on ever-more-stringent federal standards for appliances and lighting systems. Escalating federal efficiency standards hike the baseline, Laurent said, making it harder for utilities to nudge their customers to even loftier efficiency heights.
The idea behind utility efficiency benefits is “to incentivize customers to buy more efficient measures than what’s available out there,” Laurent said. “We want to incentivize the next level. It does impact the amount of efficiency you can get.”
While conceding that tougher federal efficiency standards do pose a challenge for utility efficiency programs, Stanfield maintains that Ameren can achieve a lot more efficiency than it is now aiming for.
Because they now fail the cost-effectiveness test, two of Ameren’s efficiency benefits would be terminated in the proposal. One pertains to residential home energy audits; the other to new home construction.
While all of the other benefits now offered would remain through 2018, Ameren proposes relatively modest energy savings the second time around. The energy-savings goal for the lighting subsidy, for example, would tumble from 280,000 megawatt hours in the 2013-2015 plan to 61,000 megawatt hours in 2016-2018.
While she contends that Ameren could achieve more with its lighting and other existing benefits, the NRDC’s Stanfield suggests shifts of a more wholesale nature. Ameren needs “to get deeper in the buildings they’re going into,” she said. “A lot of their residential and multi-family programs are direct install programs where someone from the utility will do faucet aerators and light bulbs. They don’t have programs that allow for deeper savings.”
Costly efficiency moves like insulation and windows don’t usually pencil out when evaluated for either electric or natural gas, she said. An energy-efficiency program in Chicago, Energy Savers, evaluates the feasibility of more costly and long-term improvements, like insulation, and often finds the investment is worthwhile.
“They combine gas and electric utility programs and financing,” she said. “They capture all savings possible in the building. That’s what utility programs need to evolve to. We have to get to more sophisticated programs.”
On a limited scale in St. Louis, Laurent said, Ameren actually does approach efficiencies on a joint basis with the LaClede Gas Co. About 127,000 mostly low-income households may take advantage of the program.
“It’s an approach we’ve already had some success with,” he said.
Long-term continued success in energy efficiency requires innovation and enterprise, rather than “doing the same old thing all the time,” Stanfield said. “Lots of places that been doing efficiency for decades are still finding lots of cheap savings out there. I think it is partly about how willing you are to build in new programs that focus on new technologies and program design.
“That’s what we expect of Ameren.”
The Sierra Club and Natural Resources Defense Council are members of RE-AMP, which publishes Midwest Energy News.