Watching the WUTC grapple with the continuing disconnect between the regulated business model of an investor owned utility and its incentive to aggressively pursue the acquisition of energy efficiency is becoming increasingly like watching Mariner’s baseball – lots of potential but we’ll have to wait until next year for a winning season. This year the WUTC broke spring training with some hope that this decades old problem would find a resolution in the Puget Sound Energy rate case. Unfortunately, hopes were dashed once again well before the All Star break. The WUTC Order is 193 pages long, but pages 158 – 177 make particularly interesting reading. In this section of the Order, the WUTC makes plain its preference for a decoupling approach consistent with a policy paper it wrote in 2010 (UTC Docket U-100522, Investigation Into Energy Conservation Incentives, Report and Policy Statement on Regulatory Mechanisms, Including Decoupling, To Encourage Utilities To Meet or Exceed Their Conservation Targets). While the Northwest Energy Coalition had promoted a decoupling approach in their intervention in this case, PSE did not support it due to its insufficiency in closing the gap in the company’s financial position caused by the successful implementation of conservation programs. Alternatively, PSE had proposed a separate tariff, dubbed the Conservation Savings Adjustment (CSA) which was to be based on the annual measured and verified conservation savings that trigger the gap in the company’s revenues from the foregone sale of the energy commodity.
The WUTC rejection of the CSA mechanism is troubling on at least two fronts. First, the lack of positive action by the Commission leaves in place 30 years of regulatory policy that works against energy efficiency. This is a long enough time period that we should not take for granted the continued aggressive conservation programming of investor owned utilities with a broken regulatory model. Second, the reasoning by the WUTC in this Order seems to infer a suspicion in the very existence of energy efficiency as a resource.
“PSE uses the savings estimates from its energy efficiency programs to estimate conservation-related load reduction for the CSA. These estimates are based on the Regional Technical Forum or other engineering sources. They are used for program planning and conservation target setting under RCW 19.285.040(1)(e). Such estimates have been acceptable for those purposes because cost-effectiveness calculations have shown them to be conservative enough to conclude that particular measures, on average, contribute savings to the program. Ms. Deborah Reynolds testifies for Staff that, “these energy savings estimates are really intended to be used for forecasting and as a guide for making a decision about which plant to purchase, where plant A is conservation and plant B is a gas plant[.]” Public Counsel and Staff argue that these savings estimates are not rigorous enough for ratemaking. “ [WUTC Order, page 171]
Wow. Despite ever increasing rigor in EM&V and a now 30 year experience with energy efficiency as tangible resource, it seems to have now been relegated to the status of a “guide” with insufficient veracity for use in ratemaking. Why does this feel like the Cliff Lee trade? [Cliff Lee is one of the best pitchers in baseball and was traded by the Mariners for their current first baseman who is hitting .178]
NEEC believes that this problem in the utility regulatory model must be fixed if conservation is going to get a fair shake. As the saying goes, “wait till next year”.