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EEI Energy Efficiency EEI Energy Efficiency InitiativeInitiative
Eric Ackerman Eric Ackerman (([email protected])Senior Manager, Regulatory Policy Senior Manager, Regulatory Policy
April 23, 2007April 23, 2007
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Overview
Why – Do we need to aggressively increase energy efficiency in the electric sector?
What – Does the EEI Energy Efficiency Initiative aim to do?
How – Do we aim to do it, what are our strategies?
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EEI Efficiency Initiative – The Case for Action
Rates Are Increasing: Our Customers Need Help
Evolving Customer Requirements: We Can Be Ready Wholesale/Retail Competition: Reduce Risks Through Demand
Response and Innovative Rate Design
Environmental Issues: An Opportunity To Reduce Emissions
Evolving Technology: New Developments Will Change the Business
EPAct and PURPA Requirements: An Opportunity for State Action
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EEI Energy Efficiency Initiative (Con’t)
Approved by EEI Board, September 2006
Five component strategies, five teams:1. Innovative Rate Designs & Regulation2. Advanced Metering and Infrastructure3. Smart and Efficient Buildings4. Smart and Efficiency Appliances5. Plug In Hybrid Electric Vehicles
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Innovative Rate Designs & Regulation Goal
• Implement innovative rate designs and regulatory structures that support energy efficiency as a viable business compatible with and attractive to the electric industry and its customers
Strategy• Develop innovative rate designs, regulatory and business models to support
energy efficiency and demand response programs
• Outreach to state regulatory commissions and other stakeholder groups to gain acceptance of EEI’s innovative rate designs, regulatory and business models that support energy efficiency and demand response programs
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Advanced Metering and Infrastructure Goal
• Increase the penetration of cost-effective AMI with effective communications capability that will support innovative rate designs, energy efficiency and demand response programs
• Secure legislative and regulatory policies that will reduce investment risk associated with investments in advanced metering
Strategy• Develop proposed regulatory and legislative policies that will reduce metering
investment risk
• Outreach to state regulators to gain acceptance and implementation of required regulatory changes
• Advocate federal & state incentives to support financial viability of metering investment
• Coordinate with vendors to guide the development of cost-effective AMI
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Advanced Metering and Infrastructure
Goal• Increase the penetration of cost-effective Advanced Metering and Infrastructure
(AMI) with effective communications capability that will support innovative rate designs, energy efficiency and demand response programs
• Secure legislative and regulatory policies that will reduce investment risk associated with investments in advanced metering
Strategy• Develop proposed regulatory and legislative policies that will reduce metering
investment risk• Outreach to state regulators to gain acceptance and implementation of required
regulatory changes• Advocate federal & state incentives to support financial viability of metering
investment• Coordinate with vendors to guide the development of cost-effective AMI
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Smart and Efficient Buildings Goal
• Improve the efficiency and responsiveness of new and existing buildings by working with end-use customers, trade allies, and government agencies
Strategy • Have states adopt 2006/2007 building efficiency codes
• Extend, expand, and simplify federal (and state) tax incentives
• Raise public awareness of EEI member company programs that help improve the efficiency of residential and commercial customer buildings
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Smart and Efficient Appliances Goal
• Increase the market share of smart, efficient, and cost-effective appliances that are accessible and affordable for customers
Strategy • Build coalitions to support consensus-based national appliance efficiency
standards
• Extend and expand federal (and state) appliance efficiency tax incentives
• Raise public awareness of EEI member company programs that help improve the efficiency and responsiveness of residential and commercial equipment
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Plug In Hybrid Electric Vehicles Goal
• Increase awareness, visibility and viability of Plug In Hybrid Electric Vehicles (PHEV) in advance of a successful launch of a vehicle by 2010
Strategy • Implement incentives (Legislative and Regulatory)
• Outreach to key stakeholders (auto manufactures, environmental advocacy groups)
• Initiate communications initiative (PR, Education)
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Rate Designs We need to move toward more efficient rate designs:
• Greater use of time-differentiated designs to reflect the true cost of generation (e.g., time-of-use, critical peak pricing)
• Greater choice among options that let customers trade off stability vs. cost minimization
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Price vs. Risk Profile
Risk to Buyer
ExpectedPrice
toBuyer
RTP-DA
FPA & RTP w/ Adjustable CBL
RTP w/ PPP
RTP-HA
PLL Rates
TOU Rates
Variability
Source: Jon Kubler, GA Power Co.
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Advanced Metering Infrastructure Critical support to demand-response:
• Sends time-differentiated price signals• Records time-differentiated consumption (interval metering)
Many other operational cost savings and reliability improvements that benefit customers
The issue is careful business case development to ensure that benefits justify costs• Treatment of legacy meters can tip the decision• Accelerated depreciation of new meters also is appropriate and will improve
business case
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Possible Business Models Conventional regulatory incentives
• Rate basing• Shared savings
Performance-based models• Revenue caps
Market-based models• Customer infrastructure models• Fee-for-service models
Green power models• Rate basing• Fee for services• Renewable / carbon credits models
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Enabling Regulatory Policies DSM cost trackers
Decoupling mechanisms
Measuring and sharing benefits
Rate basing
Performance based regulatory authority, plan designs
Premium services policy
Cost/revenue separations mechanisms
Affiliate codes of conduct
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Conclusions1. The need for increased efficiency is urgent.
2. Multiple policies are needed:
a. Efficient ratesb. Advanced metering infrastructure (where cost-effective)c. New business modelsd. Enabling regulatory policies.
3. No one model will work for every utility / service territory.
4. Criteria for sustainable businesses:
a. Timely recovery of DSM program costsb. Keeping whole for fixed costsc. Ability to make a margin.