California’s giant Pacific Gas and Electric has a major program providing energy audits for its customers, and recently retained an outside firm to study the results. While quite a few customers did reduce their energy usage after the audits, it turned out a larger number increased demand.
The report, dated December 2018, noted 19 percent of PG&E electricity customers reduced usage but 27 percent of them increased it following the audit. On the natural gas side, 25 percent reduced usage and 31 percent increased.
Dominion Energy Virginia is proposing a very similar program for its customers, as one of eleven new demand management programs pending before the State Corporation Commission. The $226 million Dominion proposes to charge its customers over five years to pay for them is just a down payment on the $870 million in such spending over ten years which the General Assembly ordered in last year’s Ratepayer Bill Transformation Act.
We customers pay for these programs with (you guessed it) stand-alone riders on our electric bills, Riders C1A and C2A. Approval of these new programs as requested, plus some higher cost recovery sought for existing programs, would add 61 cents per month to that mythical 1,000-kilowatt hour residential customer bill. That’s your price for encouraging your neighbor or a neighboring business to buy an LED bulb, tune up the old heat pump, put some film on the windows, buy a smart thermostat and get that energy audit.
Along with paying for those activities, however, the $226 million also includes $9.5 million in utility profit, $6.6 million in overhead charges, and $97 million in compensation to the utility for the electricity it expects to not sell. The program costs themselves are only half the total bill to customers.
Dominion cited the PG&E home audit program in its application, so the SCC staff sought out the recent report on its effectiveness, finding and including two of the report’s key pages in its 200-page analysis of the proposed eleven programs. PG&E claimed a 1.5 percent net decrease in demand among participants, but the staff noted that 80 percent of PG&E electricity customers saw no change or used more power and challenged Dominion’s claim the audits will do much better in Virginia.
That was just one of the several programs challenged by the staff. A proposed appliance recycling program, where a Dominion-approved contractor picks up inefficient appliances and provides a $20 stipend to the person discarding them, is intended to reach 45,000 customers over the five years. But the SCC staff notes Dominion did an earlier version of this, reaching fewer than 15,000 customers in three years while offering a larger cash incentive.
“Staff believes that reductions in expected participation will likely result in lowering of the benefits in the cost/benefit tests substantially enough that the proposed Phase VII Residential Appliance Recycling Program may not pass either the TRC (Total Resource Cost) or Utility Cost Tests,” wrote David Dalton, director of the Division of Public Utility Regulation.
Another program offers cash incentives to buy new energy-efficient appliances, through approved Dominion contractors, called the Residential Efficient Products Marketplace. The SCC staff noted it is heavily reliant on persuading people to get rid of incandescent light bulbs, which by the way become illegal next January 1 anyway. When compact fluorescent bulbs become the new baseline, all those cost-benefit calculations with incandescent bulbs as the baseline are shot to pieces.
Staff also noted that of the 35 activities or products included in the program, 16 of them (new light bulbs, shower heads, pipe insulation, etc.) have incentive payments that cost more than the improvement, for example a $7.50 payment to install a $2 LED bulb. (And then, as noted, a payment to the utility for profit and the electricity not burned.)
One key objection that runs through the whole staff report is doubt about participation levels, based on lower than projected participation in the programs Dominion has already been conducting since 2012. Projected participation is key to the projected drop in energy demand and those cost/benefit analyses the utility must pass to get these programs approved.
The environmental groups following the case endorse all eleven proposals, of course, but one of their witnesses makes the excellent point that this whole process should be coordinated with the effort to build the proposed “smart” distribution grid. That will make real time pricing, immediate customer feedback and system-wide demand management possible.
There are a couple of additional key issues facing the Commission, which is taking public comments on the case through March 13.
Previous state-mandated demand management programs have included at least some of the large general service customers, who had to jump through various hoops to be exempted from having to share the cost. The 2018 legislation exempted all larger customers, but there is disagreement over whether that applies only to these new eleven programs or also applies to the existing programs still underway. If those big customers are now excluded from responsibility older programs, the costs for everybody else will go up.
Then there is the money the utility proposes to collect for the electricity it doesn’t sell, “lost” revenues. The Virginia Energy Efficiency Council complains in its written testimony it “does not support the inclusion of lost revenue in the spending cap. First, as a threshold issue, lost revenues are not program costs,” and the new statute only allows program costs.
Its witness Rachel Gold cited a national study finding among other utilities collecting lost revenue, “At the low end of the range, dollars collected for lost revenue were equivalent to only about 1% of electricity efficiency program costs in a given year, but most were clustered between 15 and 35% of program expenditures, with very few examples above 50%.”
What is the figure in Dominion’s proposal? Apparently, about 43 percent. If the pattern holds, could almost half of the $870 million in demand management spending ordered by the General Assembly simply be payment for electricity unsold, another $400 million in revenue to a utility already known to be making and hoarding excess profits? Or will hundreds of millions from ratepayers for lost revenue be layered on top of $870 million in program costs as it piles up over ten years?