PG&E Efficiency Program’s Contrary Results

From Opinion Dynamics report on PG&E’s Home Energy Report program, showing most in the program did not change their consumption of energy. Click for larger view.

Okay, for the wonks among you: At my request, the State Corporation Commission staff directed me to the full report on Pacific Gas and Electric’s Home Energy Report (HER) Program, which found that more people in the program increased their consumption of electricity and gas than decreased it.

The SCC staff had reproduced two pages of the report in its comments on Dominion Energy Virginia’s proposed demand management programs. I cited their citation at the beginning of a Bacon’s Rebellion report a few days ago. With the original report, I could extract the chart used above, which was used by the SCC staff but with a copy too blurry to reproduce.

Along with the static data for 2016, which is bad enough, the report by Opinion Dynamics also tracked various waves of participants over time and found the trends held: “For electric participants, the percent of negative savers appears to increase annually for all waves. For electric participants, the percent of negative savers increases with duration of treatment.”  

 The report never discusses people who increased consumption of electricity or natural gas. These customers are referred to as “negative savers.”  

The 72-page report is packed with more charts and tables than clear exposition and firm conclusions. Opinion Dynamics worked hard on trying to figure out what was driving the various responses, with the goal of either focusing the program on those who seemed responsive or revising the program to spark changes in behavior. Others may dig deep in this and find the pony where I see a big pile.

Some of the statements included did jump out.

Very positive electric savers tend to have higher average baseline consumption (before the program) than other savings groups. This is consistent with existing research that suggests that baseline consumption is correlated with larger energy savings. Further, these customers tend to have higher summer and winter baseline consumption than other savings groups as well. However, for electric participants, those with very negative savings also tend to have higher baseline consumption than neutral or positive or negative savings.

Brilliant insight! In order to substantially cut consumption, you must have plenty to cut. And if you are already a heavy consumer, you might not care and keep using more.

Implication: This result suggests that a select group of participants contribute to savings. As a result, program delivery could focus on maximizing savings from positive savers through potentially increasing report delivery frequency or identifying more targeted messaging strategies, particularly for electric participants. Further, PG&E could consider removing some negative savers or reduce the frequency of reports to those participants.

Focus on those who are responding! Oh, and that was not the only place where the report suggested as a solution merely dropping the unresponsive customers out of the program. Good advice, but also an admission that the program simply does not change behavior.

Elsewhere one reads that low-income customers in the company’s bill subsidy program are not cutting consumption, and that one subgroup showing lower consumption consists of people who have installed rooftop solar panels for net energy metering. A small group with growing consumption is comprised of folks charging their electric cars overnight, identified by their use of an EV rate.

Since the first story, I’ve also found more information on the program. If indeed the practice is to send customers detailed monthly information on how their usage compares, why is there such shock that some people might respond with complacency on being told they are average, or celebrate their status as low energy users with a decision to crank up the AC?

Oh yeah, I really want Dominion to increase my bill so it can start doing this in Virginia! Then it too can hire a high-powered consulting firm to tell it that electric vehicles increase home demand, people with somebody else helping pay their bill are not motivated to conserve, and people who put on some solar panels use less electricity. Conclusion:  the program is not really changing behavior at all.

There are currently no comments highlighted.

31 responses to “PG&E Efficiency Program’s Contrary Results

  1. Well – didn’t it change the behavior of the higher-than-average consumers?

    Another thing to consider is the fact that people in California – ALREADY consume less electricity than folks in Virginia by a significant amount:

    7. Virginia – 1,156 kWh Per Month

    The average electricity costs per year for Virginia residents is around $1,584 annually

    49. California – 557 kWh Per Month

    California was first state to adopt deregulated market

    Residents spend around 30% less on energy than US average

    so it should come as no shock that people that are already using much less electricity may not be able to cut much more.

    In Virginia – we use – according to some stats like this – we are using more than twice as much electricity per capita!

    and that translates into more costs for generation facilities as well as more pollution.

    The irony is that in Virginia we DO use increased cost for increased use to keep costs down – for water/sewer. It’s not like it’s some terrible thing to encourage people to not waste – because those costs for increased use actually will get put on everyone if we don’t target the increased users to pay their fair share.

    We just need to do the same thing for electricity so that people who do conserve don’t get the bill for those who waste it – which is how our system is set up right now.

    It’s a subsidized system where there is no significant penalty for waste and so we waste.

    It’s the OPPOSITE of “Conservative” of which the word “Conservation” is directly related.

    No self-respecting Conservative should be arguing for waste!

  2. So you want to turn our electric bills into an income transfer program, too, right? A progressive electric bill modeled on progressive income taxes? You socialists just don’t give up…..

    I notice you didn’t list the annual cost of juice in California. I agree that demand is somewhat elastic, and high prices spur conservation. And I do think it fair to note that natural gas is probably in more common use in parts of California than in parts of Virginia, although large parts of that state are summer peaking (AC). It is known for its overall milder climate, and heating and AC are the big drivers of home demand.

    • I’m certainly not a fan of more wealth transfer but I am a fan of motivating conservation. Why not a tax swap? Have progressive electric bills but reduce sales tax by an equal amount.

  3. No more “income transfer” than there is for water/sewer rates where they do incentivize reasonable use and penalize wasteful use because wasteful use require more/bigger infrastructure.

    But you know – all this angst over the cost and hardly a whimper about Dominions excess profits and refusal to give their tax rebate back to customers.

    Dominion’s basic plan is to sell MORE electricity to encourage and reward waste and to penalize conservation and lower use.

    • Larry, I tire of correcting you because you never give up your preconceived notions. Dominion’s basic plan to to build plenty of new capital assets, generation and now distribution. It makes profit on its capital rate base, not sales. The GA has given it a subsidy and an opportunity to earn a profit on these demand management programs, and I think it will jump in. (It may put too much focus on the one’s that don’t actually work, like this one.)

      • Steve –

        Great reporting!!!!!!!

        Here is my take: We must teach energy experts to:

        1/ write and speak in plain understandable English, and
        2/ construct studies and reports that reveal true facts and trends, instead of spinning, obfuscating, hiding, and outright lying about what is going on in the real world,

        And we must find a way to hold these expert people accountable for all the damage they cause us, and our society generally.

        • Reed, I won’t defend the lengthy report Jim has summarized here for successfully avoiding jargon and obfuscation — but please remember, it was written to answer specific questions in southern California, and trying to apply those answers elsewhere requires a lot of speculation and extrapolation that they didn’t attempt to address even in 72 pages. Again, this underscores the need for freeing the SCC to apply its own expertise without GA interference, and for NOT politicizing Dominion’s rate-making process any further at the GA.

      • Understood. I don’t see the progressive electricity bills as Dominion charging more I see a graduated tax based on kwHs used. Dominion might collect this tax but then it goes to the state. I also recommend that the overall sales tax be lowered. The goal is tax neutral conservation.

      • Steve – in my defense – Dominion routinely claims increased use forecasts for data centers, etc… correct?

        and second – other states have programs that DO result in less electricity consumption – something that Virginia could also do without really increasing bills if they couple increased rates for high consumption users but also give rebates and credits for the installation of demand side technology.

        I just think other states are actually do this and Virginia is not.

        Finally – yes.. for a state that already uses 1/2 per capita of what Virginia uses – such programs to cut use – further – may well be at their limits.

        But that’s NOT a “failure” when you compare that to Virginia use.

        so correct that… 😉

  4. California also pushing plug-in cars very heavily. You get lots of money back from Feds + Ca. for a plug-in and you save driving time due to Ca.’s free HOV lane incentives for plug-ins. Soon we will have 2018 year end data, but California was running about 55% of USA plug-in vehicle sales.

  5. Let me focus on one quote from Jim: “Brilliant insight! In order to substantially cut consumption, you must have plenty to cut. And if you are already a heavy consumer, you might not care and keep using more.”

    Of course. Programs intended to induce a change in behavior (a) work best on those with the most to change or those particularly focused on their energy consumption, and (b) worst on those indifferent to the inducement. Always. But the important thing is what happened on average and across the board. This energy savings program was a failure. A successful program would pay for itself by reducing the growth of demand overeall, hence saving the cost of the added investment in generation and wires that would have been required to accommodate that growth in demand, more than the cost of the program. This program was not a cost-benefit success.

    Of course; the lessons learned here must be applied by other utilities in light of their different climates, different existing price structures, different demographics. Even PGE wanted to know if the program could have been a success if more narrowly targeted. I suspect they originally designed this program across the board intentionally, to address the allegation from many Greenies that energy savings programs always pay for themselves. No, they don’t. But targeted programs can.

    The economic question is, can you induce the customer to do what is, long term, in the customer’s own best interest — by spending money now to achieve efficiencies that pay for themselves? And that special problem, can you induce the landlord to pay for improvements that benefit tenants? And the key constraint is, are the inducements significant enough (on the relative scale of consumer concerns) that enough people will bother to respond? Most people won’t, and don’t; a program to induce a broad change in behavior works only at the margins, can be measured only broadly.

    Aside from cost-benefit, there is politics. The discussion above talks about “income transfers” and all that social stuff. That is not what a good energy savings program is about. But you can easily devise a program targeted to achieve a political or social goal, cost-benefit be damned. Want more homeowner solar? — Just subsidize the effective rate for solar output outrageously, as “net metering” does. Want more efficient appliances and better insulation in rental apartments? Just regulate the heck out of landlords. Want to shift consumers off natural gas? Hit them with a carbon tax.

    In general, electric utilities strive to keep their rates cost neutral. That means, the retail price of electricity is closely aligned with its cost, for all customer classes as possible, for all levels of consumption as possible. There are efficiencies of scale for the largest customers but their biggest savings comes from using cheaper wholesale electricity off-peak, a cost-savings for the utility, which it passes on through its retail rates. There are inefficiencies of scale for smaller customers — higher costs on average for metering and billing and distribution wires and transformers — but these don’t vary much with consumption so it’s hard to offer a way for energy savings to cut the small customer’s bill. The most notable politically-motivated rate is the inherent discount built in to the very-low-consumption residential rate — the “senior citizen discount” — that results from NOT recovering the full monthly cost of service-connection/metering/billing/ as an up-front monthly charge but spread over higher energy consumption amounts. But there are no big revenue redistribution schemes at play in most utility rates, and Virginia ranks pretty high in that regard! Rate design is complicated (and this is why we need the politically-shielded expertise of the SCC to oversee it).

    Bottom line: I applaud the SCC being skeptical of Dominion’s proposed broad energy savings program; but energy savings programs can make economic sense if carefully targeted.

    • A brilliant analysis of the issue. Worth its weight in gold. Someone should fund an Endowed Chair of Electric Studies for Acbar. One to match Steve Haner’s.

      In addition, as I recall last time I looked California has the highest juice rate in America, somewhere north of 16 cents per whatever, which is odd for such a mild climate. Forbes rated Dominion the best run utility in America (a complicated subject I know). And electric generation and demand is projected to double world wide by year 2050 by reliable sources, or perhaps a bit lower. And in general, you cannot trust 95% of what you read about these subjects on the internet. That’s why we need to find Acbar an Endowed Chair for Electric Studies pronto.

    • Just for the record: Steve deserves credit for the post, not me.

  6. This is insanity. Obviously, increased efficiency is in the public interest. Doing more with less. But to keep the United States’ economy growing, we need lots of energy, hopefully more and more from reliable renewable sources that is priced as low as reasonably possible.

    Where are the big energy disrupters? We see Lyft and Uber disrupting for-hire transportation. We see online retailing disrupting bricks and mortar stores. We see wireless phones VoIP disrupting traditional TDM telephony. Online education is starting to disrupt traditional teaching methods. We are in the dawn of autonomous vehicles. Etc. Etc.

    But why cannot clean energy companies cut down Dominion’s fossil fuel generation business?

    • Because clean energy is still highly inefficient, costly, unreliable, and disruptive to electric grid, environment, economy, and people’s lives. Clean energy is a parasite. To survive in even a minority status, it must live off fossil fuels (particularly gas generation, new coal technologies), and nuclear. Clean energy alone will not solve our carbon problem, only disrupt our ability to solve it with nuclear, interim gas and better coal technologies world wide. Clean energy today is a great distraction that threatens real solutions to the challenges we face.

  7. If PG&E cannot generate energy conservation in California, as woke as the population is there and as high as the electric rates are, it’s hard to imagine that Dominion’s proposals will be any more successful here in Virginia.

    That’s not to say, as Acbar points out, that carefully targeted initiatives in Virginia can’t be successful. But a blunderbuss approach will squander resources and do little to reduce consumption.

    Dominion knows this. The company has warned of the low return on investment on energy conservation programs for a long time in its Integrated Resource Plans, and it was cautious about the programs that it put before the SCC. All that has changed. Under legislative orders to spend an arbitrary amount of money on energy conservation — about $800 million, as I recall — Dominion must continue submitting proposals in order to meet its legislatively mandated target.

    From the stockholder’s perspective, Dominion doesn’t care whether these programs work or not. The company is rewarded for making the capital investment, regardless. I suspect that corporate executives have the same view of the efficacy of these programs that they always have. But they made a deal with the devil, so to speak, with environmental groups who made energy conservation a high priority, in order to get other legislative concessions they really wanted.

    I applaud Steve for bird-dogging this issue. This is something the mainstream media would never chase down.

    • Yes, Jim, exactly.

      Meanwhile, Virginia’s poor and middle class get particularly screwed by this highly regressive and unnecessary “tax” demanded by the activist environmentalists, their leftist progressive New Green Deal politicians, labor unions and crony capitalists.

    • Jim, I agree with your analysis of motivations here. As Larry points out, California already has relatively high retail rates and those have squeezed customers to achieve the easy energy savings they already can. So, going after more is — more difficult. Those high retail electric rates reflect California’s penchant for demanding that its utilities subsidize social goals — such as, absorbing the entire cost of wildfires originating from contact with electric distribution facilities, something that has just driven PGE to declare bankruptcy. This is insane. Obviously there is much about California’s treatment of its utilities that we Virginians should avoid! But, even California residents have some lessons to teach us about showering ratepayers’ money on energy savings programs that won’t work.

      A better model, as TomH points out, is New England, which also has relatively higher rates but a usage profile closer to Virginia’s and some examples of costs and benefits from existing energy savings programs to study.

  8. just want to point out that when we reduce electricity consumption and produce the same amount or more – that’s an INCREASE in productivity.

    and it can and does free up income for people who use less electricity , pay less and have that money for other spending.

  9. As energy consumers, we must understand that, in Virginia, there is no incentive for investor owned-utilities to develop highly effective programs to improve energy efficiency.

    As has been noted, our utilities earn more when they build more. Energy efficiency projects lower the peak and overall demand for electricity. The forecasts for peak load growth are what justify the need to build more power plants. If the peak does not increase, the utility has little justification for building a new profit-producing power plant. That is why we have seen a flood of new projects deemed “in the public interest” by the GA that will produce a great deal of profit for the utility, but have little benefit to customers.

    It is good for customers when the peak is lowered. That means Dominion will purchase less electricity when it is most expensive, thus lowering customer bills.

    Dominion executives are very intelligent about maximizing profit. They know how to work the system in their favor. In the 2017 Utility Energy Efficiency Scorecard, the American Council for an Energy Efficient Economy rated 51 of the largest utilities in the U.S. Dominion ranked at the bottom, 50th out of 51, in terms of the effectiveness of their energy efficiency programs. The study ranked a number of factors including incremental energy savings, peak reduction, and lifetime energy savings. For net savings as a percentage of sales the top utilities achieved a 3.0 % annual energy savings. Dominion achieved 0.11%, a small fraction of even the average savings of 0.89%.

    The top utilities achieved an annual reduction in peak demand of 2.5%. Dominion barely made a dent in peak demand, lowering it by just 0.05%. Again this was a small fraction of the average peak reduction of 0.76%.

    We cannot expect our utilities to be good at something that goes against their interest. The top utilities in improving energy efficiency are in the northeast where there are high rates, and extreme weather increases energy usage and new generating units do not go in the rate base. The utilities are unharmed by having their customers use less energy, so they have become effective advocates on their behalf. Over the years, Dominion has proposed a variety of energy efficiency programs, some of which are just cost-effective enough to gain SCC approval. These have had little effect on energy use. Dominion gets reimbursed for any reduction in energy use, and they earn a hefty guaranteed profit on the programs.

    If all $890 million in efficiency programs are approved, and if the RAC’s include rates of return in the neighborhood of what has been approved for other recent projects, then Dominion could earn $1.7 – $1.8 billion in profit for projects that have little effect of energy usage and result in higher bills for customers.

    The fault is not in our stars, but in ourselves. We continue to elect state legislators who choose the financial interests of a few energy companies over the interests of their constituents. We should pay our utilities for serving the interests of their customers. What a novel concept! It is the job of the state energy regulator in every other state to determine a fair rate for customers and provide a fair rate of return for shareholders. We need to allow the SCC to do what it is already empowered to do, without undue influence from the GA.

    In its load forecast, Dominion has assumed all of the growth in data centers occur in its service territory, even though many of new data centers are located in the territories of co-oops in northern Virginia. The data centers want to be served by solar energy. Dominion does not want to lose these customers to lower-cost third-party providers or to other utilities. Dominion is also aware that energy generated by customer-sited or third-party solar will lower its peak demand, reduce costs to its customers, and avoid the need for it to build new facilities. Even though Dominion’s load will likely remain flat, even with added data centers, the utility has proposed to build 5,000 MW of new solar facilities. These units would be added to the rate base and provide Dominion with billions in added profits. But it would raise the cost of energy to its customers, compared to the cost of others providing the solar energy.

    There are many opportunities for highly effective energy efficiency projects, especially involving commercial, institutional and governmental buildings. But these projects should pay for themselves, at zero cost to utility ratepayers. Such projects have great value for job creation, as well as economic and environmental benefits.

    I will repeat my old refrain. We need financially healthy utilities, but they should earn more by serving us better. Failing to reset our energy policy on to this new path will be costly for all Virginians and our utilities. There is a much better way to handle energy efficiency in this state than our current policies allow.

  10. Per Tom’s cite – check below

    the thing that kills me here is that Steve/others are Dinging PG&E for the lack of “effectiveness” of their programs when Californias use 1/2 the electricity of Virginians – where there is essentially no efficiency programs in place but we point fingers at PG&E for not being “successful” and the excuse for Virginia not having similar programs!

    It’s this kind of topsy-turvy “reasoning” that amazes …. i.e. Virginia should not do any efficiency programs because they’ve been tried in California and they “don’t work”. So 1/2 the consumption of electricity is a “does not work”!

    I’m sure that Dominion is eating this logic up…

    • Maybe the problem is not with energy savings per se, but that Virginia ratepayers need better targeted energy savings programs that are cost effective? And how about spending some of that huge sum the GA mandated for energy savings outside the utility — through, say, better insulation for low income housing, rather than on rate-base-able investment in distribution equipment that customers aren’t asking for and won’t benefit from?

      • Well that’s the point Acbar. There are a wide range of demand-side conservation options from insulation to high efficiency HVACs to LED lights to smart thermotstats, etc… that do, right now today – reduce electricity consumption.

        The question is why do we have to do this OUTSIDE of Dominion?

        Why can’t this be part of electricity use and consumption like it is in other states SUCCESSFUL programs to reduce consumption and actually lower bills for those who want to upgrade their equipment?

        The whole energy-star idea and energy efficiency tax credits are all about this.

        This is not “social engineering” – it’s about NOT wasting electricity, lowering pollution and just plain common sense conservation of resources and finances.

        This is like buying a new car and looking at the EPA mileage as part of your decision process… or looking at an LED light bulb and comparing it to non-LED light bulbs and realizing that even though it costs more up-front that long term it saves energy AND money.

        I baffles me why this is such a hard sell…

        It does NOT baffle me why Dominion is not on board with it. They make money selling electricity and building new stuff to support selling that electricity and stuff that results in less electricity use – they are not exactly supporters of.

        It’s understandable corporate behavior to maximize profits and to protect their monopoly business model but it’s clearly not in the best interests of most Virginians and not in the longer term best interests of all of us including Dominion.

        Dominion is going to end up like Kodak if they do not change. They will not be able to stop the forces of change – at some point.

        That point will be reached when cost-effective power storage becomes a reality. It may not happen for decades but a breakthrough might occur in the next few years and when/if it does, people who can, will install solar to capture and store energy for less than what Dominion is selling it for.

        So the question is – how well positioned is Dominion as a company if/when that happens? A sarcastic will say -yes – since Dominion is creating RACs for everything in sight!

        • I tell this story all the time here, but Virginia had a program a few years ago, back around 2009/2010 or so.

          We paid $150 for a new $800 top load HE washing machine at Home Depot. We paid $500 on Black Friday, and got a $350 credit from Virginia for washers over $500.

        • My point was that energy efficiency programs should be accomplished outside of Dominion because it costs twice as much when the utility does it and puts it in the rate base.

          Why should our utilities compete against private firms to do energy efficiency projects and get a large guaranteed profit to do so?

          Utilities do have an advantage because they have the information about customer usage that would help them select the best candidates for efficiency projects. In the deregulated states, the utilities collaborate with private companies. In Virginia, the incentives are aligned to reduce energy use by very little but have customers pay a lot.

          • Dominion does already have a air conditioner peak-load cut-back program in summer, which I have participated for some years, at the time reflecting my aversion to more utility coal fired power plants.

  11. re: ” My point was that energy efficiency programs should be accomplished outside of Dominion because it costs twice as much when the utility does it and puts it in the rate base.”

    maybe been talking past each other – My complaint is why do we have to do it outside of Dominion and the unsatisfying answer is that Dominion won’t do it inside so we have to go around.

    This has many parts to it. Some folks just want the cheapest electricity possible so they can use as much as they want for cheap. Others are suspicious that conservation programs just make it more expensive for those who don’t want to participate. Dominion don’t want nothing to do with ANY program that reduces consumption that then reduces their revenues and profit. Finally, we have folks that are opposed to solar and demand-side programs because they perceive them to be liberal activist wants and desires.

    I make the argument that reduced consumption saves money – period.

    you don’t have to involve politics in it.

    a side benefit is that reduced consumption reduces pollution and reduces the need to build more plants.

    but again – this is not about “green” environmental – it’s about “green” dollars…

    People will buy equipment to reduce consumption – but equipment that has a higher up-front cost works to incentivize stuff that has lower up front cost -but longer term higher costs – and consumption.

    A ground source heat pump (that CAN be installed on a small lot) will cost less over 20-30 years than a standard heat pump.

    An on-demand water heater than cost $3000 up front will cost you LESS than a conventional water heater – over the life of the unit.

    A high efficiency air-source heat pump will cost half again as much as a standard efficiency heat pump but over the life of the unit will cost you less.

    THAT’s where incentives, credits and loans paid back with the electric bill – “work”.

    They could work easier and better inside the Dominion monthly bill.

    The “net” result in the bill would be almost no change. You’d use LESS electricity and that essentially pays for the loan and credit.

    No rocket science. Just simple and reasonable financial common sense.

  12. I am all for cost-effective energy efficiency projects. Your earlier idea about ground-source heat pumps is a wonderful idea, especially for large buildings with the space to install them.

    My concern is that Dominion is more than willing to do EE “inside” because the GA has given them a way to make $1.7+ billion in profit by doing it. Based on past results, Dominion’s EE programs don’t provide much energy savings for the dollars invested compared to projects accomplished by private firms and paid for by those who benefit.

    All ratepayers will benefit somewhat if the peak is reduced, but the huge profit payout to the utility will more than offset that savings.

    Energy efficiency is the cheapest way to provide more energy, but it should be done in the most cost-effective way. Based on past experience, and the disincentive Virginia utilities have to save too much energy, our current policies are unlikely to save a lot. More likely – this will be another wealth transfer between ratepayers and the utilities under the guise of doing something good.

    The EE policy is similar to the solar and wind profit giveaways in the 2018 energy bill. It makes for good publicity and profit, but is not the best way to deal with the issues.

Leave a Reply