Southeast Energy Savings Pacesetter: Entergy Arkansas Breaks the 1% Barrier

Guest Blog | February 8, 2016 | Energy Efficiency, Energy Policy, Utilities

This is the first entry in a new blog series entitled Energy Savings in the SoutheastWe will dive into the recent performance of Southeastern utilities’ energy efficiency programs, and highlight how the region can achieve more money-saving and carbon-reducing energy savings. Future posts in this series can be found here.

Entergy Arkansas has forced a paradigm shift in the Southeast when it comes to energy efficiency potential, and that’s a big deal. Clean energy advocates, including Southern Alliance for Clean Energy (SACE), have long recommended that Southeastern utilities strive to achieve energy savings representing at least 1% of prior-year sales – a symbolic benchmark for moving into the big leagues of energy efficiency.

For years, utilities have scoffed at the 1% target as unachievable in our region. As a result, utility energy efficiency programs in the Southeast have chronically lagged behind other parts of the country. However, the naysayers were finally proven wrong when Entergy Arkansas reported 2014 net energy savings of 1.1%.

SACE has held up the achievements in Arkansas as a standard, as we’ve continued to push our region’s electric utilities to reap the multiple benefits of additional cost-effective energy efficiency. Entergy Arkansas first rocketed to the top of the Southeastern leaderboard in 2013, when its energy savings grew to a level equivalent to 0.89% of prior-year sales, and by 2014, the company had more than doubled its 2012 energy savings level. One factor contributing to Entergy Arkansas’ success is its robust stakeholder engagement process that brings together utility staff, regulators, advocates and others to work toward consensus solutions for growing cost-effective energy savings. SACE has looked to that engagement process for best practices that are now beginning to improve our ongoing collaborative efforts with other Southeastern utilities toward increased energy efficiency.

Southeastern states have consistently ranked among the worst in the nation in the American Council for an Energy Efficient Economy’s annual state energy efficiency rankings reports, and even the leading states in our region are a long way from reaching the high-water mark set by Rhode Island’s savings level of 2.7% in 2014. Entergy Arkansas’ achievement is a leap forward in the win-win quest to save Southeasterners money on their utilities bills while also helping to move the region toward a cleaner energy economy.

2015 ACEEE State Energy Efficiency Rankings

As we wait for our region’s utilities to begin reporting their 2015 energy savings over the next several months, it will be helpful to examine the current landscape of utility-run energy efficiency programs in the Southeast. In upcoming entries in our Energy Savings in the Southeast blog series, SACE will take a closer look at specific Southeastern utilities and highlight their progress to date, and recommend ways that they can progress to increasing cost-effective energy savings to 1% of sales or above. While each utility is different, there are some common themes throughout the region that first need to be addressed.

Obstacles to Growth

So what is holding the Southeast back from catching up with the rest of the nation in energy efficiency? One reason you may hear from utility staffers is the region’s low power prices. However, this doesn’t seem to be constraining regional leader Entergy Arkansas, and the utilities’ own energy efficiency potential studies have shown that they could cost-effectively achieve significantly higher energy savings. We see three key obstacles to accelerating the growth of energy savings in the Southeast.

Lack of Investment in Programs Serving Large Non-Residential Customers

Most Southeastern utilities fail to drive energy savings among large commercial and industrial customers. Many such customers are allowed to opt out of funding – and participating in – energy efficiency programs in the Carolinas. Georgia Power does not even offer any energy efficiency programs for its large non-residential customers, and local industrial interest groups have been resistant to any efforts to develop money-saving programs tailored to their members’ needs. The Tennessee Valley Authority (TVA) does offer energy efficiency rebates to large non-residential customers, but TVA’s budget means that the demand from its customers can’t be met, with program applications being suspended for many months.

SACE is working with allies to press for better program designs. For example, in the Carolinas our suggestions focus on attracting opt-out-eligible customers, including a “self-direct” program that would allow customers to receive rebates for verified savings stemming from any actions they take outside of the traditional utility-run programs.

Unequal Treatment in Resource Planning

Southeastern utilities often view energy efficiency more as a customer benefit (or worse, as a government mandate), when in reality it is the very best kind of energy resource. That’s why we advocate strongly for energy efficiency to “compete” head-to-head against power plants in the utilities’ integrated resource plans (IRPs). We scored a major victory in this fight last year when TVA became the first Southeastern utility to adopt this practice.

Unfortunately, Southeastern utilities mostly just pick modest goals for their energy efficiency targets, and then subtract that figure from their electricity forecasts. Because energy efficiency is actually the least-cost resource available (and perfectly clean!), the utilities are repeatedly wasting customers’ money by overbuilding power plant and transmission capacity.

Lack of Meaningful Goals

Arguably, the overarching obstacle in the Southeast is a lack of meaningful and enforceable energy efficiency goals. With SACE’s support, most of the investor-owned utilities are able to earn a profit when they operate successful energy efficiency programs. But even these generous incentives are evidently not sufficient to persuade them to go all-in on the least-cost resource. Utilities seem to prefer to build expensive new power plants instead, and earn a return on those investments for decades. At the end of the day, most of the large utilities are for-profit enterprises, and it is a difficult task to persuade them not to maximize profit at the expense of their customers.

Sadly, the few Southeastern energy efficiency goals have largely been gutted or ignored. For example, in 2014, the Florida utilities proposed updated goals that would have rolled back energy efficiency efforts by 87-99% at precisely the time they should have been ramping them up. Even when the utilities agree to stronger goals, such as in the Duke/Progress merger settlement agreement signed by SACE and approved by the South Carolina Public Service Commission, the utilities have fallen short of the effort needed to achieve the goals.

Clean Power Plan and the Path Forward

While there are some considerable obstacles in the way, they are by no means insurmountable, and our region’s utilities could achieve significantly higher energy savings in the near future. Southeastern utilities have already been gradually ramping up their focus on energy efficiency over the past few years, and many improvements have been made to existing programs based on lessons learned. Even some utilities that have not historically offered robust energy efficiency programs have recently joined the pack. As a notable example, Mississippi’s electric utilities launched their mandated Quick Start energy efficiency programs in mid-2014, and the companies are required to propose comprehensive energy efficiency portfolios in 2017.

Looking forward, the Clean Power Plan is expected to be a new driver of increased efficiency in the Southeast. In future blogs we’ll discuss best practices from existing programs, innovative approaches, and the importance of keeping the pressure on and building momentum for bigger programs across the region. We’ll be breaking down the numbers to show where each Southeastern utility stands in their paths toward increasing energy efficiency, and how we plan to nudge them forward along the way.

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