This blog was written by John D. Wilson, former Deputy Director for Regulatory Policy at the Southern Alliance for Clean Energy.Guest Blog | February 7, 2018
Yesterday, Tampa Electric received a well-deserved vote of approval for its program to convert 100% of its street and outdoor lighting to efficient LED fixtures. We give credit to the Florida Public Service Commission: By approving the new program, the commission took its first positive step forward on energy efficiency since 2009.
Yet a closer review of the written record shows a pattern of skeptical questioning from Florida Public Service Commission staff. We certainly appreciate diligent staff review.
The staff probably did not anticipate that the exchange would expose some less-than-diligent review of Florida Power & Light’s voluntary LED conversion pilot program. (FPL’s program was approved in March 2017.) In the staff recommendation to approve FPL’s pilot program, the staff endorsed what appears to be an “evergreen” (never-ending) charge for old light fixtures, and failed to discuss whether the FPL program would be cost-effective for participating customers.
These issues weren’t even noticed until Tampa Electric responded to the commission staff’s questions. Essentially, the commission staff asked, “Why don’t you just do what we let FPL do?”
When Tampa Electric didn’t follow the more politically powerful utility’s lead, staff’s interest in diligent review was aroused. While the commission’s staff agreed that the proposal met the criteria of an appropriate energy efficiency program, the staff repeatedly commented that the program is not “typical.”
Staff didn’t think the program was “typical” because it wasn’t voluntary, some customers may not see bill reductions or receive monetary incentives, and lighting fixtures are usually recovered in base rates. The staff’s concerns are misplaced due to its narrow definition of savings, and a narrow definition of customer.
Staff underestimated savings in the recommendation to approve the program, stating that around 90% of street lighting customers would not see bill savings. However, in Tampa Electric’s response to the fourth data request from staff, Tampa Electric re-evaluated the “participant cost test,” using the alternate assumptions provided by staff, and found that the benefit/cost ratio for street light customers is almost always positive.
For the vast majority of customers, the benefit/cost ratio is 1.17. This translates into a 15% cost savings for the typical customer. For a bit more than 14,000 fixtures, the billed cost of LED lighting will be higher, but it is likely that owners of these fixtures may also own other types of lighting. So there’s little evidence that very many customers will be paying higher bills.
Here’s what I think happened here. (I’ve submitted and read a lot of data requests, it’s not hard to read between the lines.) Staff was suspicious of Tampa Electric’s proposal, so they set up a cost-effectiveness test that they anticipated the program would fail. But staff misfired, because they really didn’t take time to appreciate the smart planning at Tampa Electric. So when the results came back to demonstrate strong support for Tampa Electric’s program, staff went back and cherrypicked some different data, giving the Commission the least favorable impression of the program’s benefits to customers.
This cherry-picking is a too-narrow reading of benefits by staff. The five local governments who commented in favor of the program also noted that they would be getting better lighting, better service, and other benefits. These additional benefits were virtually ignored in the staff’s analysis.
If the staff had wanted to do a true benefit-cost ratio test on the new program, it would be important to value better lighting, better service and the other benefits noted by the local governments. One way to measure that value would be to estimate the cost to local governments of those upgrades without the help of the utility.
So even thought the staff recommended approval of the program, in doing so the staff missed the entire point of the program: providing both energy efficiency and better service at the same or a better cost.
By ignoring the “win-win,” the commission staff’s recommendation simply revisits negative stereotypes of energy efficiency. In fact, customers appreciate the benefits of new and improved technology, and view these programs as a benefit even if they don’t see large bill savings. For example, home air sealing or new HVAC fans that are quieter are valued by customers even if they don’t result in enough bill savings to impress the staff at the Florida Public Service Commission.
Staff also failed to recognize that Tampa Electric, on behalf of all its customers, is also a participant in the LED street light conversion program. The staff recommendation stated that the program wasn’t voluntary, and that participants won’t see a monetary incentive. In fact, the program was voluntary – Tampa Electric, the company that owns the street lights, voluntarily proposed the program and as a participant in financing the new lighting will receive a financial incentive (the ECCR payment discussed above) to install the more efficient equipment. This addresses the other point of staff, since the ECCR payment to cover the remaining value of the old fixtures is an incentive payment to the owner of the street lights (Tampa Electric), it is actually quite similar to “typical” energy efficiency programs.
Describing Tampa Electric as a “participant” is an unusual situation, so it is not surprising that the commission staff didn’t recognize this perspective. However, in this docket it is not the only example of a utility being a financial partner in the energy efficiency investment. Duke Energy Progress received approval for an energy efficiency program in which it installed upgrades to its own power lines and other equipment. Duke Energy Carolinas has embarked on at least two utility-owned combined heat and power plants. Using energy efficiency programs to cut costs and improve service is appropriate and, yes, typical when the solutions involve partnerships between utilities and their customers.
We are hopeful that the staff at the Florida Public Service Commission may be a little bit closer to understanding how innovative energy efficiency programs can be developed and implemented in everyone’s interest. With the next FEECA proceeding only a year away, there isn’t much more time for the Commission to gain a new perspective.