Florida PSC Fails to Answer the Call on Energy Efficiency

Guest Blog | December 10, 2009 | Energy Efficiency, Energy Policy, Utilities

Chair-designate Argenziano argued forcefully for stronger efficiency goals. Image: The Florida Channel, WFSU

The PSC meeting last week was marked by two dramatic changes for Florida electric utilities.  Utility-oriented commissioner Carter was succeeded as chair for 2010-2012 by the far more consumer-oriented commissioner, Nancy Argenziano.  In remarks made while nominating Ms. Argenziano, Chairman Carter said, “. . . she answered the call to leadership.”   But in the same meeting in which new electricity conservation goals were being set, the commission failed to answer the call to leadership with respect to energy efficiency.  The call to the commission was clear from the state’s editorial boards and the public. But when the commission asked how to answer the call, the staff could not, or would not, show the way.

On December 1st, 2009, the Florida Public Service Commission (PSC) set energy savings goals for the next ten years, for the state’s seven major power companies subject to the Florida Energy Efficiency and Conservation Act (FEECA). The utilities asked the commission for what collectively amounted to the status quo.  In its November hearing, the staff endorsed similar status quo recommendations, but the Commission demanded more.

After hearing the clear desire for more aggressive action on efficiency, it was a disappointment to see the Commission approve goals that would lead to just 3.5% in electricity savings by 2019. While an improvement over the anemic goals recommended by the big power companies, the goals are still well below those recommended by national experts.

Click image to enlarge - Prospect of strong goals not appreciated despite successive review by staff across summer & fall 2009.
Click image to enlarge - National expert recommendations had been on the table for months, but staff set them aside in favor of lower goals.

The Commission did not hear the call from national experts for attainable goals that are three times those adopted this month. National experts testifying on behalf of by SACE and Natural Resources Defense Council (NRDC) and similar goals recommended by the expert hired to advise the Commission staff.  This keeps Florida in the back of the pack compared to states that are leading in energy efficiency.

This decision was a big step in the every-five-years FEECA process.  The next major step will be proposals by the big power companies for programs to attain the new energy efficiency goals.

The legal and procedural details supporting the goals will be established soon in a formal order. Nevertheless, it appears that  in the next ten years the seven big power companies will be expected to improve energy efficiency among their customers by programs that save in aggregate 7,843 gigawatt hours (GWh) of annual energy by the end of the ten years. If our estimate is matched in the final order, this represents 3.56% of forecast 2019 electricity sales by the seven big power companies.

Outgoing PSC Chairman Matthew Carter stated in a statement issued after the meeting, “The goals we approved today are achievable, and customers who implement the programs will save on their energy bills by reducing utilities’ fuel costs and their need to build more power plants.”

However, to put this in perspective, this is less than one-half the forecast impact of the Duke Energy Save-a-Watt program that is anticipated to be approved for the Carolinas.

The mainstream media is onto this story.  The St. Pete Times addresses it in The Buzz on Florida Politics.  “It’s a minimal thing that’s a good thing to do,” said Commissioner Nancy Argenziano.  The Sun-Sentinel business section covered the decision, too: “There’s a lot of low-hanging fruit that just got eradicated,” said commissioner Nathan Skop.

Advice Questioned

The hearing wasn’t just a call to action on behalf of Florida’s energy consumers, it was also a call to professionalism and leadership by the Commission and, in particular, its staff.

Why didn’t the staff offer forthright answers to the commissioner’s questions?  As a member of the audience, I was gritting my teeth with frustration over the failure of the staff to directly answer several good questions by commissioners.  I wanted to stand up, interrupt and correct the answer, to explain where no good explanation was offered.   What are the staff motives?  Are they concerned for their future job prospects with utilities?  Is it incompetence or philosophical bias?  Are they covering for someone?

Commissioner Argenziano tried to help the PSC wrestle with several of these questions:

  • How do these goals compare to those set in other states?  At what levels are the utilities leading elsewhere delivering energy efficiency?
  • Do the municipal FEECA utilities have to do anything we ask them to do or are their goals voluntary?  Does the PSC regulate them?
  • What cost test has the Legislature told us to use?
  • Isn’t there some point down the line where efficiency is going to really benefit us, even if everybody pays for it now?
  • Isn’t it a goal of the state and of the nation to try to use less energy or become more efficient with the energy that we use?
  • How do we help lower-to-middle income families participate in energy efficiency upgrades when the incentive programs the state and utilities offer still cannot help them enough so they can participate?
  • Why aren’t we attending to supply-side energy efficiency prospects now?

The staff responded with concerns about utility revenues and the financial impact on customers who fail to take advantage of these programs (and continue wasting energy), not to mention disregarding the Governor and Legislature’s call to reduce global warming pollution. It seemed to me that the staff’s replies were often unclear and illogical, perhaps even intended to distract the commissioners from their questions.

Preliminary Details

Click image to enlarge
Click image to enlarge - Utility proposals were built upon by PSC, but are well below real opportunities

One interesting aspect of the roughly 3.5% by 2019 energy savings goal by 2019 is that it does not apply uniformly to all seven big power companies. The approved levels are greater than those originally offered by each utility. The full details are forthcoming in the order to be issued later in December.

More than a dozen states are targeting and some already attaining that level of annual efficiency improvement (1%, and even 1.5% or more per year!).  While Florida’s PSC did set a higher FEECA goal than seen before in the state, it still has not set the stage for really substantial improvement—market transformation will not result from this PSC decision.

The call from the national experts testifying on behalf of SACE and NRDC to ahcieve about 9% by 2019 would require about nine-tenths of one percent (0.9%) gain in efficiency per year, a goal similar to the level proposed by the expert who advised PSC staff. As illustrated below, the program impacts accumulate over the next ten years, with the early goals (under any recommendation) moderated by adjustments for program “ramp-up.”

Click image to enlarge - Building energy efficiency results takes years of sustained leadership

A Bright Spot: Solar Incentives

The commission also authorized utilities to provide what may amount to about $25 million in incentives for installing solar energy systems (solar water heaters and solar photovoltaic arrays). This should roughly double the current level of rebates, which are offered directly by the state, subject to funding availability.  The cost to customers in general will vary by utility, ranging from about 8 cents to 19 cents a month extra on utility customer bills for the average home that uses 1,200 kilowatts of electricity per month.

Commissioner Skop provided some leadership in bumping up the incentives targeted to foster solar systems in the state, reiterating the proposal he outlined earlier in the PSC debate on FEECA.  This is one of the bright spots in an otherwise lackluster prospect for the state.  Fortunately, the percentage basis for these solar incentives will build over time, as the utilities ramp up spending for energy efficiency programs, the amounts to be committed to support solar systems will grow as well.  “I think it’s a good thing for the Sunshine State to push solar,” said Chairman Matthew Carter in a  Sun-Sentinel story.

Cost Effectiveness Tests

Another key decision made Tuesday was for the PSC to give more weight in energy efficiency goals setting to a cost-effectiveness test that counts conservation savings as a benefit to consumers (TRC, or Total Resource Cost test) rather than the previously prevailing method that viewed the savings as a cost to consumers (RIM, or Rate Impact Measure test).

The discussion of cost-effectiveness tests was a crucial, but highly confused part of the hearing. As several Commissioners called for going beyond the staff’s second recommendation, they heard muddled rationales and little cogent guidance on what measures are really cost effective and why. For no apparent reason, the staff made some “Top 10” lists the points of reference. The Commission staff simply did not demonstrate an understanding of the opportunity for Florida to develop energy efficiency as a strong public resource to curb electricity demand, stop building more power plants and really reduce our carbon footprint.

Next steps???

To support the kind of change needed to really impact energy consumption in Florida, to really reduce our carbon footprint and get on the path to reducing our emissions of CO2 by significant amounts, we’ll need to revisit the FEECA goals soon.  In addition, Florida must substantially expand our generation of electricity by renewable energy systems (solar and biomass are strong resource opportunities in Florida).  We’re getting started, but we should reconsider these goals as soon as the new programs are established in 2010 and move forward to triple the effort, and then do even more!

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