20061218Gale supplemental direct.pdf

PI:""" 1 r" r".f\1....I....' liI"'
. '--
2006 DEC 18 Prl 3: 46
iD";:.IC, i:JLi:.J Ii"
"".)!..,
tL :
;:j (;,.j
'(:"'1
... -
., '"~ '-'ul
. -
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE INVESTIGATION
OF FINANCIAL DISINCENTIVES TO
INVESTMENT IN ENERGY EFFICIENCY BY IDAHO POWER COMPANY. CASE NO. IPC-O4-
IDAHO POWER COMPANY
SUPPLEMENTAL DIRECT TESTIMONY
JOHN R. (RIC) GALE
Please state your name and business address.
My name is John (Ric) Gale and my business
address is 1221 West Idaho Street, Boise, Idaho.
By whom are you employed and in what capacity?
I am employed by Idaho Power Company (Idaho
Power or the Company) as the Vice President of Regulatory
Affairs.
Have you previously submitted testimony before
the Idaho Public Utili ties Commission (IPUC or the Commission)
in this proceeding?
Yes.On January 27 , 2006, I filed testimony
regarding the introduction of a true-up rate mechanism for
Idaho Power Company entitled Fixed Cost Adjustment (FCA).
Company witnesses Ralph Cavanagh and Michael Youngblood also
filed testimony in support of an FCA at that time.
What is the purpose of your testimony at this
time?
I am supporting the settlement stipulation (the
Stipulation) that was a result of that earlier FCA filing.
have included the Stipulation as Exhibit 10 to my testimony.
This Stipulation has been signed by three of the four parties
represented in this proceeding and the fourth party is not
opposing its implementation.
Please describe the events since Idaho Power
request was filed.
On March 3, 2006, the Commission issued a
Notice of Application and acknowledged the intention of the
Company and the Staff, together with the other parties of
GALE , SUPPLEMENTAL DI
Idaho Power Company
record, to initiate and engage in settlement discussions.
These settlement discussions ultimately led to the signing of
the compromise agreement by the parties on December 1 r 2006.
Please describe the FCA Stipulation.
The Stipulation addresses the actual mechanics
of the FCA, as well as Idaho Power s commitment to energy
efficiency advancement in its service area.Regarding the
mechanics of the FCA , the Stipulation calls for the
reconciliation of any differences between Schedule 1 and
class revenue requirements and the corresponding fixed cost
per customer approved by the Commission in Idaho Power s last
general rate case , Case IPC-05-28, with the fixed cost per
customer and fixed cost per energy used in the FCA.The
Company will determine the actual number of customers on a
monthly basis using the same customer count methodology and
the same weather normalization methodology it used in the last
general rate case.
The Stipulation also calls for the FCA to be
implemented on a pilot basis for a three-year period from
January 1 , 2007 through December 31 , 2009.The first rate
adjustment would occur on June 1 , 2008 coincident with the
annual Power Cost Adjustment (PCA) change.For reporting
purposes, the calculation of the FCA deferral will be shown as
a separate line item in the monthly PCA report to the
Commission and , for bill presentation purposes , any approved
FCA will be combined with the Conservation Program Funding
Charge.
The Stipulation proposes that Idaho Power file
GALE , SUPPLEMENTAL DI
Idaho Power Company
its FCA request on March 15 th of each year.This date was
selected to provide Idaho Power adequate time to prepare the
filing after year end and to provide Staff adequate time to
audit the FCA proposal before the Company s PCA filing one
month later.
Addi tionally, the Stipulation provides both the
Commission Staff and the Company the ability to request a
discontinuance of the FCA during the three-year period.
Please elaborate on the Company s energy
efficiency commitment.
In agreeing to the Stipulation, Idaho Power
commi ts to provide with its annual March 15 th Demand-Side
Management (DSM) filing a detailed summary of DSM activities
that demonstrate an enhanced commitment to DSM resulting from
the implementation of the FCA and the corresponding reduction
of the financial disincentive to DSM.
In his previously-filed testimony, Company
wi tness Cavanagh advocated for a pilot energy efficiency
program that might contain incentive elements.Do you agree
with his recommendation?
Yes.An energy efficiency incentive pilot is
consistent with the recommendations that came from the
workshop group assembled as part of this proceeding.Mr.
Cavanagh's recommendation also provides an opportunity to test
the impact of incentives in a pilot environment.In a
separate filing, but related to this proceeding in its
genesis r the Company is proposing to implement a performance-
based incentive (and penalty) pilot for the energy efficiency
GALE, SUPPLEMENTAL DI
Idaho Power Company
program targeted to new residential construction.
What is the underlying problem that a true-
mechanism like the FCA is trying to address?
If a utility recovers a material portion of its
fixed costs through variable rates , it is not rational for a
utility to embark on any programs or initiatives that reduce
the amount of energy sold.However, as in the case of Idaho
Power , where a commitment exists to energy efficiency
advancement, a middle ground between sound business practice
and energy efficiency can be struck through a mechanism like
the FCA.
How does a true-up mechanism like the FCA help
this situation?
A true-up mechanism disconnects (or decouples)
the fixed cost recovery from the energy rates and recouples
the cost recovery to some other variable such as the number of
customers served by the utility.The utility becomes
indifferent to increases or decreases in energy sales, which
eliminates the disincentive to promote programs and services
that reduce energy consumption.
Are there potential concerns that might be
raised when a new mechanism is implemented?
Yes.A chief concern with the introduction of
a new rate application is the potential for unintended
consequences - something unforeseen in the development of the
mechanism that causes the mechanism to not work as designed or
intended.There are other possible negative effects that may
arise wi th the introduction of a true-up mechanism , such as
GALE , SUPPLEMENTAL DI
Idaho Power Company
(1) a true-up mechanism may take the pressure off efforts to
better align prices and costs through rate design,(2) a true-
up mechanism may be countercyclical to a region s economic
cycle , and (3) a true-up mechanism may introduce potentially
large rate swings.
Given the potential positives and negatives,
what is the Company proposing?
The Company proposes a measured implementation
of a true-up mechanism to two customer classes - Schedule 1
Residential Service, and Schedule 7, Small General Service -
that would start for accounting purposes on January 1 , 2007.
Rates would adjust annually on June 1 at the same time as the
PCA and seasonal rates change.These two customer classes
would recouple fixed costs to customer counts and the energy
usage would be weather-normalized in the same manner employed
by the Company for its rate proceedings.Idaho Power proposes
a monthly deferral that would operate, in terms of reporting
and the application of a carrying charge, similar to the PCA.
Finally, the Company proposes a cap on any upward rate change
of three percent that could be implemented at the option of
the Commission - again similar to the seven percent provision
provided for in the PCA.
Why limit the mechanism to Schedule 1 and
Schedule 7?
Idaho Power wants to take an incremental
approach to the introduction of a true-up mechanism in order
to gain experience and to avoid exposure to potential
unintended consequences.Schedule 1 and Schedule 7 are
GALE, SUPPLEMENTAL DI
Idaho Power Company
logical places to start in that these two customer classes
present the most fixed cost exposure (in percentage terms)
and, because fixed cost revenue is recoupled to customer
counts under the FCA , these customer classes avoid the
recoupling complications associated with larger-sized customer
groups.Addi tionally, because neither rate schedule has a
demand charge, the calculations are simpler.
What is the importance of starting the
accounting on January 1 , 2007?
There are two advantages in using a calendar
year for tracking an FCA deferral.One is tha t the numbers
can tie directly to the numbers reported in the Company
general rate filings , which is particularly important for
consistency in reporting the number of Schedule 1 and Schedule
7 cus tomers .The second advantage is that weather can be
normalized on a calendar year basis as opposed to split year
reporting.
If this is the case, why is the Company
proposing to wait until June 1, 2008 to change rates?
The five-month intervening time period between
the end of the FCA accounting period and the start of the rate
period allows ample time for the books to close, and for the
FCA rate application to be filed , reviewed, and authorized.
The June 1 date is especially desirable because it allows the
Company to change customer rates once for the PCA, the FCA,
and the summer season.
When will rates first change under the
Company s proposal?
GALE , SUPPLEMENTAL DI
Idaho Power Company
The rates will first change on June 1 , 2008
based on data for calendar year 2007.
Why recouple to customer count?
Historically, energy usage correlates well to
customer counts for the Schedule 1 and Schedule 7 customer
classes, so there should be no material change in the
Company s opportunity to recover its authorized fixed cost
revenue requirement, compared with the current practice.
Customer counts are straightforward and easy to determine.
Why does the Company propose to wea ther-
normalize the energy consumptions for Schedule 1 and Schedule
The Company historically has assumed risks
associated with weather-related changes in sales; we seek no
change in that risk allocation , which obviously does not
affect the Company s incentives to promote and invest in
energy efficiency.
Why is the Company proposlng a cap to potential
rate lncreases and how will it be implemented?
The cap is proposed to mitigate some the
potential negatives - such as an economic downturn - that
might occur with the introduction of a new rate mechanism.
The proposed cap is intended to work exactly like the cap
provided in the PCA.Accordingly, the Commission at its
discretion and judgment can impose the cap or let the rate
change as calculated.Historically, under the PCA mechanism
the Commission has been reluctant to impose the cap for
various reasons, including the dilution of the price signal
GALE , SUPPLEMENTAL DI
Idaho Power Company
and the fear of another high-cost year.Nevertheless , the cap
is there as a tool for the Commission s potential use.
Why is the deferral being set up similarly to
the PCA deferral?
The PCA has been in place since 1993.One of
the outstanding characteristics of the PCA has been its
sYmmetrical approach to benefits and costs.The mechanism has
been tested in a variety of water/cost scenarios and has
proven to work well for all concerned.Accordingly, Idaho
Power believes in applying the same tried and true method to
the FCA.
Is it your opinion that the implementation of a
FCA as proposed by the Parties in the Settlement Stipulation
is in the public interest?
Yes.The FCA proposal provides an opportunity
to conservatively test the concept of a true-up mechanism and
the removal of a financial disincentive to energy efficiency
acti vi ties.The FCA will make Idaho Power properly
indifferent to choices between demand and supply side
resources creating an environment where load reduction
activities can be pursued in balance with Idaho Power
financial goals.The proposal incrementally addresses the
customer classes that are the simplest to administer and that
have the largest relative exposure to problems with fixed cost
recovery.In addition , safeguards have been added to protect
against the unintended.Finally, the deferred aspect of the
FCA is mirrored after another mechanism that has been
successfully in effect since 1993.
GALE , SUPPLEMENTAL DI
Idaho Power Company
Furthermore, The FCA is consistent with the
National Action Plan for Energy Efficiency introduced last
summer and endorsed by many entities including the National
Association of Regulatory Utility Commissions and the Edison
Electric Institute.A copy of the executive summary is
included as Exhibi t No. 11.
Addi tionally, I believe the criteria developed
by the participants in the Commission s workshops have been
met by this Stipulation.These criteria were:
Stakeholders are better off than they would be
wi thou t the mechani sm
Cross-subsidies are minimized across customer
classes,
Financial disincentives are removed,
The acquisition of all cost-effective DSM are
optimized,
Rate stability is promoted
The mechanism is simple,
Administrative costs and impacts of the
mechanism are known, manageable, and not
subj ect to unexpected fluctuation
Short and long term effects to customers and
Company are moni tored,
Perverse incentives are avoided, and
10.A close link between mechanism and desired DSM
outcomes is established.
Does this conclude your testimony?
Yes.
GALE , SUPPLEMENTAL DI
Idaho Power Company
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on this day of December, 2006 , I served a true and
correct copy of the within and foregoing upon the following named parties by the
method indicated below, and addressed to the following:
Scott Woodbury
Deputy Attorney General
Idaho Public Utilities Commission
472 West Washington Street
Post Office Box 83720
Boise, Idaho 83720-0074
) U.S. Mail , Postage Prepaid
(X) Hand Delivered
) Overnight Mail
) Facsimile
(X) Email Scottwoodburv(fYpuc.idaho.qov
Peter J. Richardson
Richardson & O'Leary PLLC
515 N. 2ih Street
Boise , Idaho 83702
(X) U.S. Mail , Postage Prepaid
) Hand Delivered
) Overnight Mail
) Facsimile [phone]
(X) Email peter(fY richardsonandolearv.com
William M. Eddie
Advocates for the West
610 SW Alder St , Suite 910
Portland , OR 97205
(X) U.S. Mail, Postage Prepaid
) Hand Delivered
) Overnight Mail
) Facsimile
(X) Email beddie (fY advocateswestorq
billeddie ~ rmci. net
Don Reading
Ben Johnson Associates
6070 H ill Road
Boise, Idaho 83702
(X) U.S. Mail , Postage Prepaid
) Hand Delivered
) Overnight Mail
) Facsimile
(X) Email dreadinq (fY mindsprinq.com
~(e
Barton L. Kline
GALE , SUPPLEMENTAL 01
Idaho Power Company
BEFORE THE
ID AH PUB LI C UTILITIES CO MMIS S ION
CASE NO. IPC-04-
IDAHO POWER COMPANY
EXHIBIT NO.
JOHN (RIC) GALE
SUPPLEMENT AL DIRECT TESTIMONY
BARTON L. KLINE ISB #1526
MONICA B. MOEN ISB # 5734
Idaho Power Company
O. Box 70
Boise, Idaho 83707
Phone: [phone]
FAX: [phone]
bkline (fY idahopower.com
mmoen (fY idahopower.com
Attorneys for Idaho Power Company
Express Mail Address
1221 West Idaho Street
Boise , Idaho 83702
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE INVESTIGATION
OF FINANCIAL INCENTIVES TO
INVESTMENT IN ENERGY EFFICIENCY BY
IDAHO POWER COMPANY
) CASE NO. IPC-04-
) STIPULATION
This Stipulation ("Stipulation ) is entered into by and among Idaho Power Company
Idaho Power" or the "Company ), the Staff of the Idaho Public Utilities Commission
Staff") and the NW Energy Coalition ("Coalition ). These entities may individually be
referred to as a "Party" and collectively referred to as the Parties
STIPULATION , Page Exhibit No. 10
Case No. IPc-04-
John (Ric) Gale, IPc
Page 1 of 8
INTRODUCTION
The terms and conditions of this Stipulation are set forth herein. The Parties
agree that this Stipulation represents a fair, just and reasonable compromise of the issues
raised in this proceeding and that this Stipulation is in the public interest The Parties
maintain that the Stipulation and its acceptance by the Idaho Public Utilities Commission
I PUC" or the "Commission ) represents a reasonable resolution of multiple issues
identified in this matter. The Parties, therefore recommend that the Commission , in
accordance with RP 274, approve this Stipulation and all of its terms and conditions
without material change or condition.
II.BACKGROUND
On August 10, 2004, the IPUC in Order No. 29558 established Case No.
I PC-04-15 to investigate financial disincentives to investment in energy efficiency by
Idaho Power. In its Order, the Commission directed the parties to participate in a series of
workshops and to provide a written report to the Commission no later than December 15
2004 to update the Commission on the status of the workshop.
On December 15 , 2004, the workshop participants filed a status report with
the Commission. The final report on the workshop proceedings was filed on February 14
2005. The final report called for two action items: (1) the development of a true-up
simulation to track what might have occurred if a decoupling or true-up mechanism had
been implemented for Idaho Power at the time of the last general rate case; and (2)
advocacy for filing of a pilot energy efficiency program that would incorporate both
performance incentives and fixed cost recovery adjustments. A final order was not issued
and the case remained open.
STIPULATION , Page 2
Exhibit No.1 0
Case No. IPC-04-
John (Ric) Gale, IPC
Page 2 of 8
On January 27, 2006, Idaho Power filed an Application in this case
requesting authority to implement a rate adjustment mechanism that would adjust the
Company s rates upward or downward to recover the Company s fixed costs , independent
of the volume of Company energy sales ("FCA Mechanism ). With its Application the
Company filed the direct testimony of witnesses Ric Gale, Mike Youngblood and Ralph
Cavanagh. In its Application the Company also indicated its belief that consideration of
the proposed FCA mechanism would be facilitated by resuming the workshop process that
was conducted earlier in the case. Idaho Power requested that the Commission issue its
order reinitiating the workshop process and ultimately authorizing the Company to
implement the FCA Mechanism for residential and small general service customers with
an initial rate change to occur on June 1 2007.
On March 3, 2006, the Commission issued a Notice of Application and
acknowledged the intention of the Company and the Staff, together with other parties of
record, to initiate and engage in settlement discussions.
Based on the settlement discussions among the parties , as a compromise of
the Parties' respective positions in this case and for other consideration as set forth below
the Parties agree to the following terms:
III.TERMS OF THE STIPULATION
The Parties agree that it would be in the public interest for the Company to
implement, as a pilot program, the FCA mechanism proposed by the Company in its
Application with the following conditions and provisions.
Any differences between Schedule 1 and 7 class revenue requirements and
the corresponding fixed cost per customer approved by the Commission in
STIPULATION , Page 3
Exhibit No. 10
Case No. IPC-04-
John (Ric) Gale, IPC
Page 3 of 8
Case No. IPC-05-28 (2005 qeneral rate case)must be reconciled with the
fixed cost per customer and fixed cost per energy utilized in the approved
FCA mechanism.
To determine the actual number of customers determined by class on a
monthly basis, the Company will utilize the same customer count
methodology used in the Company s 2005 rate case filing.
The methodology used to weather-normalize actual monthly energy used in
the FCA will be the same weather normalization methodology used in the
Company s filing in the 2005 rate case.
The FCA mechanism will be implemented on a pilot basis for a three-year
period beginning January 1 , 2007 and running through December 31 , 2009
plus any carryover. The first rate adjustment will occur June 1 , 2008
coincident with the 2008-2009 PCA and subsequent rate adjustment will
occur on June 1 of each year during the term of the pilot
Calculation of the monthly FCA deferral will be recorded as a separate line
item in the monthly PCA report provided to the Commission.The
Commission approved FCA adjustment will be combined with the
Conservation Program Funding Charge for purposes of customer bill
presentation. There will be no separate line item for the FCA on customers
billing statements.
The Company will file its FCA adjustment request on March 15th of each
year. Staff's audit of the FCA adjustment request will include review of
deferral balances, comparison of actual energy savings to DSM energy
STIPULATION , Page 4 Exhibit No. 10
Case No. IPC-04-
John (Ric) Gale, IPC
Page 4 of 8
savings estimates as normally provided in the DSM Annual Report and load
growth forecasts and verification of the resulting FCA adjustment
Either Staff or the Company can request the Commission to authorize
discontinuance of the pilot program during the three-year period. Requests
to discontinue the pilot program, with supporting justification must be filed
with the Commission during the March 15 to June 1 review period.
The Company will provide with its annual March 15th filing a detailed
summary of DSM activities that demonstrate an enhanced commitment to DSM
resulting from implementation of the FCA mechanism and removal of the financial
disincentive to DSM. Evidence of enhanced commitment will include, but not be limited
, a broad availability of efficiency and load management programs , building code
improvement activity, pursuit of appliance code standards, expansion of DSM programs
pursuit of energy savings programs beyond peak shaving/load shifting programs and
third party verification. As part of this commitment, the 2008 Integrated Resource Plan
will include an evaluation of the costs and potential for energy savings that would occur
if the appliance and equipment efficiency standards adopted by the State of Oregon
were applicable in the State of Idaho. In addition , the Company will make the following
specific commitments in regard to building code improvements, and enforcement of
such standards:
The Company will promote the adoption of energy codes to achieve
improved levels of efficiency in new commercial and residential
construction and appliance standards in Idaho consistent with the Model
Conservation Standards released by the Northwest Power and
STIPULATION , Page 5
Exhibit No. 10
Case No. IPC-04-
John (Ric) Gale, IPC
Page 5 of 8
Conservation Councilor that exceed the 2003 IECC and ASHRAE 90.
codes.
As part of its enhanced commitment to DSM described above , the
Company will promote and support appropriate energy code training
programs and advocate the enforcement of energy codes. Idaho Power
will identify ways to support energy code implementation and enforcement
in all jurisdictions in Idaho Power s service territory.
The Parties agree that this Stipulation represents a compromise of the
positions of the parties in this case. As provided in RP 272 , other than any testimony filed
in support of the approval of this Stipulation, and except to the extent necessary for a Party
to explain before the Commission its own statements and positions with respect to the
Stipulation , all statements made and positions taken in negotiations relating to this
Stipulation shall be confidential and will not be admissible in evidence in this or any other
proceeding.
10.The Parties will submit this Stipulation to the Commission and recommend
approval in its entirety pursuant to RP 274. Parties shall support this Stipulation before
the Commission , and no Party shall appeal a Commission Order approving the
Stipulation or an issue resolved by the Stipulation. If this Stipulation is challenged by
any person not a party to the Stipulation , the Parties to this Stipulation reserve the right
to file testimony, cross-examine witnesses and put on such case as they deem
appropriate to respond fully to the issues presented , including the right to raise issues
that are incorporated in the settlements embodied in this Stipulation. Notwithstanding
this reservation of rights, the Parties to this Stipulation agree that they will continue to
STIPULATION , Page 6 Exhibit No.1 0
Case No. IPC~E-04-
John (Ric) Gale, IPC
Page 6 of 8
support the Commission s adoption of the terms of this Stipulation.
11.If the Commission rejects any part or all of this Stipulation , or imposes any
additional material conditions on approval of this Stipulation , each Party reserves the
right, upon written notice to the Commission and the other Parties to this proceeding,
within 14 days of the date of such action by the Commission, to withdraw from this
Stipulation.
12.The Parties agree that this Stipulation is in the public interest and that all
of its terms and conditions are fair, just and reasonable.
13.The obligations of the Parties under this Stipulation are subject to the
Commission s approval of this Stipulation in accordance with its terms and conditions
and upon such approval being upheld on appeal by a court of competent jurisdiction.
14.This Stipulation may be executed in counterparts and each signed
counterpart shall constitute an original document.
Dated this 1st day of December, 2006.
Idaho Power Company Idaho Public Utilities Commission Staff
~l~
Barton L. Kline
Attorney for Idaho Power Company
Scott Woodbury
Attorney for IPUC Staff
Northwest Energy Coalition
William M. Eddie
Attorney for NW Energy Coalition
STIPULATION , Page 7
Exhibit No.1 0
Case No. IPC-04-
John (Ric) Gale, IPC
Page 7 of 8
support the Commission's adoption of the terms of this Stipulation.
11.If the Commission rejects any part or all of this Stipulation, or imposes any
additional material conditions on approval of this Stipulation, each Party reserves the
right, upon written notice to the Commission and the other Parties to this proceeding,
within 14 days of the date of such action by the Commission , to withdraw from this
Stipulation.
12.The Parties agree that this Stipulation is in the public interest and that all
of its terms and conditions are fair, just and reasonable.
13.The obligations of the Parties under this Stipulation are subject to the
Commission s approval of this Stipulation in accordance with its terms and conditions
and upon such approval being upheld on appeal by a court of competent jurisdiction.
14.This Stipulation may be executed in counterparts and each signed
counterpart shall constitute an original document.
Dated this 1 st day of December, 2006.
Idaho Power Company Idaho Public Utilities Commission Staff
Barton L. Kline
Attorney for Idaho Power Company
Scott Woodbury
Attorney for IPUC Staff
Northwest Energy Coalition
William M. Eddie
Attorney for NW Energy Coalition
STIPULATION, Page 7 Exhibit No. 10
Case No. IPC-04-
John (Ric) Gale, IPC
Page 8 of 8
BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
CASE NO. IPC-04-
IDAHO POWER COMPANY
EXHIBIT NO.
JOHN (RIC) GALE
SUPPLEMENT AL DIRECT TES TIM 0 NY
ExecutiveS u mma ry
This National Action Plan for Energy Efficiency (Action Plan) presents policy recommendations for creating
a sustainable, aggressive national commitment to energy efficiency through gas and electric utilities,
utility regulators, and partner organizations. Such a commitment could save Americans many billions of
dollars on energy bills over the next 10 to 15 years, contribute to energy security, and improve our
environment. The Action Plan was developed by more than 50 leading organizations representing key
stakeholder perspectives. These organizations pledge to take specific actions to make the Action Plan a reality.
A National Action Plan
for Energy Efficiency
We currently face a set of serious challenges with regard
to the U.S. energy system. Energy demand continues
grow despite historically high energy prices and mount-
ing concerns over energy security and independence as
well as air pollution and global climate change. The deci-
sions we make now regarding our energy supply and
demand can either help us deal with these challenges
more effectively or complicate our ability to secure a
more stable, economical energy future.
Improving the energy efficiency 1 of our homes, business-
es, schools, governments, and industries-which
consume more than 70 percent of the natural gas and
electricity used in the country-is one of the most
constructive, cost-effective ways to address these chal-
lenges.2 Increased investment in energy efficiency in our
homes, buildings, and industries can lower energy bills
reduce demand for fossil fuels, help stabilize energy
prices, enhance electric and natural gas system reliabili-
ty, and help reduce air pollutants and greenhouse gases.
Despite these benefits and the success of energy effi-
ciency programs in some regions of the country, energy
efficiency remains critically underutilized in the nation
energy portfolio.3 Now we simultaneously face the chal-
lenges of high prices, the need for large investments in
new energy infrastructure, environmental concerns, and
security issues. It is time to take advantage of more than
two decades of experience with successful energy effi-
ciency programs, broaden and expand these efforts, and
capture the savings that energy efficiency offers. Much
more can be achieved in concert with ongoing efforts to
advance building codes and appliance standards, provide
tax incentives for efficient products and buildings, and
promote savings opportunities through programs such
as ENERGY STARtID. Efficiency of new buildings and those
already in place are both important. Many homeowners
businesses, and others in buildings and facilities already
standing today-which will represent the vast majority
of the nation s buildings and facilities for years to
come-can realize significant savings from proven energy
efficiency programs.
Bringing more energy efficiency into the nation s energy
mix to slow demand growth in a wise, cost-effective
manner-one that balances energy efficiency with new
generation and supply options-will take concerted
efforts by all energy market participants: customers, util-
ities, regulators, states, consumer advocates, energy
service companies (ESCOs), and others. It will require
education on the opportunities, review of existing poli-
cies, identification of barriers and their solutions, assess-
ment of new technologies, and modification and adop-
tion of policies, as appropriate. Utilities 4 regulators, and
partner organizations need to improve customer access
to energy efficiency programs to help them control their
own energy costs, provide the funding necessary to
To create sustainable, aggressive national commitment to energy efficiency Exhibit No. 11 ES-
Case No. IPC-O4-
John (Ric) Gale, IPC
Page 3 of 16
deliver these programs, and examine policies governing
energy companies to ensure that these policies facili-
tate-not impede-cost-effective programs for energy
efficiency. Historically, the regulatory structure has
rewarded utilities for building infrastructure (e., power
plants, transmission lines, pipelines) and selling energy,
while discouraging energy efficiency, even when the
energy-saving measures cost less than constructing new
infrastructure.5 And, it has been difficult to establish the
funding necessary to capture the potential benefits that
cost-effective energy efficiency offers.
This National Action Plan for Energy Efficiency is a call to
action to bring diverse stakeholders together at the
national, regional, state, or utility level , as appropriate
and foster the discussions, decision-making, and commit-
ments necessary to take investment in energy efficiency to
a new level. The overall goal is to create a sustainable
aggressive national commitment to energy efficiency
through gas and electric utilities, utility regulators, and
partner organizations.
The Action Plan was developed by a Leadership Group
composed of more than 50 leading organizations repre-
senting diverse stakeholder perspectives. Based upon the
policies, practices, and efforts of many organizations
across the country, the Leadership Group offers five
recommendations as ways to overcome many of the
barriers that have limited greater investment in programs
to deliver energy efficiency to customers of electric and
gas utilities (Figure ES-1). These recommendations may
be pursued through a number of different options
depending upon state and utility circumstances.
As part of the Action Plan, leading organizations are com-
mitting to aggressively pursue energy efficiency opportu-
nities in their organizations and assist others who want to
increase the use of energy efficiency in their regions.
Because greater investment in energy efficiency cannot
happen based on the work of one individual or organiza-
tion alone, the Action Plan is a commitment to bring the
appropriate stakeholders together-including utilities
state policy-makers, consumers, consumer advocates
businesses, ESCOs, and others-to be part of a collabora-
tive effort to take energy efficiency to a new level. As
energy experts, utilities may be in a unique position to play
a leading role.
The reasons behind the National Action Plan for Energy
Efficiency, the process for developing the Action Plan
and the final recommendations are summarized in
greater detail as follows.
Figure ES-l. National Action Plan for Energy Efficiency Recommendations
. Recognize energy efficiency as a high-priority energy resource.
. Make a strong, long-term commitment to implement cost-effective energy efficiency as a resource.
. Broadly communicate the benefits of and opportunities for energy efficiency.
. Promote sufficient, timely, and stable program funding to deliver energy efficiency where cost-effective.
. Modify policies to align utility incentives with the delivery of cost-effective energy efficiency and
modify ratemaking practices to promote energy efficiency investments.
ES-National Action Plan for Energy Efficiency Exhibit No. 11
Case No. IPC-O4-
John (Ric) Gale, IPC
Page 401 16
The United States Faces Large and
CompLex Energy Challenges
Our expanding economy, growing population , and rising
standard of living all depend on energy services. Current
projections anticipate U.S. energy demands to increase
by more than one-third by 2030, with electricity demand
alone rising by more than 40 percent (EIA, 2006). At
work and at home, we continue to rely on more and
more energy-consuming devices. At the same time, the
country has entered a period of higher energy costs and
limited supplies of natural gas, heating oil, and other
fuels. These issues present many challenges:
Growing energy demand stresses current systems,
drives up energy costs, and requires new investments.
Events such as the Northeast electricity blackout of
August 2003 and Hurricanes Katrina and Rita in 2005
increased focus on energy reliability and its economic
and human impacts. Transmission and pipeline systems
are becoming overburdened in places. Overburdened
systems limit the availability of low-cost electricity and
fossil fuels, raise energy prices in or near congested
areas, and potentially compromise energy system relia-
bility. High fuel prices also contribute to higher electrici-
ty prices. In addition, our demand for natural gas to heat
our homes, for industrial and business use, and for
power generation is straining the available gas supply
North America and putting upward pressure on natural
gas prices. Addressing these issues will require billions of
dollars in investments in energy efficiency, new power
plants, gas rigs, transmission lines, pipelines, and other
infrastructure, notwithstanding the difficulty of building
new energy infrastructure in dense urban and suburban
areas. In the absence of investments in new or expand-
ed capacity, existing facilities are being stretched to the
point where system reliability is steadily eroding, and the
ability to import lower cost energy into high-growth load
areas is inhibited, potentially limiting economic expansion.
High fuel prices increase financial burdens on house-
holds and businesses and slow our economy. Many
household budgets are being strained by higher energy
costs, leaving less money available for other household
purchases and needs. This burden is particularly harmful
for low-income households. Higher energy bills for
industry can reduce the nation s economic competitive-
ness and place U.S. jobs at risk.
Growing energy demand challenges attainment of
clean air and other public health and environmental
goals. Energy demand continues to grow at the same
time that national and state regulations are being imple-
mented to limit the emission of air pollutants, such as sul-
fur dioxide (S02), nitrogen oxides (NO )' and mercury, to
protect public health and the environment. In addition
emissions of greenhouse gases continue to increase.
Uncertainties in future prices and regulations raise
questions about new investments. New infrastructure
is being planned in the face of uncertainties about future
energy prices. For example, high natural gas prices and
uncertainty about greenhouse gas and other environ-
mental regulations, impede investment decisions on new
energy supply options.
Our energy system is vulnerable to disruptions in
energy supply and delivery. Natural disasters such as
the hurricanes of 2005 exposed the vulnerability of the
u.s. energy system to major disruptions, which have sig-
nificant impacts on energy prices and service reliability. In
response, national security concerns suggest that we
should use fossil fuel energy more efficiently, increase
supply diversity, and decrease the vulnerability of domes-
tic infrastructure to natural disasters.
Energy Efficiency Can Be a BeneficiaL
Resource in Our Energy Systems
Greater investment in energy efficiency can help us tack-
le these challenges. Energy efficiency is already a key
component in the nation s energy resource mix in many
parts of the country. Utilities, states, and others across
the United States have decades of experience in deliver-
ing energy efficiency to their customers. These programs
can provide valuable models, upon which more states
To create a sustainable, aggressive national commitment to energy efficiency tExhibit No. 11 ES-3
(Case No. IPC-O4-
John (Ric) Gale, IPC
Page 5 of 16
Benefits of Energy Efficiency
Lower energy bills, greater customer control, and
greater customer satisfaction. Well-designed energy
efficiency programs can provide opportunities for cus-
tomers of all types to adopt energy savings measures
that can improve their comfort and level of service
while reducing their energy bills.6 These programs can
help customers make sound energy use decisions
increase control over their energy bills, and empower
them to manage their energy usage. Customers are
experiencing savings of 5, 10, 20, or 30 percent
depending upon the customer, program, and average
bill. Offering these programs can also lead to greater
customer satisfaction with the service provider.
Lower cost than supplying new generation only
from new power plants. In some states, well-
designed energy efficiency programs are saving ener-
gy at an average cost of about one-half of the typical
cost of new power sources and about one-third of the
cost of natural gas supply (EIA, 2006).7 When inte-
grated into a long-term energy resource plan, energy
efficiency programs could help defer investments
in new plants and lower the total cost of delivering
electricity.
Modular and quick to deploy. Energy efficiency pro-
grams can be ramped up over a period of one to three
years to deliver sizable savings. These programs can
also be targeted to congested areas with high prices
to bring relief where it might be difficult to deliver
new supply in the near term.
Significant energy savings. Well-designed energy
efficiency programs are delivering annual energy sav-
ings on the order of 1 percent of electricity and natu-
ral gas sales.8 These programs are helping to offset 20
to 50 percent of expected growth in energy demand
in some areas without compromising the end users
activities and economic well-being (Nadel et aI., 2004;
EIA, 2006).
ES-4 National Action Plan for Energy Efficiency
Environmental benefits. While reducing customers
energy bills, cost-effective energy efficiency offers
environmental benefits related to reduced demand
such as lower air pollution, reduced greenhouse gas
emissions, lower water use, and less environmental
damage from fossil fuel extraction. Energy efficiency
can be an attractive option for utilities in advance of
requirements to reduce greenhouse gas emissions.
Economic development. Greater investment in ener-
gy
efficiency helps build jobs and improve state
economies. Energy efficiency users often redirect their
bill savings toward other activities that increase local
and national employment, with a higher employment
impact than if the money had been spent to purchase
energy (Kushler et aI., 2005; NYSERDA, 2004). Many
energy efficiency programs create construction and
installation jobs, with multiplier impacts on employ-
ment and local economies. Local investments in ener-
gy efficiency can offset imports from out-of-state
improving the state balance of trade. Lastly, energy
efficiency investments usually create long-lasting
infrastructure changes to building, equipment and
appliance stocks creating long-term property
improvements that deliver long-term economic value
(lnnovest, 2002).
Energy security. Energy efficiency reduces the level of
u.s. per capita energy consumption, thus decreasing
the vulnerability of the economy and individual con-
sumers to energy price disruptions from natural disas-
ters and attacks on domestic and international energy
supplies and infrastructure. In addition, energy effi-
ciency can be used to reduce the overall system peak
demand or the peak demand in targeted load areas
with limited generating or transport capability.
Reducing peak demand improves system reliability
and reduces the potential for unplanned brown-
outs or black-outs, which can have large adverse
economic consequences.
Exhibit No. 11
Case No. IPC-O4-
John (Ric) Gale, IPC
Page 6 of 16
utilities, and other organizations can build. Experience
shows that energy efficiency programs can lower
customer energy bills; cost less than, and help defer
new energy infrastructure; provide energy savings to
consumers; improve the environment; and spur local
economic development (see box on Benefits of
Energy Efficiency). Significant opportunities for energy
efficiency are likely to continue to be available at low
costs in the future. State and regional studies have found
that adoption of economically attractive, but as yet
untapped , energy efficiency could yield more than 20
percent savings in total electricity demand nationwide by
2025. Depending on the underlying load growth, these
savings could help cut load growth by half or more com-
pared to current forecasts (Nadel et aI., 2004; SWEEp,
2002; NEEP, 2005; NWPCC, 2005; WGA, 2006).
Similarly, savings from direct use of natural gas could
provide a 50 percent or greater reduction in natural gas
demand growth (Nadel et aI., 2004).
Capturing this energy efficiency resource would offer
substantial economic and environmental benefits across
the country. Widespread application of energy efficiency
programs that already exist in some regions could deliv-
er a large part of these potential savings.9 Extrapolating
the results from existing programs to the entire country
would yield annual energy bill savings of nearly $20 bil-
lion, with net societal benefits of more than $250 billion
over the next 10 to 15 years. This scenario could defer
the need for 20 000 megawatts (MW), or 40 new 500-
MW power plants, as well as reduce U.S. emissions from
energy production and use by more than 200 million
tons of carbon dioxide (CO2), 50 000 tons of SOz, and
000 tons of NOx annually.10 These significant eco-
nomic and environmental benefits can be achieved rela-
tively quickly because energy efficiency programs can be
developed and implemented within several years.
Additional policies and programs are required to help
capture these potential benefits and address our sub-
stantial underinvestment in energy efficiency as a nation.
An important indicator of this underinvestment is that
the level of funding across the country for organized effi-
ciency programs is currently less than $2 billion per year
while it would require about 4 times today s funding lev-
els to achieve the economic and environment benefits
presented above., 12
The current underinvestment in energy efficiency is due
to a number of well-recognized barriers, including some
of the regulatory policies that govern electric and natu-
ral gas utilities. These barriers include:
Market barriers such as the well-known "split-
incentive " barrier, which limits home builders' and
commercial developers' motivation to invest in energy
efficiency for new buildings because they do not
pay the energy bill; and the transaction cost barrier
which chronically affects individual consumer and
small business decision-making.
Customer barriers such as lack of information on
energy saving opportunities, lack of awareness of
how energy efficiency programs make investments
easier, and lack of funding to invest in energy
efficiency.
Public policy barriers which can present prohibitive
disincentives for utility support and investment in
energy efficiency in many cases.
Utility, state, and regional planning barriers, which
do not allow energy efficiency to compete with
supply-side resources in energy planning.
Energy efficiency program barriers which limit
investment due to lack of knowledge about the
most effective and cost-effective energy efficiency
program portfolios, programs for overcoming
common marketplace barriers to energy efficiency,
or available technologies.
While a number of energy efficiency policies and programs
contribute to addressing these barriers, such as building
codes, appliance standards, and state government lead-
ership programs, organized energy efficiency programs
To create sustainable, aggressive national commitment to energy efficiency Exhibit No. 11 ES-5
Case No. IPC-O4-
John (Ric) Gale, IPC
Page 7 of 16
provide an important opportunity to deliver greater
energy efficiency in the homes, buildings, and facilities
that already exist today and that will consume the major-
ity of the energy used in these sectors for years to come.
The Leadership Group and National
Action Plan for Energy Efficiency
Recognizing that energy efficiency remains a critically
underutilized resource in the nation s energy portfolio
more than 50 leading electric and gas utilities, state util-
ity commissioners, state air and energy agencies, energy
service providers, energy consumers, and energy effi-
ciency and consumer advocates have formed a
Leadership Group, together with the U.S. Department of
Energy (DOE) and the U.S. Environmental Protection
Agency (EPA), to address the issue. The goal of this
group is to create a sustainable, aggressive national com-
mitment to energy efficiency through gas and electric
utilities, utility regulators, and partner organizations. The
Leadership Group recognizes that utilities and regulators
play critical roles in bringing energy efficiency programs
to their communities and that success requires the joint
efforts of customers, utilities, regulators, states, and
other partner organizations.
Under co-chairs Diane Munns (Member of the Iowa
Utilities Board and President of the National Association
of Regulatory Utility Commissioners) and Jim Rogers
(President and Chief Executive Officer of Duke Energy),
the Leadership Group members (see Table ES-l) have
developed the National Action Plan for Energy Efficiency
Report, which:
-Identifies key barriers limiting greater investment in
energy efficiency.
- Reviews sound business practices for removing these
barriers and improving the acceptance and use of
energy efficiency relative to energy supply options.
- Outlines recommendations and options for
overcoming these barriers.
ES-6 National Action Plan for Energy Efficiency
The members of the Leadership Group have agreed to
pursue these recommendations and consider these
options through their own actions, where appropriate
and to support energy efficiency initiatives by other
industry members and stakeholders.
Recommendations
The National Action Plan for Energy Efficiency is a call to
action to utilities, state utility regulators, consumer advo-
cates, consumers, businesses, other state officials, and
other stakeholders to create an aggressive, sustainable
national commitment to energy efficiency.1 The Action
Plan offers the following recommendations as ways to
overcome barriers that have limited greater investment
in energy efficiency for customers of electric and gas util-
ities in many parts of the country. The following recom-
mendations are based on the policies, practices, and
efforts of leading organizations across the country. For
each recommendation , a number of options are avail-
able to be pursued based on regional , state, and utility
circumstances (see also Figure ES-2).
Recognize energy efficiency as a high-priority energy
resource. Energy efficiency has not been consistently
viewed as a meaningful or dependable resource com-
pared to new supply options, regardless of its demon-
strated contributions to meeting load growth.
Recognizing energy efficiency as a high-priority energy
resource is an important step in efforts to capture the
benefits it offers and lower the overall cost of energy
services to customers. Based on jurisdictional objectives
energy efficiency can be incorporated into resource plans
to account for the long-term benefits from energy sav-
ings, capacity savings, potential reductions of air pollu-
tants and greenhouse gases, as well as other benefits.
The explicit integration of energy efficiency resources
into the formalized resource planning processes that
exist at regional , state, and utility levels can help estab-
lish the rationale for energy efficiency funding levels and
for properly valuing and balancing the benefits. In some
jurisdictions, these existing planning processes might
need to be adapted or even created to meaningfully
Exhibit No. 11
(Case No. IPC-O4-
John (Ric) Gale, IPC
Page 8 of 16
incorporate energy efficiency resources into resource
planning. Some states have recognized energy efficiency
as the resource of first priority due to its broad benefits.
Make a strong, long-term commitment to implement
cost-effective energy efficiency as a resource. Energy
efficiency programs are most successful and provide the
greatest benefits to stakeholders when appropriate poli-
cies are established and maintained over the long-term.
Confidence in long-term stability of the program will
help maintain energy efficiency as a dependable
resource compared to supply-side resources, deferring or
even avoiding the need for other infrastructure invest-
ments, and maintain customer awareness and support.
Some steps might include assessing the long-term
potential for cost-effective energy efficiency within a
region (i., the energy efficiency that can be delivered
cost-effectively through proven programs for each cus-
tomer class within a planning horizon); examining the
role for cutting-edge initiatives and technologies; estab-
lishing the cost of supply-side options versus energy effi-
ciency; establishing robust measurement and verification
(M&V) procedures; and providing for routine updates to
information on energy efficiency potential and key costs.
Broadly communicate the benefits of and opportuni-
ties for energy efficiency. Experience shows that ener-
gy efficiency programs help customers save money and
contribute to lower cost energy systems. But these ben-
efits are not fully documented nor recognized by cus-
tomers, utilities, regulators, or policy-makers. More
effort is needed to establish the business case for ener-
gy efficiency for all decision-makers and to show how a
well-designed approach to energy efficiency can benefit
customers, utilities, and society by (1) reducing cus-
tomers' bills over time, (2) fostering financially healthy
utilities (e., return on equity, earnings per share, and
debt coverage ratios unaffected), and (3) contributing to
positive societal net benefits overall. Effort is also neces-
sary to educate key stakeholders that although energy
efficiency can be an important low-cost resource to inte-
grate into the energy mix, it does require funding just as
a new power plant requires funding. Further, education
is necessary on the impact that energy efficiency pro-
grams can have in concert with other energy efficiency
policies such as building codes, appliance standards, and
tax incentives.
Promote sufficient, timely, and stable program fund-
ing to deliver energy efficiency where cost-effective.
Energy efficiency programs require consistent and long-
term funding to effectively compete with energy supply
options. Efforts are necessary to establish this consistent
long-term funding. A variety of mechanisms have been
and can be, used based on state, utility, and other stake-
holder interests. It is important to ensure that the effi-
ciency programs' providers have sufficient long-term
funding to recover program costs and implement the
energy efficiency measures that have been demonstrat-
ed to be available and cost effective. A number of states
are now linking program funding to the achievement of
energy savings.
Modify policies to align utility incentives with the
delivery of cost-effective energy efficiency and modify
ratemaking practices to promote energy efficiency
investments. Successful energy efficiency programs
would be promoted by aligning utility incentives in a
manner that encourages the delivery of energy efficien-
cy as part of a balanced portfolio of supply, demand, and
transmission investments. Historically, regulatory policies
governing utilities have more commonly compensated
utilities for building infrastructure (e., power plants
transmission lines, pipelines) and selling energy, while
discouraging energy efficiency, even when the energy-
saving measures might cost less. Within the existing reg-
ulatory processes, utilities, regulators, and stakeholders
have a number of opportunities to create the incentives
for energy efficiency investments by utilities and cus-
tomers. A variety of mechanisms have already been
used. For example, parties can decide to provide incen-
tives for energy efficiency similar to utility incentives for
new infrastructure investments, provide rewards for pru-
dent management of energy efficiency programs, and
incorporate energy efficiency as an important area of
consideration within rate design. Rate design offers
To create a sustainable, aggressive national commitment to energy efficiency ES-
Exhibit No. 11
Case No. IPC-O4-
John (Ric) Gale, ,PC
Page 9 of 16
Figure ES-2. National Action Plan for Energy Efficiency Recommendations & Options
Recognize energy efficiency as a high priority
energy resource.
Options to consider:
. Establishing policies to establish energy efficiency as
a priority resource.
. Integrating energy efficiency into utility, state, and
regional resource planning activities.
. Quantifying and establishing the value of energy
efficiency, considering energy savings, capacity sav-
ings, and environmental benefits, as appropriate.
Make a strong, long-term commitment to implement
cost-effective energy efficiency as a resource.
Options to consider:
. Establishing appropriate cost-effectiveness tests for
a portfolio of programs to reflect the long-term
benefits of energy efficiency.
. Establishing the potential for long-term, cost-
effective energy efficiency savings by customer class
through proven programs, innovative initiatives
and cutting-edge technologies.
. Establishing funding requirements for delivering
long-term, cost-effective energy efficiency.
. Developing long-term energy saving goals as part
of energy planning processes.
. Developing robust measurement and verification
(M&V) procedures.
. Designating which organization(s) is responsible
for administering the energy efficiency programs.
. Providing for frequent updates to energy
resource plans to accommodate new information
and technology.
Broadly communicate the benefits of and
opportunities for energy efficiency.
Options to consider:
. Establishing and educating stakeholders on the
business case for energy efficiency at the state, util-
ity, and other appropriate level addressing relevant
customer, utility, and societal perspectives.
. Communicating the role of energy efficiency in
ES-B National Action Plan for Energy Efficiency
lowering customer energy bills and system costs
and risks over time.
. Communicating the role of building codes, appli-
ance standards, and tax and other incentives.
Provide sufficient, timely, and stable program funding
to deliver energy efficiency where cost-effective.
Options to consider:
. Deciding on and committing to a consistent
way for program administrators to recover energy
efficiency costs in a timely manner.
. Establishing funding mechanisms for energy
efficiency from among the available options such
as revenue requirement or resource procurement
funding, system benefits charges, rate-basing,
shared-savings, incentive mechanisms, etc.
. Establishing funding for multi-year periods.
Modify policies to align utility incentives with the
delivery of cost-effective energy efficiency and
modify ratemaking practices to promote energy
efficiency investments.
Options to consider:
. Addressing the typical utility throughput incentive
and removing other regulatory and management
disincentives to energy efficiency.
. Providing utility incentives for the successful
management of energy efficiency programs.
. Including the impact on adoption of energy
efficiency as one of the goals of retail rate design
recognizing that it must be balanced with other
objectives.
. Eliminating rate designs that discourage energy
efficiency by not increasing costs as customers
consume more electricity or natural gas.
. Adopting rate designs that encourage energy
efficiency by considering the unique characteristics
of each customer class and including partnering
tariffs with other mechanisms that encourage
energy efficiency, such as benefit sharing programs
and on-bill financing.
Exhibit No.
Case No. IPC-04-
John (Ric) Gale, ,PC
Page 10 of 16
opportunities to encourage customers to invest in
efficiency where they find it to be cost effective and
participate in new programs that provide innovative
technologies (e., smart meters) to help customers
control their energy costs.
National Action Plan for Energy
Efficiency: Next Steps
In summer 2006, members of the Leadership Group of
the National Action Plan on Energy Efficiency are
announcing a number of specific activities and initiatives
to formalize and reinforce their commitments to energy
efficiency as a resource. To assist the Leadership Group
and others in making and fulfilling their commitments, a
number of tools and resources have been developed:
National Action Plan for Energy Efficiency Report.
This report details the key barriers to energy efficiency in
resource planning, utility incentive mechanisms, rate
design, and the design and implementation of energy
efficiency programs. It also reviews and presents a vari-
ety of policy and program solutions that have been used
to overcome these barriers as well as the pros and cons
for many of these approaches.
Energy Efficiency Benefits Calculator. This calculator
can be used to help educate stakeholders on the broad
benefits of energy efficiency. It provides a simplified
framework to demonstrate the business case for energy
efficiency from the perspective of the consumer, the util-
ity, and society. It has been used to explore the benefits
of energy efficiency program investments under a range
of utility structures, policy mechanisms, and energy
growth scenarios. The calculator can be adapted and
applied to other scenarios.
Experts and Resource Materials on Energy Efficiency.
A number of educational presentations on the potential
for energy efficiency and various policies available for
pursuing the recommendations of the Action Plan will be
developed. In addition lists of policy and program
experts in energy efficiency and the various policies avail-
able for pursuing the recommendations of the Action
Plan will be developed. These lists will be drawn from
utilities, state utility regulators, state energy offices
third-party energy efficiency program administrators
consumer advocacy organizations, ESCOs, and others.
These resources will be available in fall 2006.
DOE and EPA are continuing to facilitate the work of the
Leadership Group and the National Action Plan
for Energy Efficiency. During winter 2006-2007, the
Leadership Group plans to report on its progress and
identify next steps for the Action Plan.
To create a sustainable, aggressive national commitment to energy efficiency
Exhibit No. 11
ES-
Case No. IPC-O4-
John (Ric) Gale, IPC
!Page 11 of 16
Table ES-l. Members of the National Action Plan for Energy Efficiency
Co-Chairs
Diane Munns
Jim Rogers
Leadership Group
Member
President
President and Chief Executive Officer
Iowa Utilities Board
National Association of Regulatory Utility Commissioners
Duke Energy
Barry Abramson
Angela S. Beehler
Bruce Braine
Jeff Burks
Kateri Callahan
Glenn Cannon
Jorge Carrasco
Lonnie Carter
Mark Case
Gary Connett
Larry Downes
Roger Duncan
Angelo Esposito
William Flynn
Jeanne Fox
Anne George
Dian Grueneich
Blair Hamilton
Leonard Haynes
Mary Healey
Helen Howes
Chris James
Ruth Kinzey
Peter Lendrum
Rick Leuthauser
Mark McGahey
Janine Migden-
Ostrander
Richard Morgan
Brock Nicholson
Pat Oshie
Douglas Petitt
ES-10
Senior Vice President
Director of Energy Regulation
Vice President, Strategic Policy Analysis
Director of Environmental Sustainability
President
General Manager
Superintendent
President and Chief Executive Officer
Vice President for Business Performance
Manager of Resource Planning and
Member Services
Chairman and Chief Executive Officer
Deputy General Manager, Distributed Energy Services
Senior Vice President, Energy Services and Technology
Chairman
President
Commissioner
Commissioner
Policy Director
Executive Vice President, Supply Technologies
Renewables, and Demand Side Planning
Consumer Counsel for the State of Connecticut
Vice President, Environment, Health and Safety
Air Director
Director of Corporate Communications
Vice President, Sales and Marketing
Manager of Energy Efficiency
Manager
Consumers' Counsel
Commissioner
Deputy Director, Division of Air Quality
Commissioner
Vice President, Government Affairs
National Action Plan for Energy Efficiency
Servidyne Systems, LLC
Wal-Mart Stores, Inc.
American Electric Power
PNM Resources
Alliance to Save Energy
Waverly Light and Power
Seattle City Light
Santee Cooper
Baltimore Gas and Electric
Great River Energy
New Jersey Natural Gas
(New Jersey Resources Corporation)
Austin Energy
New York Power Authority
New York State Public Service Commission
New Jersey Board of Public Utilities
Connecticut Department of Public Utility Control
California Public Utilities Commission
Vermont Energy Investment Corporation
Southern Company
Connecticut Consumer Counsel
Exelon
Connecticut Department of Environmental Protection
Food Lion
Entergy Corporation
MidAmerican Energy Company
Tristate Generation and Transmission Association, Inc.
Office of the Ohio Consumers' Counsel
District of Columbia Public Service Commission
North Carolina Air Office
Washington Utilities and Transportation Commission
Vectren Corporation
Exhibit No. 11
Case No. IPC-O4-
John (Ric) Gale, IPC
Page 12 of 16
Bill Prindle
Phyllis Reha
Roland Risser
Gene Rodrigues
Art Rosenfeld
Jan Schori
Larry Shirley
Michael Shore
Gordon Slack
Deb Sundin
Dub Taylor
Paul von
paumgartten
Brenna Walraven
Devra Wang
Steve Ward
Mike Weedall
Tom Welch
Jim West
Henry Yoshimura
Observers
Deputy Director
Commissioner
Director, Customer Energy Efficiency
Director, Energy Efficiency
Commissioner
General Manager
Division Director
Senior Air Policy Analyst
Energy Business Director
Director, Business Product Marketing
Director
Director, Energy and Environmental Affairs
Executive Director, National Property Management
Director, California Energy Program
Public Advocate
Vice President, Energy Efficiency
Vice President, External Affairs
Manager of energy right & Green Power Switch
Manager, Demand Response
American Council for an Energy-Efficient Economy
Minnesota Public Utilities Commission
Pacific Gas and Electric
Southern California Edison
California Energy Commission
Sacramento Municipal Utility District
North Carolina Energy Office
Environmental Defense
The Dow Chemical Company
Xcel Energy
Texas State Energy Conservation Office
Johnson Controls
USAA Realty Company
Natural Resources Defense Council
State of Maine
Bonneville Power Administration
PJM Interconnection
Tennessee Valley Authority
ISO New England Inc.
Steel Manufacturers AssociationJames W. (Jay)
Brew
Roger Cooper
Dan Delurey
Roger Fragua
Jeff Genzer
Donald Gilligan
Chuck Gray
John Holt
Joseph Mattingly
Kenneth Mentzer
Christina Mudd
Ellen Petri II
Alan Richardson
Steve Rosenstock
Diane Shea
Rick Tempchin
Mark Wolfe
Counsel
Executive Vice President, Policy and Planning
Executive Director
Deputy Director
General Counsel
President
Executive Director
Senior Manager of Generation and Fuel
Vice President, Secretary and General Counsel
President and Chief Executive Officer
Executive Director
Director, Public/Private Partnerships
President and Chief Executive Officer
Manager, Energy Solutions
Executive Director
Director, Retail Distribution Policy
Executive Director
To create sustainable, aggressive national commitment to energy efficiency
American Gas Association
Demand Response Coordinating Committee
Council of Energy Resource Tribes
National Association of State Energy Officials
National Association of Energy Service Companies
National Association of Regulatory Utility
Commissioners
National Rural Electric Cooperative Association
Gas Appliance Manufacturers Association
North American Insulation Manufacturers Association
National Council on Electricity Policy
Electric Power Research Institute
American Public Power Association
Edison Electric Institute
National Association of State Energy Officials
Edison Electric Institute
Energy Programs Consortium
Exhibit No. 11 ES-
Case No. IPC-O4-
John (Ric) Gale, IPC
Page 13 of 16
Notes
Energy efficiency refers to using less energy to pro-
vide the same or improved level of service to the
energy consumer in an economically efficient way.
The term energy efficiency as used here includes
using less energy at any time, including at times of
peak demand through demand response and peak
shaving efforts.
Addressing transportation-related energy use is also
an important challenge as energy demand in this
sector continues to increase and oil prices hit histor-
ical highs. However, transportation issues are out-
side the scope of this effort, which is focused only
on electricity and natural gas systems.
This effort is focused on energy efficiency for regu-
lated energy forms. Energy efficiency for unregulat-
ed energy forms, such as fuel oil for example, is
closely related in terms of actions in buildings, but is
quite different in terms of how policy can promote
investments.
A utility is broadly defined as an organization that
delivers electric and gas utility services to end users
including, but not limited to, investor-owned, pub-
licly-owned, cooperatively-owned , and third-party
energy efficiency utilities.
Many energy efficiency programs have an average
life cycle cost of $0.03/kilowatt-hour (kWh) saved
which is 50 to 75 percent of the typical cost of new
power sources (ACEEE , 2004; EIA, 2006). The cost
of energy efficiency programs varies by program and
can include higher cost programs and options with
lower costs to a utility such as modifying rate designs.
See Chapter 6: Energy Efficiency Program Best
Practices for more information on leading programs.
Data refer to EIA 2006 new power costs and gas
prices in 2015 compared to electric and gas pro-
gram costs based on leading energy efficiency pro-
grams, many of which are discussed in Chapter 6:
Energy Efficiency Program Best Practices.
Based on leading energy efficiency programs, many
of which are discussed in Chapter 6: Energy
Efficiency Program Best Practices.
These estimates are based on assumptions of aver-
age program spending levels by utilities or other
program administrators, with conservatively high
numbers for the cost of energy efficiency programs.
ES-National Action Plan for Energy Efficiency
See highlights of some of these programs in Chapter
6: Energy Efficiency Program Best Practices, Tables
1 and 6-
10 These economic and environmental savings esti-
mates are extrapolations of the results from region-
al program to a national scope. Actual savings at the
regional level vary based on a number of factors. For
these estimates, avoided capacity value is based on
peak load reductions de-rated for reductions that do
not result in savings of capital investments.
Emissions savings are based on a marginal on-peak
generation fuel of natural gas and marginal off-
peak fuel of coal; with the on-peak period capacity
requirement double that of the annual average.
These assumptions vary by region based upon situa-
tion-specific variables. Reductions in capped emis-
sions might reduce the cost of compliance.
11 This estimate of the funding required assumes 2
percent of revenues across electric utilities and 0.5
percent across gas utilities. The estimate also
assumes that energy efficiency is delivered at a total
cost (utility and participant) of $0.04 per kWh and
$3 per million British thermal units (MMBtu), which
are higher than the costs of many of todays programs.
12 This estimate is provided as an indicator of underin-
vestment and is not intended to establish a national
funding target. Appropriate funding levels for pro-
grams should be established at the regional, state,
or utility level. In addition, energy efficiency invest-
ments by customers, businesses, industry, and gov-
ernment also contribute to the larger economic and
environment benefits of energy efficiency.
13 One example of energy efficiency s ability to meet
load growth is the Northwest Power Planning
Council's Fifth Power Plan which uses energy con-
servation and efficiency to meet a targeted 700 MW
of forecasted capacity between 2005 and 2009
(NWPCC, 2005).
Exhibit No. 11
Case No. IPC-O4-
.John (Ric) Gale, IPC
lPage 14 of 16
References
American Council for an Energy-Efficient Economy
(ACEEE) (2004). A Federal System Benefits Fund:
Assisting States to Establish Energy Efficiency and
Other System Benefit Programs. Washington, Dc.
Innovest Strategic Value Advisors (Innovest) (2002
October). Energy Management Investor Returns:
The Real Estate Sector.
Kushler, M., Ph., York, D., Ph., and Witte, P, MA
(2005 , January). Examining the Potential for Energy
Efficiency to Help Address the Natural Gas Crisis in
the Midwest. Washington, DC: American Council
for an Energy-Efficient Economy (ACEEE).
Nadel, S., Shipley, A, and Elliott, R.N. (2004). The
Technical, Economic and Achievable Potential for
Energy Efficiency in the US.A Meta-Analysis of
Recent Studies. Washington , DC: American Council
for an Energy-Efficient Economy (ACEEE).
New York State Energy Research and Development
Authority (NYSERDA) (2004, May). New York
Energy $martSM Program Evaluation and Status
Report, Report to the System Benefits Charge
Advisory Group, Final Report. Albany.
Northeast Energy Efficiency Partnerships (NEEP) (2005
May). Economically Achievable Energy Efficiency
Potential in New England. Optimal Energy.
Northwest Power and Conservation Council (NWPCC)
(2005, May). The 5th Northwest Electric Power and
Conservation Plan. o(http://www.nwcouncil.org/
energy/powerplan/defa u It. htm:;:.
Southwest Energy Efficiency Project (SWEEP) (2002
November). The New Mother Lode: The Potential
for More Efficient Electricity Use in the Southwest.
Report for the Hewlett Foundation Energy Series.
S. Energy Information Administration (EIA) (2006).
Annual Energy Outlook 2006. Washington , Dc.
Western Governors' Association (WGA) (2006, June).
Clean Energy, Strong Economy and Healthy
Environment. A Report of the Clean and Diversified
Energy Advisory Committee.
For More Information
Stacy Angel
S. Environmental Protection Agency
Office of Air and Radiation
Climate Protection Partnerships Division
Tel: [phone]
E-mail: angel.stacy~epa.gov
Larry Mansueti
U.s. Department of Energy
Office of Electricity Delivery and Energy Reliability
Tel: [phone]
E-mail: lawrence.mansueti~hq.doe.gov
Or visit wwwepa.gov/cleanenergy/eeactionplan
To create a sustainable, aggressive national commitment to energy efficiency Exhibit No. 11 ES-13
Case No. IPC-O4-
John (Rio) Gale, IPC
Page 15 of 16