The issue
Utilities are committed to actively pursuing energy efficiency and demand management (EE/DM) across their various service territories.
Utilities must always be cognizant that EE/DM programs require financial resources, meaning that they also require regulatory cost recovery. Therefore, utilities have a responsibility to advocate for programs that are sound investments.
Electricity Demand Projections
- Although energy efficiency and demand side management programs will help mitigate load growth, it is important to realize they will not eliminate load growth – simply slow it.
- All projections, including low- and high-growth scenarios, created by the industry as well as the DOE Energy Information Administration indicate continued load growth through 2030 and beyond.
- Residential consumption in 2030 is forecasted to be 24% greater than it was in 2007. (Due to increased applications, such as plasma televisions, computers in the home, etc.)
Many utilities understand the sincere interests of their stakeholders in wanting to pursue energy efficiency programs more aggressively.
A supportive regulatory climate is a threshold requirement in enabling sustainable utility EE/DM efforts and policy principles need to be well-founded, and also understand the need for flexibility in adapting them to specific situations within individual jurisdictions. Utilities should be vigilant in their attempts to remain true to the concepts, while working with our customers, legislators and regulators, community leaders, and other interested parties to support sound EE/DM policy with fiscal responsibility.
AEP position
AEP’s own current commitment is not the end goal, but part of a sustained commitment to energy efficiency actions that are viable and deemed to be of interest to state utility commissions and other stakeholders.
AEP believes that recovery for utility investment in EE/DM programs includes three main components: program costs, net lost revenues, and an appropriate return on investment.
‘Program costs’ include customer incentives and other utility administrative costs (i.e., utility internal labor, implementation contractors, marketing, evaluation, etc.).
‘Net lost revenues’ is a term used to describe the fixed costs that aren’t recovered from rate payers in-between rate cases due to reduced consumption that results from EE/DM programs.
Estimated EE/DR Costs
EE/DR CapEx
(through 2030)
|
Base case efficiency – no carbon policy |
Maximum efficiency – no carbon policy* |
|---|
|
AMI capital costs
|
$19 |
$27 |
| Energy efficiency measure costs |
$66 |
$165 |
| Total EE/DR CapEx ($BB) |
$85 |
$192 |
* Maximum efficiency includes a more aggressive EE requirement than the base case, although neither includes a carbon policy.
Source: Brattle Report, for Edison Foundation, 2008
‘Appropriate return on investment’ means that EE/DM expenditures are treated comparably to the investments in new generation that AEP would have otherwise made.
Where appropriate, AEP supports predetermined estimates (“deemed savings”) of the impacts of EE/DM programs to assure a consistent understanding among all interested parties.
AEP also favors contemporaneous recovery (such as through a surcharge mechanism), to avoid the deferral of expenditures for future recovery that only increases the ultimate cost of these programs.
AEP anticipates that interested parties will recognize the need to appropriately compensate utilities for their use of resources to advance EE/DM and will support regulatory recovery efforts.
