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Extreme Efficiency

Performance standards are a valid idea—if targets are achievable.

Fortnightly Magazine - September 2010

directs the Pennsylvania Public Utilities Commission to set targets beyond 2013.

During each of the four years from 2010 to 2013, utilities may spend up to 2 percent of their 2006 annual revenues to achieve these targets. Failure to reach either energy or peak demand-reduction targets subjects the utility to a penalty of not less than $1 million and, potentially, up to $20 million.

Moreover, utilities are required to offer programs equitably—interpreted as proportional to their share of the utility’s load—to various customer classes, including the low-income segment. The law also directs utilities to ensure that at least 10 percent of all energy savings come from institutional and non-profit entities.

The electricity saving targets, which average about 0.75 percent of sales per year, aren’t formidably high compared to what recently has been adopted in other states—or compared to what actually has been achieved by many utilities. It’s by no means unreasonable to expect that benefits to each customer class from energy-efficiency programs should be commensurate with their share of the costs of these programs. The required peak-load reduction, although aggressive compared to achievements in demand-response programs elsewhere in the United States, possibly might be attainable.

What makes the Pennsylvania performance standards unique and especially challenging is their multiplicity of—often competing—objectives. This is particularly true with the peak-load reduction targets, especially given the unusual way the statute defines the peak period. The gravity of this challenge is clearly evident in the plans filed by the seven utilities in 2009, showing that utilities grappled with the challenge of balancing these objectives when preparing their portfolios within the strict confines of the law.

Looking Ahead

The problem with prediction is that the future eventually arrives. According to a recent estimate from the NPCPC, by the end of 2002, the Northwest had achieved on average about 2,300 MW of savings, equivalent to 12.5 percent of the actual electricity use in 2002. 11 Although markedly below the forecasted amount, the achievement was substantial, especially for a first comprehensive attempt at systematic conservation. Additionally, the savings likely would have been higher without the severe cutbacks in conservation expenditures resulting from the attempts at restructuring of the electric power industry in the 1990s.

In April 2010, the NPCPC published its 6th Regional Power Plan , projecting nearly 5,860 MW of technically achievable conservation potential on average—about 22 percent of the average demand forecast scenario by the end of the forecast period in 2030. Most of this potential is projected to be available at a levelized life-cycle cost of less than $200 per MWh in 2006 dollars.

Setting targets is essential to effective planning, so challenging goals are necessary for improving performance—but only as long as the goals are realistic and reasonably achievable. Several years ago, ACEEE proposed developing a nationwide energy-efficiency performance standard, which would set a national goal for energy efficiency to be implemented and enforced at the state level. Utilities that provide retail electric service would be required to implement measures each year so as to save the equivalent of 1 percent of the electricity used by