HomeMy WebLinkAboutF-5 California Public Power Sector-- 2015 Status Update Information Item
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INFORMATION ITEM
TO: HONORABLE CHAIRPERSON AND MEMBERS OF THE SA UTILITY
BOARD
FROM: GEORGE F. MORROW, DIRECTOR OF UTILITIES
DATE: SEPTEMBER 28, 2015
SUBJECT: ANNUAL ENERGY EFFICIENCY REPORT FOR CALIFORNIA'S PUBLIC
POWER SECTOR-- A 2015 STATUS UPDATE
Beginning in 2005, Azusa Light & Water has reported annual energy efficiency program results
to the California Energy Commission (CEC) through collaborative effort with the California
Municipal Utilities Association (CMUA), the Northern California Power Agency (NCPA) and
the Southern California Public Power Authority(SCPPA).
The report complies with Section 6 of Senate Bill 1037 (SB 1037) and Section 3 of Assembly Bill
2021 (AB2021) to measure energy efficiency program effectiveness and report program savings
in a consistent and comprehensive manner on a statewide basis.
As part of the annual review process, the Natural Resources Defense Council (NRDC) provides
comments and suggestions on how to meet the Governor's goal of doubling energy efficiency
savings by 2030. NRDC uses the measuring of electricity savings as a percent of retail sales to
evaluate the utility's overall effort in developing and implementing efficiency programs and
therefore allows the ability to compare utilities of all sizes on an even playing field.
Using this comparison, the NRDC pointed out that, "Of the 23 small POUs, only two utilities —
Truckee Donner and Azusa—met the national best practice of achieving energy savings equal to
1 percent of sales", showing that Azusa's conservation efforts are more effective than most other
small Publicly Owned Utilities (POUs) within California.
Prepared by: Paul Reid,Utility Programs Specialist
Attachment: NRDC Letter on Public Power Energy Efficiency Program Results(9/ 9/15)
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NRDC
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September 9,2015
David Modisette
Executive Director
California Municipal Utilities Association
915 L Street, Suite 1460
Sacramento,CA 95814
RE:Energy Efficiency in California's Public Power Sector:A 2015 Status Report
Dear Mr.Modisette:
The Natural Resources Defense Council(NRDC)commends the California Municipal Utilities
Association(CMUA),Northern California Power Agency(NCPA),and Southern California Public Power
Authority(SCPPA)for producing a thorough report documenting energy efficiency activities,policies,
and progress of California's publicly owned utilities(POUs)in this year's Energy Efficiency in
California's Public Power Sector:A 2015 Status Update.We are encouraged by renewed outreach from
both NCPA and SCPPA to collaborate on expanding energy efficiency savings.We are also pleased to
see the POUs'coordination with the California Technical Forum through evaluating measures in the
TRM.These efforts demonstrate a strong commitment to effective efficiency programs and collaboration.
The POUs' commitment to energy efficiency has played an important role in helping California meet its
ambitious climate goals. Since 2006,the POUs have collectively saved more than 4,000 gigawatt-hours
(GWh)of electricity,or the equivalent annual electricity consumption of more than 600,000 California
homes.These energy savings have avoided more than 2 million metric tons of carbon dioxide,which is
equal to avoiding the annual carbon pollution of more than 400,000 cars.The POUs have also reduced the
state's peak demand by almost 800 megawatts(MW),or more than enough to avoid one large-sized
power plant,while also saving customers an impressive$1.9 billion on their electricity bills.
Public power has increased efficiency savings in aggregate for two years in a row. California's POUs
achieved more than 600 GWh of gross energy savings in 2014,which is the second highest year on
record.Additionally,many of the POUs exceeded their savings targets for 2014.These energy savings
will reduce POU customers' energy bills by over$300 million due to programs from last year.
NATURAL RESOURCES DEFENSE COUNCIL
III SUTTER STREET SAN FRANCISCO. CA 94104 T 415 875 6100 F 415 875 6161 NROC.ORG
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Figure 1. POU Annual Electricity Savings'
600
Small
•Mid-sized
I:: e
1110 11
2006 2007 2008 2009 2010 2011 2012 2013 2014
Total savings continue to be driven by the state's two largest POUs–the Los Angeles Department of
Water and Power(LADWP)and the Sacramento Municipal Utility District(SMUD).Together,LADWP
and SMUD saved enough electricity to power more than 60,000 California homes for a year.Each utility
saved over 1 percent of electric sales in 2014,which demonstrates best practice in the industry2—if they
were a state,they would place tenth in national rankings.3.4
Mid-sized POUs had a wide variety of results but as a group did not materially increase their energy
savings in 2014.About half of the mid-sized POUs increased their investments and energy savings—
while the other half decreased.The leaders in this group,like Pasadena,Glendale,and Anaheim,
continued to exceed the national best practice by achieving energy savings greater than 1 percent of sales;
whereas others,like Redding and Vernon,still have room for improvement(saved less than 0.3 percent of
sales).
Small POUs as a group experienced a decline in energy savings,with many small POUs decreasing their
annual investments in efficiency.Of the 23 small POUs,only two utilities–Truckee Donner and Azusa–
met the national best practice of achieving energy savings equal to 1 percent of sales,and only three met
the guideline of investments equal to 2.5 percent of revenue.'
Figure 1 uses net values for 2006-2012 and gross values for 2013-2014(gross values were first reported in 2013).
2 A common benchmark for evaluating energy efficiency programs is savings as a percent of annual sales.Savings
that are 1 percent of sales are considered good energy efficiency programs.ACEEE currently uses 2 percent of
sales as its best practice standard.
3 Together,SMUD and LADWP sold approximately 32,000 GWh in 2014,which is about as much electricity sold in
the states of Nevada or Utah.
SMUD and LADWP collectively reached net electricity savings that were 1.2 percent of sales in 2014,which
would be tenth in the ACEEE Scorecard ranking of savings as percent of sales in 2013(the report containing 2014
data is not yet available),between California and New York.ACEEE,The 2014 State Energy Efficiency
Scorecard,October 2014,Table 14,p.33,http://aceee.ore/state policy/scorecard.
5 Spending 2.5 percent of revenue is a common benchmark for good energy efficiency programs.ACEEE now uses
4 percent of revenue as its best practice standard for investments.
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Measuring electricity savings as a percent of retail sales evaluates a utility's overall effort in developing
and implementing efficiency programs(a higher percentage means more efficiency activity)and allows a
comparison among utilities of different sizes,as shown in Figure 2.
Figure 2.Net Savings as Percent of Electric Sales(2014)
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Given Governor Brown's ambitious goal to double energy efficiency savings by 2030,the POUs are
integral to ramping up energy efficiency savings statewide.The POUs have made significant
improvements in their efficiency efforts over the last two years,and we urge each one to build on this
success by doing the following:
Take a long-term perspective to rate reform and avoid raising fixed charges,which disincentivizes
energy efficiency.
The energy landscape is fundamentally changing: utility relationships with customers are becoming
increasingly transactional in two directions;the costs of clean energy resources have reached historic
lows;distributed energy resources are proliferating;and to maintain the reliability of a decarbonized
electric grid,the load will increasingly need to meet the supply—not vice versa. Restructuring rates is a
key tool to create a utility business model that works for the future,but needs to be done thoughtfully and
strategically. Short-term solutions that address immediate problems, like increasing fixed charges in order
to maintain adequate revenues,create deeper problems in the long-term.
If and when utilities raise the fixed charge(the portion of the customers'bills that does not vary,
regardless of how much energy is used),the utility then diminishes the rewards to customers who invest
in energy efficiency.Raising the fixed charge shrinks the amount of energy efficiency that is cost-
effective to achieve.There are a number of factors that contribute to total energy saved,but instituting
high fixed charges creates an additional barrier to capturing what are otherwise cost-effective energy
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savings opportunities. For example,SMUD has increased its monthly fixed charge for residential
customers,which has coincided with a decrease in efficiency savings.°
A number of other utilities have either proposed(Redding Electric Utility)or adopted(SMUD,Roseville,
and Trinity PUD)increasing fixed charges.'We recommend that all utilities facing financial pressures
from a changing energy landscape work with stakeholders and their regulators to devise long-term rate
reforms that will both maintain financial health of the utility and ensure that all costumers pay their fair
share of using the electric grid.
Adopt decoupling,which removes the link between electricity sales and revenues while ensuring
utilities are made financially whole.
Decoupling is a prime,strategic rate reform option that positions a utility to succeed financially in the
future. In 2014, LADWP and Glendale Water and Power became the first publicly owned utilities in the
nation to implement decoupling into their business models. By decoupling revenues from sales,LADWP
and Glendale have removed one large disincentive to investing in energy efficiency and are better able to
ramp up investments in efficiency programs without risking financial harm.°It is notable that in 2014,
both utilities also increased their energy savings(in total and as a percent of sales) and net benefits to
customers over the previous year. We recommend that utilities reach out to LADWP and Glendale,and
stakeholders, for lessons learned in the process of adopting decoupling.
Plan now for a robust potential study that will enable utilities to meet the Governor's goal to double
energy savings.
Potential studies survey the universe of energy saving technologies,assess how much of those energy
savings are cost-effective,and analyze the market opportunities to achieve those cost-effective savings.A
potential study sets the stage for energy saving goals,future investments,growth,and strategies to
capturing energy efficiency. POUs now have less than two years to build robust potential studies that
examine savings over a ten-year horizon,which are due March 15,2017.9 Given the Governor's goals and
the fact that we are half-way through this quadrennial period,we recommend that POUs initiate work on,
and continue to collaborate with stakeholders, in order to develop a potential study that provides a
roadmap to meeting the state's energy savings goals in 2030.
6 In 2014,SMUD's net energy efficiency savings dropped by nearly 20 percent.While many factors may have
contributed to this drop,the decrease in savings coincides with a recent increase to the monthly fixed charge for
residential customers,which has now reached$14(and plans to reach$20 in 2017). SMUD,Chief Executive
Officer and General Manager's Report and Recommendation on Rates and Services,April 2,2015,p.44,
https://www.smud.org/assets/documents/pdf/2015-GM-Rate-Report-Vol-I.odf.
'Fortunately,Redding City Council rejected the proposal to more than triple its monthly fixed charge for residential
customers,which would have been the highest in the state.
8 Lisa Xue and Dylan Sullivan,NRDC,Southern California municipal utilities innovate with decoupling,April 11,
2014,htto://switchboard.nrdc.orgiblogs/dsullivan/southern california municipal.html.
9 California Public Utilities Code Section 9505 says that each publicly owned utility"shall identify all potentially
achievable cost-effective electricity efficiency savings and shall establish annual targets for energy efficiency
savings and demand reduction for the next 10-year period"by March 15,2013 and by March 15 of every fourth
year thereafter.
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Conclusion
The POUs have collectively continued the trend of increasing energy savings and benefits for customers,
and we are encouraged by the recent progress and renewed collaboration. By aligning financial interests
to incentivize efficiency and exploring savings potential for the next decade,all POUs can expand on past
efforts to meet the Governor's goal of doubling energy efficiency savings.
Sincerely,
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Christa Heavey Sierra Martinez
Sustainable Energy Fellow Legal Director of California Energy Projects
cc: Commissioner Andrew McAllister,California Energy Commission
Chair Robert Weisenmiller,California Energy Commission
Commissioner Karen Douglas,California Energy Commission
Commissioner David Hochschild,California Energy Commission
Commissioner Janea Scott,California Energy Commission
Rob Oglesby,Executive Director,California Energy Commission
Sylvia Bender,Deputy Director of Energy Assessments Division,California Energy Commission
Randy Howard, Executive Director,Northern California Power Agency
Bill Carnahan,Executive Director, Southern California Public Power Authority
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Appendix
For all figures:
• Data used below is reported by POUs as presented in Energy Efficiency in California's Public Power Sector:A 2015 Status Update.
• Utilities with(*)have insufficient data for the analysis.
• Large POUs have annual retail sales of over 5,000 GWh: LADWP and SMUD.
• Mid-sized POUs have annual retail sales over 500 GWh,but less than 5,000 GWh:Anaheim,Burbank,Glendale,Palo Alto, Pasadena,Redding,
Riverside,Roseville, San Francisco PUC,Silicon Valley Power,Vernon, Imperial Irrigation District,Modesto Irrigation District,and Turlock
Irrigation District.
• Small POUs have annual retail sales of less than 500 GWh: Alameda,Azusa,Banning,Biggs,Colton,Corona,Gridley,Healdsburg,Hercules,
Industry,Lassen,Lodi,Lompoc,Merced Irrigation District,Moreno Valley,Needles,Pittsburgh/Island,Plumas Sierra,Port of Oakland, Rancho
Cucamonga,Shasta Lake,Trinity,Truckee Donner, Ukiah, and Victorville.
Figure Al. POU Annual Efficiency Spending
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Small
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2006 2007 2008 2009 2010 2011 2012 2013 2014
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Figure A2.POU Annual Net Benefits from Efficiency Programs
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2007 2008 2009 2010 2011 2012 2013 2014
Note:Net Benefits are calculated by subtracting out Total Costs from Total Benefits for each individual POU.Total Benefits for each POU were calculated by multiplying
the TRC Ratio by the Total Costs.
Figure A3.Gross Savings as Percent of Annual Target(2014)
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Figure A4.Energy Efficiency Investments as a Percent of Annual Revenue(2014)
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Note:The line representing expenditures that are 2.5 percent of revenue indicates one best practice guideline for good energy efficiency programs.
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