Bill would cut funding for Wisconsin energy efficiency program

Wisconsin’s ratepayer-supported energy efficiency program could see a reduction in funding under a pending proposal in the state legislature.

The bill, AB804, would cut about $7 million a year from the state’s Focus on Energy program. It was passed by the State Assembly  February 18, and is now before the State Senate (SB654).

The plan would recalculate the way funds are collected from ratepayers for the efficiency program. Currently customers are charged 1.2 percent of utilities’ annual operating revenues for the efficiency program, but the bill would change that to 1.2 percent of utilities’ retail sales.

The change would lower the cost customers pay directly, but proponents of the efficiency program say customers would lose out in the big picture with the efficiency program’s benefits reduced. They point to an independent 2015 study showing more than $3 in direct savings and more than $6 in net economic benefits for each dollar invested in the Focus on Energy program between 2011 and 2014. The program’s total annual budget is about $100 million.

“This change is going to hurt customers, they’ll have less opportunity to take advantage of the programs that Focus on Energy offers, and those programs help customers lower their bills,” said Mitch Brey, campaign organizer of the citizen group RePower Madison.

The numbers in the study just refer to the energy efficiency improvements customers are able to make through Focus on Energy. There are also financial and environmental benefits to the state’s energy system as a whole.

“Money invested by families and businesses in energy efficiency helps avoid the need for expensive power plants,” says a fact sheet about the program from the environmental group Clean Wisconsin. “Since 2011, Focus on Energy has offset more than 403 MW, or two gas power plants worth of demand – keeping rates lower for everyone.”

Double charging?

The main argument for the change is that the current structure amounts to “double charging” the 1.2 percent fee, since both wholesale and retail electricity sales are included in the investor-owned utilities’ operating revenues.

Municipal utilities and participating electricity cooperatives pay $8 per year per meter in their system into the program. If an investor-owned utility sells electricity to one of these entities, and then that co-op or municipal utility sells it to a customer, a fee is essentially charged on the same electricity two times.

“The ‘double-charge’ issue occurs when a utility sells electricity at wholesale. Purchasers of that wholesale electricity – such as municipal utilities, cooperatives or other utilities – also collect funds from their customers for Focus on Energy,” said Brian Manthey, spokesman for We Energies, which supports the bill and the change to the Focus on Energy funding.

“Under the provision, the investor-owned utilities’ contribution would be based on revenues derived from retail sales – not wholesale,” he said. “Any savings we and other utilities would realize from this change would flow back to customers.”

But Keith Reopelle, senior policy director of Clean Wisconsin, said the double-dipping analysis is “clearly a misnomer.”

“I’ve testified twice now in two different hearings on this bill, and where I started in both cases was talking about the history of the program and its funding,” said Reopelle, who was part of a governor’s advisory task force that created the Focus on Energy program in 2000.

“It was in the context of industry deregulation, and the funding level was set in an attempt to basically mimic the funding levels that utilities were spending prior to that time on energy efficiency programs. In the mid-’90s the utilities sort of stopped all their investments in efficiency and distributed renewables because they believed we were going to deregulate … It made perfect sense they would discontinue these investments, that’s why Focus on Energy was created.”

The 1.2 percent charge on both wholesale and retail sales, he said, “was a really complicated mechanism for coming up with a funding level that kept their investments the same. The 1.2 percent was always an arbitrary number that got you to a certain funding level.”

Industry support

Like We Energies, most of the state’s utilities, along with utility and industrial associations, are supporting the bill, as noted on the state website tracking lobbying. The bill’s other provisions include an extension on the time the Department of Natural Resources has to permit new high-voltage transmission lines; changes in how sulfur dioxide compliance programs are administered; and expansion of the Public Service Commission’s ability to charge companies for costs incurred related to their proceedings.

The bill originally included changes to enforcement of the “digger’s hotline” system wherein owners of transmission facilities pay to maintain the hotline that people call before they dig near pipelines. That provision drew opposition from building groups and was removed.

Along with Clean Wisconsin, the Wisconsin Community Action Program Association, the Wisconsin Council of Churches and Wisconsin Farmers Union oppose the bill.

Brey and Reopelle said they support a proposal to eliminate the “double charging” but increase the percent charged on retail sales from 1.2 to 1.29 percent. That idea was part of a bill considered by an Assembly committee, but was not in the version of the bill passed by the Assembly.

Reopelle noted that some utilities have more wholesale than others; some make only retail sales. So utilities with more wholesale business could feel they are being treated unfairly by the “double charge.” Dana Breuck, spokesperson for the utility Madison Gas & Electric, said the change would not affect the utility since they make only retail sales.

RePower Madison has been asking MG&E to lobby against the bill, to demonstrate commitment to their recently unveiled “Energy 2030 Framework” that includes an emphasis on energy efficiency.

“This seems like a program we should be increasing funding for, not decreasing,” said Brey. “Energy efficiency is going to be the low-hanging fruit when it comes to Clean Power Plan compliance. Instead we’re damaging that program, we’re going in reverse.”

One thought on “Bill would cut funding for Wisconsin energy efficiency program

  1. Madison Gas & Electric is affected because the amount of funds available for energy efficiency and renewable energy would decline. It’s strange to hear them say they are not affected. They have laid out some stepped up goals for carbon reduction and renewable energy and less funding makes it more difficult to reach those goals.