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FirstEnergy will no longer offer incentives for CFL bulbs under a new efficiency program, opting for LEDs instead.

Ohio utility’s efficiency programs to move forward under settlement

As 2016 drew to a close, key environmental groups signed onto FirstEnergy’s revised energy efficiency plan for its Ohio utility customers.

The December 8 stipulation addresses major objections to FirstEnergy’s earlier plan, including elimination of terms that would have let the company profit from energy-saving activities it played no part in.

FirstEnergy’s revised energy efficiency plan “comes on the heels of the thaw on Ohio’s previously frozen clean energy standards, and the growing acknowledgement across Ohio’s utilities of the value of energy efficiency for customers,” said Samantha Williams at the Natural Resources Defense Council, which is one of the settling parties.

While other Ohio utilities continued to offer a range of money-saving efficiency programs during the recent two-year freeze on the state’s clean energy standards, FirstEnergy moved to gut most of its efficiency programs in 2014.

“Thankfully, the programs are back, and we’re very encouraged by the progress we’ve made with the utility in working towards more extensive, innovative options,” said Williams.

“The plan will allow our customers to participate in energy-saving programs through 2019, and strives to achieve energy savings each year that will meet or exceed Ohio’s annual reduction targets,” FirstEnergy spokesperson Doug Colafella said.

Not all parties have joined in the settlement, however, and the revised plan still requires approval by the Public Utilities Commission of Ohio. A hearing is scheduled for January 23.

‘A big change’

Provisions of the revised plan “are quite similar” to ones outlined in previous filings, Colafella said, “with some tweaks based on input from stakeholders who signed onto the plan, including key environmental groups.”

Yet those changes matter a lot to Williams and the NRDC, as well as the Environmental Law & Policy Center, Ohio Environmental Council and Environmental Defense Fund.

Among other things, FirstEnergy will not get shared savings profits from cuts in electricity usage that result from customer actions in which the company played no role.

“Keeping ‘non-programs’ like these off the shared savings ledger means utilities will be more focused on other programs that are actively designed to provide new, cost-effective benefits to consumers,” Williams said.

“That’s a big change,” agreed Rob Kelter of the Environmental Law & Policy Center. “To their credit, FirstEnergy has come up with what we feel is a very reasonable program. And it’s certainly a big improvement on what they were running before the freeze.”

For lighting, for example, FirstEnergy will no longer offer rebates for standard compact fluorescent light bulbs. Instead, the plan will promote light-emitting diodes (LEDs), which may cost more up front but generally save more money and energy overall.

Programs under the plan will also encourage energy savings by people who live in multi-family units, a sector that is currently “under-served,” said Williams.

In addition, mid-stream rebates will encourage equipment distributors and contractors to stock certain energy-efficient equipment, such as select Energy Star products, circulation pumps, and residential heat-pump water heaters. In turn, ready availability and an incentive to sell the products should make it easier for customers to obtain and use them.

Support for smart thermostats will give customers more flexibility than earlier programmable thermostats and can also be used for residential demand response programs, Kelter noted.

FirstEnergy will also investigate a geotargeting pilot program. If utilities can focus energy efficiency efforts on specific areas, they might defer larger expenditures for transmission and distribution upgrades for those places.

“The slate of program opportunities is really exciting, and all told is estimated to save consumers (at least) $400 million over the next three years,” Williams said.

Other settling parties include Ohio Partners for Affordable Energy, Energy Management Solutions, IGS Energy and EnerNOC.

Concerns remain

Despite the changes, the Office of the Ohio Consumers’ Counsel continues to oppose the plan, particularly its shared savings provisions. Ohio Consumers’ Counsel Bruce Weston told lawmakers last month that, in his view, utilities already collect too high a share of profits for shared savings.

For the few programs FirstEnergy continued in 2015, the two-year freeze on targets let FirstEnergy keep $15.6 million as profits beyond the $27.3 million those programs cost, Weston noted.

Total program costs are also a concern for the consumer advocate agency.

“A problem for consumers is that the settlement lacks an adequate cost cap to limit charges for energy efficiency to 1.9 million consumers,” explained Ohio Consumers’ Counsel spokesperson Dan Doron.

Testimony by PUCO staff witness Patrick Donlon also recommended limiting program costs and shared savings to 3 percent of operating revenues from “total sales to ultimate consumers.”

The Ohio Manufacturers’ Association, the Kroger Company and Industrial Energy Users—Ohio did not join in the settlement with FirstEnergy but have agreed not to oppose it.

The revised plan includes more customer protection and puts FirstEnergy in a position “to offer cost-effective efficiency programs to its customers,” said Kimberly Bojko, who represents the Ohio Manufacturers’ Association Energy Group in the case. ““If the programs are run well, they should save customers money.”

“Unfortunately, FirstEnergy has again asked to be insulated for poor past decisions, requesting to lower the threshold for achieving shareholder profit,” Bojko added. It appears that those provisions might kick in before FirstEnergy had fully met energy efficiency commitments that it agreed to in another case that sought a “bailout” for unprofitable generating plants.

“Continuing to bail out FirstEnergy for poor past decisions is not in the best interest of Ohio’s manufacturers,” Bojko said.

One thought on “Ohio utility’s efficiency programs to move forward under settlement

  1. Although Ohio Consumer Counsel Bruce Weston thinks utilities collect too much in the way of shared savings, that is simply because he and his agency have refused to consider the actual amounts collected as a fraction of the verified net savings. I have offered his agency that comparison.

    Ohio law allows two forms of shared savings – lost distribution revenues and incentives. What the utilities seek varies greatly. Over seven years (2009 – 2015) cumulative shared savings are probably close to $500 million, a little less than half of the $975 million in program costs which are reported. Savings from the installed hardware are not reported over the life of the measure, but only as first year savings. What this means is that we have to calculate the savings. But there are ways to verify the accuracy of such a calculation, including the fact that AEP reports lifetime savings even though they are not required.

    Total savings using a 10% discount below the rate of savings AEP reports are distributed over about twenty years. The average measure lasts about 11 years. Using this, and the average retail rate for all rate classes we find that total savings realized by the end of 2015 were $2.9 billion, with another $2 billion remaining to be saved. In addition to the direct energy savings the PUCO acknowledges that 1350 MW’s of capacity has been avoided. This capacity is worth over $3 billion in avoided new power plant construction, if avoided transmission and distribution costs are included.

    This is an approximate value, but it is without question lower than the actual value based on similar calculations done in other states and using AEP’s calculation and the ratio of cost-effectiveness of program costs to first year savings that the other Ohio utilities report.

    Therefore total net savings are in the range of $8 – 9 billion from an expenditure of less than $1 billion. The $500 million in shared savings are determined by calculations that the utilities make of their share of the $8 – 9 billion. This calculation must be made in order to determine the amount of shared savings, but the calculation results are not included in their public filings and the PUCO has never made a public report on the savings created, even though it is required to do so by law.

    You never know who is paying attention to what, so I go on writing this sort of thing. I have addressed Consumer’s Counsel’s error in testimony and in print. I tried to meet with them once, and sent their analyst a copy of my calculations. Obviously, they are influenced by the Republican anti-clean-energy thrust, as are all the other Kasich agencies, which is why I am concerned about the staying power of Kasich’s recent veto. He needs to carry his message through to his agency heads.

    The incentives and lost distribution revenues do different things: Each is about half of the >$500 million, but each utility varies greatly in different years. Without a public record we have to guess. But lost distribution revenues replace the revenue the utility was promised in the last rate case. Incentives reward them for making their future sales smaller. Each is critical to good program performance, particularly in making the utility an enthusiastic partner in creating massive benefits for the public.

    Much more ought to be said on this.