A Win and a Threat on Energy Efficiency in the Keystone State

This piece was originally posted on Advanced Energy Perspectives and is reposted in full with permission. 

The past two months have been a whirlwind for energy efficiency policy in Pennsylvania. This period was marked by the high point of the Public Utilities Commission (PUC) issuing a strong final rule for Phase III of Act 129, the next stage of the state’s energy efficiency mandate, and a low from the state legislature with the introduction of SB 805, which would exempt large industrial and commercial users, reducing funding for energy efficiency improvements by all customers and making efficiency gains subject to corporate whim.

On the positive side, the PUC released its Final Order on Act 129, Phase III, on June 11. The final order is a big victory for energy efficiency in the Keystone State. The commission extended Act 129 an additional five years – the longest phase yet, and one of the longest authorizations for EE programs in the country. AEE worked with our state partner, the Keystone Energy Efficiency Alliance, on the extension, which also made some key improvements in the state’s energy efficiency efforts.

Among the key decisions in the Final Order is the return of demand response (DR), with participants allowed to take advantage of DR in both the PJM marketplace and for compliance with Act 129. Also, the PUC decided to expand the Total Resource Cost test, which measures the cost-effectiveness of proposed programs by the utility, to recognize savings from reduced fossil fuel and water use. Both of these decisions will lead to more deployment of energy efficiency going forward, and were strongly supported by AEE and KEEA.

With this victory for energy conservation, Pennsylvania can expect to save 6.6 million MWh of electricity. Phase III will also be a win for Pennsylvania’s economy by maintaining certainty in a market that currently employs 57,000 people at more than 4,200 companies.

While the decisions on Phase III are all positive, large energy consumers and their allies in the legislature have introduced legislation that would allow many industrial and commercial customers to opt out of Act 129 programs.

Senate Bill 805, sponsored by Sen. Lisa Boscola, would allow commercial and industrial customers not to participate in Act 129 programs. Recent history has shown that these opt-out programs stymie investment in programs that reduce energy consumption by all customers. In Indiana, a state with a similar energy portfolio, the legislature voted in 2014 to end the Energizing Indiana efficiency program, largely in response to a push from large industrial users who wanted to opt out. A replacement program was signed into law this year, but included an opt-out provision. Reports by Duke Energy Indiana estimate that over 71% of the utility’s eligible load would be opting out of efficiency programs in 2015. 

While many large industrial companies claim that they already maximize their energy use, having already made investments in energy efficiency, most programs show the greatest savings from their commercial and industrial customers. Indeed, an independent evaluation of Energizing Indiana showed that commercial and industrial rebates drove about half of the 11 million MWh saved and 19,000 jobs created by the program.

If Pennsylvania continues down the path of large customer opt-out, it can expect to see the same impact. Reducing energy efficiency investments will lead to higher costs and more volatility for all Pennsylvania consumers. 

According to the PUC, energy efficiency is Pennsylvania’s least cost option for meeting additional energy needs, with other sources costing two to five times more. If the legislature decides to accommodate a few large energy users it will force higher costs on other consumers, both commercial and residential.

If large energy users believe that Act 129 lacks value for their companies, the proper venue for addressing those concerns lies not in the legislature but at the PUC. As the decision-making body with authority on energy efficiency, the PUC is the place these companies should take their concerns, so that the commission can better tailor the program to meet their needs, without starving other customers of resources for energy efficiency investments that can help them.

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