Presentation is loading. Please wait.

Presentation is loading. Please wait.

Energy Efficiency Performance Incentives Successfully Aligning Utility and Public Policy Objectives By Carol White Director, Program Strategy April 17,

Similar presentations


Presentation on theme: "Energy Efficiency Performance Incentives Successfully Aligning Utility and Public Policy Objectives By Carol White Director, Program Strategy April 17,"— Presentation transcript:

1 Energy Efficiency Performance Incentives Successfully Aligning Utility and Public Policy Objectives By Carol White Director, Program Strategy April 17, 2013

2 2 Overview  What is a performance incentive mechanism?  History of EE PI mechanisms in MA  Today’s MA EE PI mechanism

3 3 A performance incentive provides a reward for achieving pre-defined desirable outcomes that might not otherwise be a priority. Definition: Performance Incentive

4 Shifting Focus – Increasing Importance of Demand-side Efforts  Integrated Resource Planning/Least Cost Planning methods instituted in late ‘80’s to ensure reliability at the lowest possible cost.  Demand-side efforts that resulted in reduced sales became a prominent component of a utility’s long-term resource plan.  Misalignment between utility management’s focus on creating a return for investors and public policy objectives related to IRP/LCP. 4

5 Finding Solutions – LBR and/or PI  LBR: Utility allowed to recover lost revenue based on energy savings achieved  Performance Incentive: Utility allowed to earn a return on EE investments based on performance  3 components: 1.Efficiency Mechanism (B/C ratio) 2.Maximizing Mechanism (Savings) 3.Other Metrics 5

6 Utility Restructuring and LBR/PI  DPU emphasis on performance incentives in place of LBR recovery (DTE )  Minimum and maximum performance under the PI defined  Threshold: 75% of goal  Design: 100% of goal  Exemplary: 125% of goal  Incentive rate tied to return on 3-month T-bills – expected return projected to be 4.5 – 5.5% after taxes  Funding for EE limited by statute - $0.0025/kWh 6

7 Modifications to PI Over Time (Pre-Green Communities Act)  T-bill rates bottomed out – returns based on T-bills insufficient to align utility and public policy objectives  Negotiated incentive rate accepted by DPU (5% after tax return at Design Level performance)  Incentive cap lowered to 110% of Design 7

8 Green Communities Act (2008)  Funding for EE no longer limited by SBC - focus on all cost-effective EE  Law included continued support for EE PI  Led to reconsideration of EE guidelines by the DPU 8

9 DPU Response to GCA  Continued recognition of importance of aligning utility and public policy objectives:  Revenue decoupling – elimination of disincentive and  Performance Incentive – potential reward 9

10 Incentive Mechanism Post GCA  Negotiated PI pool allocated based on contribution to planned statewide efforts  3 components: Savings, Value, Other Metrics  Consistent PI design for all utilities  No penalties – focus on carrots, not sticks 10

11 2013 – 2015 Electric Incentive Mechanism 11

12 Minimum Performance Requirements  Minimum performance requirements by PA dependant on proposed goals relative to EEAC recommended goals.  Threshold for PAs at or below EEAC recommended goals increased to 76.72%.  PAs with savings targets above EEAC recommended goals have threshold set as if goals were at and not above recommended level Threshold is less than 76.72%. 12

13 Incentive Caps  Maximum earnings defined by component  Earnings capped at 125% of Design Level incentive 13

14 Determining Earnings  Actual savings, value, expenses, and net benefits documented in a DPU filing  Documentation for performance metrics includes support for the PA’s distinct role in achieving results 14

15 Recovering Earned Incentives  Design Level incentive is built into the energy efficiency cost- recovery factors and collected on a current basis  Energy efficiency cost recovery factors are adjusted periodically to take into account actual under or over recoveries, including the PI  Utility is provided with certainty that both costs and the PI will be recovered in a timely way. 15


Download ppt "Energy Efficiency Performance Incentives Successfully Aligning Utility and Public Policy Objectives By Carol White Director, Program Strategy April 17,"

Similar presentations


Ads by Google