1. Florida Energy Efficiency and Conservation Act (FEECA) Presentation to: Florida Energy & Climate Commission Terry Deason July 22, 2009 Radey I Thomas I Yon I Clark

2. Florida’s Success Under FEECA  Since the late 1970’s, Florida utilities have actively engaged in demand response and energy efficiency and offered numerous programs.  FEECA (sections 360.80-360.85 and 403.519, Florida Statutes) was enacted in 1980, requiring the Public Service Commission (PSC) to adopt goals and requiring utilities to develop plans and to implement programs to increase energy efficiency and conservation.  The FEECA goals are established by the PSC every five years. 2

3. Florida’s Success Under FEECA (cont’d)  In addition to setting new goals every five years, the utilities file a Ten-Year Site Plan (TYSP) with the PSC for approval each year.  The TYSP projects the utility’s power generating needs and proposed power plant sites.  As part of the TYSP and in light of current FEECA goals, a utility’s demand-side management (DSM) and energy efficiency measures and their resulting impact on the utility’s projected demand are reviewed. 3

4. Florida’s Success Under FEECA (cont’d)  DSM has, and will continue to be, a key component of the utilities’ capacity and integrated resource planning (IRP) process. DSM cannot be separated from the utilities’ planning process.  The utilities’ DSM programs have avoided the need for many new power plants. For example, for FPL alone, DSM programs have avoided the need for 12 new power plants. 4

5. Florida’s Success Under FEECA (cont’d)  Efforts under FEECA have proven to be very successful:  Utilities have performed over 300,000 residential energy audits and offer over 71 conservation programs.  Since 1980, utility-sponsored DSM programs have reduced statewide summer peak demand by over 5,800 MW and winter summer peak demand by 6,245 MW.  Annual energy savings were estimated at 7,250 GWh in 2008. (This is enough energy to serve approximately 500,000 residential customers). 5

6. Florida’s Success Under FEECA (cont’d)  Florida’s commitment to DSM spending has remained constant, even when the nation as a whole has faltered. (See next slide).  Constant commitment means less additional potential exists as no “low-hanging fruit” remains.  The updated federal appliance efficiency and lighting standards are reflected in the utilities’ filings. This further erodes the potential for utility-sponsored DSM and conservation. For FPL alone, the federal standards are projected to result in 895 MW of savings in 2010-19. 6

7. Florida’s Success Under FEECA (cont’d) The nation’s DSM spending dropped 53% by 2003. In 1998/2003 Florida was 19% of the total spending nationwide. Source: DOE EIA F861 1990-2005 reports 7

8. Florida’s Success Under FEECA (cont’d) Florida’s DSM success has been recognized:  Utilities have established financial incentives and offer a “myriad” of programs to encourage energy efficiency improvements and to make such measures more affordable for customers – Florida’s Action Team on Energy and Climate Change’s Final Report, p. 46.  Florida’s four largest IOUs all rank in the top seven (7) in the Southeast in kWh savings – U.S. EIA Form 861 Database (2007). 8

9. Florida’s Cost-Effective DSM  In establishing goals, FEECA requires the PSC to consider the costs/benefits to participants and to all customers and requires DSM programs to be “cost-effective.”  PSC Rule 25-17.008, F.A.C., provides that utilities must file cost-effectiveness data on a DSM program using at least: o Participant Test – looks at whether the customer will be better off by participating in a DSM program but not at the impact on the utility or non-participants; o Rate Impact Measure (RIM) Test – looks at the impact of the program on utility rates and the effect on non-participants; and o Total Resource Cost (TRC) Test – looks at the overall economic efficiency of a DSM program from society’s perspective, including the participants’ and utility’s costs, but not incentives paid to participants and revenue losses. 9

10. Florida’s Cost-Effective DSM (cont’d) Under the TRC test, cross-subsidization occurs: o By not counting the incentive payments to participants as costs, even though they are paid for by all utility customers, non- participants subsidize incentives paid to participants. o In addition, non-participants subsidize the reduced revenues resulting from the lower energy bills enjoyed by participants. o Each DSM program targets certain customers (e.g., residential customers). All other customers (e.g., commercial and industrial customers) are automatically non-participants because they are ineligible for that program. Any program that fails the RIM test but passes the TRC test increases rates above what they would otherwise be. Thus, non-participants in that program have higher rates, which subsidize the participating customers. 10

11. Florida’s Cost-Effective DSM (cont’d)  Under the RIM test, participants and non-participants benefit from capacity deferral, resulting in lower rates.  The RIM-based goals proposed by the utilities in the current DSM dockets incorporate environmental compliance costs as a benefit for the first time.  This makes more DSM programs cost-effective and recognizes the emission reduction benefit of DSM.  The PSC requires the utilities to file a RIM and TRC portfolio and to provide sensitivity analyses related to environmental compliance costs, capital costs and fuel. 11

12. Florida’s Cost-Effective DSM (cont’d)  Historically, the PSC has focused on ensuring reliable electric service at the lowest possible cost.  DSM programs approved by the PSC and implemented by the utilities have benefitted all utility customers.  As a result, Florida has gotten more for its money and has been 124% more cost-effective per MWh achieved than the nation’s DSM average. 12 Cost per EE MWh Source: DOE EIA F861 2006 report

13. Florida’s Cost-Effective DSM (cont’d)  Some groups have suggested Florida should model its DSM activities after other states.  As shown previously, Florida is a leader in DSM.  Also, this suggestion is misplaced given the many differences between Florida and other states, including cost- effectiveness, customer mix, weather, generation fleets, fuel costs, regulation, age of houses/buildings, and electric rates.  DSM cannot be divorced from the IRP process and must incorporate reliability issues, rate impacts, etc.  DSM efforts in Florida must be Florida-specific. 13

14. Florida’s Cost-Effective DSM (cont’d)  Florida customers enjoy lower electric rates than many other states:  In states where electric rates are higher, customers receive a faster payback on a DSM investment and are therefore more likely to implement a DSM measure. Therefore, caution must be used in making comparisons with other states. 14 Source: DOE/EIA-0318(01)/2 (2007) 12.80

15. FECC’s Role in the Current DSM Dockets  To meet its statutory obligation to file comments, the FECC should participate in the PSC’s on-going proceeding by filing a pre-hearing statement and/or post-hearing brief.  The PSC process includes an in-depth review: Extensive discovery has and continues to take place. PSC Staff just served its 9th,10th and/or 11th rounds of discovery on the utilities last week. There are eleven (11) parties to the proceedings, representing all sides of the issues, including NRDC/SACE, the Florida Solar Coalition and the Florida Industrial Power Users Group. To date, testimony has been filed by 19 individuals, covering a broad spectrum of positions on the issues. Twelve (12) preliminary issues have been identified. 15

16. Wrap-Up  Florida is a leader in DSM.  Florida utilities have made great strides in DSM while minimizing rate impacts to customers and avoiding cross-subsidization.  Incorporating environmental compliance costs has allowed more DSM measures to be cost-effective and has recognized the emissions reduction benefit of DSM. 16