CWEB.018/June.27.1997
AS SUMMER BEGINS around the Pacific Northwest, we bring you a smorgasbord of developments in energy efficiency and renewables.
In market transformation, the Northwest Energy Efficiency Alliance doubled its portfolio of projects at a series of June board meetings. In Idaho, meanwhile, debate continues over Idaho Power's plan to fund its participation in the Alliance through a flat-rate meters charge.
We also take a look at electric industry restructuring and public-purposes funding around the Northwest states; Montana has taken the restructuring plunge, while Oregon, Washington and Idaho are in various stages of sticking their toes in the roiling waters. And for those fretting about the future of energy conservation in these turbulent times, or in search of reasons for optimism, a new report from the Northwest Power Planning Council shows how a number of utilities and agencies around the region are using efficiency and other energy services as key strategies for competitiveness. This is good and important reading.
Architectural design and energy efficiency are also explored in this issue, as is the demise of Idaho Power commercial design and industrial programs that we previously covered and recently made official. You can also read how Springfield Utility Board is steamed--pun intended--over its exclusion from settlement talks on a Northern California geothermal-energy project.
Enjoy the longest days of the year, and connect with us, if you wish, via e-mail to marko@newsdata.com.
Note: We appreciate the continued support of this publication from the Northwest Energy Efficiency Alliance. Thank you, Alliance board members and staff.
In a series of June meetings, the Northwest Energy Efficiency Alliance board of directors doubled its number of regional market transformation projects and approved continuation of two existing initiatives, including this publication.
The Alliance board--meeting on June 9, 10 and 23--endorsed a revised program for residential duct-sealing along with projects involving building commissioning, energy codes, compact fluorescent fixtures, manufactured housing, the Energy Ideas Clearinghouse and national standards. It turned down a program for energy-efficient window products, however.
In addition, the board voted for a 2-1/2-year extension of the LightWise compact fluorescent bulb program and interim funding for Con.WEB as Alliance staff negotiates with NewsData Corp. for a long-term contract.
With its June project decisions made, the eight-month-old Alliance is now moving into a new phase. "What we had done thus far was take a look at those projects that had been on the computer screen as projects that needed attention for one reason or another," explained executive director Will Lutgen. Many of the 14 market transformation projects now in the Alliance portfolio had been previously funded by utilities around the region.
Now, the Alliance is looking for new proposals to transform markets for energy efficiency. It is holding a two-part solicitation, one general in nature and one targeting specific markets. "We hope to essentially cast a little broader net than what has been previously cast and bring in some fresh ideas and perhaps some fresh players, perhaps not," said Lutgen. "We want to see what's out there."
Proposals under this solicitation are due to the Alliance by Aug. 1. A letter is being sent to a couple of hundred entities identified as potential proposers, according to Lutgen, although anyone is welcome to submit ideas. Alliance staff will screen proposals based on the board's criteria, and the board is scheduled to consider qualified project proposals this fall. For more information on the solicitation, contact the Alliance at (425) 644-4143, phone, or (425) 644-2507, fax.
Following are summaries of the projects considered by the Alliance board in June:
Residential Space-Conditioning Air-Distribution Systems (Ducts)
In contrast to the Alliance board's contentious rejection of the residential duct-sealing proposal in April (see Con.WEB, May 23), a collaboratively revised program sailed through with unanimous approval on June 9.
One of the major changes was the inclusion of several milestones at which the Alliance board can decide whether to commit additional funding for the program. These checkpoints include a draft report on a review of literature on duct-sealing costs and benefits (three months), development of a marketing plan and research design (five months), the beginning of contractor training (seven months) and development of a research report, marketing plan report and draft business plan (12 to 18 months).
A memo from Alliance staff and sponsors responded to additional board member questions and concerns about the costs, benefits and magnitude of the potential market; the possibility for development of a market independent of the Alliance; contractor certification; synergy with local utility initiatives; business plan development; and project management structure.
"I want to commend those who worked on this," said board member Nancy Hirsh. "I think this memo really adds some clarity to the questions that were raised and answers a lot of the concerns I had . . . I'm pleased to see it and pleased to see that kind of response from staff."
This project, primarily developed by the Oregon Office of Energy, seeks to establish retrofitting of leaky air-distribution systems in homes as a viable and profitable business around the Northwest and to create sustained demand for efficient duct systems in new homes.
To achieve these goals, OOE and its subcontractors--including Washington State University Cooperative Extension Energy Program, Oregon State University Energy Extension Program, Idaho Department of Water Resources Energy Division and Montana Department of Environmental Quality--have developed a five-pronged approach. They will refine estimates of the costs and benefits of reducing duct leaks, test and refine protocols and standards for utilities and contractors to follow, develop and test a marketing plan, establish a trained group of contractors and trade allies and put together a self-supporting training and certification program for contractors.
OOE and colleagues have identified four main market impediments for the proposal to address: 1) Contractors and residents alike are generally unaware of the impacts of leaky duct work on comfort, health, safety and space-conditioning energy consumption; 2) Contractors don't realize how their design and installation practices affect air leakage in duct systems; 3) Contractors have neither the skills nor the information to successfully market improvements in duct efficiency, both in new construction and retrofits; 4) There is no credible means to identify and verify the benefits of efficient duct work.
The energy-saving potential from improved ducts is substantial. An Alliance staff memo reports that the region could save 30 average megawatts over 10 years if the air-distribution systems in 25 percent of new and existing single-family homes and 25 percent of existing manufactured homes can be made an average of 14 percent more efficient. The total resource cost is estimated at 2.1 cents/kilowatt-hour. This project "represents a modest investment in what is presently the largest 'untapped' cost-effective efficiency improvement remaining in residential space heating," according to the staff memo.
The Alliance board approved funding of $1.12 million over two years; the Electric Power Research Institute is expected to provide an additional $160,000.
LightWise Compact Fluorescent Program
One of the flagship market transformation ventures in the region, the LightWise compact fluorescent venture got a green light to continue at least through 1999.
The Alliance board approved $2.5 million for the project, which has an expressed goal "to overcome market barriers for energy efficient lighting through increasing consumer awareness of efficient lighting options, increasing consumer acceptance and support of quality efficient light products and reducing the long term first cost prices by creating a competitive and valuable marketplace for manufacturers of target technologies. Ultimately our goal is to exit the lighting market with energy efficient lighting able to maintain a stable and substantial share of the market."
Already there are indications LightWise has contributed to lower retail prices for high-quality energy-saving CFs, and it has clearly expanded their availability regionwide (see Con.WEB, May 23, for a story on LightWise's first annual report). "We are on the path to changing long term market dynamics with our efforts through marketing, education and steadily increasing the market pressure through the addition of new sponsors and geographic areas," according to the proposal from program administrator Portland Energy Conservation Inc. Yet compact fluorescents still capture a negligible share of the regionwide lighting market, accounting for an estimated 3 percent of total sales for screw-based lights in 1996, according to PECI.
For the rest of 1997 LightWise will continue offering a $5 per bulb rebate to participating manufacturers, currently Lights of America, Osram/Sylvania, Enertron and MaxLite (additional major lighting manufacturers will be specifically targeted for future participation). The incentive payment is planned to drop to $4 in 1998 and $3 in 1999. This gradual reduction is the cornerstone of PECI's exit strategy, which will be timed based on evaluated indications of the program's success. These indications could include lower prices, comparable new products and/or incentive payments from non-participating manufacturers, as well as retailer preferences for LightWise products as manifested through more store promotions, increased shelf space allocations and/or comments to manufacturers.
As the incentive payments drop, additional money will be spent on marketing, although the manufacturer rebates still account for $1.9 million of the $2.5 million total budget through 1999. The remainder is earmarked for program administration ($215,000), marketing ($200,000) and evaluation ($130,000).
LightWise aims to distribute 500,000 high-quality CFs through 1999, which, when added to some anticipated impacts on the compact fluorescent market, would lead to estimated regional energy savings of about 6 aMW. Projected levelized cost for these savings on a total resource cost basis ranges from 1.6 cents/KWh to 2.2 cents/KWh, and 1.0 cents/KWh to 1.4 cents/KWh from a utility perspective.
In discussing the LightWise proposal June 9, some Alliance board members were concerned about the amount of funding devoted to residential lighting programs; LightWise and the CF fixtures program (see below) together will account for nearly one-tenth of the Alliance's three-year maximum budget of $65 million. "Between this and fixtures it is a big commitment to residential lighting," said Alliance deputy director Margie Gardner. "The board needs to want to be in residential lighting, because this is a significant amount of money."
It is, agreed board member Larry Bryant, but he called residential lighting "one of our flagships in market transformation, one that people can put their hands on and see there's an opportunity in every home." Board member Brian Hedman suggested that buying a compact fluorescent light bulb "triggers a thought process" in people that can lead to future consideration and purchases of energy-efficient products.
To those hesitant about the residential lighting budget, board member Nancy Hirsh responded, "I'm not inclined to want to delay. I do think there's merit in working with the fixtures program if possible, looking at ways to maximize our budget and target an area where we can make and are already seeing significant market transformation. That's something that will only build." Board members Jim Baggs believes it wise to spend large amounts of Alliance money where it can have the most impact, rather than a widely scattered shotgun approach. "We should have the courage to go ahead and say, 'Yes, some things we're going to throw big money at,'" added board member Bev Corwin.
In the end the LightWise extension passed unanimously, and Hedman joked, "I'm really annoyed we spent an hour and a half arguing about this."
Building Commissioning
In its initial foray into building commissioning, the Alliance will issue a request for proposals focused on assessing the market for commissioning and developing a plan for intervening in the market. This work will "establish the foundation for any future Alliance efforts" in building commissioning, according to an Alliance staff memo. The ultimate goal is for commissioning to become a self-sustained standard practice in commercial buildings.
"Despite the fact that there are now a good number of case studies documenting the benefits of including commissioning in the design/build/operations process, there remains a lack of either interest or willingness in the market place to adopt these practices on a wide scale," according to the RFP proposal, which was initially developed by the ad hoc Northwest Building Commissioning Collaborative. "It is also not clear at this time exactly what the infrastructure needs will be to support a market where most buildings are in fact commissioned." (See Con.WEB, March 28, for a story on building commissioning).
In addition to such benefits as increased occupant comfort, better indoor air quality, improved functioning of building systems and reduced operations and maintenance expenses, commissioning can save a lot of energy. The Northwest Power Planning Council's draft 1996 power plan identifies about 200 a potential electric energy efficiencies from commissioning regionwide through 2015, at a total cost of less than 1.5 cents/KWh.
The RFP process approved by the Alliance board has five major objectives: 1) Determine which segments of the commercial building market are most appropriate for commissioning; 2) Establish techniques to measure commissioning practices; 3) Identify barriers to widespread adoption of commissioning; 4) Determine opportunities to overcome those barriers; 5) Create an action plan with priorities for market intervention. "By starting with a firm basis of market research, this proposal will produce a strategy that prioritizes the actions the Alliance should take to be the most appropriate and highly leveraged efforts possible," said the staff memo.
Board member Liz Klumpp praised the Alliance staff for taking this approach to building commissioning. "I think staff's been thinking creatively here, and I want to encourage that," she said.
The budget for this project is $110,000, although the actual spending may vary slightly depending on the RFP responses.
Con.WEB
The Alliance board unanimously approved a funding extension for publication of Con.WEB, effective June 1, during which Alliance staff will negotiate with NewsData, publishers of Con.WEB, for information services.
NewsData had proposed financial support of Con.WEB, in addition to prospective services including a printed quarterly edition, increased promotion of the Web publication, fax access for readers without Web access, targeted market transformation articles and development of an interim Alliance Web site.
"It was clear from . . . the proposal that [NewsData publisher] Cyrus [Noë] wanted to find a way to meet the Alliance's needs focusing on market transformation and at the same time continue, for now, to provide overview coverage of the DSM/conservation scene in the Pacific Northwest," according to an Alliance staff memo.
The staff, in consultation with Noë, recommended a modified proposal including development of an Alliance external Web site and internal FTP site; continued Con.WEB publication with promotion of market transformation and links to the Alliance site; writing, editing, posting and archiving market transformation information for the Alliance; developing a quarterly printed report distributed to stakeholders; promoting the Alliance and Con.WEB sites to increase readership; providing fax-access service; producing various spin-off documents for target audiences; and providing training and technical assistance to help the Alliance staff directly post information to the Web and FTP sites.
"Many of the things Cyrus proposed we think we ought to do as part of our overall Web site activities," Will Lutgen told the board on June 9.
Klumpp, among other board members, supported further Alliance partnership with NewsData. In addition, she also encouraged the staff to "reach out to a variety of PR, communications, marketing specialists" who can also help the Alliance in its communications strategies.
Energy Codes
Interim infrastructure support for energy codes in the four Northwest states received Alliance board endorsement on June 10, as did a request for proposals for a long-range plan for supporting energy codes in the region.
The state government proposals, according to an Alliance staff memo, "will maintain current code support efforts in anticipation of the long-term code effort. The activities vary substantially by state, but are generally aimed at completing prior commitments to put codes into practice (Idaho and Oregon), or to transition current activities towards future ventures (Washington and Montana)."
The total budget for the state code work is about $395,000: $170,000 for Oregon for a year, $114,500 for Idaho for a year, $98,050 for Washington for six months and $12,000 for Montana for six months.
In the meantime, the Alliance will solicit proposals to develop a long-term strategy for the support of energy codes around the region. This has three main goals, according to the staff-developed RFP proposal: 1) Transform the energy-code support structure from its current reliance on utility and other "external" funding sources to more stable long-term sources; 2) Improve compliance with existing energy-code requirements, to gain so-called "lost opportunity" energy savings; 3) Provide a way for new energy-efficiency measures to be introduced and adopted into energy codes.
Energy codes in the Northwest have saved about 220 aMW since 1980; at current levels of stringency and compliance, additional savings would amount to 620 aMW by 2015.
The projected budget for developing a long-term code plan is $108,000, although the exact costs will be determined through the RFP process. The RFP is scheduled to be issued soon, and a final plan delivered to the Alliance in November.
Window Products
A proposal from the Northwest Fenestration Efficiency Collaborative, coordinated by the Oregon Office of Energy, sought $2.5 million from the Alliance over three years, of which $1 million was earmarked for the first year.
The goal of the project was to increase consumer demand, mainly by advertising and promotion, for more energy-efficient windows and patio doors toward eventual adoption of the higher efficiency standard in code. The higher efficiency windows represent a potential 8 to 10 percent space-heat reduction in homes where they are installed.
The Alliance was asked to provide about 75 percent of a three-year budget of $3.2 million, the remainder to come from the manufacturers, builders and state agencies in the collaborative. The estimated electric savings were 13 aMW at a total cost of 2 cents/KWh.
Board member Jake Fey withdrew his earlier motion in favor of funding and announced his opposition, citing unacceptable risks and calling it a "million dollar gamble." Board member Jon Powell agreed with Fey.
Board member Ken Keating said he appreciated the enthusiasm of the manufacturers but would have liked more buy-in bucks, although he said it ought to be tried for $l million first-year funding. Board member Stan Price said he would be interested in seeing a scaled-down proposal. The board ultimately overruled the staff's recommended support and voted nine to five not to fund the window proposal.
Compact Fluorescent Fixtures
The Alliance board on June 23 approved $3.4 million for a 30-month program that will offer performance rewards to manufacturers and/or wholesale distributors of energy efficient lighting fixtures. The program, which, like LightWise, will be operated by PECI, involves partnering retailers and wholesalers with fixture manufacturers and launching a focused consumer marketing and ad campaign to emphasize the benefits of efficient fixtures.
"Who is the target market, and how do we reach them best?" asked Alliance chairman Dave Houser. "Has anyone looked at this?"
Gardner said there are two target markets: distributors of lighting fixtures and the "Home Base/Home Depot clientele" of do-it-yourselfers. "Media ads are geared to these [retail shoppers]," she said, while the distributor/wholesaler market will require personal contacts. At the same time, the partnerships between retailers and manufacturers are aimed at increasing the availability of point-of-purchase materials at store displays, said PECI's Lois Gordon.
In recommending approval of the proposal, Alliance staff added the requirement for a board review at 18 months to weigh further efforts in the Lightwise fixture program against other options available and against its track record. In addition, Gardner said administrative costs for the program could decrease if PECI were able to run similar programs for other utilities or organizations; in that case, the Alliance wants the opportunity to request a revised administration budget.
Under the proposal the program will start with a focus on hard-wired fixtures, but it's flexible enough to incorporate portable fixtures, such as table lamps, and other developing lighting technologies. "It looks like we took the Lightwise bulbs and fixtures programs in the wrong order," commented Houser. But according to Keating, "You can't separate the two programs if you want to get consumer acceptance." And board member Charlie Grist said lack of a fixtures program has been a "fundamental problem in transforming the lighting market."
The Lightwise Fixtures program is expected to save 6 aMW over 2-1/2 years at a cost of 1.3 cents per kilowatt-hour.
Super Good Cents Manufactured Housing
The Alliance board also breathed new life into the old MAP--or Manufactured Housing Acquisition Program--by approving a proposal from the Idaho Department of Water Resources Energy Division for infrastructure maintenance and market development of manufactured homes built to Super Good Cents standards.
The program includes regional television advertising; retailer sales training and marketing support; promotion of energy-efficient financing for purchase of SGC manufactured homes; and educational efforts, tailored to each state's needs, to ensure proper site preparation and installation of SGC manufacture homes. Subcontractors include the Washington State University Energy Extension Program, Montana Department Of Environmental Quality and Bonneville Power Administration. Additional partners are the Oregon Office of Energy, Northwest Pride (the marketing association for the region's manufactured housing industry) and Pacific Northwest National Laboratory.
IDWR's funding request to the Alliance was for $1.3 million for three years--about half the cost of the program. The rest will be covered by venture partners and fee revenues. If the venture achieves its goal of an 85-percent market penetration rate by the year 2000 and sustains it through 2007, the region would save 12 aMW of energy. But that assumes the current market penetration rate of 60 percent can be sustained without the program; if not, each 1 percent reduction in SGC market penetration would reduce regional savings by about .5 aMW over the same time period.
Some board members voiced skepticism on the chances of meeting the target market penetration goal. Fey asked if the program would be economically justified if penetration rates hung on at 60 percent.
Under that scenario, the program would be "economically justified but not necessarily self-supporting," according to the Northwest Power Planning Council's Tom Eckman.
Fey ended up voting in favor of the program, but still doubted the 85-percent market penetration rate would be accomplished. But "we'll leave the market permanently changed," Fey said. "With minimum reservations, I'm prepared to support it."
Jon Powell was the sole no vote on the board. "I'm not convinced they'll be able to get the most recalcitrant sectors of the market up to Super Good Cents standards," Powell said. Klumpp, however, viewed it as a conclusion of the old MAP--an opportunity to provide "the wrap, the closure . . . so as familiarity increases the infrastructure is there to support the program."
Energy Ideas Clearinghouse
The question of whether the Alliance should fund a program that provides information that doesn't specifically fall under market transformation was a complicating factor in the board's decision on the Energy Ideas Clearinghouse.
The Clearinghouse, which began in 1989 with BPA funding, provides technical engineering assistance on energy efficiency, through an international bulletin board system, a Web site and a toll-free hot line. The Clearinghouse now serves regions beyond the Northwest and receives funding from a number of sources. But its contracts with BPA and other Northwest funders expire at the end of June, and the Clearinghouse asked the Alliance for $305,000 to cover another year of operation.
Alliance staff made no recommendation to the board on this proposal. Nonetheless, Fey suggested the board delegate responsibility to the staff to determine if the Clearinghouse's activities fit within the Alliance's goals and, to the extent they do, negotiate a contract reflecting that convergence. Fey said the Clearinghouse proposal was "not a venture but an infrastructure proposal that currently isn't directed towards the Alliance's goals, but could be."
Hedman, however, disagreed. "This is very much market transformation in a venture form," he said. "Absent knowledge on which they can get an answer, people will go with the lowest cost [product or method]. Providing technical information allows the market to be transformed by providing people with enough information to make an educated choice."
And Grist wondered if it was fair for the board "to kick this back to the staff" in the first place. Fey responded that the Clearinghouse was not "at the core of what we do" and that "$300,000 may not be the right amount of money."
After additional discussion, the board decided to approve six months of interim funding--provided by Bonneville, which would be reimbursed or credited by the Alliance--during which time the staff would more thoroughly examine how Clearinghouse activities support the Alliance's mission.
Corwin thinks the Alliance could learn something from supporting the Clearinghouse even if its information services aren't directly aimed at market transformation. "I want to see a place to go with questions on energy efficiency and then I want to know does anybody ask them," she said.
National Standards
Another proposal that raised a lot of board-member questions involved staff support for participation in three national standards processes: appliance efficiency standards, window efficiency testing standards and updated ASHRAE commercial lighting codes.
The proposal, from the Oregon Office of Energy, sought $168,000 for 12 months starting July 1 to cover OOE participation in the three forums to represent the Alliance's interests in energy efficiency. Three OOE staffers are members of the subcommittees addressing these issues--one sits on the U.S. Department of Energy committee on appliance efficiency standards; another belongs to the technical steering committee for the National Fenestration Rating Council and chairs the rating/codes/standards committee; and the third chairs the ASHRAE lighting subcommittee.
Houser expressed concern about the real value of OOE staff's involvement in the processes. "One position on a subcommittee provides some influence, are we valuing that too highly?" he asked. "Would we be better off with one FTE participating in a broader set of code activities?"
Those concerns are behind staff's recommendation to develop a work plan for national processes and standards, said Gardner. In addition, staff suggested the board approve the proposal for six months, rather than 12, at a budget not to exceed $80,000, and that NEEA retain policy oversight rather than turning that responsibility over to OOE.
Klumpp offered an amendment to approve a 12-month contract with a six-month review, rather than the staff's six-month recommendation. Board members approved Klumpp's recommendation, although several of them--including Houser and Carol Brown--hesitated before casting a yes vote, while Gary Mahugh voted no.
In other business, the board voted unanimously to provide a contingency fund of $170,000 for the WashWise program working the market for energy and water efficient front-loading washing machines. The staff memo asking approval said the funds would "be used for rebates and processing those rebates in the event the original budget in this area [$1.2 million] is exhausted before December 31, 1997. If the funds are not used for rebates, they will simply remain with the Alliance."
The board's next scheduled meeting is Aug. 12 in Kalispell, MT.--Mark Ohrenschall, Jude Noland and Cyrus Noë
The Idaho Public Utilities Commission will soon decide whether Idaho Power's proposal to fund its participation in the Northwest Energy Efficiency Alliance through a flat-rate meters charge contradicts a rate-freeze agreement.
The IPUC held a June 25 pre hearing conference on Idaho Power's proposal, under which it would assess customers a surcharge--the amount based on customer class--to fund virtually all of its planned $4.25 million Alliance budget through 1999 (see Con.WEB, April 25, and Con.WEB, Jan. 24, for more details on the proposal).
But instead of a typical pre hearing conference, the meeting ended up more like a workshop during which representatives of Idaho Power, the Alliance and intervenors in the case presented their views and asked questions.
At the end of the three-hour session, commissioners said they would issue an order in the near future on a critical point of contention: whether Idaho Power's proposal violates a rate-freeze agreement reached in the company's last general rate case. If the answer is yes, the rest of the issues are moot. If the answer is no, the commission will set a schedule to deal with other issues related to the company's proposal.
While both the utility and IPUC staff, in their filed comments, have said the Idaho Power funding proposal does not violate the rate-freeze agreement, several intervenors--including the Rate Fairness Group and the Industrial Customers of Idaho Power--disagree. Other intervenors in the case include Micron Technologies, Northwest Conservation Act Coalition and the Idaho Citizens Network; the latter two support the utility's proposal.
During the meeting, commissioners heard from Alliance executive director Will Lutgen, who briefed the IPUC on the structure and purpose of the organization. Idaho Power's Jim Baggs also talked to the commissioners, explaining in more detail Idaho Power's perspective on participation in NEEA.
Baggs told Con.WEB the Idaho PUC has until the end of July, statutorily, to make a decision on the utility's filing. He added that Idaho Power had hoped to begin collecting funds for its NEEA costs as of June 1. "There's some urgency to get an answer here," he said. --Jude Noland
Six months after the conclusion of the Regional Review, only one of the four Northwest states--Montana--has approved electric industry restructuring legislation with provisions for public-purposes funding of energy conservation, renewable resources and low-income energy assistance.
The other three states continue to mull the complex and controversial issues associated with fundamental changes in the electric industry.
Oregon lawmakers debated restructuring into June, but in the end proposed legislation died in committee. In Washington, potential restructuring legislation fizzled in March, although many observers expect the issue to resurface in the 1998 session. Idaho, meanwhile, is taking a cautious approach, and a state senator co-chairing an interim legislative study committee on electric restructuring has predicted no legislation passing in 1998.
At the national level, a number of electric industry restructuring bills have been introduced in Congress but the process remains in a formative stage.
Following are summaries of restructuring activities in three of the four Northwest states, with a focus on conservation and renewables. We'll take a look at Oregon in July and the national scene in a future issue.
Montana
The Last Best Place is now The First Restructured Place--at least in the Northwest.
On May 2, Gov. Marc Racicot signed the Electric Utility Industry Restructuring and Consumer Choice Act, which passed the state House of Representatives and Senate in April.
As the title indicates, the bill provides for customer choice of electric supplier by July 1998--for large customers--and by July 2002 for all other customers of investor-owned utilities (notably Montana Power). Other provisions include utility recovery of transition (also known as stranded) costs, with an option for bond financing to cover some of the costs; a rate freeze for all customers from July 1998 through June 2000; open-access transmission and distribution systems; functional separation of utility power supply, transmission, distribution and retail energy services; continued regulation by the Public Service Commission of retail transmission and distribution; licensing of electric suppliers; and creation of a legislative transition oversight committee.
Many similar guidelines apply to the state's rural electric cooperatives, although they can choose to exempt themselves from all but the public-purposes-funding requirement.
For public purposes, the restructuring bill sets aside 2.4 percent of each utility's annual retail sales revenue in Montana--based on 1995 levels--for energy conservation (including market transformation), low-income weatherization and energy assistance, renewable energy projects, and research and development for conservation and renewables. At least 17 percent of the total spending must go to low-income programs.
The program costs will be collected through a meters charge for each utility customer.
Utilities as well as large customers (loads greater than 1,000 kilowatts) will receive credit toward the 2.4 percent requirement for their own internal public-purposes initiatives. Any shortfalls will require payment to a conservation/renewables fund or a low-income fund.
Cooperatives, meanwhile, can pool their public-purposes activities statewide to meet the 2.4-percent mandate.
The public-purposes funding starts in January 1999 and continues to July 2003.
Why 2.4 Percent?
One of the most fundamental questions about Montana's public-purposes program is: Why 2.4 percent?
The answer appears to be: Political compromise.
The Regional Review steering committee recommended 3 percent funding for conservation, renewables and low-income weatherization and energy efficiency services (not including low-income energy assistance, which warranted separate funding). However, according to Montana Power president Bob Gannon, a steering committee member, the Review's final report acknowledged Montana's unique situation of less than half of its land and population being covered by the regional forum.
Gannon, in an opinion piece in the Great Falls Tribune, wrote that Montana Power was "not troubled" with a 3-percent level for public-purposes funding. Similar sentiments came from Racicot's office and many cooperative utilities, according to Bill Drummond, manager of the Western Montana Electric Generating & Transmission Cooperative and also a Review steering committee member. Others supporting 3 percent included PSC commissioners Bob Anderson and Bob Rowe and the Northwest Conservation Act Coalition.
However, Drummond acknowledged opposition from cooperatives in eastern Montana that he said are not as familiar with energy efficiency as those in western Montana that have operated Bonneville Power Administration conservation programs over the years. "They weren't very happy with it at all," he said of east-side utilities. "They saw this as a tax . . . another requirement that they don't currently face. For those of us who've been under the requirements of the Northwest Power Act for 17 years, it doesn't come as a big shock."
Many legislators also were concerned about increased costs for citizens, according to Montana Power's Pat Corcoran. "The Montana Legislature kind of had a no-new-taxes frame of reference," he said.
In the end, 2.4 percent roughly reflects current levels of public-purposes funding, according to John Hines of the Montana office of the Northwest Power Planning Council. Total 1995 public-purposes spending by all Montana utilities amounted to slightly more than 2 percent, he said; the remainder covers the electric industry's share of declining federal funding for low-income energy programs.
Hines estimated the 2.4 percent will provide $13 million to $14 million in annual public-purposes funding around the state.
As for why Montana opted for a funding requirement instead of some other standard for public purposes, the answer seems to be pragmatism--as it was in the Regional Review. "The idea of coming up with, much less even measuring some sort of regional efficiency standard, is just problematic," said Drummond. "It was much, much easier just to assign a tax to everybody and assess it that way." Non-dollar guidelines weren't even discussed in Montana, he added.
Montana Power, Western Montana Cooperatives Perspectives
For Montana Power, which serves 278,000 electric customers, 2.4 percent of its 1995 retail sales revenues comes to about $8.6 million, according to Corcoran. This exceeds current utility funding of conservation, renewables and low-income energy programs of about $7 million. However, previous funding levels have surpassed 2.4 percent; in 1993, for example, the IOU spent $10.6 million for conservation programs and budgeted $14.1 million in 1994.
"We've always been very proactive with regards to the funding of those types of [public-purposes] programs," Corcoran said. "The 2.4 percent is something we're very comfortable with."
Montana Power's transition plan filing is due July 1 to the PSC, and will include specific public-purposes proposals that Corcoran said will probably resemble the current mix. Those include assorted conservation programs, the utility's participation in the Northwest Energy Efficiency Alliance and some specialized renewables applications. For green power, Montana Power is looking into solar-powered irrigation pumping and has been involved in some wind-energy activities. However, Corcoran indicated Montana Power is unlikely to invest in out-of-state renewables, such as planned wind farms in Washington and Wyoming, since it would prefer to spend its money in Montana.
Corcoran is uncertain how much of the 2.4-percent requirement might be accomplished by Montana Power's large commercial and industrial customers. "It just depends what options large customers have. Some have already done some of the things" to become more energy-efficient. "It just depends on the particular business and operations."
In any case, Montana Power is not worried about the public-purposes funding posing any competitive disadvantage for the utility in a competitive market, since all electric customers in Montana will be obligated to pay regardless of their power supplier.
For the six rural cooperative members of the Western Montana G & T--Flathead, Glacier, Lincoln, Missoula, Ravalli County and Vigilante rural cooperatives--2.4-percent funding on public purposes actually is a decrease from current spending. Drummond said the statewide cooperative average is about 3.5 percent, and he believes the figure is even higher among his members, although "there are lots of questions to be answered how you calculate the 3.5 or the 2.4 [percent]." For example, does a 100-percent BPA customer get credit for its portion of BPA's debt service on its past conservation expenditures?
Regardless, said Drummond, "This is something we can make work for us." In fact, he sees the public-purposes funding as a potential competitive advantage: "One aspect of this bill allows you to turn over money to the state to have the state make investments in renewables and efficiency programs. I personally think that's crazy. Anybody who does that is nuts. They're missing a golden opportunity to position their utility in the minds of their consumers. As an example, you could take a portion of your 2.4 percent, invest that or use that to subsidize a renewable resource, a green power rate for example, and you'd be a hero."
On the efficiency side, the G & T has developed an energy services guide, which Drummond called "a series of common programs [and] projects that we're continuing to pursue." The cooperative is moving away from reliance on BPA conservation funding, and is also shifting from rebates and subsidies to more sustainable approaches in a competitive market, such as loans. Still, Drummond noted the G & T is having trouble interesting rural lenders in partnering on efficiency loan programs, because of the low volume and the largely residential, dispersed service territories of cooperatives. "I anticipate we will see more partnership with people who already have efficiency programs developed and that utilities might end up marketing efficiency programs in their service territory, much like was done with Super Good Cents."
Although Montana cooperatives can elect to stay on the sidelines of the competitive electric field, Drummond expects all of his members eventually to join the fray--although he doesn't predict when. "I think the vast majority of co-ops believe that opting out would be nothing more than a holding action, a short-term response to buy you a little time. Ultimately, you would have to answer at your next annual meeting why it is you decided your members should not have a choice of power suppliers. And you better have a good answer."
Montana Power, too, looks forward to the competitive world. "The [public purposes] charge is just one item amongst many," said Corcoran. "We're pleased with where the bill ended up as part of the collaborative effort of all the interested parties. The bill taken as a whole is something we're pleased with."
How Montana Restructured
It may seem surprising that a state with reasonably low-cost electricity passed restructuring legislation in a few short months, since the potential benefits of competition in lowering rates are not as apparent as in high-cost states like California. "I think many people [are] rather shocked," said Drummond.
A number of reasons are advanced for Montana's full-speed approach. One prominent explanation is the fact Montana's Legislature only meets every other year, and wouldn't get another crack at restructuring until 1999. "That was a critical point for me and other legislators" supporting restructuring, state Sen. Fred Thomas told a Portland restructuring conference on May 30. By the time Congress acts, he said, Montana will have already dealt with stranded costs, public-purposes funding and other major restructuring issues.
"We were concerned issues would pass us by," said Hines. "We'd have less ability to lead and be more of a follower. That was a real key reason for acting, as well as a sense of urgency we wanted to be able to direct our future."
He also described Montana as "a small enough state we could get most of the major interests in the room." These interests found "a lot of commonalities between them, which allowed compromises to be made." IOUs, he said, wanted to provide customer choice, and be compensated for stranded costs. Cooperatives were concerned about maintaining local control. Industrial customers clearly wanted market opportunities, and some say in stranded-cost calculations. Environmental and low-income advocates sought funding for public-purposes programs. The governor wanted to ensure ratepayers were not disadvantaged, nor were subject to unfair cost-shifting.
Hines called the restructuring act "a good piece of legislation that recognized all the diverse interests of Montana, allowing the market to be able to start operating."
Washington
Electric industry restructuring legislation was considered at some length in Olympia this year, but did not gain sufficient consensus. The issue is likely to surface again during the 1998 session, according to observers.
A major restructuring bill did pass the Senate Energy & Utilities Committee in early March. The bill would have allowed open access as of July 1999. It also would have established a 3-percent charge on all electric customers for conservation and renewables. Up to 18 percent of this public-purposes funding could have been spent on low-income weatherization and up to another 18 percent on market transformation. Renewables could have received up to 15 percent of the funds. This charge would have been re-evaluated by the legislature by 2002, and would have ended no later than 2009.
However, this comprehensive bill proved "just a little bit too controversial," according to staffer Phil Moeller of the Energy & Utilities Committee. Puget Sound Energy, among others, opposed the measure. Puget government relations manager Mike Tracy called the bill "unjust and unfair," and said it "just demands that a customer can buy power from anyone they want and leave us with a responsibility to cover their loads."
Tracy also said he wasn't sure about the 3-percent proposed funding for public purposes. On the other hand, Enid Layes, lobbyist for Industrial Customers of Northwest Utilities, said her organization had agreed to the 3-percent provision for conservation, renewables and low-income energy services. "I don't think anyone is against it," she said, although acknowledging potential questions about allocation of the funds.
A similar view came from K.C. Golden, a Review steering committee member and assistant director of the Washington Energy Policy Group of the state Department of Community, Trade and Economic Development. "I think [3 percent] had pretty broad support," he said. "What it applied to was still a subject of some debate."
In the end, no electric restructuring legislation passed in the Evergreen State this year.
As for 1998, "There's just a lot of uncertainty," said Golden. Many people will be watching California's retail competition debut next year, he said, and the federal perspective is still murky.
A different take came from David Arbaugh, until recently a lobbyist for the Washington PUD Association. "The outlook for next session is that something will happen," said Arbaugh, who believes restructuring legislation will be adopted in 1998, but not necessarily a comprehensive approach. It may take a couple of more years to address all the major issues. "This is not in my view a one-shot process," Arbaugh said.
He also believes that "public purposes factors critically in all this." Conservation, renewables and low-income provisions are necessary to ensure Democratic support in the Legislature, according to Arbaugh, and such an important issue as restructuring will require a bipartisan approach.
Gov. Gary Locke has weighed into the debate with a statement of broad principles for electric industry restructuring. Among the six principles: "All users of Washington's electric power system must share in system-wide benefits and obligations that promote efficiency, conservation, renewable sources of energy, and environmentally sound practices." He called for a collective charge on all power customers, irrespective of supplier, to fund these initiatives.
Idaho
The Idaho legislature did not seriously consider comprehensive restructuring this year, although an interim House-Senate committee is studying restructuring issues.
"We are attempting to be very, very thorough and deliberate and careful," said state Sen. John Hansen, who co-chairs the committee. Speaking at a Portland restructuring conference in May, he said that Idahoans, like Dorothy and her friends in "The Wizard of Oz," are inclined "to get behind the curtain and make certain we all know what's happening."
Committee staffer Mike Nugent agrees. "I do think the mode is being cautious and go slow. What's really wrong with the system we have right now?" The study committee "feels that Idaho has a lot more to lose than to gain from the whole subject of power deregulation." Power rates are already very low, he noted, and as a largely rural state Idaho has not reaped great benefits from airline and telecommunications deregulation.
Although large power users view electric restructuring as "the land of milk and honey," Nugent said many other interests in Idaho--including irrigators and small businesses--"are just scared to death" at the prospects of a competitive market and its consequences.
Conservation and renewables are "peripheral" to the restructuring debate in Idaho, according to Nugent. Some Idaho legislators believe the Regional Review's public-purposes recommendations were done "just . . . to buy some people off, pure and simple."
Idaho is vitally dependent on water for power, commerce, irrigation, recreation and other activities. "I'm not sure some people driving the deregulation train" are sensitive to the importance of water in Idaho, Hanson said.
He, for one, does not see restructuring legislation in Idaho, at least in 1998. "I don't see the pressure there," he said at the Portland conference.
In addition to the legislative committee studying electric restructuring, Idaho Gov. Phil Batt has formed a Governor's Council on Hydroelectric and River Resources, chaired by former U.S. Sen. Jim McClure. This council is comprised of four citizens committees that will examine restructuring, hydro relicensing, river governance and public purposes. The consumer and public purposes committee, chaired by Boise attorney Chris Bray, will analyze safety, reliability, energy costs, conservation, low-income assistance and alternative energy sources.--Mark Ohrenschall, Jude Noland, Ben Tansey
For those despairing of the future of energy efficiency in a restructured competitive electric industry, a new report from the Northwest Power Planning Council offers considerable reason for hope. And for those who are already optimistic, here is affirmation.
"Competitive Energy Services Strategies in the Northwest: A Partial Eclipse of the Moon" roams around the region and finds numerous examples of utilities and other agencies incorporating a broad range of energy services--particularly efficiency--in their positioning for the competitive era.
Co-authors Jim Nybo and Ted Flanigan use the metaphor of a lunar eclipse to describe their findings. "There is no question that competition in the electric industry has eclipsed energy conservation," they write in the May NWPPC report. "But at the darkest point in a partial eclipse of the moon, the unshadowed crescent around the edge shines all the brighter. This report features the illuminating stories where conservation has become effectively integrated with corporate strategies to address competition . . . This bright assortment shows that conservation has been retooled and that a new class of customer-oriented energy services are being used as key features of service in an increasingly competitive utility environment."
Nybo, a former conservation analyst for the Council and now a Montana-based consulting economist, and Flanigan, who formerly headed The Results Center in Colorado, acknowledge the difficulties facing the demand-side today.
Competition, they write, has had a "major and detrimental impact on the region's focus on conservation." Utility concerns about rate impacts have led to shrinking conservation budgets and staff reassignments or layoffs. Declining energy prices, meanwhile, have reduced the cost-effectiveness of efficiency measures. The abundance of cheap power has essentially eliminated the need for conservation as a resource in the region. "Power marketing is where the action is hot, replacing a prior least-cost emphasis on conservation."
Investor-owned utilities are focused on mergers and acquisitions, while smaller utilities worry about their very survival under retail competition. "For both, conservation programs that have provided least-cost resources and environmental benefits have become distant priorities."
Flanigan and Nybo also offer some historical context, including the roller coaster of Northwest conservation over the past two decades. They credit Bonneville Power Administration as "the region's most powerful engine for conservation," and trace BPA's demand-side evolution from a source of centralized programs and funding for resource acquisition to its current role focused on nurturing market-based efficiency services and market transformation. Bonneville's substantially reduced conservation presence--its funding has dropped from nearly $220 million in 1994 to an estimated $65 million this year--has left "a gaping hole" in the region's energy-saving fabric, they write.
Yet despite these hard realities, Nybo and Flanigan have found what they call "a diversity of exciting competitive energy service strategies" that include energy efficiency as well as "complementary strategies involving diversified power supplies, power brokering, power generation, green power initiative[s] and organizational development.
"The strategies presented in this report hold promise for small to mid-sized utilities that face extinction due to competition and potential industry consolidation," they write. "Their survival may indeed be based on their ability to continue to serve their customers with locally delivered services uniquely tailored to local conditions. Through the repeated interactions that energy services affords, local providers can align their services with the specific demands of their long-held customers, assuring their viable role in the future."
In some detail, the report examines the energy services activities, strategies and thinking of 11 entities around the region: the Conservation and Renewable Energy System (CARES), Oregon Municipal Energy Conservation Agency (OMECA), Clark Public Utilities, Eugene Water & Electric Board, Kootenai Electric Cooperative, Montana Department of Environmental Quality, the Northwest Energy Efficiency Alliance, Pacific Northwest Generating Cooperative, Salem Electric Cooperative, Washington Water Power and Western Montana Generating & Transmission Cooperative. These are not the only proactive and innovative entities in the region, the authors note: "There are surely many more inspiring stories in the Pacific Northwest of utilities that are rising to the challenges of competition and finding satisfaction in tapping the opportunities that it unfolds."
Although many of the initiatives outlined in the report have been profiled in some fashion in Con.WEB and other energy publications, Nybo and Flanigan have pulled them together in a comprehensive, analytical and very readable manner. (Editor's note: The specific endeavors in "Partial Eclipse" don't lend themselves to brief summary, so we encourage interested people to read the report firsthand. Call the Council at 1-800-222-3355 and ask for document 97-1.)
Lessons Learned/Conclusions
Nybo and Flanigan list eight lessons learned from their research:
"Throughout the region, the authors sensed that energy-efficiency services illustrate the resolve of the utilities themselves," Nybo and Flanigan conclude. "Those unclear of the future, without clear visions of their purpose and scope and thus their direction, tend to have let conservation go by the wayside. Those with an aggressive stance and a clear direction appear to be embracing efficiency. They are broadening their past conservation focus to offer a range of customer-driven services, integrating these services with attractive supply-side opportunities for maximum value and customer benefit. These utilities are ahead of the curve, they have visions for the future that are allowing them to capitalize on change and to create sustainable win-win solutions with their customers."--Mark Ohrenschall
When outstanding architecture combines with energy efficiency, the result can be a triumph of form and function.
Buildings like this are at once challenging, rewarding--and uncommon.
This theme emerged at a recent awards program in Seattle intended to honor and encourage the integration of design and efficient energy use in Pacific Northwest commercial buildings.
The June 5-6 gathering--sponsored by the American Institute of Architects/Portland Chapter, Bonneville Power Administration, Portland General Electric and Battelle Conference Center--culminated with awards for five Northwest buildings. All five were praised by a panel of jurors for their combinations of design and efficiency--and all five also were acknowledged as falling short in some respects. Meanwhile, a group of award-winners from the previous four annual programs presented lessons they had learned.
"Some of the buildings have fabulous architecture," said Jeff Harris of the Northwest Power Planning Council, in a brief talk preceding the awards presentation. "Other have great energy features. But there's always that creative tension: How do you make those two mesh in a seamless blend of great technology [and] good art.?
"You folks as designers have all these pressures," Harris continued to the audience that consisted largely of architects. They need to be conversant in materials science, engineering, structures. Sustainability is now emerging as an architectural issue. The art of design must be remembered. And all this while fees are tight. Harris suggested a question for architects to ask themselves as they work: "How does this decision in this design in this building fit into the global context?"
Efficient Design Strategies, Benefits
Those who designed the buildings featured in this year's program were clearly thinking of ways to reduce energy and environmental impacts. Although each building is unique, a number of popular strategies were apparent: daylighting and solar access, site orientation, natural ventilation, energy-efficient lighting, windows, mechanical and control systems, use of recycled materials, strategic landscaping.
These various approaches all contribute to efficient use of resources. They also can provide other benefits.
One example is the administration building at the Washington Correction Center for Women, in Gig Harbor, which won a 1994 award. Architect Pierce McVey described the "amazing" boost to employee morale of such a seemingly innocuous feature as windows that people can open and shut. The extensive natural light provided in the building also is appreciated by workers. "The overall positive definitely had to do with daylighting," he noted. "It had become such an integral part of their lives in this office space." He walked in on a reasonably bright day and found that 20 percent of the lights had been turned off by people. "That was very rewarding to see," McVey said. He also acknowledged a few problems that had arisen, including overheating in some spaces, occasional glare on computer screens and angled windows that were difficult to clean.
At the Missoula Airport renovation and addition in western Montana, which won a 1995 citation for thermal conditioning, architect Eric Hefty recounted how a 1970s-era renovation had tried to save energy by cutting back on windows and installing high-pressure-sodium lighting. "It was a very, very unfriendly building," said Hefty. He explained that rural Western Montanans don't fly very often, and when they come to the airport they like to watch planes take off and land. In the old building they had to line up several deep to get a look outside--but not anymore. Hefty's design added high-performance windows. He also took out a 100-ton chiller and replaced it with a well-water cooling system, while improving the roof insulation. The daylighting, Hefty said, could be improved with mirrors to bounce light further inside and filtering techniques to mute the sharp sunlight that shines in Big Sky country.
Other designers noted such advantages of resource-efficient design as reduced operations and maintenance expenses and better indoor air quality.
And The Winners Are . . .
The panel of five distinguished jurors from around the nation--Robert Berkebile, Charles Benton, Nancy Clanton, Charles Eley and Harry Gordon--found much to admire in the nine projects they reviewed from around the Northwest.
"We saw several projects that had really good features," said Gordon, a founding member of the AIA Committee on the Environment and the leader of a heating/cooling team for the Greening of the White House project. These included architectural, mechanical engineering, lighting and sustainable design elements.
Still, he said, "In each one of the projects, in every one we looked at, we felt the opportunity for the integration of the architecture, the design, the sustainability . . . had been missed" in some regard.
It might have to do with process, Gordon suggested. He encouraged people to identify opportunities for resource sustainability in buildings "in steps that are parallel to the design process . . . There are no elegant solutions to a poorly defined problem." Unless architects, engineers, lighting designers and other professionals are examining sustainable solutions individually and collectively from the very beginning, "You don't have much chance of getting an integrated solution."
Following are summaries of the five award-winners and jury comments:
Idaho Power's plan to discontinue its program fostering the energy-efficient design of commercial buildings has been approved by the Idaho Public Utilities Commission.
The Design Excellence Award Program (DEAP) has promoted the use of energy-modeling software for new and extensively retrofitted commercial buildings since 1989, providing the software itself, energy-modeling training, efficiency guidelines for consideration, assistance in reporting results to clients, and incentives (ranging from $1,500 to $4,500) to participating design professionals. Idaho Power has reported spending of $2.1 million on DEAP between 1990 and 1995 and energy savings of 15.9 million kilowatt-hours, or 1.8 average megawatts.
Through the program, Idaho Power officials and many design professionals believe the market for energy-efficient building design has been effectively transformed in the utility's service territory (see Con.WEB, March 28). The utility now wants experienced designers responding to market demand and a prospective Idaho commercial energy code (also see Con.WEB, March 28) to chart the future, contending that DEAP has fulfilled its mission and is now common practice.
The IPUC agrees. "It is the inherent nature of some conservation programs that they have limited useful lives. We find that Idaho Power has accomplished the intended purpose of the DEAP," said the commission's May 27 order.
"The modeling software provided by the program is now, apparently, in general use by the design professional community and is being incorporated in new commercial buildings and retrofits of existing buildings," the IPUC order continued. "Participation in DEAP has diminished considerably. Furthermore, the majority of participation is in buildings heated primarily by natural gas. While reducing natural gas consumption is beneficial to society as a whole, the cost to achieve such savings should not be borne by the ratepayers of electric utilities."
The IPUC also agreed with its staff and the utility that "adding to Idaho Power's deferred accounts increases the Company's stranded cost exposure as the industry moves toward restructuring. That is not a risk worth taking for a conservation program that has outlived its useful life."
Although the program will end, the IPUC is requiring Idaho Power to "maintain the capability to provide technical support for users of the DEAP modeling software, if assistance is requested." Idaho Power also must make the software available to any new design firms who ask for it. And, it must notify design firms that have participated in DEAP and offer them up to two months to submit any new designs for review and possible participation in DEAP.
Idaho Power's Jim Baggs said the utility is pleased with the IPUC ruling, and he noted the lack of opposition to DEAP's discontinuation.--Mark Ohrenschall
Despite opposition from a group of industrial customers, Idaho Power has received final approval from the Idaho Public Utilities Commission to drop its flagship industrial conservation program.
The IPUC in mid-January had endorsed the utility's plans to end the Partners in Industrial Efficiency (PIE) program (see Con.WEB, Feb. 21). Idaho Power cited rate impacts, fears of stranded investment and evidence of transformed markets as primary reasons for its action.
Soon after the IPUC's decision, the Industrial Customers of Idaho Power--a trade group representing more than a dozen customers with 60 percent of the utility's industrial load--petitioned for and was granted a reconsideration.
On May 30, the IPUC affirmed its original decision and rejected ICIP's arguments. This effectively ends the process; ICIP can appeal the decision to the Idaho Supreme Court, but attorney Peter Richardson said in early June that the customer group he represents most likely won't pursue the issue. "We still think we're right, but the Supreme Court gives the commission great deference on a lot of policy questions," he said.
The IPUC's May 30 ruling came down against the ICIP on two key points.
First, the ICIP contended that PIE program expenses were not identified as a potentially stranded cost or asset in a competitive electric market. The customer group argued--as summarized in the commission's ruling--that PIE could only be terminated as stranded if the IPUC defined the term and then classified all the company's assets as either stranded or not stranded.
"We reject the ICIP's contention that our decision whether to terminate the PIE program requires that we first identify and quantify Idaho Power's stranded costs," the commissioners found. " . . . we recognize that an investment by a regulated utility in deferred accounts, such as those created when a DSM program is implemented, generally increases that utility's risk in light of a restructuring of the electric industry. It is not necessary that we quantify the magnitude of that risk in order to recognize its existence."
In addition, the commission noted that it did not approve PIE's termination strictly on the risk of stranded costs. It cited the existence of the Northwest Energy Efficiency Alliance as a regionwide conservation initiative. The commission also said "several of the technologies funded through the PIE program, including efficient lighting measures, variable speed drives and more efficient refrigeration technologies, are now becoming commonly used by Idaho Power's industrial customers lessening the need for the PIE program."
Secondly, the IPUC rejected the industrial customer group's argument that ending the PIE program constituted discrimination, since industrial customers would continue to pay through rates for other conservation programs but would not have access to such programs for themselves. "The ICIP argues that the PIE program is one of Idaho Power's most cost effective" conservation programs, according to the ruling. "The ICIP supports the termination of PIE on the basis that the industrial customers are more interested in securing lower rates than they are in investing in potentially stranded assets. The ICIP contends, however, that forcing the industrial class to pay for nonindustrial conservation, while terminating industrial conservation programs, defeats Idaho Power's stated goal and is not beneficial to the industrial class as a whole." To avoid discrimination, ICIP contended, all other Idaho Power conservation programs should be ended or the industrial class should be insulated from paying for them.
No, said the commission. First, industrial customers still have access to Idaho Power's commercial lighting program. "Second . . . conservation programs specific to other classes have been terminated in the past (e.g. the Good Cents Program, the Mobile [Manufactured] Home Acquisition Program, etc.) without 'insulation' of the customer classes from paying the costs of programs designed to benefit other classes. The ICIP's claim of discrimination is, in fact, a request for preferential treatment. Morever, as [commission] Staff notes, expenses related to conservation have never been allocated to specific customer classes because all customers benefit from the acquisition of cost effective resources."
Finally, the commission said, " . . .the ICIP never disputed Idaho Power's observation that many of the conservation measures provided under the program are now available to industrial customers on the open market, lessening the need for the program."
Richardson said the customer group is "disappointed" in the ruling, while Idaho Power's Jim Baggs said the utility is "pleased that the commission ruled again in our favor."
PIE began in mid-1991 and offered substantial funding for industrial conservation projects: a maximum of 50 percent of project cost or 10 cents per kilowatt-hour saved, up to $250,000 per customer account. From 1992 through 1995, 48 customers participated in PIE. They averaged 869,044 KWh in annual savings. Total direct costs averaged $162,719, including an average Idaho Power incentive of $50,777.
Although Idaho Power will not have an industrial conservation program as such in the absence of PIE, Baggs said in February that "we would continue to work with our industrial customers on an individual case-by-case basis to assist them with their energy efficiency needs." Financing, technical support and technological information are among the possible efficiency services for industrial customers, he said--but no more rebates.--Mark Ohrenschall
The Springfield Utility Board, in a recently disclosed lawsuit, has accused Bonneville Power Administration of excluding it from talks terminating any obligation BPA may have had to purchase power from Calpine Corp.'s proposed 30-megawatt geothermal project at Glass Mountain in California.
SUB was one of the signers of a 1993 memorandum of understanding under which the project is being developed. It also has a billing credits agreement with BPA for a 9 aMW share of the project. BPA officials have declined comment on the lawsuit or the settlement, in which it agreed to pay Calpine at least $12 million. The federal agency also reached a similar agreement with another geothermal developer that cost it $9 million.
The suit claims SUB was excluded from negotiations that led to a settlement last December in which BPA and Calpine Siskiyou Geothermal Partners agreed to terminate any obligation BPA may have had to purchase power from the proposed Glass Mountain (also known as Fourmile Hill) geothermal project in Northern California, 25 miles south of the Oregon border. SUB, BPA and Calpine's predecessor signed a memorandum of understanding in January 1993 to develop the project.
The settlement "was executed without the knowledge of SUB and in violation of SUB's rights under the MOU and the Northwest Power Act," reads the March 26 9th Circuit Court of Appeals filing. According to the petition, the settlement was consummated only days after SUB "executed a confidentiality agreement concerning discussions among the three parties 'over the respective rights and obligations of each party under the MOU.'"
The petition, which seeks to invalidate the settlement, notes that under the MOU, modifications can be made "only by written amendment executed by all of the parties." It also asserts that none of the conditions recognized in the MOU as grounds for termination have been satisfied. In addition, SUB complained, Bonneville refused to provide the utility with a copy of the settlement agreement. "One thing we want that isn't in the petition is an honest, coherent explanation of what they've presumed to do to us," said SUB attorney John Cameron.
BPA's response was brief. "We are going to have to deal with this in the courts," said an agency spokesman. "There are some questions Bonneville has to have answered regarding the filing, and we're hopeful we'll get those through normal procedures."
In its March 11 record of decision on the settlement, BPA acknowledged that SUB did not participate in the negotiations and did not sign the settlement. "BPA was not authorized by SUB to represent its interests, and BPA made no representations to Calpine that it was representing SUB," according to the ROD. The Oregonian newspaper reported that BPA administrator Randy Hardy "declined to discuss why his agency cut SUB out or why it declined to release to SUB the settlement agreement."
The ROD was issued shortly after SUB had sent a list of "settlement conditions" to BPA. These included termination of the 21-MW surplus power deal SUB signed with BPA last summer and retention of its 21 aMW firm resource exhibit for 1998. However, these items were not mentioned in SUB's 9th Circuit petition.
The decision to seek the Calpine settlement, and a similar one on the other geothermal project in which BPA has an interest (see below), were "reasonable decisions," said Rachel Shimshak of the Renewable Northwest Project. She said Bonneville has reduced its costs and created more financial certainty for the developers while creating more flexibility in its renewable options without reducing its overall commitment to renewables.
Calpine got involved with Glass Mountain when it formed a partnership with Trans-Pacific Geothermal Corp., the developer that signed the original memorandum of understanding with SUB and BPA. The MOU calls for a 45-year power purchase agreement, with an option to develop another 100 MW. In a separate billing credits agreement, SUB agreed to acquire a 9 aMW share of the project for the same term. After Trans-Pacific determined the geothermal potential at the original Vale, OR site was inadequate, it formed a partnership with Calpine, which moved the project to Glass Mountain, where Calpine has some leasehold interests. Trans-Pacific has since dropped out of the partnership.
According to Calpine Corp.'s March 31 10-K filing to the Securities and Exchange Commission, it and BPA "entered into a settlement agreement which restructured the rights and obligations of the parties. In return for a $12 million payment by BPA to the partnership and the grant by the partnership to BPA of future options to purchase power at Glass Mountain, the partnership and BPA terminated the MOU and certain ancillary agreements. In addition, BPA will pay the partnership additional consideration should certain future events occur related to ongoing environmental review of the Glass Mountain project." The draft EIS on Glass Mountain is due out soon.
In its record of decision, BPA said it agreed to pay up to $14.5 million to Calpine in exchange for the release of all claims. It said the settlement grants it an option of future development at Glass Mountain (which, according to Calpine, is the largest undeveloped geothermal resource in the US, with estimated potential in excess of 1000 MW) and that Calpine agreed to continue at its own expense environmental review work already under way.
BPA also reached a settlement last December with CalEnergy, the developer of another geothermal project. CalEnergy intended to develop a 30-MW project at Newberry Crater in Oregon, but later determined the resource there was insufficient. Insisting it had a right to do so, Cal Energy moved the project to another site, also at Glass Mountain, and increased the size to 48 MW. It published a notice of intent for the project in the Federal Register this spring.
BPA had already executed a power purchase agreement for 10 MW of the Newberry project, and Eugene Water & Electric Board was involved for another 10 MW under a billing credits agreement. When CalEnergy decided to relocate, negotiations began. BPA's George Darr said that on Dec. 6 of last year BPA agreed to pay $9 million to settle any disputes that might arise from the Newberry deal and got an option for power from the new project. If the developer goes forward with the Glass Mountain site and BPA does not execute a power-purchase agreement, CalEnergy gets an additional $9 million. If BPA does reach accord, CalEnergy gets $10 million after the project goes into commercial operation and BPA gets the power at a "substantial reduction" to the price compared to the price in the original Newberry agreement, Darr said.
Another part of the settlement obligates CalEnergy to hang on to the leaseholds at Newberry for five years, with BPA sharing some of the carrying costs. If the developer eventually decides to return to Newberry, BPA and EWEB will have right of first refusal. "We're trying to preserve some value at Newberry," Darr explained.
Darr said the status of the two other renewable projects in which BPA has an interest--a 68-MW wind-energy project in Wyoming and a 31-MW wind farm in south-central Washington--is completely different. The agency has not made a final decision on whether to proceed with either project, and there are no power-purchase agreements in place. Discussions for contract revisions are under way for both, but neither contemplate "termination scenarios," he said. "We're working to resolve remaining issues."--Ben Tansey.
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