CWEB.024/Dec.31.1997
WE GREET THE NEW YEAR with extensive coverage in two very significant areas for Pacific Northwest energy conservation and renewables.
One is electric industry restructuring in Washington, the region's largest state. We examine the uncertain 1998 prospects for restructuring legislation--and public-purposes funding--in the Evergreen State. We also summarize public-purposes policy positions taken by many stakeholders around Washington.
The other subject covered at length in this issue is the Northwest Energy Efficiency Alliance. In particular, we examine the Alliance's contribution to the surging popularity of resource-efficient clothes washers, and the issues faced by the collaborative in deciding to extend its program supporting this technology. We also summarize an Alliance board discussion on the future and past of the regional market transformation group, and offer, separately, thoughts on that subject from the Alliance's inaugural chairperson.
In addition, we catch up with some conservation-related happenings at Snohomish County PUD and Idaho Power.
Happy New Year! Keep in touch with us in 1998, if you'd like, via e-mail to marko@newsdata.com.
As the Washington Legislature prepares to open its 1998 session on Jan. 12, the prospects for electric industry restructuring legislation--including public-purposes funding--are about as clear as a gray winter's day in Olympia.
A comprehensive restructuring bill that includes a compromise version of customer choice of electric suppliers is expected to be introduced into the state Senate this session. Meanwhile, according to a news report, a key member of the House of Representatives has abandoned plans to consider major restructuring legislation in his chamber--at least for the moment. And Gov. Gary Locke has yet to stake a formal position on this complex and critical issue.
There is, however, emerging support among influential stakeholders for the so-called "portfolio access model" of customer choice, in which large electric customers would have the option of shopping the open marketplace for electricity, while smaller commercial and residential customers would be able to select from a variety of power-supply options provided through their local utilities, including market-priced power.
In the realm of public purposes, there appears to be widespread although not complete stakeholder agreement on the reasonableness of funding energy conservation, renewable energy and low-income energy services through a statewide customer charge equaling 3 percent of electric bills--which would generate in the range of $100 million annually, based on 1995 figures. Beyond this fairly broad consensus, however, lies a thicket of debate over myriad details. (See related story below on public-purposes positions and issues.)
And public purposes are merely one aspect of a much larger discussion over the wisdom of altering the fundamental nature of one of the state's most important industries--and if such a course of action is deemed wise, exactly how it should be accomplished.
The Politics
There are at least two broad schools of thought on electric industry restructuring in Washington. One advocates a go-slow-and-wait-and-see approach. The other takes the view that Washington must move proactively to protect interests threatened by, among others, market forces and the other Washington (D.C.).
Those are the respective positions of Republican Rep. Larry Crouse, chair of the House Energy and Utilities Committee, and Republican Sen. Bill Finkbeiner, chair of the Senate Energy and Utilities Committee.
Crouse, according to a December report in The Spokesman-Review newspaper in Spokane, has "shelved plans to introduce his own deregulation bill, and won't hold hearings on any others that originate in the lower chamber," although he "may consider" hearing a Senate bill if one should pass.
"We're not ready," Crouse told the eastern Washington paper. "I do not feel comfortable that we are far enough along" to change the state's low-cost electric system. This way, Crouse said, Washington can watch how legislation shakes out in Congress and how restructuring proceeds in California, where an open retail electric marketplace had been scheduled to begin Jan. 1 which was recently delayed until sometime later in 1998. The Spokane-area legislator said he does plan to introduce a bill to require all Washington utilities to separate their generation, transmission and distribution costs. This should illuminate some of the technical issues with restructuring, Crouse told The Spokesman-Review.
Finkbeiner, meanwhile, has a considerably more activist perspective. The sponsor of an ill-fated restructuring bill in the 1997 session, Finkbeiner came back this fall with draft restructuring legislation calling for retail choice by July 1999 for most Washington electric customers, along with many other provisions, including a 3-percent maximum funding for conservation and renewables.
After circulating that draft bill for comments, Finkbeiner has been crafting a revised bill now scheduled to be finished by Jan. 2. It will incorporate the portfolio model for customer choice and also include 3-percent funding for public purposes, he told Con.WEB in an e-mail interview earlier in December.
Finkbeiner believes Washington must act to avoid losing "our current market advantages and even more so our future advantages (hydro) . . . The biggest fear, really, is that as de facto competition increases (with utilities like Seattle City Light selling retail into California) and as large customers get increasing access to market rates, that the residential customers will see their rates go up. Lack of legislative action quite likely leads to this scenario and jeopardizes our current 'preference' in relation to hydro resources."
Should Washington dawdle with restructuring, he continued, "The next thing you know it's going to be the year 2000, we will have no hope of getting public purposes (because all the large customers will have market prices and won't want to pay another 3 percent), we will have sold our cheap power to California, BPA [Bonneville Power Administration] will be in jeopardy in Congress because we will not have stepped up to our responsibilities and no [BPA] customers will have been motivated to re-sign their contracts . . . I see my role as the person who pushes people to really look hard at these issues, in a real way and not a 'one day theoretically we should do this' way. So if the governor doesn't totally slam the door on this then I will be pushing a bill and I think, given the downside of inaction, we will have a good chance of getting something through to protect the current advantages enjoyed by our state in this market."
Prospects for 1998 Legislation
Asked about the prospects for restructuring legislation passing the House and Senate this year and getting Locke's signature, Finkbeiner pegged them at 50-50 or better. "At this point it is all up to the governor . . . Thus far he has not outlined any sort of position here. If he does advocate something the chances of a bill immediately rise substantially."
Marilyn Showalter, a policy advisor to Locke, said on Dec. 19 that the governor has been meeting with stakeholders and legislators about restructuring. "He wants to think through the issue and also the timing" before making any decisions on how to proceed, she said. "He recognizes the issue is extremely important and extremely complex." Locke has "expressed interest" in the portfolio model of customer choice and is "committed to protecting public purposes," she added.
Last March Locke released a statement of principles for electric industry restructuring. In it he urged Washingtonians to "proceed cautiously and deliberately" on this issue, and advocated six very broad principles: universal access to reasonably affordable electricity; safe and reliable power; fair sharing of stranded costs; shared responsibilities to promote energy efficiency and renewable energy; continued honoring of Washington's tradition of locally controlled public power; and equitable tax policies that contribute to state and local government revenues.
In addition to Finkbeiner, other very interested parties offer varying assessments of the prospects for restructuring legislation in 1998--which is both a short two-month session for the Washington Legislature and an election year. No one interviewed by Con.WEB flatly predicted a bill will pass both chambers and earn Locke's signature.
"Does it really have enough steam? I just don't know. I think it's an uphill thing," said K.C. Golden, assistant director of energy services at the state Department of Community, Trade and Economic Development, and a member of the Regional Review steering committee. "Ultimately the question is, 'Are people sufficiently interested in having legislation and are willing to make compromises?' The jury's out on that."
At Puget Sound Energy, the state's largest investor-owned utility, "We think and hope that we'll make a try at it," said Ron Davis, vice president of regulation and utility planning. If all the major stakeholders coalesce around some version of restructuring, "Odds of it passing are somewhere in the 90-plus percent range." If any key stakeholders balk, he said, "Then we'll be studying this for another year."
The Northwest Energy Efficiency Council, which represents energy efficiency businesses, is more pessimistic. In its November/December newsletter, NEEC concluded: "It is becoming increasingly difficult to be optimistic, however, about chances for successful legislation in Washington this session. This, of course, most likely delays the establishment of a systems benefit charge for public purposes. Expect, then, another year of reduced utility spending on energy efficiency programs. The inability to establish a public purposes fund means our industry loses tens of millions of dollars that could be strategically targeted to grow market opportunities for our products and services. No other single issue is as important in its effect on our industry."
Nancy Hirsh, policy director for the Northwest Energy Coalition (formerly Northwest Conservation Act Coalition), described herself as "not optimistic" for Washington restructuring in 1998. "I think people sense that the House is not interested," she said. "I think they just want to wait and see" what happens in California and elsewhere. In addition, she finds less clamor by large industrial customers for a retail-choice electric system--"mainly because they've gotten most of the special deals they need."
In response to this view, consultant Dan Seligman of Industrial Customers of Northwest Utilities had this to say: "My clients would still like to see electric utility restructuring legislation [in Washington]. They think it needs to be done right . . . They're not desperate for a bill and one of the reasons they're not desperate for a bill is a significant number but certainly not all have access to either a market-based rate or some other mechanism that allows them to take advantage of the marketplace out there . . . I haven't talked to any one of the companies that has said, 'We no longer want electric utility restructuring' . . . What I do hear is we need to do it right and need to make sure . . . that there is a package that fits together and . . . addresses stranded-cost recovery and [distribution system] bypass and a series of related issues."
The Portfolio Approach
One restructuring package that has gained considerable momentum in late 1997 is known as the portfolio access model. Developed by Washington Water Power, the portfolio plan essentially charts a course between the current system of monopoly electric service and a wide-open retail power marketplace.
This approach is anticipated as the centerpiece of Finkbeiner's proposed restructuring legislation, and has earned varying degrees of conceptual support (or at least non-opposition) from a number of stakeholders through informal discussions this fall.
Under Water Power's proposal, all retail electric customers in the state would have the opportunity to choose from among a portfolio of energy services supplied by their current utility. These options for investor-owned utility customers could include traditional regulated electric service, market-priced power adjusted monthly or annually, green power, or other options, such as interruptible rates, according to a WWP position paper. Bonneville Power Administration electricity is another potential option, according to Golden.
Meanwhile, larger customers would gain direct access to the retail marketplace, or they could select from a portfolio offered by their incumbent utility. Water Power defines large-use customers as industrial, institutional and commercial customers with loads greater than one megawatt at a single meter, and individual loads greater than 300 kilowatts that can be aggregated to one megawatt. This proposed threshold echoes the definition of large customers adopted by Montana in its restructuring plan.
In addition to the portfolio approach to customer choice, Water Power recommended 11 other elements for inclusion in comprehensive restructuring legislation: unbundling of utility functions, stranded-cost recovery, public-purposes programs, public utility tax reform, customer obligations under direct access, consumer protection, system reliability and service quality, access by all utilities to BPA power, low-income energy assistance, updated laws governing publicly owned utilities, and distribution bypass.
Water Power touts the portfolio model as "a 'consumer choice' approach to offering energy service alternatives to all retail electric customers in a manner that does not diminish system reliability, service quality, societal values, or state and local tax revenues. This approach may be the most expedient method to deliver energy service choices to consumers in the Pacific Northwest, and it should move the market toward direct access in a friendly, safe environment for small-use customers." The portfolio plan, according to WWP's position paper, would preserve the region's low-cost and reliable power system, and it represents a Northwest solution reconciling the interests of customers, utilities, environmental groups, consumer advocates, regulators and power marketers and brokers.
WWP chairman and chief executive officer Paul Redmond, writing in a Dec. 7 opinion piece in the Seattle Post-Intelligencer, believes the portfolio model solves many potential restructuring pitfalls. "Lawmakers can assure service quality, reliability, and consumer protections through continued oversight by public utility commissions and boards of locally elected utility commissioners. Regional generating resources remain under regional control and the motivation for utilities to serve their own customers first remains unchanged," he wrote.
"Further, this approach supports the ongoing use of hydroelectric resources within the region, keeps BPA in business, and gives utilities incentives to continue investing in their distribution systems. Northwest power prices would be precluded from rising to match higher priced markets. And benefits would be available to all customers, not just big power users. Small-use customers, whether they bought market-priced power or not, would still benefit from the efficiencies and product innovations that will result from great competition.
"The most persuasive argument for the portfolio access concept," Redmond concluded, "is that it does not require that we scrap our current system in exchange for an untested and experimental new one."
This model "has been generally well-received" by stakeholders, Redmond wrote. The portfolio plan, he continued, is "being recognized as an approach which serves the interests of those who support restructuring, as well as those who continue to have reservations."
From Golden's perspective, "People are sort of coalescing around that basic [portfolio] model," although with plenty of specific reservations. "I think the tricky thing about the portfolio model is what is the relationship of the incumbent utilities' generation resources to the portfolio offered to small consumers . . . Can you do it in a way that doesn't unduly advantage the incumbent and discriminate against other power suppliers?"
Golden characterizes the portfolio plan as a "modest incremental step" toward full-tilt retail competition that "puts some rules in place for what is already happening in the marketplace to better align risks and better protect consumers."
At Puget Sound Energy, Davis likes the portfolio approach. "The appeal is, it's workable . . . We don't have to put in all this technical infrastructure to make a million accounts nominate their energy provider and change it every month." That would cost many tens of millions of dollars, he estimated, and take considerable time. However, with the existing infrastructure, "We can do a few thousand of these, or a few hundred," and create the necessary systems for large customers. The portfolio plan also insulates small customers from the vagaries of the marketplace--such as potential higher rates and consumer abuse--while allowing the larger and more sophisticated customers to take their chances in that same marketplace.
Davis, too, believes the portfolio plan is politically popular. "It would be the exception to find the party opposed to it as a concept," he said.
ICNU is among the supporters. "We've said that at this time, it looks like the way to go," said Seligman, with the caveat of resolving many important details. "It's garnered a fair amount of interest among a lot of parties, including the industrial customers . . . It's more flexible, and it allows utilities to offer different items to different classes of customers." After learning of the technical infrastructure problems and a lack of enthusiasm for restructuring among residential customers, "Everybody has taken stock and has asked hard questions about what's the best way to proceed. The portfolio approach seems to be considerably more modest in scope" than full open access, although, he added, "Many different components need to fit together before people formally sign off on it."
Hirsh agrees that any restructuring legislation must be a package deal, although she is not as enamored of the portfolio approach. "Our basic premise on restructuring is that we don't even have the status quo anymore. The system has changed, and we're not in 1994 anymore where lots of money was being spent on investments in energy conservation and renewables investments were going well," she said. "We see restructuring as a way to . . . maintain the investments we have had in the past, and capture new opportunities for investments in renewable resources through green marketing. There are a lot of risks in this [portfolio] approach [but] if we could get what we wanted without going to direct access, we would."
In a November letter to Finkbeiner, the coalition wrote: "While we believe this customer choice approach reduces some of the consumer protection and reliability concerns of full direct access, there are some specific issues which will need special attention . . . a portfolio model for choice is as unacceptable as full direct access without adequate provisions for public purposes, consumer protection and universal service." --Mark Ohrenschall
Despite the very uncertain fate of electric industry restructuring legislation in Washington in 1998, many very interested parties have already formed positions on the issues, including the future of energy conservation, renewable energy and low-income energy services.
These so-called public purposes are among many elements under consideration as part of any fundamental change in the state's electric industry. Public purposes are by no means the critical issue at stake, and the money associated with them is a tiny fraction of this multi-billion-dollar sector of the Washington economy. Nevertheless, investments in energy conservation and renewable energy initiatives occupy an important niche in the debate over the future of Washington's electric services.
Following is a look at public-purposes positions outlined in recent weeks and months by many stakeholders. These appear with the following caveats: conservation and renewables are, again, just one piece of a much bigger restructuring puzzle; these positions are subject to change; and the ultimate decisions on restructuring rest with the Republican-controlled Legislature and Democratic Gov. Gary Locke.
Sen. Finkbeiner's Draft Legislation
In a draft comprehensive restructuring bill sent out for review in early fall, Republican Sen. Bill Finkbeiner proposed to allow most Washingtonians their choice of electric suppliers by July 1999--with a multitude of conditions. One of those was a provision for conservation, renewables and low-income weatherization.
Finkbeiner floated the idea that all Washington electric customers, including the direct-service customers of Bonneville Power Administration, would pay a non-bypassable 3-percent charge on their electric bills for public purposes. This would be a maximum, although utilities could exceed 3 percent by allocating those additional costs to their power-generation side.
All the money collected would be kept by local utilities for conservation and renewables programs, with three potential exceptions: 1) Up to 18 percent of the 3 percent could be earmarked for low-income weatherization; 2) Up to 18 percent could be spent on regional conservation market transformation activities; and, 3) Up to 15 percent could be earmarked for research, development and demonstration projects.
Finkbeiner's draft bill also included options for publicly owned utilities to aggregate their public-purposes spending, and for large customers with annual loads greater than 1 megawatt to take credit against the 3-percent levy for their own investments in conservation (except for low-income weatherization and regional market transformation) and renewables. He also outlined reporting and evaluation requirements for public-purposes spending.
Although Finkbeiner's proposal matched the 3-percent public-purposes spending recommended by the Regional Review, it differed "in some very important respects," said K.C. Golden, assistant director of energy services at the state Department of Community, Trade and Economic Development, and a member of the Regional Review steering committee. For one, Finkbeiner's 3 percent would be a cap, not a minimum as intended by the Review. The Review also included specific allocations for public purposes, while Finkbeiner only suggests spending up to certain amounts for certain categories. "If you allocate zero to conservation, put it all into renewables, and put zero to low-income, as I read the bill that would be OK," said Golden.
Although acknowledging that the Review is not "a holy grail," Golden added, "It did represent a very time-consuming and sincere effort on the part of the parties to reach agreement." From his perspective as a state official, "It would be counter-productive to reopen what I think was a reasonable and difficult negotiated settlement," as industrial customers have by seeking a public-purposes figure below 3 percent. "To declare open season on what people have committed to--the signal you send is that those who seek consensus and compromise will be punished later. That just doesn't bode well on reaching agreement" on an entire restructuring package.
Finkbeiner, in a December e-mail interview with Con.WEB prior to the planned release at the beginning of January of his revised restructuring proposal, pledged to retain the 3-percent figure but offered no further details. "Public purposes is difficult now, and it will continue to get progressively more difficult as large customers begin to realize market rates [for power]. My intent is to peg it at 3 percent and not let either side pull away," said the chair of the Senate Energy and Utilities Committee.
Informal discussions this fall among stakeholders has created a "general consensus . . . that 3 percent should be the standard" for public purposes, according to Nancy Hirsh of the Northwest Energy Coalition (formerly Northwest Conservation Act Coalition). Puget Sound Energy's Ron Davis agreed, adding that accountability for the spending is very important.
Here are public-purposes positions of many stakeholders, in alphabetical order:
Industrial Customers of Northwest Utilities: "We think the Legislature ought to look at a number less than 3 percent" for public-purposes funding, said Dan Seligman, a consultant to ICNU, which represents about 40 companies regionwide. "The concept of a non-bypassable charge to fund public purposes is something that we can support, but the amount of the charge--the allocation within whatever amount it is, for different programs--is something we'll need to resolve." At current revenue levels for Washington utilities, he noted, 3 percent represents about $100 million annually. "We're talking about a billion-dollar program over a 10-year period."
ICNU has suggested Montana's 2.4-percent public-purposes funding level as "a number that's at least examined," said Seligman. "We have not come out with a specific number and said we think this is it." ICNU, he added, wants the Legislature to "conduct its own statewide needs assessment prior to enacting a public-purposes charge." Such a charge should be instituted simultaneously with retail customer choice. And industrial customers, according to ICNU, should be credited for their own conservation and renewables investments, such as biomass-energy facilities.
As for specific allocations, "We think it makes sense to give utilities a fair amount of flexibility" to spend about 50 percent of the collected public-purposes funds as they see fit. ICNU has suggested three categories for the remaining 50 percent: conservation, renewables and low-income weatherization. Regional market transformation is conspicuously absent--unless, Seligman said, "a significant number of consumers" are represented on the board overseeing such an endeavor [currently, the Northwest Energy Efficiency Alliance] and performance standards are established for where the market transformation money goes and what it achieves.
Gov. Gary Locke: Although yet to stake any recent position on restructuring, Locke did issue a set of principles in March. One of his six principles stated: "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 continued: "We . . . have opportunities to make investments that sustain the system's productivity for new generations of electric consumers. These opportunities include investments in energy efficiency, new renewable resources such as wind, solar and geothermal power, and system reliability. These 'system benefits' should be funded through a collective charge shared by all consumers, independent of their choice of electricity supplier."
Northwest Energy Coalition (formerly NCAC): In an October letter to Finkbeiner, the coalition said, "As we have mentioned many times, we believe a higher level of investment [than 3 percent] in energy efficiency, renewable resources and low income programs is justified, but realize compromise is necessary."
NWEC believes 3 percent should be the low threshold, and minimum standards should be set for allocations in certain public-purposes categories, "to ensure no program type is neglected." The coalition also pushes an expansive definition of allowable renewables, including residential solar. And the regional advocacy organization is big on accountability: "Without adequate accountability requirements the expenditure of consumer money on business as usual programs administered by utilities could prove ineffective and wasteful . . . If an independent administrator of all public purposes funds is unacceptable, then consistent statewide standards must be established for public purpose program implementation."
In addition, NWEC criticized the omission in Finkbeiner's draft bill of low-income energy-bill assistance. And in a November letter responding to the portfolio model proposal NWEC said green rates offered by utilities should not be substituted for the collection of public-purposes funds, because "green rates reflect what the market will do without public funds."
Northwest Energy Efficiency Council: The regional trade association for the energy efficiency industry supports the public-purposes spending level recommended by the Regional Review, funded by non-bypassable and non-discriminatory charges to all customers, according to a September NEEC letter to Finkbeiner. "Energy efficiency activities which are determined to be societally cost effective and are approved by regulators and/or public power system planners should be available to all customers who use the power distribution system."
At the same time, NEEC believes "a restructuring bill should clearly state that the purpose of public purpose conservation funding is to achieve additional savings through actions and measures which would not be undertaken in the absence of that funding." Industrial customers, for example, should not get public-purposes funding for installing common-practice efficiency measures. And instead of promoting the norm, utilities should support "'next step' technologies with technical, marketing and financial assistance to help them break through initial market barriers such as technology refinement, lack of familiarity and acceptance, lack of trained sales, installation and maintenance staff, lack of vendor stocking, limited production volumes, etc."
In a restructured industry, NEEC thinks, regulated distribution utilities "should plan and design efficiency programs, but should contract out most implementation efforts, with the objective of providing effective service at the lowest possible cost." In addition, the council wants to put boundaries on utilities: "The for-profit activities of the regulated distribution utilities should be clearly limited to activities that are tied closely to their regulated roles, which are distributing power at least cost, and providing public purpose conservation and other legislatively mandated public goods. Other profit-making activities which involve potential private sector competitors should be handled through unregulated entities, with a clear separation of responsibility, accountability and information between the two."
Puget Sound Energy: The state's largest investor-owned utility supports a 3-percent funding level for public purposes, according to vice president of regulation and utilities Ron Davis. But it must be competitively neutral (applied to all electric customers statewide as a meters charge) and wisely spent.
"There'll be a cost-effectiveness test applied and every single thing that gets funded will have to pass muster [each year]. If not, it'll get adjusted," said Davis. This would ensure that "we're not just giving 3 percent of the region's gross energy revenues to whatever [is decided is] good. That's irresponsible." Puget, he said, doesn't especially care which cost-effectiveness standard is applied, but it must be very clear.
Puget "basically" agrees with the allocation categories for public purposes as recommended by the Regional Review, although, Davis said, "We are opposed to handing anyone a blank check to buy 7- and 10-cent[s per kilowatt-hour renewable] resources in a 2- or 3-cent market . . . We will offer [customers] a green portfolio to take care of that problem. If somebody values renewables, we'll offer them that market choice . . . We do not want to tax [customers] in the name of conservation, then go and spend all the money on renewables."
Seattle City Light: Washington's largest publicly owned utility foresees instituting a non-bypassable charge to promote conservation, renewables and low-income programs, and to set it at a level that "meets or exceeds the 3 percent public purposes funding standard identified by the Regional Review," according to a draft document, "A Vision for Seattle City Light in Changing Times," that outlines the utility's preliminary positions on a number of restructuring issues.
The utility also wants to establish standards for renewable resource portfolios and labeling of resources to indicate their environmental impact. This information could help the utility develop more choices for customers, according to SCL director of strategic planning Marc Sullivan. If a customer wanted to purchase 100-percent solar power, for example, City Light would be glad to offer this option.
Washington Public Utility Districts Association: The PUD association, whose 23 electricity-providing members collectively serve more than 715,000 customers, touted the commitment of its utilities to energy efficiency programs, renewable resource development and serving low-income customers. "These efforts are effective, efficient and responsive to local needs because they are locally adopted and controlled," according to a restructuring position paper adopted by the PUD association board of directors in September.
Any restructuring legislation, the association said, "should ensure that the local distribution utility has sole authority to spend public purpose funds for the benefit of the utility's customers." All customers should "contribute equitably" to such programs, and all efficiency measures installed by customers should be credited toward public-purposes requirements, as should utility spending on low-income customer assistance.
As for renewables, the power costs from new unsold renewable resources could be recovered by a non-bypassable charge to all customers. And renewables should include hydro, which is included in the renewables definition of the 1980 regional power act.
Washington Water Power: In a position paper on its portfolio access model of customer choice (see story above), Water Power urged a 3-percent non-bypassable charge levied by utilities to fund cost-effective conservation, regional market transformation and low-income programs. So-called "green rates" for renewable resources also should be included in the 3-percent utility obligation.
This charge, according to WWP, "should capture existing utility commitments . . . To the extent public purposes are currently built into utility rates, they may be separated from rates and funded through the public purposes charge . . . if utilities are required to maintain rate-based programs and impose the additional [3 percent] charge, all utility customers will realize cost increases." Utilities also could spend more than 3 percent, if they chose. And direct-access customers should receive credit toward the public-purposes requirement for "qualifying activities, such as cost-effective conservation investments."--Mark Ohrenschall (Jude Noland also contributed to this report)
Dirty clothes are getting washed better and more efficiently in a growing number of Pacific Northwest homes, thanks to a new spin on the age-old process of cleaning clothes.
Resource-efficient washing machines such as those promoted by the Northwest Energy Efficiency Alliance's WashWise program are surging in popularity around the Northwest. This technology offers "a lot of attributes that people really appreciate," said project manager Lois Gordon of Portland Energy Conservation Inc., the WashWise contractor.
These efficient machines consume about 40 percent less water and 60 percent less energy than standard washing machines. Detergent use also drops substantially. A higher spin speed--about 100 miles per hour--removes more moisture and therefore reduces drying time and its attendant energy consumption. And, not least, clothes get kinder treatment than with the conventional top-loading, vertical-axis models found in the great majority of homes in the Northwest and elsewhere in the United States.
These are among the reasons Northwesterners who buy WashWise machines "absolutely love them," reports Dana Banks of PECI.
Here are a few comments from owners of new resource-efficient washers, as reported by PECI:
A recent consumer survey found that energy and water savings topped the list of reasons people purchased a WashWise machine. Lower operating costs also were considered instrumental. Other significant factors cited by consumers, in order of importance: gentler on clothes, the rebate, cleaner clothes, less detergent needed and quieter operation.
Retailer Perspectives
WashWise retailers contacted by Con.WEB affirm the growing consumer appreciation of resource-efficient machines, which in many stores are exceeding internal projections by capturing 10 percent or more of the market for new washers.
The $130 incentive payment has clearly boosted sales, dealers report.
"The WashWise rebate has helped us definitely in terms of selling it. They're halfway affordable compared to where they started out originally," said sales manager David Payne of Jack Roberts Appliances in Lynnwood, WA. His store charges anywhere from $639 to $799 for WashWise models, which translates to $509 to $639 with the rebate included. At that price, he noted, "You're within $100" of top-of-the-line conventional washers, and it's not as much of a stretch for consumers to select a resource-efficient machine.
Guy Eklund of Eklund Appliance in Great Falls, MT, also thinks the incentive payment "means a lot to people . . . The rebate really helps out." So does the endorsement by electric utilities, believes Evan Weeks of Commercial Home Furnishings in Boise, ID.
Jamin Clark of Butch Finnigan Appliance in Kennewick, WA, acknowledges that many consumers balk at the premium for resource-efficient washers. "The price is the big disadvantage," she said. "Other than that, everybody would buy them."
But purchase price is not the only economic consideration for a new washing machine. "If a person is looking for economy of the product over the life of the machines, the best buy I have is a front-load washer," said Weeks. "Even though initially they're the most expensive, they're the cheapest to own." Water savings alone for his WashWise customers amount to anywhere from $40 to several hundred dollars annually--and the energy and detergent reductions provide even more financial benefits.
For Eklund's rural Montana customers, water savings are especially important because of the expense of hauling water from cisterns. "Taking half the amount of water to do your laundry; that they really like," he said. They also appreciate the performance of resource-efficient washers, in which, according to a WashWise publication, "clothes are lifted and gently tumbled through a shallow pool of water instead of [mashed] against an agitator." Eklund said many of his customers "like the idea of being able to have your clothes last longer and not tear them up as much. Probably the easiness on your clothes is as important as the energy savings, but energy savings is important, too."
Even with the incentive payment, WashWise machines are currently more expensive than top-loading models and tend to be purchased by consumers who can afford the higher initial cost. Still, this generalization does have exceptions. "Anybody who wants to save money" over time is a potential WashWise customer, said Clark. "People I wouldn't even think could get $10 out of their wallets are buying it."
Weeks said he is careful not to prejudge customers. "Sometimes you get a young couple and you think, 'They don't have enough money'" to buy a WashWise model. Actually, however, "They're probably the best prospect. Their family's starting, they're doing a lot of laundry, they have a couple of kids. They're the ones that are going to benefit the most. We're seeing some of that profile."
Also, Weeks has found, people who buy resource-efficient washers are likely to stay with the technology. "Once they get used to the performance of it, the money they save, they have a hard time going back to a top-loader . . . You get kind of spoiled once you see the way they wash."
Although price is considered the major drawback for resource-efficient washers, a handful of minor shortcomings have been reported. One is the location of the door, which requires people to bend over to load clothes. Another--more of an educational issue--is the smaller amount of detergent necessary. A number of WashWise buyers reportedly have put in too much detergent and have opened their machines to discover overly sudsy clothes. "They have to . . . re-learn how to wash their clothes," said Banks. "You don't just dump in a whole big cupful of detergent anymore. It doesn't require as much."
Retailers have found that consumers ask more questions about WashWise models, but Payne attributes that to unfamiliarity. "In terms of complaints, [we've had] none whatsoever. They're a hot ticket."
Alliance executive director Margie Gardner said her organization is "really excited to be part of this new technology delivering both energy savings and better-quality washing to consumers. These machines are here to stay, and we're glad we helped make it happen."--Mark Ohrenschall
Facing a critical decision on the future of one of its most visibly successful projects--the WashWise venture promoting resource-efficient clothes washers--the Northwest Energy Efficiency Alliance confronted some basic issues for the fledgling practice of market transformation.
Namely: What constitutes a transformed market? How should money be spent, and how much? And when should the Alliance declare victory and go home?
In the end the Alliance board on Dec. 11 took a collective deep breath and decided--although not unanimously--to spend up to $5.7 million for WashWise in 1998 and 1999. With that budget added to an estimated $2.9 million in 1997 funding, the Alliance has committed as much as $8.6 million for this single project--or roughly 13 percent of its total three-year budget of $65 million.
"We're already into this, and we need to see it through to the right outcome," urged board member Stan Price. That sentiment carried the day, and the Alliance board approved by a 12-4 vote a two-year extension for WashWise. This comes with a $5.7 million spending cap and flexibility to adapt the program--particularly rebate levels and marketing initiatives--to marketplace circumstances.
The Alliance's long-term goal with WashWise is a change in federal energy-efficiency standards for clothes washers--ideally a national efficiency level comparable to WashWise machines, which typically use 60 percent less energy than the conventional top-loading washers found in the great majority of Northwest and American homes. Revised federal standards for clothes washers are scheduled to be considered over the next couple of years, and formally adopted by the U.S. Department of Energy in late 1999.
But according to Alliance staff, a number of pieces must fall into place before clothes-washer efficiency requirements are spun up to WashWise levels. The most important is consumer acceptance of resource-efficient machines, as demonstrated by growing market share. And manufacturers must be persuaded there will be a viable long-term market for this relatively new product after incentive programs such as WashWise come to an end.
WashWise Results
WashWise, which officially debuted in May 1997, has addressed two of the most daunting market obstacles for resource-efficient washers: high purchase price and low consumer awareness. The program has furnished incentives to both buyers ($130 apiece) and dealers ($20) of qualifying models, and has sought to spread the word about the virtues of resource-efficient washers through extensive marketing and advertising around the Northwest.
From a sales perspective, WashWise has been an overwhelming success. Initial projections anticipated about 2,800 resource-efficient units selling in the Northwest in 1997; this early figure, however, was based on inaccurate data and should have been set at about 7,000 units to reach the target of 3-percent market share. In any case, by the end of 1997 WashWise sales are forecast to reach about 14,600 around the region, according to the latest Alliance numbers. Meanwhile, the cumulative market penetration of WashWise machines has risen from less than 1 percent in May to 8.1 percent in December--and is climbing. It is expected to stretch into double digits in 1998.
Clearly the Alliance has made progress toward its desired outcome, which, if achieved through revised federal standards, would have enormous impacts on the region's energy efficiency. Alliance staff estimates that under WashWise efficiency levels mandated by the federal government for all clothes washers, the Northwest could save more than 160 average megawatts over 20 years. This represents, according to staff, "the largest single source of market transformation potential currently identified" in the Northwest, at a prospective levelized cost of well under 1 cent per kilowatt-hour.
WashWise also has contributed to some lowering of the retail price gap between resource-efficient washers and conventional top-loaders.
Frigidaire models, in particular, have dropped from an average of $838 in May to $750 in November, which, with the $130 rebate, brings the retail price to within $120 of a high-end $500 standard washer. At the same time, however, Maytag resource-efficient machines have stayed in the price range of $980-$990, while European models have actually gone up slightly since May and are retailing for an average cost of more than $1,100. In addition, many WashWise purchasers indicated in a summertime survey they would have bought the washers even without the $130 rebate--although Alliance staff characterized this finding as normal for early adopters of a new technology.
Rebates, Retail Prices and Program Cost
In the Dec. 11 discussion on WashWise, two Alliance board members raised questions about the relationship between consumer rebates and retail prices. As long as the rebates are offered, said Gary Mahugh, manufacturers can maintain artificially high prices. Brian Hedman took this point further: "If prices are not falling because rebates are in place . . . what the rebate's really doing is bolstering profits [for manufacturers]. It's not going to consumers; it's not dropping the cost of the machine." Hedman added he is "not so sure this market hasn't already been aggressively" worked by the Alliance, and it might be time to "phase out gracefully so we don't burn any bridges and sully the name of NEEA."
The Alliance staff recommended that the current rebate levels remain through February, and then be dropped to $100 for consumers and $10 for dealers through September. "Concurrently," said the staff, "a revamped marketing strategy would be implemented, along with a concentrated effort to encourage water and gas utilities to support marketing and additional rebates."
But even the $100 rebate level bothered Hedman. And, a number of board members were uncomfortable with the staff-proposed budget of $7 million for 1998 and 1999, which would transform WashWise into a $10 million venture. "I very much want the standards and I want [the program] to be well-received," said Liz Klumpp. However, she added, "I'm interested in seeing a number that doesn't look like $10 million . . . I'm pretty sensitive about those issues," especially since the industrial-sector projects adopted by the Alliance to date have a total budget of less than $5 million.
Although he described WashWise as a "great program" that he supports, Charlie Grist said the costs--which have been consistently underestimated--pose a liability that require close management. He said he wanted to be fiscally prudent, while at the same time avoiding sending a signal that the Alliance doesn't support the program.
Board member Carol Brown wondered why WashWise has gone through nearly $3 million in less than nine months--roughly the same amount anticipated for a similar program planned for California in 1998. "I do have some concern here about the lack of working together," she said, and was reinforced by visitor Noah Horowitz of the Natural Resources Defense Council, which is working on the California venture. "You're pacesetters; you need to keep going," he told the board. "Your goal is national standards [but] you can't do it alone. Your success is dependent on other regions." He urged the Alliance to "court other regions more aggressively," a point that drew agreement from board chairman Jake Fey and board member Darlene Nemnich.
Timing
Timing is a critical issue for WashWise. The California program and a resource-efficient washer initiative by New England utilities both are expected to begin in the spring. "We are anticipating that we will be 'handing off' the program to the other regions after they gear up and establish a presence in the market, just as we have managed to do," according to Alliance staff. "This should demonstrate to the manufacturers that there is national interest in efficient washers, and will allow the Pacific Northwest program to scale back to marketing only [no rebates]."
Also in the spring, DOE is scheduled to release an Advanced Notice of Proposed Rulemaking for clothes washers, which will set a range of potential efficiency standards.
The Alliance also has gotten wind of interest by Whirlpool in producing resource-efficient washers, with a decision perhaps by June. This is very significant; Whirlpool has 52 percent of the American clothes-washer market, according to Alliance board member Ken Keating. "Our target [with WashWise] is the manufacturers," he said. "Without them, we don't get standards." Whirlpool knows it is losing market share, and the Alliance hopes the appliance manufacturing giant will be sufficiently concerned to introduce its own competing resource-efficient models at Frigidaire price levels. Should Whirlpool join the fray, said Keating, "The battle for standards is just about over."
But the turning point has not yet arrived, and board members generally agreed on the need to continue significant funding at least for the next few months. If all the Alliance accomplishes with WashWise is to provide a lot of rebates and enrich a few manufacturers, "That would be the worst possible effect . . . on this organization," warned Price. "That'll be a really bad thing."
Board member Bev Corwin also worried about the repercussions of slashing WashWise at this juncture. "I fear you're backing up, to cut the rebates. When you've got something going this well, this level of penetration, be careful of overreacting. You could lose what you've gained," with key milestones just ahead.
Although some board members were inclined to give very specific directions on how the program should be operated in the near future, Fey cautioned against too much micromanagement. "We can't all be program managers here," he said. "Give [staff] flexibility and hold them accountable."
To ease the worries about a $10 million program, board member Larry Bryant suggested lopping off $1.3 million from the staff-proposed $7 million budget for 1998 and 1999. This cut came from the category earmarked for rebates in late 1998. Otherwise, the board gave Alliance staff and program contractor Portland Energy Conservation Inc. considerable latitude to adjust WashWise as long as they retain a "market presence" with the program through 1999.--Mark Ohrenschall
The Northwest Energy Efficiency Alliance expanded its project portfolio in December, approving three new ventures and extending five others while turning down another proposal.
One of the new initiatives targets efficiencies in the region's booming microelectronics industry. Another supports the Northwest Energy Education Institute, based in Oregon but serving the entire region. The third new project seeks to expand the practice of commissioning in buildings owned by Northwest state and local governments.
The board's actions, taken at a Dec. 11-12 meeting in Seattle, bring the total number of projects sponsored by the Alliance to 26, with a combined budget of slightly more than $35 million--more than half the organization's maximum $65 million budget through 1999.
This also brings to a close the Alliance's inaugural request for proposals, a process that began in the summer and brought in 35 potential initiatives, of which 17 were adopted this fall.
In other actions Dec. 11-12, the board approved a $2.1 million operations budget for the Alliance in 1998--8.3 percent of the total budget--and allocated $300,000 for further research and development efforts in three high-priority markets--motor systems, air compressors and the pulp and paper industry.
Following are summaries of the projects considered by the board in December.
Microelectronics
This venture aims to identify and pursue efficiency opportunities in the booming and energy-intensive Northwest microelectronics industry, which includes semiconductor fabrication, printed wiring boards, the manufacture of consumer appliances, and raw materials processing.
The region's microelectronics sector now uses about 200 average megawatts of electricity, according to Alliance staff, but is expected to consume as much as 850 aMW by 2010. The energy-savings potential, meanwhile, is 50 percent or greater in new facilities or production equipment. However, the staff reports, a number of obstacles exist to reaching this potential: lack of concern in the industry about energy costs; lack of awareness of the benefits of efficiency; intense schedule pressures; and a fragmented approach to the design of new plants and tools.
An initial microelectronics proposal was reviewed by the Alliance board earlier this fall. Although it was considered an important market, board member concerns led staff to modify the proposal.
In the revised version, the Alliance staff recommended seeking out an integrated design project in which to enhance energy efficiency for a semiconductor manufacturing facility, participating in important industry forums and assessing potential efficiencies in the polysilicon manufacturing process. The proposed $1.4 million budget for two years includes a reserve fund of up to $350,000 annually for specific projects.
This narrowed focus and greater mitigation of risk met with broad support from Alliance board members, who endorsed the venture on an 11-3 vote. There are, however, no guarantees this venture will directly result in improved energy efficiencies in microelectronics facilities.
"This is a unique resource market . . . that seems to require a speculative approach," said board member Mat Northway. "It's part of our responsibility to take some risks and lay ourselves out there and push the edge of the envelope to acquire a resource we've labeled as key in this region," added board member Nancy Hirsh.
This industry, moreover, is especially open to change, according to Alliance staffer Jeff Harris. He described the microelectronics sector as "probably our most transformable market . . . This market moves so fast, nobody can afford to miss a good idea if it could shave points off their operating margin."
Northwest Energy Education Institute
Education and training in energy efficiency is the focus of the Northwest Energy Education Institute.
Although based at Lane Community College in Eugene, NEEI, with the Alliance's $600,000 funding over three years, plans to serve the whole Northwest. Specifically, the institute will provide customized training for energy professionals as well as training in support of Alliance market transformation ventures. It also will offer an energy efficiency degree program available regionally, and will promote energy efficiency curricula in Northwest community colleges.
Northwest energy efficiency education has diminished significantly, according to Alliance board member Liz Klumpp. "I'm interested in seeing a minimum level preserved," she said, adding that under this project, "We're buying visibility and presence in some of these community colleges." Lane already offers a two-year energy management program (which will not be a recipient of the Alliance's funding). "If there's [training and education] capability in the Northwest, it resides here," said Northway.
Board member Larry Bryant described the intended regionalization proposed by NEEI as "the most positive aspect" of the project, although accomplishing it will be a challenge.
Commissioning Public Buildings
The integration of commissioning into Northwest state and local government buildings is the focus of this venture, which includes workshops, case studies, enhanced development of commissioning services, and communications to public-facility officials on the many benefits of commissioning building systems so they operate as designed.
The purpose, within each state as well as regionally, is to curry government support for commissioning through policies as well as practice.
A number of market barriers have been identified by Alliance staff, including lack of awareness among state and local governments about commissioning and its benefits; little experience working with commissioning service providers; a shortage of competent commissioning agents and a lack of agreed-upon standards; and concerns over the costs and potential project delays associated with commissioning.
The original proposal addressed commissioning of public buildings in Oregon, but this was seen by the board as too restricted in scope and potentially premature until the Alliance completes a separate market research/business plan project for commissioning.
This revised approach will still rely on a market transformation concept developed by the Oregon Office of Energy, the overall project contractor, but will also integrate findings from the new market research. "We've learned some things in Oregon we'd like to share," OOE's Alan Boner told the board.
A goal for Oregon is to establish policies requiring commissioning of public facilities, he said. In Washington, Klumpp said, such policies already exist but they are not necessarily followed or enforced. Decision-makers should be shown the benefits of commissioning, such as reduced operating costs for buildings.
The Alliance board approved $1.9 million for this venture over three years.
Project Extensions Approved
In addition to the three new ventures, the Alliance board extended the duration of five other previously approved projects, including the WashWise program (see story above).
The Building Operators Certification program in Washington will continue with $545,000 in additional funding for 1998 and 1999. Alliance chairperson Jake Fey noted the solid progress made by this program in its first year, and the lack of any problems. Over the next two years, the project contractor, Northwest Energy Efficiency Council, will continue to offer training and certification across the state, coordinate BOC activities region wide, refine the curriculum, expand marketing efforts and keep working on transferring the curriculum and training to other entities.
The Energy Ideas Clearinghouse--which in June was approved for six months of interim funding--received an extension through March 1998 to allow further examination of how the Clearinghouse fits within the Alliance's overall communications strategy.
Meanwhile, the Premium Efficiency Motors program got a three-month extension, also through March 1998. Another three-month extension was approved for energy code support in Washington and Montana.
Portland Lighting Facility
The one project rejected by the Alliance board in December would have provided funding for a lighting demonstration facility based in Portland.
Portland General Electric currently operates such a center in downtown Portland, primarily but not exclusively for its own customers. Under this proposal, the Alliance would have contributed $1 million over three years to create a lighting demonstration and research facility that would be integrated with and coordinated by the Lighting Design Lab in Seattle. This would have served metropolitan Portland (including Vancouver, WA) as well as helped serve the rest of Oregon and parts of southern Idaho and southern Washington--areas that Alliance staff believe are underserved by the Lighting Lab.
"Lighting is inherently a visual experience, a tactile thing," said Harris. "For a lot of people, they have to see it before they can buy it." Energy-efficient lighting is becoming more widespread through code requirements and distribution channels, he noted, but poor lighting design continues to "waste a lot of energy. A good chunk of the remaining [lighting] market potential has to do with design issues, teaching people to use the lighting equipment the right way."
Board members, however, were deeply divided on this proposal. Some viewed it as valuable in helping to promote energy-efficient lighting to influential audiences, such as architects, engineers and lighting designers.
But the skeptics finally outnumbered the supporters. Their questions and concerns included the total funds already allocated by the Alliance to lighting, unnecessary duplication of LDL services, PGE/Enron's continued role and funding, and the potential for PGE/Enron to use the facility to establish business relationships with customers outside its service territory--a possible competitive advantage in an open retail marketplace for electricity.
The board voted 8-7 against the proposal.--Mark Ohrenschall
Already one-third of the way through the Northwest Energy Efficiency Alliance's original three-year charter, Alliance officials have been contemplating the future of the regional market transformation collaborative while reflecting on the organization's inaugural year.
Looking ahead, the Alliance board generally foresees a continuing long-term role for regional market transformation beyond the end of the Alliance's guaranteed funding from Pacific Northwest utilities. This destiny is likely to be linked with public-purposes funding. In the meantime, the board believes, the Alliance must establish a record of performance and communicate its work to important audiences around the region.
Looking back, executive director Margie Gardner gives the Alliance superior marks for launching promising market transformation projects and for the dedication and cohesiveness of its board and staff. At the same time, though, she acknowledged shortcomings in the Alliance's operations and regional outreach, but believes the outlook for these is good.
These big-picture perspectives emerged during the board's Dec. 11-12 meeting in Seattle, in a wide-ranging board discussion and a separate presentation by Gardner.
The board's rumination was introduced by chairperson Jake Fey as an opportunity to discuss "where we want to head as an organization," and to assess board member positions on this topic.
At the end of the board's discussion, Gardner summarized what she learned: "Generally, this room would like to see energy efficiency market transformation move forward beyond the funding period we have already, and the Alliance is an appropriate vehicle to at least potentially deliver that." The Alliance's current charter expires at the end of 1999, although some funding may extend beyond that date within the $65 million budget.
"It might be a good idea to take some time and devote it seriously to putting together a plan folks can get behind," said Fey, "so we can move forward on a common basis and a common direction to staff where we want to head." Toward this end the Alliance board and staff scheduled a one-day retreat for mid-January.
Following is a summary of the main themes surfacing in the board's discussion.
Performance
To secure a future, the Alliance must keep focused on its fundamental mission of improving markets for energy efficient goods and services, according to several board members.
For Charlie Grist, this means the Alliance will need to "continue to find projects that make sense, do them on a regional basis, establish a record of performance on those, both good and bad, [have] honesty in evaluating that performance, be willing to take hard looks at things that are failing and stop doing them, be willing to entertain new approaches if some come up."
Liz Klumpp, meanwhile, offered her own definition of success for the Alliance: "We didn't make all our programs look good . . . Sometimes we went beyond our wildest dreams and sometimes we cut off after 18 months. Success to me is responsible spending of ratepayer dollars."
Communications
Success alone, however, is not enough to guarantee a future for the Alliance, according to Mat Northway and several other board members. "We need to have success in market transformation," said Northway, but in addition, "We need to promote our successes" so the Alliance becomes known as the regional entity for market transformation.
Spreading the word about the Alliance is vital, believes Larry Bryant. "I think this is basic for everything we hope to accomplish. Obviously we need a lot of support from a lot of folks besides the ones sitting here at the table . . . We need to have a very strong, orchestrated communications effort so we become a well-known entity, and talk about the challenges, the ventures, the successes, to make sure people throughout the region recognize this is a viable organization . . . Nothing we're doing will be successful unless we're sharing the story."
Among the audiences identified by various board members are regulators, legislators, trade allies, utility (particularly public-power) and government officials, and the region's electric customers who are funding the Alliance's $65 million maximum budget from 1997 through 1999.
Good communications can serve to inform people as well as sway opinions--sometimes negative--about the Alliance. Gary Mahugh offered this example: "There is some perception out there that we are slowly becoming a jobs agency for government, giving a lot of money to government agencies to keep people employed. I'm not necessarily taking a stand [although] I think it's probably the right perception, particularly if we don't communicate what we're doing."
Ken Keating thinks it is vital for the Alliance to communicate with publicly owned utilities and their customers, who have "some influence" over legislators considering public-purposes funding in the Northwest states. And although his employer, Bonneville Power Administration, has earmarked money for market transformation in its proposed budgets after 2001, "It is very possible that without [public utility] support for regional market transformation, that budget commitment will be much reduced from where it is now."
Public Purposes
BPA (on behalf of its customers) is providing about 57 percent of the Alliance's 1997-99 money, and the region's six major investor-owned utilities are furnishing the rest. Although the post-1999 funding outlook is not clear, "This group needs to be able to function, eventually, under different forms of funding," Grist said. He floated the idea of getting financial support from the natural gas sector, and undertaking more market transformation projects with both gas and electric orientations.
Over time, the most promising funding source for the Alliance appears to be public-purposes money. Grist, for one, wants to position the Alliance to serve as an administrator of regional funding for market transformation, and perhaps other public-purposes initiatives. But this scenario is not universally shared.
In Montana, restructuring legislation passed this spring allocates 2.4 percent of 1995 utility revenues to such public purposes as energy conservation, renewable energy and low-income services, beginning in 1999. Utilities can run their own programs and/or contribute to a state fund to reach the 2.4-percent spending level, explained Alliance board member Deb Young of Montana Power. Her utility is looking at several options for its public-purposes money, including state administration, a mix of its own programs and work put out to bid, and contracting with an independent non-profit entity to administer the money for the benefit of Montana Power customers. "Regional market transformation does have a benefit to Montana Power customers, or we wouldn't have included it," said Young, but it's "unlikely" the investor-owned utility will give all its money to an entity such as the Alliance.
"There probably are things that do make sense from a regional perspective. Other things don't make sense from a regional perspective," Young said. "I don't think that all public purposes falling under one administration is the right thing, even in one state."
Montana is the only Northwest state to have comprehensively restructured its electric industry, with public-purposes funding. The Washington Legislature is likely to consider the issue in 1998, but the prospects are iffy (see story above). The Oregon Legislature doesn't reconvene until 1999, although interim discussions on restructuring are taking place. Portland General Electric/Enron has proposed a customer choice plan under which the Alliance would administer most public-purposes funds. In Idaho, meanwhile, lawmakers appear unlikely to take up the issue in a substantive way, at least in 1998.
Separate provisions for public-purposes funding in each of the four states are a possibility mentioned by Grist and Keating, although regional funding may well be allocated by states.
The Alliance board also delved into potential strategies to influence public-purposes legislation, but with no firm conclusions or consensus.
Brian Hedman suggested working for a line-item for regional market transformation within public-purposes legislative provisions, although it need not be earmarked for the Alliance. Nancy Hirsh raised the possibility of trying to establish a more specific allocation for regional market transformation, but Doug Kilpatrick warned against anything more than a placeholder: "I'd be cautious about establishing some kind of number to put in there. You might end up getting what you ask for, and it might not be the right number." Jon Powell said he was thinking of a maximum amount earmarked for regional market transformation, with any unspent funds reverting back to local utilities. Mat Northway spoke up for a minimum figure. Young suggested caution in setting "floors or caps on dollar amounts. All it does is create bigger political fights for the money."
In addition to the politics of public purposes, the Alliance also needs to pay attention to another constituency, said Bev Corwin--"manufacturers, contractors, the private sector; those who we're trying to influence to transform the market. In order to do that," she acknowledged, "We have to handle the political side . . . I just want to throw that out there before politics swallows us up entirely."
And in another suggestion, Klumpp raised the idea of proactively changing the composition of the Alliance board: "I've heard from a variety of parties that perhaps a different makeup on the board would enhance its credibility and accountability."
Executive Director's Assessment
In a separate talk, executive director Gardner shared her reflections on the Alliance's first year of existence.
In terms of market transformation projects, "I would say the Alliance has done a stupendous job," she said, having now adopted 26 "very good" initiatives with a variety of sponsorships and a combined budget of some $36 million. "We still have to keep things moving in the new year," she added.
Gardner also lauded the hard work and dedication of Alliance board members, and their "willingness to air differences . . . That has held this Alliance together." Staff members also deserve credit for their hard work, she said.
In operations, however, "I think we hiccuped. We're not up to date . . . [although] I feel very good about how things are going." The Alliance had one employee in August, she noted (herself), and now has 10. (Also since August, the organization has experienced the abrupt resignation of former executive director Will Lutgen, the closure of his Bellevue office, the consolidation of staff in Portland, and a mid-December move to a new location in Portland.)
Gardner also acknowledged the Alliance isn't as well-known as it should be in the Northwest: "I've got to spend some time on outreach in other parts of the region, with other players."--Mark Ohrenschall
A coalition of community and political activists and labor unions has raised some concerns about Snohomish County PUD's plans to offer three new business lines, including one for energy services.
The PUD board of commissioners has already approved two of the proposals--Snohomish Energy Services, through which the PUD will market both commodity sales and energy services, and New Horizons, through which Snohomish will offer vegetation management and utility construction services.
The group RE-FUSE believes these proposals "fundamentally depart from the utility's traditional focus of directly serving PUD ratepayers." But the PUD views the proposals as a way to keep the utility viable in a restructured environment by developing other sources of revenues that will hold down power costs for its traditional customers.
The new programs grew out of the PUD's business plan, which was released in June. The plan recommends administratively dividing Snohomish PUD into three business areas: commodity sales, electricity transportation, and products and services. The new business lines provide opportunities for the PUD to market its expertise to customers outside its northwestern Washington service territory.
RE-FUSE spokeswoman Toni Bohan, labor representative for the Service Employees International Union Local 120, said her group thinks the PUD's ratepayers ought to have more information about the proposals. "We are your customers--we're the owners," Bohan said. "We have an obligation to determine what it is and why it is [the PUD] is doing what it's doing." RE-FUSE is concerned the new business lines will use public money and resources to create for-profit business lines that would operate beyond the scope of the PUD commission's oversight and public scrutiny.
But the PUD maintains that two of the three business lines would remain under the board's control, operating as "projects administered within the utility's existing organizational structure." The third business line, an expansion of the PUD's alliance with Idaho Power, would be separate, but Snohomish's involvement in the alliance would remain under the same control as any other PUD activity.
RE-FUSE is also concerned the PUD will be taking ratepayer dollars and driving "its own customers out of business." But the PUD points out that it has had little, if any, competition for the likes of electric construction and some other services. In addition, the PUD plans to contract out many of the new services it will be offering, which would enhance business and revenues for local firms.
In spite of RE-FUSE's concerns, the PUD board in December approved two of the proposals on separate 2-1 votes, with commissioner Chuck Moon casting the dissenting ballot both times.
Through one of the business lines--Snohomish Utility Services, approved Dec. 2--the PUD will, among other things, offer energy management and energy efficiency services. PUD spokesman Andy Muntz said these energy efficiency services would be aimed primarily at large industrial customers and focus on efficient motors and lighting systems.
The second new business line, New Horizons, was approved Dec. 9, when the PUD board approved the utility's budget. The third new business line won't be up for approval until late January, at the earliest. It's likely the PUD will hold at least one more public meeting to discuss it. --Jude Noland
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Idaho Power wants to shorten the number of years it will take to amortize its expenditures on demand-side management programs.
In a Nov. 26 filing with the Idaho Public Utilities Commission, the utility seeks permission to change the amortization schedule for DSM expenses from the current 24 years to five years. DSM expenses already in rates would be recovered more quickly, while DSM costs the utility has incurred since 1994--which haven't yet received PUC approval for inclusion in rates--would also be recovered on a five-year amortization schedule.
Under the proposal, Idaho Power would recover $8.4 million in DSM costs annually for the next five years, for an overall rate increase of about 1.8 percent. Jim Baggs, Idaho Power general manager of customer service and metering, said about half that amount is for speedier recovery of DSM already in rates; the other half would go for DSM costs the company has incurred since its last rate case in 1994. Most of those expenditures were for continuing DSM programs, Baggs said, such as the Design Excellence Assistance Program, the Manufactured Housing Acquisition Program, Partners in Energy Efficiency and lighting and agricultural programs. Most have since been discontinued.
Not included are costs for Idaho Power's participation in the Northwest Energy Efficiency Alliance. While the PUC approved the utility's participation in the regional collaborative, it told Idaho Power to capitalize and defer those costs and ask for recovery at a later time--after the IPUC has been able to determine the prudency of Alliance expenditures.
At the same time, however, the commission encouraged Idaho Power to initiate a proceeding that would permit a comprehensive review of its existing DSM investment and recovery. The Nov. 26 filing is in response to this suggestion, according to IPUC utilities division administrator Stephanie Miller. "I don't think the commission is going to be shocked to see this case," she said.
While investor-owned utilities in other Northwest states have refinanced conservation expenditures through bond sales, Idaho Power doesn't have that option since it doesn't have bonding authority in the state of Idaho, according to spokesman Dennis Lopez --Jude Noland
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[Editor's note: The following article was written by Dave Houser shortly after he left the Northwest Energy Efficiency Alliance board of directors in October. Houser served as the Alliance's inaugural chairperson. Con.WEB welcomes opinion articles from its readers; call editor Mark Ohrenschall at (206) 285-4848, or send an e-mail to marko@newsdata.com]
by Dave Houser
Montana Power
It has been almost a month since I completed my term as the first chairperson for the Northwest Energy Efficiency Alliance's board of directors, and almost a month since I turned over Montana Power's seat on the board to Deb Young (who I am sure is already making a valuable contribution to the Alliance's efforts).
I will always look back on this experience with a great sense of accomplishment for whatever role I played in the Alliance's many successes, and with a great deal of respect for the Alliance's other board members and staff. These individuals, in spite of their diverse backgrounds and their diverse perspectives, have shown repeatedly that hard work and a spirit of compromise and collaboration can accomplish great things (even on the eve of a profound competitive revolution in the energy industries).
During this last month, I have occasionally paused to think about the Alliance's first year of operation, and about where the Alliance might be headed in the future. I am pleased to have this opportunity to share my thoughts.
In its first year, the Alliance was created from the combined ideas of a broad spectrum of energy interests, grew through a period of staffing additions and process development, and now has matured into an entity capable of processing multiple complex project proposals. This start-up year was not without its share of bumps and twists and turns, but it was always moving in the right general direction.
The Alliance is essentially where I hoped it would be at the end of its first year of operation. The Alliance's operational processes are well-defined, it has secured the services of a well-qualified group of employees and contractors, and it is positioned in the marketplace as the most significant new source of public-purpose funding in the Northwest. The Alliance is stimulating market transformation across a broad spectrum of technologies and markets, and the benefits of these efforts are being reasonably distributed across the region.
The Alliance's future is hard to predict. The initial agreement that formed the Alliance provided funding for a three-year period [through 1999], with hopes that by the end of this period alternative public-purpose funding mechanisms would be in place across the region, and that these mechanisms would appropriately provide for the continuation of market transformation efforts. The funding organizations [Bonneville Power Administration and major investor-owned utilities] are currently developing mechanisms and agreements with the Alliance to extend the time period of their commitments to allow the Alliance to make project obligations extending beyond the three-year window. These efforts will buy some time for the market transformation effort, while the states deal with industry deregulation and public-purpose funding.
As Montana Power moves through deregulation processes with its regulators and other interested parties in Montana, we are seeing some interest in moving the administrative responsibility for public-purpose spending away from the regulated distribution utility, and possibly to an objective third-party administrator. In Oregon Portland General Electric/Enron has filed a proposal to use the Alliance as its public-purposes fund administrator. Some have suggested that the Alliance should expand its scope by offering administrative services to the four Northwest states for overseeing the distribution of public-purpose funding, including market transformation, local conservation, renewables, and related research and development activities.
These are probably the most significant policy issues that the Alliance will face in the next couple of years. Should the Alliance expand its scope of activities beyond market transformation? Should the Alliance modify its charter and its membership to deal with issues like renewable resources and local conservation? Can the Alliance effectively manage local/state efforts without creating a subsidiary board with local representation? If the Alliance takes on these additional responsibilities, will it affect the market transformation effort? Will the states proceed down a path of deregulation that would enable such activities?
I am somewhat disappointed that other important responsibilities will prevent me from playing a direct role as the Alliance continues to develop and mature, and as it plays out its (yet to be defined) role in the evolution of the efficiency marketplace.
Finally, I would like to extend my best wishes to all those friends, acquaintances and co-workers who will most certainly carry on this noble effort in my absence. May the years ahead be as productive and rewarding as the one behind!
Applications are now being accepted for the sixth annual BEST Business Awards, which will be presented in April to Portland-area businesses with notable energy and environmental accomplishments.
BEST is an acronym for Businesses for an Environmentally Sustainable Tomorrow, a city of Portland program. The annual awards issued by BEST have gone to local enterprises for their achievements in energy efficiency, water conservation, waste reduction, efficient transportation and overall environmental accomplishments.
The BEST Business Awards are co-sponsored by the Association for Portland Progress, the Environmental Federation of Oregon and The Business Journal. Applications for the 1998 awards are due Feb. 20, and are available from the Portland Energy Office. For more information, call the energy office at (503) 823-7222 or send an e-mail to pdxenergy@ci.portland.or.us.
Companies that manufacture or represent energy-efficient, water-conserving or renewable energy products and services are invited to exhibit at the "Energy '98: Breaking the Barriers" conference and exposition scheduled for Aug. 3-5 in Bellevue, WA.
The event is expected to be attended by hundreds of government and private-sector officials with an interest in these products and services. Of particular interest will be exhibits for commercial/residential appliances and equipment, construction products, and technologies for renewable, industrial/commercial, transportation and lighting sectors, as well as water-saving and office technologies.
The event is sponsored by the U.S. Department of Energy's Federal Energy Management Program, the U.S. General Services Administration and the U.S. Defense Logistics Agency, in conjunction with the Northwest Energy Efficiency Council, Bonneville Power Administration, Pacific Northwest National Laboratory and the states of Washington, Oregon and California.
For more information on exhibiting, contact Faye Boyle or Judi Berman: phone, 1-800-960-2242; fax, (301) 468-3662; or e-mail, feenw@tainc.com.
Nearly 700,000 B.C. Hydro customers have participated in Power Smart since the energy conservation program began 8-1/2 years ago, and they are annually saving $104 million on their collective electric bills, according to the British Columbia utility.
Annual energy savings through Power Smart now add up to more than 2.3 billion kilowatt-hours of electricity (260-plus average megawatts), enough power to supply about 230,000 homes.
B.C. Hydro reported these figures in early December, shortly after the end of Power Smart Month in November.
"Power Smart has been influential in creating a culture change among British Columbians," B.C. Hydro president and chief executive officer Michael Costello said in a news release. "Turning off unnecessary lights was a big step a few years ago, but it's a habit for most people now. Today's energy consumers have a better understanding of the value of our resources, and are looking for more and more ways to save energy and conserve water."
Power Smart programs have improved the energy efficiency of about 17,000 homes and more than 20,000 commercial and institutional buildings, according to B.C. Hydro. In addition, more than 160,000 old refrigerators have been collected and more than 1,000 energy efficient products endorsed through Power Smart initiatives.
For more information on Power Smart, call B.C. Hydro's Energy Information Centre at 1-800-663-0431, or visit the utility's Web site.
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