HREG PFT

Document Sample
HREG PFT Powered By Docstoc
					    DPUC REVIEW OF THE CONNECTICUT ENERGY EFFICIENCY FUND'S

              CONSERVATION AND LOAD MANAGEMENT PLAN FOR 2011

         DPUC REVIEW OF THE CONNECTICUT GAS UTILITIES JOINT

                                  CONSERVATION PLANS

                            DOCKET NOS. 10-10-03 & 10-10-04




                                 DIRECT TESTIMONY OF


                     FRANK W. RADIGAN, PHILLIP S. TEUMIM,


                      ALICE A. MILLER AND BENJAMIN STEIN


                                    ON BEHALF OF THE


                           OFFICE OF CONSUMER COUNSEL




                                     NOVEMBER 12, 2010


1




    1   Hudson River Energy Group / Docket Nos. 10-10-03, 10-10-04
 1

 2   Q.   PLEASE STATE YOUR NAMES AND BUSINESS ADDRESSES.


 3   A.   My name is Frank W. Radigan. I am a principal in the Hudson River Energy Group, a

 4        consulting firm providing services regarding the electric utility industry and specializing

 5        in the fields of rates, planning and utility economics. My office address is 120

 6        Washington Avenue, Albany, New York 12210.


 7        My name is Phillip S. Teumim. I am a consultant affiliated with Hudson River Energy

 8        Group. My business address is 37 Ruxton Road, Delmar NY 12054.


 9        My name is Alice Miller. I am a consultant affiliated with Hudson River Energy Group.

10        My business address is 9 Brookline Drive, Clifton Park, New York 12065.


11        My name is Benjamin Stein. I am a consultant affiliated with Hudson River Energy

12        Group. My business address is 17 Barry Court, Loudonville, NY 12211.


13


14   Q.   PLEASE SUMMARIZE YOUR EDUCATION AND BUSINESS EXPERIENCE?


15   A.   (Radigan) I received a Bachelor of Science degree in Chemical Engineering from

16        Clarkson College of Technology in Potsdam, New York (now Clarkson University) in

17        1981. I received a Certificate in Regulatory Economics from the State University of New

18        York at Albany in 1990. From 1981 through February 1997, I served on the Staff of the

19        New York State Public Service Commission (PSC) in the Rates and System Planning

20        sections of the Power Division. My responsibilities included resource planning and the

21        analysis of rates, depreciation rates and tariffs of electric, gas, water and steam utilities in


          2   Hudson River Energy Group / Docket Nos. 10-10-03, 10-10-04
 1   the State and encompassed rate design and performing embedded and marginal cost of

 2   service studies as well as depreciation studies.

 3

 4   Before leaving the Commission, I was responsible for directing all engineering staff

 5   during major proceedings including those relating to rates, integrated resource planning

 6   and environmental impact studies. In February 1997, I left the Commission and joined

 7   the firm of Louis Berger & Associates as a Senior Energy Consultant. In December 1998,

 8   I formed my own Company.

 9

10   In my 29 years of experience, I have testified as an expert witness in utility rate

11   proceedings on more than 100 occasions before various utility regulatory bodies including

12   the Arizona Corporation Commission, the Connecticut Department of Utility Control, the

13   Delaware Public Service Commission, the Illinois Commerce Commission, the Maryland

14   Public Service Commission, the Massachusetts Department of Telecommunications and

15   Energy, the Michigan Public Service Commission, the New York State Public Service

16   Commission, the New York State Department of Taxation and Finance, the Nevada

17   Public Utilities Commission, the North Carolina Utilities Commission, the Public Service

18   Commission of the District of Columbia, the Public Utilities Commission of Ohio, the

19   Rhode Island Public Utilities Commission, the Vermont Public Service Board, and the

20   Federal Energy Regulatory Commission. I currently advise a variety of regulatory

21   commissions, consumer advocates, municipal utilities and industrial customers

22   concerning rate matters, including wholesale electricity rates and electric transmission

23   rates.



     3   Hudson River Energy Group / Docket Nos. 10-10-03, 10-10-04
 1   (Teumim) I hold a Bachelor of Science degree in Electrical Engineering and a Master’s

 2   Degree in Business Administration from Rensselaer Polytechnic Institute in Troy NY. I

 3   was employed by the New York State PSC from 1970 to 1988, and again from 1992 to

 4   2002. During the period 1988 to 1992, I worked for the consulting firm of Theodore

 5   Barry & Associates, and later Resource Management International.          During my initial

 6   tenure with the PSC, I worked extensively on telecommunications, electric gas, and water

 7   matters. During my second tenure with the PSC, I was the Director of the Energy and

 8   Water Division, and later the Gas and Water Division. In 2002 I became a consultant,

 9   and have worked on gas, electric and water matters for a variety of clients in various

10   jurisdictions since that time.         I have appeared before a number of regulatory

11   commissions, the FERC, and several legislative committees.            I have also been an

12   instructor at Camp NARUC and other regulatory training workshops and have been an

13   invited speaker at a number of regulatory, trade and industry conferences nationally.

14

15   (Miller) I recently retired from the New York PSC where I was Chief of the Energy

16   Efficiency Design and Implementation Section and Chief of the Consumer Advocacy

17   Section. I was a co-lead for New York’s Energy Efficiency Portfolio Standards

18   proceeding, which determined how to allocate nearly one billion dollars in energy

19   efficiency spending, and oversaw preparation of all of the staff proposals in that case.

20   During my 29 years with the PSC my experience has been in the areas of energy

21   efficiency, prudence reviews, review of utility operations, evaluation of consumer issues,

22   tariff and rate analysis, retail access, and strategic planning. Over a period of twenty

23   years I was a section chief in various capacities, including management responsibilities in



     4   Hudson River Energy Group / Docket Nos. 10-10-03, 10-10-04
 1        the Office of Energy Efficiency and the Environment (Energy Efficiency Design and

 2        Implementation), Office of Electricity and Environment (Energy Efficiency and

 3        Renewables), and Office of Consumer Policy (Consumer Advocacy). I hold a B.A.

 4        (with highest distinction) and an M.A. from the University of Iowa and an M.B.A. from

 5        SUNY-Albany.


 6


 7        (Stein) I hold a Bachelor of Science degree in Mechanical Engineering from Rensselaer

 8        Polytechnic Institute in Troy NY. I was employed by the New York PSC from 1970

 9        through 1984 and again from 1986 through 2009. In the interim period, I worked for

10        Richard Metzler & Associates as a management consultant, conducting utility

11        management audits of electric and gas companies. Beginning in 2007, I was responsible

12        for restarting the Commission's management audit program with comprehensive audits of

13        Consolidated Edison and National Grid. Prior to that, I managed the Market Operation

14        and Design group as part of developing a competitive retail market for electricity and gas.

15        I have testified in gas, electric, and water rate cases, as well as merger and acquisition

16        proceedings. Since leaving the PSC, I have worked as a management consultant for a

17        number of clients.


18        Our resumes are included as Exhibit __ (HREG – 1).


19


20   Q.   ON WHOSE BEHALF ARE YOU TESTIFYING IN THIS PROCEEDING?

21   A.   We are testifying on behalf of the Office of Consumer Counsel (“OCC”), which hired

22        Hudson River Energy Group (“HREG”) to assist in its review of the 2011 Conservation

          5   Hudson River Energy Group / Docket Nos. 10-10-03, 10-10-04
 1        and Load Management Plan (“C&LM Plan”) filed by The Connecticut Light and Power

 2        Company (“CL&P”), The United Illuminating Company (“UI”) (collectively the

 3        “EDCs”),Yankee Gas Services Company (“Yankee Gas”), Connecticut Natural Gas

 4        Corporation (“CNG”) and The Southern Connecticut Gas Company

 5        (“SCG”)(collectively, the “LDCs”, and together with the EDCs, the “Companies” or the

 6        “Utilities”).


 7


 8   Q.   PLEASE DESCRIBE THE SCOPE OR YOUR REVIEW.


 9        A.        We were retained by OCC to review the 2011 CL&M Plan and Program Savings

10        Documentation (“PSD”) and to make recommendations to improve overall cost

11        effectiveness of the program management, evaluation and implementation. We have

12        evaluated the 2011 C&LM Plan, PSD and other materials as thoroughly as we could in

13        the time available. However, due to time limitations, we have had to focus our efforts on

14        areas where improvements are likely to be most beneficial and have not been able to

15        review the program in as much detail as we would have if the schedule had allowed more

16        time for program review.

17


18   Q.   PLEASE SUMMARIZE YOUR RESULTS OF YOUR REVIEW.


19   A.   We have reached the following specific conclusions with respect to the C&LM Plan and

20        the PSD:




          6    Hudson River Energy Group / Docket Nos. 10-10-03, 10-10-04
 1           The C&LM program is well established and mature. Conservation and load

 2            management, once an anathema to utilities, has been integrated into the operations of

 3            CL&P and UI. A continuing funding mechanism has been established, which

 4            generates an ample level of funds to conduct a robust energy efficiency portfolio.

 5           A supporting structure for the program is in place, including utility organizations,

 6            staffing and accounting systems.

 7           Overall, we believe the C&LM programs have a good initial structure. During the

 8            last three to four years, there has been an explosion of interest in energy efficiency

 9            throughout the country, with a concomitant increase in the level of sophistication of

10            energy efficiency portfolios being offered nationally. Furthermore, building energy

11            codes and federal appliance standards are changing significantly. The Companies'

12            plans need to reflect the innovation and improvement that have been taking place

13            nationally. At the same time, the DPUC has noted deficiencies in the C&LM plans

14            and has ordered changes which have not been implemented to date.

15

16        Given the DPUC's recent directives on program goals and objectives, improvements in

17        the state of the art, and known changes upcoming in efficiency standards, this is an

18        opportune time to reevaluate the programs and make needed improvements.

19

20   Q.   PLEASE SUMMARIZE YOUR RECOMMENDATIONS DISCUSSED IN THIS

21        TESTIMONY.


22   A.   While many process improvements have been implemented over the last several years,

23        our investigation showed that there are opportunities for improvement, particularly in the


          7   Hudson River Energy Group / Docket Nos. 10-10-03, 10-10-04
 1   areas of transparency and independence of evaluation, communications, goal-setting and

 2   goal-achievement. We recommend the following:


 3   Incentives and Goals


 4   1. Utility incentives should be based on the achievement of energy saving and demand

 5       reduction goals in a cost-effective manner. This places the emphasis on the behavior

 6       that is most important – reaching pre-determined energy savings goals and demand

 7       and emission reductions targets. Consistent with that emphasis, certain incentives

 8       should be discontinued, and the DPUC should adopt disincentives for failure to

 9       comply with DPUC orders, rather than providing incentives for simple compliance.

10       The large incentives for customer awareness of programs and target penetration levels

11       should be discontinued.


12   Evaluation and Cost Effectiveness


13   1. The DPUC should take a more active role in the evaluation, measurement and

14       verification (“EM&V”) process, to encourage and enhance the independence and

15       transparency of that process. This would involve an increased role for Department

16       Staff. Further, additional funding should be made available for expanded staffing for

17       the critical third party, independent EM&V consultant function.


18   2. More complete information should be provided about changes made by the EDCs in

19       the PSD, since it underlies the C&LM plan and is the basis for determining which

20       measures will be funded in the upcoming year. To mitigate the problem of small

21       sample sizes, which may distort evaluation results, the possibility of small samples



     8   Hudson River Energy Group / Docket Nos. 10-10-03, 10-10-04
 1       for given measures should be considered and addressed during the work plan phase of

 2       the evaluation process.


 3   3. To maximize the effectiveness of program funds, the Department should consider

 4       ordering an increase in the interest rates for energy conservation loans, while still

 5       keeping them below market rates.


 6   Administration and Reporting


 7   4. Tracking progress toward achievement of annual electric and gas targets should be a

 8       basic tenet of all energy efficiency reporting. The Companies’ data tracking

 9       processes should be coordinated and improved to facilitate timely and accurate

10       evaluations.


11   5. The DPUC should require that it and the Energy Efficiency Board (“EEB”) be

12       informed whenever the Program Administrators will be reallocating more than 20%

13       of a program’s funds. EEB and the DPUC should have veto authority if they believe

14       such a transfer of funds is not in the ratepayers’ interest.


15   6. To avoid problems caused when funds for Commercial and Industrial (“C&I”)

16       programs run out in the middle of a budget year, the Utilities should consider issuing

17       Requests for Proposals that announce that sums of money are available for

18       comprehensive energy efficiency programs and describe the requirements that

19       programs must meet to be considered.


20   The Gas Program




     9   Hudson River Energy Group / Docket Nos. 10-10-03, 10-10-04
 1            7. Greater focus should be given to the natural gas portion of the C&LM portfolio. Five

 2                year commodity and demand reduction targets should be established, as well as

 3                annual target goals. Incentives for achievement of those goals should be incorporated

 4                into the current incentive structure.


 5            Future Directions


 6            8. If funding is “cut”, careful consideration needs to be given to how best to spend the

 7                available budget rather than making proportional reductions across-the-board.1


 8            9. The CL&M Plan and PSD should be filed by August 1st to allow adequate time for

 9                review. The large budget associated with the C&LM Plan warrants this additional

10                opportunity to evaluate the plan and recommend improvements.


11


12

13   Overall Perspective on the CL&M Program

14   Q.       HOW WOULD YOU CHARACTERIZE THE C&LM PROGRAM TODAY?

15   A.       Most of the programs in the CL&M plan have been in place for years, many even pre-

16            dating the current plan format, and have yielded energy savings and emissions reductions

17            over a sustained period. The 3 mill per kWh ratepayer funding mechanism has been

18            extremely successful in providing financial support for the programs.2 CL&P and UI


     1
       There have been a variety of additional sources of funding for the C&LM Fund over the past several years,
     including RGGI funds and revenues from the FCM. This has led to significant additional funding over and above
     the 3 mill charge on ratepayers, as demonstrated in the budget set forth in the C&LM Plan at Table A2.
     2
      In fact, the effort is in danger of becoming a victim of its own success and being tapped for purposes other than
     energy efficiency. As reported on HartfordBusiness.com on September 13, 2010, “To plug state budget holes, the

            10   Hudson River Energy Group / Docket Nos. 10-10-03, 10-10-04
 1           have personnel in place to perform the various functions associated with the program and

 2           work with regional organizations on common issues. Relationships have been

 3           established with energy efficiency contractors performing new construction and

 4           retrofitting activities and a collaborative and inclusive process with stakeholders

 5           facilitates stakeholder involvement. The organizational infrastructure is well developed

 6           at the utility level and the stakeholder level, as witnessed by the size of the utility staffs

 7           involved in energy efficiency programs and the use of input from consumers, the business

 8           community, state agencies, low income representatives, and the environmental

 9           community. Connecticut is recognized nationally as one of the leaders in the field of

10           energy efficiency. In other words, Connecticut’s C&LM Fund is at a relatively mature

11           stage.

12

13   Q.      PLEASE DISCUSS YOUR CONCLUSION THAT THIS IS AN OPPORTUNE

14           TIME TO RE-EVALUATE AND IMPROVE THE PROGRAM.

15   A.      In the 2010 IRP Decision, Docket No. 10-02-07, the Department endorsed a goal for the

16           C&LM Programs of zero load growth. To help achieve this goal, the Department

17           announced that it "... will pursue greater efficiency through strategies it has encouraged

18           for many years . . . [and] continue to examine and refocus all C&LM programs to

19           maximize energy efficiency at the lowest possible cost." (IRP Decision, p. 49.) We agree

20           that this is an opportune time to re-evaluate and improve the C&LM programs, for the

21           further reasons listed below.

     Connecticut legislature will appropriate $30 million from the fund [Energy Efficiency Fund] in 2012, a sum equal to
     25 percent of the fund’s spending on energy efficiency programs.” Proposed C&LM budgets for 2012 assume the
     reality of these budget cuts and reduce budgets in all spending categories on a generally proportional basis. We
     address this approach at the end of our testimony below.


            11   Hudson River Energy Group / Docket Nos. 10-10-03, 10-10-04
 1    1. As noted above, the program, particularly on the electric side, is well beyond the

 2         "growing pains" phase and is best characterized as a mature program. Certain

 3         program attributes, which may have been appropriate for a start-up mode, or which

 4         were considered acceptable in order to overcome organizational inertia and resistance

 5         to change may no longer be appropriate. Examples of this include minimal

 6         integration of natural gas measures into program design, the percentage of total

 7         spending allocated to evaluation, measurement, and verification (EM&V), a lack of

 8         transparency in the planning process, and certain aspects of the utility incentive

 9         mechanism, which provide incentives for setting up programs required by the DPUC

10         which are now well established.

11    2. We are in very difficult economic times, and it is critical that all aspects of utility

12         operations be as efficient as possible. While efficiency is always a desirable attribute,

13         at this time it is doubly important.

14    3.    The funding of the program is forecast to be reduced by redirection of monies into

15         the state's general fund, which puts greater emphasis on the program to be efficient.

16    4. New regulations and marketplace forces are changing and will continue to change

17         customer behavior. As specific technologies develop and are brought to the mass

18         market, the need for subsidies and support diminishes, eventually to the point where

19         they should be dropped from the program. Eliminating a program may be appropriate

20         for one of two reasons -- either it is ineffective and does not provide an adequate

21         benefit, or it is a success story and no longer requires program support.

22    5. New regulations and marketplace forces are causing changes at the ISO and in the

23         vendor community.



     12    Hudson River Energy Group / Docket Nos. 10-10-03, 10-10-04
 1         6. Actions within the portfolio should be geared to meet long-term energy and demand

 2             savings goals that should be, but are not, front and center in the Plan. Emphasizing

 3             this point, in its 2010 C&LM Decision, Docket N0. 09-10-03, the Department

 4             reiterated its requirement of the prior year that the Companies include overall goals

 5             for mW and $/kW reductions in this year's plan, including long-term goals. (C&LM

 6             Decision, p. 58.)

 7                  All of the issues above indicate that now is the time to reevaluate the C&LM

 8         program.

 9

10   Incentives and Goals


11      Q. DO YOU HAVE ANY OBSERVATIONS ON PROGRAM GOALS?

12      A. When constructing a cohesive energy efficiency portfolio, it is important to have long

13         term, stable goals that are expressed in terms of energy savings (kWh and therm

14         reductions), emissions reductions (typically CO2, NOx, and SOx) and demand reductions

15         (kW savings). Those goals should not change dramatically year-to-year absent

16         extraordinary events. This allows customers, vendors, manufacturers, retailers, and other

17         stakeholders to participate in programs in a thoughtful way and to make long-term energy

18         and business plans based on the jurisdiction’s commitment to providing high quality

19         energy saving programs that offer opportunities for all customers to participate and that

20         benefit the entire body of ratepayers.

21

22         Portfolio goals should achieve and maintain a reasonable balance between energy and

23         capacity savings. Long term energy and load reduction goals should be established first,


          13   Hudson River Energy Group / Docket Nos. 10-10-03, 10-10-04
 1         based on clear and explainable objectives, with programs then developed that will best

 2         achieve those goals. The goals should be highlighted in the planning process and

 3         reporting should focus on how the program is doing relative to the goals.

 4

 5   Q.    WHAT CONCERNS DO YOU HAVE ABOUT THE C&LM PLAN’S GOALS?

 6         The C&LM Plan specifies electric program level energy and load reduction goals,

 7         prepared by the EDCs, which appear in Table B and Exhibit IV of the document. Those

 8         goals are expressed as individual utility goals, not as goals for the portfolio as a whole.

 9         The Plan does not include comparable information for gas portions of the programs. In

10         addition, goals for multi-year energy and load savings and progress toward achieving

11         multi-year goals are not discussed in the plan. Similarly, emission reduction goals and

12         progress toward their achievement are not addressed.

13

14         In response to interrogatory OCC-2, the EEB Consultant confirmed our impression that

15         the goals in the C&LM Plan are developed by the EDCs and that the EDCs provide all of

16         the information used in determining the level of incentives they will receive. The answer

17         to the interrogatory notes that other than the incentive exhibit, “The EEB does not receive

18         any additional backup documentation.”

19

20         Similarly, last year's C&LM Decision stated, “In the 2009 C&LM Decision the

21         Department discussed problems associated with the goal setting process. The major

22         problem is that the goals are established after the programs are planned. This can result

23         in the EDCs meeting or exceeding their goals annually while programs become more



          14   Hudson River Energy Group / Docket Nos. 10-10-03, 10-10-04
 1         costly and less cost-effective over time. The Department directed the EDCs to work with

 2         the ECMB and propose long-term goals in the 2010 C&LM filing. (2009 C&LM

 3         Decision, p. 30) The proposed incentive plan does not include any long-term goals and

 4         none have been proposed to date.” (2010 C&LM Decision, p. 56).

 5

 6         All indications are that identified problems with a lack of long term goals to guide the

 7         planning effort have not been addressed by the EDCs. Our impression, based on

 8         documents we have reviewed and discussions with the EDCs, is that rather than

 9         developing an overall objective for the energy efficiency portfolio that drives the creation

10         of a portfolio to best meet that target, the C&LM effort is driven by creation of individual

11         programs whose results are summed to reach the goal for the year. There are several

12         problems with this approach:

13                When planning is focused on individual programs rather than the portfolio of

14                 programs, optimization of individual programs based upon incentives may sub-

15                 optimize the portfolio.

16                When utilities control all of the program information, they may deliberately or

17                 inadvertently present the information in a way that maximizes the utility

18                 incentives.

19                There is a tendency to focus on spending program budgets rather than on achieving

20                 energy, load, and emission reduction efforts.

21

22   Q.    HOW DO YOU RECOMMEND THAT THE GOALS DEVELOPMENT

23         PROCESS BE IMPROVED?


          15   Hudson River Energy Group / Docket Nos. 10-10-03, 10-10-04
 1    Long term goals for energy (for both electric and natural gas), demand, and emission

 2    reductions should be described at the beginning of the C&LM Plan, followed by

 3    information on the progress made during the previous year on both a portfolio and

 4    individual utility basis. These goals should not simply be a summing up of current

 5    program performance, but instead should be geared toward achievement of a tangible

 6    long-term objective, informed by the most current IRP decision. Other considerations

 7    used in designing the portfolio, such as ensuring that funding will be available to all

 8    customer sectors roughly in proportion to their contribution to the C&LM Fund, should

 9    also be explained.

10

11    The energy efficiency goals should reflect the IRP planning process. The goals

12    development process should not be initiated by the Companies, although they should be

13    providing input about areas that they believe will benefit from increased focus. Within

14    the C&LM Plan, information about program goals (such as number of participants,

15    energy savings targets, demand reduction targets, emission reduction targets) should be

16    included for every program.

17

18    The C&LM Plan should also include information about the benefit-cost results for

19    individual program measures as well as for individual programs and for the portfolio as a

20    whole. This information will assist decision-makers in determining whether the measures

21    included within individual programs are appropriate and whether the allocation of funds

22    among programs is reasonable. It would also assist decision-makers if program benefit-

23    cost results were included within the descriptions of each program in the C&LM Plan.



     16   Hudson River Energy Group / Docket Nos. 10-10-03, 10-10-04
 1

 2   Q.    DO YOU SEE A NEED TO MODIFY ANY SPECIFIC PROGRAM

 3         INCENTIVES?

 4   A.    The DPUC’s decision last year on the 2010 CL&M Plan stated that “Approximately 90%

 5         of the goals are for electric system benefits and electric system benefits less program

 6         costs…The remaining 10% of the incentives are for individual programs goals.” (C&LM

 7         Decision, March 17, 2010, p. 56) As pointed out in last year’s C&LM Decision, “These

 8         are generally for conducting workshops or training events but do not directly incent lower

 9         costs of kWh/kW reductions for individual programs.” (page 56). Our review found that

10         the 2011 Plan has increased the percentage of incentive funding for specific program to

11         about 30%.

12

13             For example, in the 2011 C&LM Plan, the Companies will receive an incentive award if

14         they jointly conduct four sessions on the Small Business Program or if 20 Home Energy

15         Solutions – Income Eligible projects are conducted statewide. These are the type of

16         initiatives that the DPUC or the Energy Efficiency Board (EEB) should specify will be

17         done during the year, and they should then be completed as a matter of course, without

18         requiring specific incentives. Failure to follow Department directives should subject the

19         Companies to a disincentive.

20

21         Two of the specific incentives have a particularly large dollar value: "socket penetration"

22         rate improvements and public recognition of the existence of the C&LM Fund. With

23         respect to socket penetration -- what percent of installed bulbs are CFLs (23%) - - there



          17     Hudson River Energy Group / Docket Nos. 10-10-03, 10-10-04
 1    are known upgrades in Federal efficiency standards and changes in the marketplace that

 2    will be taking place over the next several years which will make CFL bulbs the de facto

 3    baseline. For future C&LM Plans the utility incentive for increasing CFL socket

 4    penetration (currently valued at $403,567 for CL&P and $97,962 for UI) will no longer

 5    be needed.

 6

 7    It is time to re-evaluate and continue a phase-out and significant redirection of current

 8    lighting incentives for customers (in the form of rebates) and the Companies (in the form

 9    of incentives to shareholders). Similarly, the utility incentive amount available for

10    “Increasing CEEF Fund Awareness” (also now valued at $403,567 for CL&P and

11    $97,962 for UI) is large and disproportionate to incentive amounts for achievement of

12    other goals. Going forward, we recommend that the incentives for customer awareness

13    be discontinued.


14    We recommend that the emphasis on incentives for specific programs be reduced. We

15    believe that the vast majority, if not all, utility incentives should be based on achievement

16    of energy saving and demand reduction goals in a cost-effective manner. This places the

17    emphasis on the behavior that is most important – reaching pre-determined energy

18    savings goals and demand and emission reductions targets. Furthermore, we recommend

19    that if the DPUC finds problems with the EM&V results for any program (for example, in

20    the form of delays or changes to data input into formulas), it should reserve the right to

21    reduce the incentive award associated with that program.


22



     18   Hudson River Energy Group / Docket Nos. 10-10-03, 10-10-04
 1   Q.    YOU MENTIONED CHANGES IN FEDERAL APPLIANCE STANDARDS AND

 2         IN THE MARKETPLACE. PLEASE DISCUSS THOSE CHANGES.

 3   A.    As mentioned above, the federal Department of Energy (DOE) has been actively

 4         involved in reassessing appliance efficiency standards and is expected to issue final rules

 5         on a wide variety of appliances in the next several years. One of the most far reaching of

 6         these is in the area of lighting , where the DOE has issued final rules that mandate that

 7         light bulbs must use 25-30% less energy by 2012 - 2014 (depending on wattage) and 70%

 8         less by 2020.

 9         Ten years ago, compact fluorescent light bulbs (CFLs) were expensive and hard to find.

10         Today, they are in every hardware store, small or large, in supermarkets, and in numerous

11         other places. Beyond that, light emitting diode (LED) bulbs are beginning to command

12         some shelf space in stores. The marketplace has clearly taken notice of the upcoming

13         standards changes. For example, IKEA announced that it would begin a phase-out of

14         incandescent bulbs in its stores on August 1, 2010, with a target completion date of

15         January 1, 2011.

16

17                  In addition to lighting, as mentioned above, the federal DOE is expected to

18         mandate major upgrades in standards for a number of appliances over the next several

19         years. Connecticut Utilities and the EEB should be planning ahead for these standards

20         changes and adjusting requirements customers must meet to obtain rebates, as

21         appropriate. This reevaluation should also examine incentives to the Utilities in light of

22         changing federal appliance standards and upgraded building codes.

23



          19   Hudson River Energy Group / Docket Nos. 10-10-03, 10-10-04
 1

 2   Q.    ARE THERE ANY FACTORS THAT SHOULD REDUCE THE INCENTIVE

 3         PAYMENT LEVELS?

 4   A.    Yes. There are three such factors. First, we have observed instances where program

 5         evaluations were unreasonably delayed. The DPUC should have the ability to reduce

 6         incentive payments accordingly. For example, the evaluation of the Home Energy

 7         Solutions program, the flagship residential program, has been going on for over two years

 8         and is still in the draft state. Exhibit HREG -2, Response to OCC 8 and 23, describes

 9         those delays. We see no logical reason for this level of back and forth and deliberations

10         for such a program evaluation.

11

12         Second, where it is determined that unsupported changes to underlying parameters, such

13         as in the PSD, have been made to give the appearance of meeting program goals, the

14         DPUC should reduce the incentive payments by an amount corresponding to the

15         unsupported portion of the incentive payment calculation.

16

17         Third, failure to follow DPUC requirements should also be grounds for reductions in

18         incentive awards. If a company fails to implement specific directives, that should be

19         grounds for reduction in the incentive payment levels.

20

21   Evaluation and Cost Effectiveness


22   Q.    PLEASE DISCUSS THE IMPORTANCE OF THE EM&V COMPONENT OF
23         THE PROGRAMS.



          20   Hudson River Energy Group / Docket Nos. 10-10-03, 10-10-04
 1   A.    Independent EM&V studies are a critical component of a well-run energy efficiency

 2         effort and are used ensure that programs are run cost effectively and that expected energy

 3         savings, demand reductions, and emission reductions are achieved. Results from EM&V

 4         studies for individual measures and individual programs should be an integral part of the

 5         process of determining which measures and programs to emphasize and, where

 6         necessary, which should be phased out.


 7

 8   Q.    HAVE YOU COMPARED CONNECTICUT’S EM&V APPROACH WITH
 9         THOSE IN OTHER JURISDICTIONS?

10   A.    Yes, we have. Ensuring that savings are obtained through energy efficiency and demand

11         reduction programs is especially important when an Independent System Operator is

12         counting on the results of such a program in its planning process, as is the case with ISO-

13         NE, and if the C&LM programs hope to compete with other resources in Connecticut’s

14         IRP process. Connecticut’s spending level on evaluation is low in comparison with other

15         states, as shown in the graphs below, for electric and gas budgets, respectively:




          21   Hudson River Energy Group / Docket Nos. 10-10-03, 10-10-04
                                                            EM&V as a Percentage of Total
                                                          Electric Energy Efficiency Budgets

                         Kansas                                                                                                                 22.9
                   BPA / NEEA                                                                         13
                         Indiana                                         5.9
                       California                                  5.1
                 New Hampshire                                     5
                            Idaho                                  5
                        Missouri                                 4.7
                  South Carolina                               4.5
                  North Carolina                               4.4
                       Michigan                               4
                     Wisconsin                               3.9
                         Arizona                             3.9
                 Massachusetts                               3.8
                             Ohio                            3.8
                          Florida                         3.4
         State




                    Washington                            3.4
                          Illinois                        3.3
                    New Mexico                           3.2
                   Rhode Island                         3
                   South Dakota                         3
                        Vermont                        2.9
                       Kentucky                        2.9
                             Iowa                    2.4
                      New York                   2
                         Nevada               1.4
                    Connecticut              1.2
                       Colorado             1.1
                           Maine           1
                          Hawaii           1
                           Texas           0.9
                        Georgia          0.6
                       Maryland          0.6
                      Minnesota          0.5

                                     0                             5                10                       15                      20                25
                                                                                           Percentage

                                               Source: The State of the Efficiency Program Industry: Budgets, Expenditures, and Impacts 2009,
                                                                       Consortium for Energy Efficiency, March 5, 2010



1




    22    Hudson River Energy Group / Docket Nos. 10-10-03, 10-10-04
                                   EM&V as a Percentage of Total Budget
                                       for Gas Efficiency Programs

                              Idaho                                                                         10
                      Washington                                                                            10
                        Minnesota                                                                 8.4
                         Vermont                                                       5.5
                         California                                                  5.2
                         Missouri                                                   5.1
                           Nevada                                                  5
                         Colorado                                                 4.9
                    North Carolina                                               4.7
                           Indiana                                            4.3
                       Wisconsin                                              4.3
                         Michigan                                         4
           State




                        Arkansas                                          4
                   Massachusetts                                    3.4
                   New Hampshire                                 3.1
                     Rhode Island                               2.9
                        Kentucky                              2.7
                     Pennsylvania                          2.3
                        New York                          2.2
                               Iowa                       2.2
                    South Dakota                          2.2
                               Ohio                      2.1
                            Illinois                    2
                               Utah               1.3
                          Arizona                1.1
                      Connecticut             0.7

                                       0                2             4                  6    8            10    12
                                                                                 Percentage

                                       Source: The State of the Efficiency Program Industry: Budgets,
                                       Expenditures, and Impacts 2009, Consortium for Energy Efficiency,
                                       March 5, 2010

1
2

3        In recent years, spending on energy efficiency in the United States has grown rapidly.

4    Between 2006 and 2009, spending on electric energy efficiency programs nationwide

5    nearly doubled and spending on gas energy efficiency programs nearly quadrupled.

6    Along with this expansion has come an increased emphasis on EM&V with an

7    accompanying increase in funding for EM&V. For example, the June 2004 document

8    The California Evaluation Framework prepared by TecMarket Works stated that “In

9    order to establish an evaluation framework that incorporates a wide range of evaluation



    23     Hudson River Energy Group / Docket Nos. 10-10-03, 10-10-04
 1    needs into a program cycle evaluation planning process, the evaluation budget needs to

 2    be in the range of six to eight percent of the total portfolio budget.” (page 77).

 3    California’s actual spending for EM&V as a percentage of the total energy efficiency

 4    budget has increased since that 2004 recommendation and totaled 9% in 2008 (7% as a

 5    percentage of the combined EM&V and load management budget). Similarly, New

 6    York’s spending on energy efficiency program EM&V went from about 1% of energy

 7    efficiency program costs in 2008 to 5% of program costs beginning in 2009. The New

 8    York Public Service Commission explained this upgrade in its Order Establishing

 9    Energy Efficiency Portfolio Standard and Approving Programs, June 23, 2008 (page 37),

10    explaining the need for rigorous evaluation due to the fact that utilities had the

11    opportunity to earn incentives based on their performance, and that the Independent

12    System Operator would be relying on the savings projections from energy efficiency

13    programs.


14


15    The above discussion is illustrative of the effort other jurisdictions put toward EM&V.

16    Taken in conjunction with the deficiencies in the CL&M evaluation process and PSD we

17    identify herein, we recommend that the Department order an increase in the percentage of

18    the energy efficiency budget spent on EM&V. This increase should be used to support

19    increased staffing for the independent evaluation consultant and more frequent impact

20    evaluations of the programs, as further set forth below.


21




     24   Hudson River Energy Group / Docket Nos. 10-10-03, 10-10-04
 1   Q.    DO YOU HAVE ANY CONCERNS ABOUT THE INDEPENDENCE OF THE

 2         EM&V PROCESS?


 3   A.    Yes. To ensure the integrity of the EM&V process, the evaluations need to be done by an

 4         independent third party free of the influence of those that run the programs. This

 5         becomes especially important in instances when program administrators are eligible for

 6         incentives based on program outcomes. Emphasis needs to be placed on making the

 7         EM&V process as transparent as possible so that decision makers understand why

 8         changes to programs are recommended and what changes have been made to programs as

 9         a result of evaluation results.


10         It is also important that the evaluation consultant be allowed to perform that function in a

11         truly independent manner. Given the Companies’ expertise about individual programs, it

12         is appropriate for them to offer suggestions about work plans for EM&V studies.

13         However, they should not be providing input while the studies are underway, except

14         when specifically requested by the evaluation consultant in order to clarify emerging

15         issues. Utility involvement during the evaluation process tends to hinder and to

16         compromise the independence of the process.


17         Our understanding of the process as it actually takes place found that, to the contrary, the

18         Companies, particularly the EDCs, provide excessive input throughout the evaluation

19         study period. Exhibit HREG - 4 is a flow chart of the evaluation process as set forth in

20         the Figure 3, entitled Project Management and Completion Process in the 2011 C&LM

21         Plan, and which is consistent with our observations during the audit in this matter and in

22         reviewing discovery. That chart clearly illustrates utility involvement in the process. To


          25   Hudson River Energy Group / Docket Nos. 10-10-03, 10-10-04
 1         cite a specific example, the HES evaluation, the Response to OCC-7 demonstrates that

 2         the Evaluation Consultant received approximately 380 emails and many redline reviews

 3         of draft documents from the Utilities regarding the ongoing evaluation. Moreover, at

 4         least one of the EDCs has continued to engage in direct communications with evaluation

 5         contractors about the substance of an evaluation, without including the evaluation

 6         consultant in such communications. See Response to OCC-14, first 8 pages. Such

 7         “offline” communications between the Utilities and evaluation contractors appear to be

 8         outside the scope of the Evaluation Roadmap provided at Exhibit V of the C&LM Plan.

 9         The offline communications provided in OCC-14 are particularly troubling because these

10         emails reflect an effort by utility staff to change the way the evaluation contractor reports

11         its findings.


12


13             At the end of the evaluation process, the Utilities should have the opportunity to provide

14         comments in writing that can be included as part of the public record along with the draft.

15         The Utilities should not be involved in meetings or off-line conversations with the

16         program evaluators, and they should not be engaged in endless email discussions with the

17         evaluation consultant during the evaluations. The independent evaluation should remain

18         just that – independent. This is especially important because the program administrators

19         are receiving incentive payments based on program results.


20


21   Q.    DO YOU HAVE OTHER OBSERVATIONS ON EM&V?




          26     Hudson River Energy Group / Docket Nos. 10-10-03, 10-10-04
 1   A.    Another outcome of EM&V studies that deserves some consideration, especially in times

 2         of tight budgets, is the cost per kWh or therm saved expressed as a levelized utility cost

 3         per lifetime kWh or therm saved, to allow for comparisons across programs. That

 4         information should be provided in the Plan.


 5


 6         In reviewing last year’s C&LM Plan, the Department expressed its displeasure “... with

 7         the apparent lack of concern by the EDC’s and the ECMB regarding conservation to

 8         reduce peak load ...” and with the cost per kWh for several programs (C&LM Decision,

 9         p. 57). We did not find indications in this year’s C&LM Plan that the Utilities had

10         focused on this concern and we recommend that they do so in the future. As a rule of

11         thumb, when a program with high levelized utility cost per unit saved is identified,

12         program administrators should consider ways to either improve the program’s operation

13         or reallocate funds to more cost effective programs.


14


15         We also found, based on review of documents and discussion with company personnel,

16         that the number of evaluation studies that can be performed each year is constrained by

17         the amount of work that can be overseen by one third-party evaluation consultant, which

18         is far less staffing support than we would expect to see for a portfolio of the size and

19         complexity of the C&LM program. Further, utility involvement in the process adds

20         greatly to the time needed to complete evaluations, adding to the bottleneck in the

21         program evaluation process.


22

          27   Hudson River Energy Group / Docket Nos. 10-10-03, 10-10-04
 1            With respect to updating the PSD, complex decision trails are reduced to a single line in

 2            Section 6 in the subsequent version of the PSD.          For example, an evaluation of the

 3            WRAP program found that 40% of CFLs that had been expected to be in place were

 4            missing (i.e., not in place) which was in large part responsible for the measured

 5            realization rate in the valuation study of 50.4%. The evaluation also found that the hours

 6            use per bulb was higher than what had been in past PSDs.             To reflect these changes it

 7            was recommended that the existing realization rate of 100% could be retained if the

 8            measured life and hours use variables were changed in the next PSD3. The following

 9            version of the PSD accounted for this situation by changing hours use per bulb, retaining

10            the existing gross realization rate of 100% but not changing measured lives of bulbs.

11            The only reference to the WRAP evaluation was a short notation in Chapter 6 of the 2011

12            PSD which stated that updated hours were made per the WRAP evaluation.4 Without an

13            explanation, that action is certain to raise suspicion. The only information provided in

14            the PSD about this situation is the cryptic line “Updated hours and Watt ratio for LIN per

15            KEMA WRAP/Helps Evaluation.” It is unlikely that a decision maker would understand

16            the implications of this description unless he or she had been informed of the back story

17            for these changes.


18


19            We also learned of evaluation results that the EDCs rejected as erroneous on their face.

20            They attributed this to small sample sizes, which can result when a measure is only


     3
        Final Report, Evaluation of the Weatherization Residential Assistance Partnership (WRAP) and Helps Programs,
     issued September 10, 2010, page 7-8.
     4
         2011 PSD, Chapter 6.0 changes to PSCD Measures in 2011, Number 5.1.1


             28   Hudson River Energy Group / Docket Nos. 10-10-03, 10-10-04
 1         encountered infrequently within a program. While this is certainly possible and is a

 2         cause for concern, it should have been identified and corrected early on in order to

 3         provide for a larger sample size and accurate findings. A problem in study planning is

 4         indicated if studies that have been taking up to two years or more to complete, at a cost

 5         hundreds of thousands of dollars to ratepayers, have their findings rejected due to

 6         insufficient sample size.


 7


 8   Q.    Q.  DO YOU HAVE ANY RECOMMENDATIONS FOR IMPROVING
 9         CONNECTICUT’S APPROACH TO EM&V?
10
11   A.    We recommend the following to improve the EM&V process:


12         1. Spending for program evaluations should be increased to ensure that (a) the highest

13         value programs are given more scrutiny and improved and expanded as necessary, (b) the

14         lowest value programs are modified or phased out as necessary, and (c) the overall

15         C&LM program benefit-cost ratio is optimized over the long term. Increased spending

16         will allow for increased staff for the evaluation consultant as well as more frequent, and

17         more comprehensive, impact evaluations.


18         2. The DPUC should take a more active role in the evaluation process. A model to

19         consider and perhaps work toward is the New York Public Service Commission’s (PSC)

20         approach, which has staff members dedicated to evaluation issues. These staff members

21         chair all meetings on evaluation, hire and oversee the work of third party evaluation

22         contractors, oversee preparation of Technical Manuals (the equivalent of Connecticut’s

23         PSD), and prepare recommendations to the Commission on evaluation issues.         This

24         active role in program evaluation helps ensure that the state’s investment in energy
          29   Hudson River Energy Group / Docket Nos. 10-10-03, 10-10-04
 1    efficiency is producing the benefits that are expected. It also helps ensure that incentives

 2    to Utilities are based on efforts that can be verified. When evaluations show that

 3    programs have not operated as expected, incentive results should be adjusted accordingly,

 4    and this is difficult for DPUC staff to do without more extensive knowledge and

 5    oversight of the evaluation process.


 6    3. Additional funding and an expansion of staffing of the third party, independent

 7    evaluator function should be provided. The size of the evaluation effort has been

 8    constrained because of the staffing level for the independent evaluator function. This

 9    problem can be overcome by hiring additional qualified staff.


10    4. The independent evaluator should have greater independence, with less utility

11    involvement in evaluation studies than currently exists. To avoid any actual or

12    appearance of a conflict of interest, the Utilities’ involvement in the evaluation process

13    should be explicitly limited as described in this testimony. The process should be

14    conducted as depicted in HREG - 5. We modified the flow chart in Figure 3 to remove

15    the interaction between the Companies and the evaluation consultant during the

16    evaluation process, except where the evaluation consultant requests information from the

17    Companies. This process provides for no communications between the Companies and

18    the evaluation contractor outside of the presence of the evaluation consultant. All

19    communications between the Companies and the Evaluation Consultant should be

20    preserved for review by the Department or OCC upon request. Thus, the Companies

21    should not be permitted to participate in phone conferences with the evaluation consultant

22    and the evaluation contractor during the evaluation process, after the RFP and scope of

23    work are completed.

     30   Hudson River Energy Group / Docket Nos. 10-10-03, 10-10-04
 1    5. There should be better tracking of how evaluations performed meet legislative

 2    requirements with respect to the “evaluation of performance of the programs and

 3    activities … every five years.” (Connecticut General Statute § 16 - 245m.) Information

 4    provided for our review with respect to evaluations performed over the years did not

 5    demonstrate a clear connection between those evaluations and the legislative requirement

 6    that evaluations of programs be performed at least once every five years. We understand

 7    that some evaluations are being performed on a two to three year time cycle, others on a

 8    five year or longer time cycle, and still others not at all. In this period of rapid change in

 9    energy efficiency measures and standards, five years between evaluations is too long.

10    Every effort should be made to ensure that impact evaluations are performed for each

11    energy efficiency program every two to three years.


12    6. Improvements in data tracking are necessary to enable evaluations to be performed

13    efficiently and with meaningful results. With respect to the HES Evaluation, a review of

14    the emails provided as an audit data response to OCC-7 indicates that data collection

15    efforts went on for a year through intensive email exchanges and meetings or phone

16    conferences between the Companies, the Evaluation Contractor and Evaluation

17    Consultant. Data needs for billing and other analyses should be established in advance so

18    that appropriate tracking occurs. The Companies, including the LDCs, should be

19    required to track program data in a manner that is consistent with each other and

20    accessible to evaluation contractors. After each program evaluation is conducted, a

21    “lessons learned” session should be held at the Department to discuss and implement

22    ways to better track data in the future, with the evaluation contractor’s input. Given that

23    recent evaluations have been delayed due to data collection issues, OCC suggests that the


     31   Hudson River Energy Group / Docket Nos. 10-10-03, 10-10-04
 1         Department hold a separate proceeding to determine how data should be tracked by the

 2         Companies in the future to better support the evaluation process.


 3         7. The possibility of small samples for given measures should be considered during the

 4         work plan phase of the evaluation process and steps should be taken at that time to

 5         ensure that enough instances of the measure are evaluated to provide a statistically valid

 6         sample. This also relates to the previous recommendation, regarding data tracking.


 7         8. More complete information should be provided about changes made in the PSD

 8         since it is the basis for determining which measures will be funded in the upcoming year

 9         and underlies the C&LM plan. The results from EM&V studies are taken by the Utilities

10         and incorporated into updates of the PSD document. However, there are no requirements

11         or guidelines about what needs to be incorporated, and Utilities appear to have a total

12         discretion about how the evaluation study results are used. The fact that program

13         administrators who are eligible for incentives based on program performance are able to

14         make decisions about program formulas with only limited input from other parties raises

15         concerns about real or perceived conflicts of interest. Safeguards need to be put in place

16         to ensure that parties other than the Utilities play an integral role in updating the PSD.


17   DO YOU HAVE ANY OBSERVATIONS ON THE ENERGY CONSERVATION LOAN
18        FUND?

19   A.    Yes. Providing low interest loans to customers can be a good way of encouraging

20         customers to take on larger energy efficiency projects that they might not otherwise

21         consider. However, the desire to offer attractive loan rates needs to be balanced with the

22         best use of program funds to maximize overall energy savings and demand reductions.

23         Connecticut offers loans to customers at finance rates as low as 2.99%, or even 0%.

          32   Hudson River Energy Group / Docket Nos. 10-10-03, 10-10-04
 1         These are extremely generous terms which are much lower than most other states are

 2         providing as shown in Exhibit HREG - 6.


 3         According to the response for Data Request OCC - 35, the 2.99% and 0% loan rates are

 4         bought down to that level from a beginning rate of either 14.99% or 15.99%, depending

 5         on credit score, and the majority of the loan program’s budget is used for the interest rate

 6         buy-down. Given today’s low interest rates, the Utilities should again investigate

 7         whether lower cost loan rates are can be obtained.


 8


 9         The Companies should also seriously examine whether offerings at a higher interest rate

10         than is currently used by C&LM Fund loan programs, but still below market rates, would

11         attract customer interest. This would free up funds that could be used for programs that

12         generate energy savings and demand and emission reductions. In addition, many

13         program administrators in other jurisdictions have observed that customers are more

14         likely to follow through on using newly installed efficiency measures as intended if they

15         have a stake in payment for these measures. Raising the loan amount above the current

16         0% level will mean the customers have “skin in the game” and should increase the

17         likelihood that they will take the project seriously and use the installed measures

18         effectively.


19


20   The Gas Program

21   Q.    WHAT IMPROVEMENTS DO YOU RECOMMEND TO THE GAS

22         PROGRAMS?

          33   Hudson River Energy Group / Docket Nos. 10-10-03, 10-10-04
 1   A.    Natural gas programs have been included in the planning process since 2005, with full

 2         integration in all customer sectors beginning in 2008. However, gas measures are still

 3         not fully integrated into Connecticut’s energy efficiency portfolio. The PSD includes

 4         information about many electric measures, but little information on gas measures.

 5

 6         The CL&M Plan should focus on the cost effectiveness of the gas measures it does offer.

 7         In a survey entitled “Saving Energy Cost-Effectively: A National Review of the Cost of

 8         Energy Saved Through Utility-Sector Energy Efficiency Programs”, published in

 9         September 2009, the American Council for an Energy-Efficient Economy found that the

10         median costs of energy saved (CSE), the cost to obtain a therm of gas savings, for

11         natural gas efficiency programs nationwide is $.33 per therm. Connecticut’s result, $.55

12         per therm saved, was the highest result among the state programs evaluated, and was

13         about 67% higher than the average program and about twice as costly as Iowa’s program

14         (with a CSE of $.27 per therm).




          34   Hudson River Energy Group / Docket Nos. 10-10-03, 10-10-04
                                              Average State Values for Utility Cost of Saved Energy -
                                                                 Gas Programs

                                        $0.60
            Average CSE ($ per Therm)



                                        $0.50

                                        $0.40

                                        $0.30

                                        $0.20

                                        $0.10

                                         $-
                                                    CA        CT        IA           NJ              WI               OR
                                                                             State


          Source:
          Saving Enter Cost-Effectively: A National Review of the Cost of Energy Saved Through Utility-Sector Energy Efficiency
          Programs , ACEEE, Report Number U092, September 2009
 1

 2

 3    The CL&M Plan results, in terms of measures offered and cost per therm saved compared

 4    with similar programs offered in other jurisdictions, show that there is significant room

 5    for improvement in terms of natural gas efficiency measures.


 6    It should be noted that the C&LM Plan does not include annual target energy reductions

 7    for natural gas nor do the LDCs receive incentives for achievement of gas savings targets.

 8    Furthermore, the LDCs’ role in planning for the C&LM Fund is small, with the majority

 9    of the work performed by employees of the EDCs. To place greater focus on the natural

10    gas portion of the C&LM portfolio we recommend that a five year energy reduction

11    target be established that includes annual target goals as well. We also recommend that



     35     Hudson River Energy Group / Docket Nos. 10-10-03, 10-10-04
 1         incentives for achievement of these gas targets be incorporated into the current incentive

 2         structure.


 3         While the gas plan was not a primary focus of our work, we believe that efforts should be

 4         made to further integrate gas measures, such as attic insulation, into the HES programs.

 5         With regard to commercial and industrial applications, the Utilities should continue to

 6         explore additional opportunities for incorporating cost-effective gas measures into energy

 7         efficiency projects. Funding for any increase in gas spending should come from the

 8         LDCs, not the EDCs.

 9

10

11   Program Administration and Reporting


12   Q.    DO YOU HAVE ANY CONCERNS ABOUT MANAGEMENT OF PROGRAM

13         BUDGETS?

14   A.    Yes. C&LM Programs are supported each year until funding is exhausted. At that point,

15         either money is transferred from other programs or the program is shut down. For

16         example, as reported by Connecticut Public Broadcasting Network, in 2008, rebate

17         programs had to be shut down in the summer due to a lack of funding, requiring about

18         600 businesses to halt energy efficiency upgrades, many of which were underway. This

19         year, Connecticut had money available for residential rebates as part of the federally

20         funded State Energy Efficient Appliance Rebate Program, but the program closed to new

21         applications on July 15. In other words, rebate applications for appliances purchased

22         after July 15, 2010 would not be accepted for review and would not be processed.

23

          36   Hudson River Energy Group / Docket Nos. 10-10-03, 10-10-04
 1    Having programs stop mid-year is confusing to customers and difficult for vendors. The

 2    Companies should make every effort to prepare budgets that will allow for a continuous

 3    stream of payments that will last throughout the year, to avoid such large scale program

 4    changes.

 5

 6    A potential solution for better anticipating what funding needs will be for large

 7    commercial, industrial and government projects is to issue a Request for Proposals that

 8    announces that a sum of money is available for comprehensive energy efficiency

 9    programs and describes the requirements that programs must meet to be considered.

10    Projects can then be funded based on cost per kWh, KW, and/or therm savings, as

11    appropriate. With proper planning, this approach allows the budget to be managed,

12    ensures that only the most cost effective programs receive funding, and reduces the

13    possibility that projects will need to be halted before they are completed due to lack of

14    funding.

15

16    Another concern we have about administration of energy efficiency funds is that the

17    CL&M Plan allows Program Administrators flexibility to move funds among programs

18    within a given customer sector without informing policy makers (i.e. the DPUC and the

19    EEB). Less frequently, Program Administrators move funds between customer sectors,

20    in which case they inform the decision makers but do not require approval for portfolio

21    changes. We recommend that the DPUC require that it and the EEB be informed

22    whenever the Program Administrators will be reallocating more than 20% of a program’s




     37   Hudson River Energy Group / Docket Nos. 10-10-03, 10-10-04
 1         funds. EEB and the DPUC should have veto authority if they believe such a transfer of

 2         funds is not in the ratepayers’ interest.


 3


 4   Q.        WHAT STEPS CAN BE TAKEN TO BETTER FOCUS ATTENTION ON

 5         RESULTS AND BUDGETS?

 6   A.    In a well managed energy efficiency effort, monthly, quarterly, and annual reports

 7         prominently show, for each program, the number of projects in process, the annual

 8         budget level for the program and the percentage of the program budget that has been

 9         spent, the annual energy savings and emissions reduction goal for the program and the

10         percentage of the goal achieved, and highlight any significant problems encountered.

11         Reports should also show, for the overall energy efficiency portfolio’s budget, the

12         percentage of the budget spent and the percentage of energy savings (expressed as kWh,

13         KW, and therm savings) and emission reduction targets that have been achieved.

14

15                   Our review found that some of this information is included in quarterly reports to

16         the DPUC. Progress achieved as a percentage of the annual electricity savings targets is

17         currently shown in monthly reports. Progress toward achievement of annual gas

18         reduction targets should also be shown, along with progress toward achievement of

19         annual goals by sector and for the portfolio as a whole. A summary page that compiles

20         all of this information would help decision makers track progress toward achievement of

21         annual goals and highlight instances where spending and progress toward goals is

22         occurring either more quickly or slowly than anticipated so that they can take necessary

23         actions to use the C&LM budget as effectively as possible. We recommend that tracking

          38    Hudson River Energy Group / Docket Nos. 10-10-03, 10-10-04
 1         progress toward achievement of annual electric and gas targets should be a basic tenet of

 2         all energy efficiency reporting.


 3

 4   Future Direction of the Program

 5   Q.    WHAT IS YOUR CONCERN WITH RESPECT TO THE ANNUAL FILING

 6         DATE OF THE CL&M PLAN?

 7   A.    As we mentioned earlier, we were constrained in our time to review the filing due to the

 8         time schedule for the proceeding. The filings are made on October 1 with the intent of

 9         having the Commission act on them by the end of the year, leaving 90 days or less for the

10         review. In contrast, a rate case normally has a 180 day schedule. Given that the costs

11         associated with the CL&M plan rival or exceed those in rate cases, we believe they

12         should receive a similar review period. Therefore, we recommend that the filings be due

13         no later than August 1 each year, with a goal of Commission action before year end.

14

15


16   Q.    IF THE C&LM BUDGET IS CONSTRAINED IN THE FUTURE, HOW SHOULD

17         THE COMPANIES CONTINUE TO OBTAIN ENERGY SAVINGS AND

18         EMISSIONS REDUCTIONS WITH A LOWER FUNDING?

19

20   A.    If funding is constrained in the future, the Companies and the EEB should carefully

21         evaluate the cost effectiveness of each of program in the C&LM portfolio and make

22         funding decisions that will allow programs to reach the portfolio’s annual energy savings,

23         load reductions, and emissions reductions goals with the available funding. In order to

          39   Hudson River Energy Group / Docket Nos. 10-10-03, 10-10-04
 1         reach those goals, it may be necessary to make significant adjustments to budgets for

 2         items that have a limited impact on energy savings, such as museum and education

 3         programs. Funding cuts should not automatically translate into proportionate cuts in

 4         energy and demand savings targets. Introducing program improvements already

 5         underway by the Companies and as recommended herein and trimming the least cost-

 6         effective programs should result in benefit reductions less than the proportionate cut in

 7         funding.

 8

 9   Q.    Does that conclude your testimony?

10   A.    Yes, it does.

11




          40   Hudson River Energy Group / Docket Nos. 10-10-03, 10-10-04

				
DOCUMENT INFO
Shared By:
Categories:
Tags:
Stats:
views:0
posted:4/23/2012
language:
pages:40