Energy Efficiency Goals and

Budgets
Energy Efficiency Summit
March 29, 2012
Jay Zarnikau, Frontier Associates
LLC
Policy Goal
From Substantive Rules:

. . . ensure that all customers, in all

eligible customer classes and all areas
of an electric utilitys service area, have
a choice of an access to energy
efficiency alternatives that allow each
customer to reduce energy
consumption, peak demand, or energy
costs. . . .

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Demand Goal

In 2012, the goal is 25% of the utilitys annual growth in

the demand of residential and commercial customers.
In 2013, 30% of the utilitys annual growth in the
demand of residential and commercial customers.
Beginning in 2013, once the goal as calculated by the
growth in demand metric equals at least 0.4% of the
utilitys total summer weather-adjusted peak demand
for residential and commercial customers, the metric
switches to the 0.4% of demand metric.
However, the goal for demand reduction cannot be less
than the goal established for the previous year
(ratchet or floor).
This goal was updated by the Legislature in 2011.

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More on the Demand
Reduction Goal
Percent of growth metric is based on a 5 year average of
growth rates.
Growth rates are normalized to remove the effects of abnormal
weather.

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Demand Reduction,
2003-2010

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2010 Goals and
Achievements

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Metric Switch
Beginning in 2013, once the goal as calculated by the growth
in demand metric equals at least 0.4% of the utilitys total
summer weather-adjusted peak demand for residential and
commercial customers, the metric switches to the 0.4% of
demand metric.

Potential for a Metric Shift in 2013

Yes: El Paso Electric, Sharyland, CenterPoint, TNMP

Staying with Percent of Load Growth: Oncor, AEP TCC & TNC,
SWEPCO, Entergy, Xcel

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Metric Switch

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Secondary Goals and
Constraints
Savings achieved through programs for hard-to-reach
customers (consumers with incomes below 200% of
federal poverty guidelines) shall be no less than 5% of
the utilitys annual demand reduction goal.

Energy goal based on a 20% load factor.

Energy Efficiency Cost Recovery Factors (EECRFs) Cost

ceilings

Energy efficiency opportunities in the utilitys service

area.
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Good Cause Exception

A utility may submit for commission

approval an alternative method to
calculate its growth in demand, for
good cause.

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Good Cause Exceptions
Most Common Requests for Good Cause
Exception:
Goals Deemed to be too High
Projected Costs exceed Cost Ceilings

Reasons Why:
Nature of Service Territory (disjointed, rural, cooling
type)
Lack of Customer Base (# of customers simply too
low)
Growth Rate
High growth results in disproportionally high goals compared
to slower growing utilities
Smaller, more rural utilities typically have high growth rates,
thus compounding the difficulties 11
Exception Examples
El Paso Electric Company
Small, yet fast-growing utility

2011 goal based on % of growth was

equivalent to approximately 1% of its total
peak load (over twice that of the average
utility)

Service area covers thousands of miles

Good Cause Exception Granted, 2011

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To Set Overall Budgets
Considerations in setting a budget
include:
Budgets must be sufficient to enable the utility to
meets its goals.
There are limits on the total revenues that may be
collected through the EECRFs, which are subject to
cost ceilings (absent the commission granting a
good cause exception) at the customer class level.
Budgets must be aligned with anticipated EECRF
revenues at the customer class or rate class level.
For the ERCOT utilities, there are low-income
weatherization program funding requirements
which tend to increase overall program costs.
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When Allocating Overall
Budgets to Individual
Programs
Need to align budgets with anticipated EECRF
revenues at the customer class or rate class
level.
Need to ensure that the numerous goals are met.
Utilities tend to fund programs which will serve a
variety of consumers and promote a variety of
energy efficient technologies. Yet, the utilities
may find it necessary to address niche markets
with targeted programs.
For the ERCOT utilities, there are low-income
weatherization program funding requirements.

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