Bloated costs for Florida IOU energy efficiency programs

John D. Wilson | July 30, 2010 | Energy Efficiency, Utilities
Two weeks ago, SACE provided detailed analysis and findings based on evaluation of proposed energy efficiency programs filed by Florida power utilities. Over the past couple of days, one of those utilities responded.

Progress Energy Florida feels that our comments “should not be considered ” by the Florida Public Service Commission (PSC).  Progress Energy also says that its programs will cost customers $17 per month, but then claims that the “programs will be refined before they go into effect.”

. . . energy consumer watchdog group Southern Alliance for Clean Energy said the amount the utility giant wants to charge customers is bloated with exaggerated cost estimates in order to justify building new power plants instead. — Ocala Star-Banner, Fred Hiers – 7/30/10

Progress Energy’s efficiency programs better be “refined.”

We found that the four major investor-owned utilities all have costs that are more than twice the costs reported by five peer utilities we reviewed to establish benchmarks.

Some Florida Utilities Propose Energy Efficiency Programs with Bloated Costs

Saved Energy Cost of Efficiency Programs for Florida and Peer Utilities

Notes: “Saved Energy Cost” is calculated as the total cost to the utility (program costs plus incentives) per total annual energy savings attributed to those programs, irrespective of measure life. A program with a saved energy cost of 40 ¢ per kWh with an expected measure life of ten years would cost about 4 ¢ per kilowatt hour per year. See tables 2 and 3 of our findings for the data illustrated above.

We found three principal reasons that the costs in Florida are excessive (there may be more to find …). First, for reasons that are not explained, Progress Energy Florida uses an “escalation factor” that adds more than $1 billion to program costs for most of its energy efficiency programs. This “escalation factor” is not applied to the benefits of these same programs, and no other utility uses an “escalation factor” or anything resembling it. Second, many of the most cost-effective energy efficiency programs used nationwide are not being proposed or fully exploited by Florida utilities. Third, we found instances of excessive costs for specific measures or programs.

Most of the “excessive costs” we found were in the Progress Energy proposals. (This isn’t to say that the other utilities had appropriate costs, it is just that they weren’t obviously excessive.) There’s a pool pump incentive of $2,000, eight times the incentive offered by Arizona Public Service, and more than the actual cost of the pump. There’s a $570 per household cost estimate to encourage the “annual cleaning of outdoor coils in the HVAC system.” For all the details, you’ll have to read our full comments.

Progress Energy appears to blame the Florida PSC for these high costs, citing the fact that their goals are “higher than the other Florida investor-owned utilities.”  True, they have the highest goals in Florida, but their goals are low relative to many utilities in other states. The goals of  five peer utilities we reviewed range from 7% – 14% over ten years, compared to 8% for Progress Energy Florida, yet Progress projects a saved-energy cost that is three to six times higher than those reported by the five peer utilities.

It is our desire to see Florida’s utilities expeditiously implement aggressive energy efficiency programs — but in order to be sustainable those programs must be cost-effective.

SACE Major Findings — Florida Utilities Proposed Energy Efficiency Programs:

  • • The major utilities filed generally what the commission requested, with the exception of Progress Energy Florida, which proposes to defer achieving a substantial portion of its goals until after the next anticipated goal-setting proceeding.  (More than five years from now!)
  • • Energy efficiency program costs range from excessively high to improbably low. The four major investor-owned utilities all have costs that are more than twice the costs reported by five peer utilities we reviewed to establish benchmarks. Progress Energy Florida appears to have a cost of saved energy that is three to six times higher than what peer utilities consider reasonable.
  • • Two FEECA utilities use a measure-driven approach to respond to the Commission’s decision to expand goals beyond the E-TRC (enhanced Total Resource Cost test). This approach is inconsistent with best practices, and suggests something short of a good-faith effort to implement leading energy efficiency programs.
  • • None of the proposed plans describe a process for program improvement and cost control.
John D. Wilson
For more than a decade, John has directed SACE’s research activities and led SACE’s utility reform campaigns. He often represents SACE in formal or informal stakeholder engagement with utilities, and…
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