This blog was written by John D. Wilson, former Deputy Director for Regulatory Policy at the Southern Alliance for Clean Energy.Guest Blog | February 6, 2018
Today, Tampa Electric took the spotlight – an efficient, LED spotlight. Over the next five years, Tampa Electric will covert all 209,821 of its inefficient street lights to efficient LED fixtures.
Tampa Electric’s LED conversion program will reduce peak demand by about 30 megawatts, annual energy use by about 128 gigawatt-hours, and reduce CO2 emissions by about 63,000 tons per year. Nearly every street lighting customer will see lower rates with the new fixtures, and Tampa Electric also projects that all of its customers will benefit from long-term rate reductions. Take a bow, Tampa Electric!
Tampa Electric appears to be the second investor-owned utility in the country to proceed with a plan to convert 100% of its street lights to efficient LED fixtures. In April 2016, Xcel Energy’s operating company in Minnesota broke new ground when it received approval for a 5-year, 100% LED street lighting conversion program. And, of course, many municipal governments and utilities have also moved forward with their own programs. SACE is encouraging utilities across the Southeast to review these two programs and adopt 100% LED street light programs of their own.
We also want to recognize the Florida Public Service Commission for its support. This is also the first time in well over a decade that one of Florida’s electric utilities has voluntarily proposed a new energy efficiency program outside of the state-mandated proceeding that occurs every five years. By approving this new program, the Florida Public Service Commission has taken its first step forward on energy efficiency since 2009.
If LED street lights are cheaper to buy, install and maintain than older technology lights – and use less electricity – Why are Tampa Electric and Xcel Energy are likely the only two investor-owned utilities with 100% LED conversion programs?
LED light conversions haven’t yet gained momentum because of the way that investor-owned utilities finance street lighting. Most people probably don’t think about who owns street lights, or other outdoor lights. In the case of Tampa Electric and many other investor-owned utilities, cost is an issue when converting to efficient LED lighting. Usually, the utility has paid up front for the street lights that have been requested by a customer (usually a local government).
Customers who ask power companies to install street lights then get a power bill. Unlike the power bills that most homeowners receive, these power bills include charges that essentially amount to a “lease” for the new utility-owned street lights. Converting to efficent LEDs means that the “lease” for the old lights would end early.
Tampa Electric’s program deals with the thorny issue of “who pays” for early termination of the “lease” by showing that the installation of the LED street lights will help reduce costs for all customers. LED lighting customers will benefit from a reduced power and light leasing bill, and all other customers will benefit from a long-term reduction in the cost to generate and deliver power.
By looking at LED lighting as a long-term cost-saving strategy, Tampa Electric has justified a more rapid and efficient approach than most other Southeastern utilities. Most utilities are offering a voluntary LED conversion program, in which the street lighting customer pays the full cost of the conversion.
Are voluntary conversion programs likely to succeed?
If LED lighting costs less, you might think a voluntary program will be sufficient. However, for a voluntary program to succeed, most local governments and other street lighting customers will want to know that there is no budget impact. In a voluntary conversion program, most utilities appear to be charging the customer to end the “lease” early. This fee may be high enough to create a budget impact.
A typical example of such a program is FPL’s voluntary LT-1 pilot LED conversion program. FPL’s LT-1 tariff provides its street lighting customers with a simple contract for having FPL convert the city, subdivision or county’s street lights to new LED fixtures. But paying off the “lease” means that the tariff includes a LED Conversion Recovery fee of $0.97 per month, per fixture.
It appears that the conversion recovery fee may be indefinite as long as the customer remains on the tariff, as FPL did not specify an end date for the fee. (Tampa Electric described FPL’s fee as “evergreen” in a subsequent filing.) Based on some calculations I performed, it appears that it will take 23 years for FPL to recover the costs of replacing the fixture, so after 23 years, this fee would be unnecessary. Whether it is 23 years, some shorter period, or even forever, a buck-a-month can add up, especially if your city is under contract for 30,000 street lights.
Neither FPL’s tariff sheet nor the staff report on the tariff provide examples that demonstrate whether or not the $0.97 per month (or $11.66 per year) charge will save money for FPL street lighting customers who choose to switch. Typically, street light customers are paying for hundreds or thousands of lights, and is often the first or second largest local government energy use, typically accounting for 25-50% of a municipal energy bill. These small fees can add up.
It seems unusual to me that the Florida Public Service Commission staff did not request an example of how a typical FPL customer would be affected by the pilot program. Perhaps because it is voluntary. Whatever the reason, the staff issued only one fairly basic data request in response to the request, compared to four requests and an in-person meeting for Tampa Electric’s similar proposal. Also, none of FPL’s customers filed letters commenting on the program, suggesting a wait-and-see attitude. While many FPL customers may be interested in updating to LED street lights, they will have to conduct their own analysis to determine if it is cost effective.
How is Tampa Electric’s 100% conversion program be better than a purely voluntary program?
Unlike the quick approval for FPL’s voluntary program, Tampa Electric faced some skeptical questioning from Florida Public Service Commission staff. Tampa Electric’s responses helped explain how its different approach is an improvement: guaranteed savings, universal and equitable participation, and long-term benefits for all its customers.
Tampa Electric guarantees most street lighting customers will see a reduction in their monthly bill. Existing customers with non-LED light fixtures will be converted to LED lighting fixtures, with resulting bills comparable to their current bills. On average, these customers will save $0.46 per month, per fixture. (Technically, no customer is required to agree to the upgrade, but Tampa Electric doesn’t anticipate any customer rejecting the upgrade.) Only 5% of the fixtures converted will see a bill increase, with most of the few increased monthly charges estimated at less than 5%.
(If Tampa Electric had added on a LED Conversion Recovery fee similar to FPL’s, it would have added $0.84 per month to each fixture, which would have wiped out the savings for the average LED fixture. This suggests that FPL’s voluntary approach may result in a bill increase for many replacement fixtures, a result that will not occur often for Tampa Electric customers.)
The new rates will also benefit new street lighting customers. When comparing Tampa Electric’s former charges for new LED street light installations to the new tariff, one bulb-to-bulb comparison shows a savings of $1.84 per month. (Tampa Electric no longer installs many new non-LED street lights.)
Tampa Electric has chosen to deliver updated LED street lights to all of its customers. Universal participation is a winning choice from both a cost and equity perspective. Tampa Electric’s costs will be lower due to bulk purchases of lighting. These lower costs enable Tampa Electric to benefit not only grandfathered customers but new customers as well.
In comparison, Tampa Electric argued that a flat “LED conversion recovery” fee could favor some customers over other. Flat fees, such as the one used by FPL, will be of less concern to customers who select more expensive designs, such as upscale subdivisions. By providing : The program provides fair rates for both less expensive local government lighting as well as more expensive lights used in settings where design choices have been valued
Tampa Electric projects that its approach will benefit every customer on its system. By moving quickly and efficiently, Tampa Electric’s program will reduce peak demand by about 30 megawatts and annual energy use by about 128 gigawatt-hours. That’s similar to the output of the City of Tampa’s McKay Bay energy-from-waste facility. With these savings, the utility will cost-effectively defer or avoid expensive investments in power plants and the grid.
Tampa Electric recognized these benefits formally by proposing that the cost of ending the “lease” early should be covered in the same way that its other energy efficiency programs are paid for: through the Energy Conservation Cost Recovery (ECCR) charge. This is a small charge that is a part of the utility bill of every customer of Florida’s largest utilities. Under the Florida Energy Efficiency and Conservation Act (FEECA), Florida’s utilities are required to implement cost-effective energy efficiency programs. Tampa Electric had previously used this same method for a street lighting upgrade in 1982.
By making use of FEECA to solve the “who pays” problem, Tampa Electric has become the first utility in well over a decade to voluntarily initiate a new energy efficiency program outside of the every-five-years FEECA proceeding. Tampa Electric could have suggested that this program replace one of its others – but by voluntarily choosing to add this program, providing “additional savings over and above [its] current approved DSM savings,” Tampa Electric has taken a significant step towards updating its energy efficiency program.
In addition to being an overall reduction in cost for the utility system, Tampa Electric’s analysis suggests that all customers will likely benefit from reduced electric rates, as demonstrated by a score of 1.05 on the rate impact measure test. To achieve these rate savings, Tampa Electric will receive $40 million from the ECCR to cover the outstanding “lease payments” for the light fixtures that are replaced with LED systems. This cost will be more than offset by savings to customers of an estimated $114 million over the next 25 years.