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Kentucky's regulated utilities administer and implement DSM programs with oversight from the Kentucky Public Service Commission. At least one utility, Duke Energy, has offered DSM programs in Kentucky since 1996. The programs are funded via utility surcharges on customer bills. Under present statutes, such programs exist only through the initiative of utility companies. The commission's authority is only to review and approve or deny DSM programs and associated cost recovery through surcharges on customer bills. According to the Energy Information Administration, Kentucky electric utilities spent $5.9 million on energy efficiency in 2007, saving 17,874 MWh, 0.03% of total retail sales. Significant changes are under consideration as a result of Kentucky's 2007 Energy Act. Section 50 of this act establishes a number of specific issues to be examined regarding energy efficiency and related programs in Kentucky. New rules may be established to allow the commission to require utilities to implement specific DSM programs. The commission also is likely to clarify and standardize the rules affecting industrial customers' participation in and funding of utility programs to avoid lost opportunities for energy efficiency improvements with these customers. New DSM regulations will also establish standards for evaluating proposed and ongoing DSM programs. The Kentucky Public Service Commission examined these and a number of other related issues. The commission's findings and recommendations on these issues are given in Electric Utility Regulation and Energy Policy in Kentucky, a report to the Kentucky General Assembly, 1 July 2008. In 2008, Duke Energy proposed an expanded energy efficiency program, known as the “Save-A-Watt” program. The Alliance to Save Energy, ACEEE, and the Energy Future Coalition endorsed this initiative. The program proposes making energy efficiency a high-priority fuel choice in Duke’s operations in Kentucky to reduce costs for customers. Duke also proposed creating an incentive mechanism for energy efficiency. The Public Service Commission responded in 2009 with detailed questions about the specifics of the program. The “Save-A-Watt” program would set a target of reducing retail electricity sales by 1% by 2015 throughout the five-state region served by Duke Energy. This would involve ramping up the program gradually to meet the target in 2015. After 2015, the savings goal would increase by 1% each year.The plan includes a commitment to “all cost-effective energy efficiency” and sets no upper limit on spending. Several publicly-owned utilities are also discussing energy efficiency programs with the PSC. Owen Electric Cooperative is developing plans to expand its DSM programs and will submit the plans to the PSC in December 2009. In 2009, the commission encouraged Farmers Rural Electric Cooperative to “step up” its energy efficiency efforts. Natural gas programs are not required by legislation, but are available for all sectors other than industrial customers. These programs are administered by utilities and implemented by third-party contractors. In 2007, natural gas programs — including low-income weatherization — cost utilities $1.5 million and saved 286,000 MCF.
Kentucky utilities fund electric and natural gas programs through a tariff rider that adds a surcharge to customer bills. In 2007, natural gas programs — including low-income weatherization — cost utilities $1.5 million. According to the Energy Information Administration, Kentucky electric utilities spent $5.9 million on energy efficiency in 2007, 0.14% of total spending. Kentucky will receive $71 million in weatherization program funding and $52.5 million in state energy program assistance from the federal economic stimulus. The state energy program funding may support other programs in addition to energy efficiency improvements.
None in place or proposed.
Some parties have recommended decoupling be implemented, but there has been no commission action on this issue. The Kentucky Public Service Commission does, however, consider lost revenue recovery mechanisms on a case-by-case basis. All electric utilities in Kentucky have DSM proposals in place that include lost revenue recovery.
Kentucky Rev. Statute 278.285 allows utilities to recover the full costs of DSM programs via rates and allows incentives designed to provide financial rewards for utilities and encourage implementation of cost-effective DSM programs. Duke Energy and Kentucky Power (AEP) have a shared savings mechanism in place that allows them to receive an incentive of up to 10% of program costs for exceeding goals.
Regulated utilities are required to prepare and file annual integrated resource plans that include consideration of demand-side resources to meet forecasted requirements in a reliable manner and at the lowest possible cost.
Last Updated 09/23/2009
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For more information contact: Dan York, Utilities Program Senior Research Associate |
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