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Virginia’s Improved Efficiency Offerings Model Success for the Southeast

May 9, 2019

Virginia has recently made a major leap forward on energy efficiency and can serve as a successful model for utility efforts under consideration in Southeast states, including Louisiana, North Carolina, and Florida.

Virginia’s State Corporation Commission (SCC) issued a landmark order last week that approved a package of 11 new energy efficiency and demand response programs from the state’s biggest utility, Dominion Energy Virginia. Set to begin this summer and run through mid-2024, these programs will invest $225 million in customer programs and will deliver lower bills, greater comfort, and safer homes and workplaces for Virginia customers.

This action builds on Virginia’s 2018 Grid Transformation and Security Act (GTSA) and more than a decade of groundwork by energy efficiency advocates. It demonstrates how state legislatures, commissions, and utilities can show leadership in delivering the benefits of energy efficiency to customers. Other states in the region are poised to make critical decisions for energy efficiency. Will they follow Virginia’s lead?

Dominion’s increased commitment

Virginia’s utilities have long struggled to deliver the benefits of energy efficiency to customers. Dominion ranked 50 out of 51 utilities in the 2017 Utility Energy Efficiency Scorecard. However, with the GTSA’s passage, Dominion and neighboring Appalachian Power must together propose more than $1 billion for energy efficiency programs through 2028, with $870 million from Dominion alone. The legislation called for a good-faith commitment from Dominion to propose these programs, but did not guarantee regulatory approval.

Dominion submitted a proposal last October that was an acceptable first step, a 53% increase in investment in energy efficiency over its 2018 portfolio. It includes the first programs for Dominion residents in more than two years. However the proposal also counted “lost revenues” — the sunk costs of past infrastructure investments — into program costs, thereby potentially decreasing Dominion’s efficiency investment for customers.

The Virginia Energy Efficiency Council, with ACEEE as its expert witness, got involved in the recent proceeding to lend support for Dominion’s proposed programs and ensure that all the funding designated for energy efficiency directly benefit customers. 

ACEEE is pleased that SCC approved all of Dominion’s proposed programs. The commission followed the GTSA’s new requirements, approving all programs that passed three of four cost-effectiveness tests and taking a more expansive view of program benefits than in the past. After pressure from the governor and lawmakers, Dominion also stepped forward to clarify that it plans to spend all of the $870 million on customer benefits, exclusive of lost revenues.

More work ahead 

Dominion will now need to demonstrate the success of these programs and scale them. Our analysis estimated that the proposed programs would get only about 40% of the way to the $870M spending commitment, so Dominion’s programs will need to expand to reach more customers and deliver deeper energy efficiency savings.

Despite recent progress on utility programs, other obstacles remain. Last week, Governor Ralph Northam signed a state budget with language from legislators that hampers Virginia’s ability to participate in the Regional Greenhouse Gas Initiative (RGGI), a regional program to limit carbon emissions. However, the Department of Environmental Quality intends to research ways to implement carbon-reduction plans.

Other opportunities in the Southeast 

Dominion and the SCC offer a successful model for utility opportunities in other Southeast states, many of which are considering whether to expand access to energy efficiency for customers.

Louisiana recently kicked off a process to expand its “Phase I” programs into more comprehensive portfolios of energy efficiency programs. The proposed rules are a start, but the state will need to do more to really deliver on their potential. Over the course of the summer, the commission should be prepared to consider a “three-legged stool” approach. This includes setting savings goals and modifying the utilities’ business model to motivate them to invest in energy efficiency.

North Carolina has multiple avenues for advancing energy efficiency in the coming months. Last year, Governor Roy Cooper signed Executive Order 80, signaling the state’s commitment to addressing climate change. As a part of that order, the Department of Environmental Quality will create a Clean Energy Plan to foster the deployment of clean energy resources, including energy efficiency. This summer, stakeholders can participate in listening sessions or submit written comments. In addition, the current demand-side management business model incentives for Duke Energy are up for review before the NC Utilities Commission. This docket creates an opportunity to ensure that energy efficiency aligns with its business model and that existing incentives will result in energy savings for customers. 

In Florida, the Energy Efficiency and Conservation Act (FEECA) calls on utilities to set goals every five years. Unfortunately, plans for programs submitted last month have shrunk to almost nothing for multiple utilities, depriving customers of the programs they need to manage electric bills and reduce system costs. The commission can demonstrate leadership by eliminating two barriers. Florida has restrictive cost-effectiveness tests, which include irrelevant costs and discount important benefits, and unnecessary payback screens, which only allow measures that take customers a long time to pay off. These changes would expand the energy efficiency services utilities can offer customers.

Louisiana, North Carolina, and Florida have some of the best potential to deliver energy efficiency for customers in the United States. If regulators, policymakers, and utilities in these states successfully follow Virginia’s lead, local families and businesses will be able to tap into the benefits of this crucial resource. However, if they fail to set strong energy efficiency goals and do not address the utility business model, Southeastern communities will miss out on this opportunity.

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