EfficiencyOne has lost a battle with Nova Scotia Power to spend more of ratepayers’ money on energy conservation programs.
Nova Scotia’s EfficiencyOne (E1) utility is the country’s first dedicated to helping people and businesses use less energy. E1’s budget is provided by NS Power. Until 2010, the Public Utilities Act required Nova Scotia Power “to undertake cost-effective electricity efficiency and conservation activities that are reasonably available in an effort to reduce costs for its customers.” E1 was created and assigned that job in 2011 so that NS Power wouldn’t remain in a perpetual conflict-of-interest (the company is in the business of selling more, not less, power.) There is some evidence that despite the best of intentions, E1 is under-performing.
Today was supposed to be the day E1 made its case before the Utility and Review Board seeking a budgetary increase from $105 million to $129 million to fund energy conservation programs — also known as Demand Side Management or DSM — for the next three years. E1’s submission to the UARB last February wanted NS Power to hand over 3% of its annual revenue to E1. It states:
The Preferred Plan requires NS Power to increase its investment in DSM funding from an average of 2.6 percent in the period of 2015-2018 to within 3 percent of its total annual revenue from ratepayers. This increase of less than one percentage point should not alone be used as justification for a rate increase.”
NS Power disagreed. It fought back and the result was an 11th hour compromise or settlement agreement reached between the two rival utilities late last week. The deal still has to be approved at an abbreviated hearing before the Utility and Review Board today. Here are some highlights from the settlement along with a few observations gleaned from the earlier public filings.
The agreement between EfficiencyOne and NS Power sets the three-year budget for E1 at $110 million. E1 will receive the same $34 million annual budget plus an accumulated $7.5 million it did not spend over the previous three years. This “underspend” is related to what E1 identified as weaker demand for its energy-efficient lighting programs for businesses and consumers as technologies evolved and products such as LEDs became easily accessible.
In its 2020-2022 budget, E1 outlines plans for new programs focused around insulation and space and water heaters. Unfortunately these products have a higher per unit cost than changing out light bulbs and may take longer to achieve savings. Unit costs are forecast to rise from 27 cents per kilowatt hour in 2019 to 31 cents per kilowatt hour in 2020-2022.
Under its rejected $129 million budget proposal, E1 predicted energy savings of 421.7 GWh (Gigawatt hours) in 2020. Under the settlement agreement, E1 says those savings will be lower, in the range of 367.8 GWh. Here’s part of the face-saving statement filed Friday by EfficiencyOne CEO Stephen MacDonald:
The DSM investment proposed for 2020-2022 is higher than the investment in the DSM Plan for 2016-2018; it is a reasonable increase and will enable us to adapt to changing customer needs and demands over the next three years.
In other words, it’s better to have $110 million budget to work with in 2020 than $105 million in 2016. This settlement agreement also includes money for two new programs: $4.5 million a year for retrofits in Mi’kmaq communities and $3.0 million dollars for low-income renters.
The basis for NS Power’s objections (apart from parting with a greater share of its revenue) is that consumers aren’t getting a big enough bang for their buck. That E1 has underperformed in terms of getting more people on the energy-saving bandwagon. That’s despite indications of public support and acknowledgement that the best way to reduce carbon emissions is to generate and consume less electricity.
A poll done by Corporate Research Associates at the end of last year found 87% of surveyed Nova Scotians placed “a high level of importance on reducing household energy use.” In its submission to the UARB , E1 reports “since 2011, over 40,000 Nova Scotians have participated in conservation programs that include home energy audits and technical assistance to businesses to cut heating/lighting costs. These initiatives have reduced the province’s electrical load by 11 percent.”
NS Power is concerned the efficiency utility (E1) has so far failed to meet other targets. For example, benchmarks prepared in 2014 estimated that the avoided energy costs flowing from energy conservation programs should be $107/MWh (megawatt hour). The actual benefit has been about $50/MWh, half as much as predicted. EfficiencyOne programs are aiming for savings equivalent to about 2% of all electricity sales. About 10 states in the United States with robust conservation programs have achieved that. In 2017, the savings from conservation programs in N.S. represented 1.3% of electricity sales. That has slipped to a disappointing 1.1% in 2019. Not inspiring.
That said, the settlement agreement calls for a transfer to E1 of the existing HomeWarming program funded through a charitable donation from NS Power beginning this January. The agreement says E1 must take reasonable steps to ensure the Clean Foundation continues to deliver the winter heating subsidy for low-income families for the next three years.
Last but certainly not least, this disagreement over how much ratepayer money should be spent on energy conservation programs sheds light on an upcoming application by NS Power to set new power rates. That application will be filed within the next month and will be tied to rising fuel costs, especially coal. E1 argues the original $129 million cost of programs to reduce the demand for electricity stack up well in comparison to rising fuel costs.
“This is a relatively minor impact when considered against non-DSM factors, such as fuel cost escalation which is estimated to increase rates by 2.7 percent per year (2020-2035),” writes E1 in a submission to the UARB. Keep that number handy — a projected 2.7% annual rate increase — to compare with the application NS Power will soon file.
The compromise worked out between E1 and NS Power will see NS Power receive $15.3 million in HST collected by EfficiencyOne on the sale of its goods and services. Another blow or ouchie for E1. In its statement regarding the settlement, NS Power lawyer David Landrigan says the HST transfer will help alleviate short-term pressure on power rates:
The Consensus Agreement achieves the combined goals of Nova Scotia Power and EfficiencyOne in terms of providing significant electricity and demand savings through efficiency measures, at a cost that is affordable for customers.
The Office of the Consumer Advocate filed a statement reluctantly in support of the agreement despite having some misgivings it doesn’t go far enough to reduce energy consumption more quickly:
While the Consumer Advocate continues to view E1’s Preferred Plan as the optimal plan on record, the Consumer Advocate, on balance, is prepared to recommend that the Board adopt the levels of DSM investment agreed to in the Terms of Consensus. In reaching this position the Consumer Advocate notes that the Terms of Consensus provide for investments in First Nations and Low-Income initiatives at a level commensurate with E1’s Preferred Plan. This is a positive outcome as it furthers the goal of making DSM programming equitably accessible.