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National Association of Energy Service Companies

Policy Priorities

State Advocacy Updates

As Washington has struggled to come to grips with comprehensive climate and energy legislation, the states have been moving ahead aggressively. Twenty-seven states, with an aggregate 68% of US electricity usage, now have EERS mandates in place. Thirty-nine states have RES mandates. Many of these mandates are not up to the national standard that NAESCO advocates (2%/year EERS or 60% of new capacity), but the states are clearly setting the pace and accumulating the experience required to move into the new clean energy economy.

NAESCO is active in all of the key state proceedings that will have an immediate effect on the ESCO industry and/or that have the potential of becoming national precedents. Highlights of our work during the past few months are as follows.

California

The utilities and other stakeholders continue to wrestle with the final evaluation of the 2006-2008 programs, which will determine the incentive compensation paid to the utilities for program management. Because of the difficulty of agreeing on this evaluation, the CPUC has opened a new proceeding to develop a new EM&V system for the next program cycle, which begins in 2013. NAESCO is a party to this proceeding, and will participate in the development of the new system. The CPUC has also issued an initial report, subject to two rounds of comments, that specifies the characteristics of a Smart Grid. Of particular interest is the Commission's principle that a Smart Grid should be able to substantiate customer GHG reductions, which means that a Smart Grid should be able to monitor and track customer energy use reductions and convert those into GHG reductions.

On another note, the state Inspector General for ARRA funds recently issued a report criticizing the Department of General Services (DGS) for spending only $121,000 of its $25 million grant for energy efficiency improvements in state facilities. It appears that DGS is not only resistant to implementing ESPC projects but also fully funded projects that use federal dollars. NAESCO is writing a letter to the Inspector General pointing out that the state is missing a huge to leverage the $25 million ARRA grant into $100 million or more of ESPC projects in state facilities.

Finally, in a development that bears watching because of its potential national implications, there is an interesting case in California in which the CPUC has asked FERC for a declarative ruling about the validity of a new Feed-in Tariff (FIT) that the CPUC wants to apply to CHP projects 20 MW and smaller. FERC is generally receptive to state FITs that are based on avoided costs, and this case may test the basis for establishing avoided costs.

Texas

The PUCT approved modest changes to the Energy Efficiency Rule (Substantive Rule 25.181) on July 30. The changes include raising the energy efficiency goal to 25% of load growth, capping the per customer expenditures for energy efficiency programs, increasing the avoided costs used in cost/benefit calculations, eliminating the target bonus for serving hard-to-reach customers, and requiring utilities to facilitate the participation of Retail Electricity Providers in energy efficiency programs. NAESCO and a number of other parties argued for more aggressive EE goals and higher customer cost caps, but the Commission was apparently swayed by the utilities' arguments that significantly expanded programs would be a hardship for customers.

NAESCO is also monitoring the efforts to end the de facto moratorium of ESCP projects in Texas state facilities. NAESCO was scheduled to testify before a legislative committee in early August, but the appearance was postponed because the state seems to be moving toward ending the moratorium without the need for new legislation. NAESCO is on standby to testify at a future legislative hearing if required.

Massachusetts

NAESCO has coordinated a group of ESCOs to provide suggestions to the state Division of Capital Asset Management (DCAM) and the Division of Energy Resources to streamline the ESPC project development process and to revise the standard ESPC contract to maximize ESCO participation in Green Communities and ARRA program implementation. NAESCO sent a letter to state officials in early August with our suggestions and is following up with meetings with these officials in early September.

New York

NAESCO is participating in the Evaluation Advisory Group, the successor to the SBC Advisory Group, which is setting program EM&V standards and protocols for the approximately $1 billion of funding in the 2009-2001 program cycle. Recent developments include the utilities' filing their second quarter 2010 progress reports, and petitioning the PSC to release them from the incentive/penalty system that the PSC had ordered, on the grounds that the PSC program approval process was too slow to allow the utilities to have a reasonable chance of making their targets. Later in the year, the PSC will consider the renewal of the Energy $mart program, the main NYSERDA program that has now been operating for a decade.

Georgia

NAESCO is participating in the Steering Committee of ESCOS and other interested parties that are members of Georgia Taxpayers for Energy Efficiency, the organization that is running the ballot campaign to ratify a Constitutional Amendment designed to facilitate ESPC in the state. NAESCO has facilitated raising campaign funding from most of the NAESCO member ESCOs that do business in Georgia.

Michigan

NAESCO continues to work with the Energy Services Coalition and with the Michigan Department of Energy, Labor and Economic Growth (DELEG) to try to get a state building ESPC program on track. The ESC is holding a state chapter organizational meeting in Lansing this week, and we hope to use the formation of this chapter, along with the looming deadlines for the expenditure of ARRA funds, to shake loose at least a few projects before the end of the year.

North Carolina

The North Carolina Sustainable Energy Association (NCSEA) reported in its recent legislative wrap-up that the utilities have meet their Renewable Energy Portfolio Standard (REPS) goals through 2014 and are significantly under their price caps. A substantial percentage of the REPS goals has been met with energy efficiency. This of course means that the goals are too low, and that a combination of more aggressive EE and RE programs can supply the electricity growth requirements of the state at less cost than the proposed new nuclear plants. NCSEA intends to bring legislative proposals to the 2011 legislature, the so-called Long Session, which will separate the EERS from the REPS. NAESCO will work with the NCSEA and with the North Carolina chapter of the ESC, to prepare and support this legislation.