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National Association of Energy Service Companies

Policy Priorities

State Advocacy Updates

During the past four months, NAESCO has been active in a number of new developments in federal, regional and state legislative and regulatory issues that affect the ESCO industry. The highlights of these initiatives are summarized below.  The full Work Plan is available for NAESCO Members on the Members Only website which can be accessed here.

Strategic Shift in NAESCO Advocacy Initiatives

As you are all aware, the efforts to pass comprehensive national energy and climate legislation failed in the last session of Congress. Meanwhile, energy efficiency programs at the state level, many of which are based on the Energy Efficiency Resource Standard that is the key goal for NAESCO federal advocacy efforts, continue to accelerate. In the fourth quarter of 2010, NAESCO therefore shifted its emphasis away from its focus on passage of federal energy and environmental language that actively promoted the use of ESPCs and the adoption of a federal EERS, and back to state advocacy efforts to support and grow state energy efficiency programs. This strategy was endorsed by the Board at its November meeting in Phoenix, and was refined into a Work Plan reviewed by the Board in late December. 

NAESCO 2011 Advocacy Work Plan Summary

The Work Plan is divided into three phases:

Ongoing Participation in State Regulatory Proceedings

This section of the work plan represents the ongoing NAESCO work of monitoring and participating in regulatory proceedings that govern utility and state-operated EE programs in the states that are most important to ESCOs. During the coming year, we anticipate that NAESCO will be concentrating its efforts in the following states:

  • New York – support renewal of the SBC program for a fourth 5-year term
  • New Jersey – provide input in the consideration and adoption of budget for 2011 EE programs + program transition rules
  • TVA – participate in the final development of the IRP process underway to include unprecedented amounts of EE
  • North Carolina – support passage of legislation to increase RES and EERS targets
  • Florida – provide input as state regulators approach completion of the EE program docket
  • Texas – support potential increase in EERS targets
  • California – provide input in the establishment of the rules (e.g., EM&V) for the 2012 EE program cycle

Preparation for ESPC Marketing Campaign in Target States

The 2010 elections have produced 29 new Governors; about 20 of whom represent a change in political parties in their respective statehouses. Each of these new Governors ran on a platform that promised job creation and economic development with no (or minimal) new state taxes. These platforms are virtually a prescription for the implementation and expansion of large-scale public building ESPC programs, which deliver energy savings, reduced environmental emissions, job creation, economic development and modernization of public facilities – all paid for from energy savings. But most of these new Governors, and their key staff, are unaware of the potential benefits of ESPC programs.

NAESCO hopes to be able to deliver a comprehensive ESPC briefing package to each new Governor during the first half of 2011. The amount of state-specific data that we hope to provide and the resultant level of effort will require support from US DOE, for which we have applied, and a continuation of NAESCO’s cooperative efforts with NASEO and the ESC. Until we hear from US DOE about funding, we will limit our briefing efforts to a set of initial target states, which have been approved by the NAESCO Board. The target states and the rationale for their selection are listed below.

  • Pennsylvania – large EE market + new Republican Governor + defend best state buildings ESPC program ($530M to date) in the country
  • California – largest EE market + new Democratic Governor + no state buildings ESPC program
  • New Jersey – large EE market + influential Republican Governor (we may remove state upon further research)
  • Georgia – large EE market + new Republican Governor + no state buildings ESPC program (state buildings ESPC authorized by Constitutional Amendment in November, 2010)
  • Michigan – large EE market + new Republican Governor + state buildings ESPC program just starting
  • Florida – large EE market + new Republican Governor + weak state buildings ESPC program
  • Ohio, New Mexico, Texas, Illinois, Missouri and Kansas were suggested by the Board as the next set of target states and we will endeavor to provide briefing materials as feasible subject to resource constraints.

Execution of ESPC Marketing Campaign in Target States

The final phase of the work plan will be to execute the ESPC marketing campaign by meeting with the Governors and/or their key staff in the target states to make the case for enhanced state and local government ESPC programs. NAESCO will attempt to engage the Governors in each target state as early as possible in their terms, but no later than the end of the first quarter of 2011.

The success of this marketing campaign will require the participation of the NAESCO members in the target states, similar to the effort (minus the campaign contributions) that NAESCO members made in Georgia this fall.

Fourth Quarter State Advocacy Activities

During the fourth quarter of 2010, there were significant developments in three of NAESCO’s target states – California, New York and New Jersey – which operate energy efficiency incentive programs that total more than $3.5 billion over the next few years. NAESCO is active in the proceedings in all three states to promote the interests of ESCOs and support the expansion of existing EE programs.


Perhaps the most significant development in California in the near-term is the retirement of PUC Commissioner Dian Grueneich, who has been the lead Commissioner in the energy efficiency proceedings during the last five years. Dian had previously advocated for NAESCO and was familiar with the ESCO industry. Her replacement, and the replacement for Commissioner Bohn who is also resigning, have not been named. We are asking Governor-elect Brown to appoint new Commissioners who are knowledgeable about the energy efficiency and the ESCO industry, to minimize the learning curve that the new Commissioners will have to climb.

In the meantime, the complex California proceedings that govern the multi-billion-dollar energy efficiency programs continue, and NAESCO has been active in advocating on behalf of issues that matter most to ESCOs working in California. The current main issues are settling the results of the 2006-2008 program cycle, setting the standards for the EM&V of the 2010-2012 program cycle, and settling the level of utility earnings for both the 2006 and 2010 program cycles. NAESCO has focused its comments to date on the EM&V standards for the 2010 program cycle, particularly the issue of the custom measures (not part of the deemed savings database) that are a feature of many ESCO projects. The CPUC Energy Division has proposed a process for establishing the savings from custom measures that, in the opinion of NAESCO and other parties, is simply unworkable, and threatens to seriously affect the development of comprehensive projects. There is a CPUC Workshop on January 5 at which the Energy Division will present its revised proposed procedures for custom measures. We expect that the absence of Grueneich and Bohn and the gap in time before the appointment of the new Commissioners will affect the overall schedule of these proceedings.

New York

In late September, NYSERDA submitted a proposal to the Public Service Commission (PSC) for the extension of the System Benefit Charge (SBC) Program, which is due to expire on June 30, 2011. NYSERDA’s proposal embodies a significant shift in the program, splitting the energy efficiency resource acquisition programs from the research and development programs. NYSERDA proposed cutting the funding for the energy efficiency programs by about $40 million per year, and making these programs subject to the same measure-based benefit/cost standards as the Energy Efficiency Portfolio Standard (EEPS) programs that are operated by the utilities. Funding for the R&D programs, renamed Technology and Market Development (TMD) is increased by the $40 million cut from the resource acquisition programs.

NAESCO, in its comments, argued against the shifting of funds from resource acquisition to TMD, and pointed out that shifting the administration of the resource acquisition programs from the SBC to the EEPS standard was unwise, given that NYSERDA’s SBC programs are national models and the EEPS programs are not yet proven. NAESCO also argued for the reinstatement of a broadly representative stakeholder group to advise NYSERDA, and suggested that the TMD proposed program should be subjected to a more rigorous planning and review process.

On December 29,2010, the PSC issued a decision that continued the SBC funding at its currently level of about $180 million per year through 2016, approved the NYSERDA resource acquisition programs, and ordered the public review and planning process for the TMD programs that NAESCO suggested. NAESCO will participate in this review process with an eye toward identifying whether some shift in funding back to resource acquisition program is warranted.

New Jersey

During the fourth quarter, the New Jersey Board of Public Utilities (BPU) considered the 2011 budget of the New Jersey Clean Energy Program (CEP) and the proposal of the BPU CEP staff to transition the program from incentives to a self-sustaining and self-financing model. The budget for EE programs was left essentially untouched for 2011, and totals almost $300 million. NAESCO’s comments supported the $54 million of funding for the Pay-for-Performance program that provides incentives to ESCO projects. The Transition Plan offered several alternatives for future CEP program administration. NAESCO, in its comments, supported a continuation of the BPU staff administration, unless and until the utilities are willing to take on the responsibility for meeting the state’s aggressive EE goals, which would significantly increase the funding available for ESCO projects in the state.

State Advocacy Resources