During hearings in Tallahassee, the state’s major utilities asked the Florida Public Service Commission to lower their energy efficiency goals to near zero, and in JEA’s case zero, over the next decade.
Under the Florida Energy Efficiency and Conservation Act (FEECA), the Florida Public Service Commission (PSC) has to establish conservation goals for each FEECA utility at least every five years. There are seven Florida utilities subject to FEECA: Florida Power & Light Company (FPL), Duke Energy Florida, Inc. (DEF), Tampa Electric Company (TECO), Gulf Power Company (Gulf), Florida Public Utilities Company (FPUC), Orlando Utilities Commission (OUC), and Jacksonville’s public utility JEA.
Ahead of last week’s hearings, all of those utilities proposed their own goals for the next decade, and they were significantly lower than past goals.
During the hearings the utilities made their case before Commissioners.
“The findings of JEA’s market potential analysis indicates there are no achievable savings for energy efficiency, demand reduction, or demand side renewable energy measures for JEA,” said Donald Wucker, who helps manage the public utility’s demand side management (DSM) portfolio. “JEA urges the commission to remain consistent with its past principles of managing upward pressure on rates and preventing cross subsidies by establishing JEA’s FEECA goals at zero, as it's done in the past. As to local governance, this will provide JEA’s board the flexibility to determine the appropriate level of investment in non DSM measures based on our community's needs and values.”
The other utilities made similar arguments, as was recently reported in the Florida Phoenix.
“Conservation is an important aspect of every utility’s portfolio,” FPL wrote to commissioners ahead of the hearings. “However, the importance of pursuing conservation programs must be balanced against the cost and the impact of such cost on ratepayers. The Commission must not overlook rate impact as it evaluates conservation goals and programs.”
“That's really the bottom line, because all the utilities in Florida that deploy these types of programs are entitled to recover the cost of those programs through the rates that they charge,” explained Ted Kury, Director of Energy Studies at the Public Utility Research Center at the University of Florida. “Overall, the PSC’s goal is to make sure that any of these programs are cost effective for ratepayers. Since ratepayers are ultimately paying the cost of the program, the PSC has to make sure that they are receiving fair value for the money they're being asked to spend.”
But there is disagreement over whether conservation programs are cost effective or not.
To determine cost effectiveness, three common tests are used:
- The societal cost test considers a wide range of factors, including environmental impacts, and asks the question: is society as a whole better off with or without conservation programs?
- The total resource cost test looks at how conservation programs will impact energy costs in general.
- The rate impact measure (RIM) test focuses on how conservation programs will impact rates.
“A particular program may, for example, look great when you evaluate it with the total resource cost test or the societal cost test, but it does have the overall impact of increasing electricity rates. And so how you weight those different tests will depend on your judgment of whether that's cost effective,” said Kury. “The Florida Public Service Commission has tended to give a little bit more weight to that rate impact measure.”
Earthjustice Associate Attorney Jordan Luebkemann argues the RIM test is inadequate.
“We call it the profits test, because really, what that measure is looking at is, would saving electricity impact the utility’s profit, therefore putting upward or downward pressure on rates,” he said. “Under the RIM test, basically every time someone is actually saving electricity, the utility is losing out. And they're counting that as a cost, which really seems to tip the scale.”
“It's been a utility line to talk about how things will affect rate. But ultimately, people don't pay rates, they pay bills. And if your rates go up slightly, but you're saving a lot of electricity, that means that you're paying less money,” he said.
But according to Kury, the PSC leans on the RIM test because while the societal cost and total resource cost tests may show that a conservation program is overall beneficial to society, it may result in higher utility bills for some segments of the population.
“Many times, the vulnerable portion of society is the people who don't participate in the programs, either because they don't have the means or they don't have the ability,” he said. “As an example, renters have a difficult time participating in energy efficiency programs because they don't own the dwelling where they're living. And if the landlord doesn't pay the electricity bill, the landlord may not have an incentive to invest in energy efficiency measures.”
JEA even defended the use of the RIM test during the FEECA hearings last week.
“The RIM test is appropriate for screening DSM programs, particularly for municipal utilities like JEA, because the RIM test ensures no DSM related upward pressure on customers’ rates. It is particularly appropriate in establishing DSM goals for municipal utilities, such as JEA, over which the Commission does not have rate making authority,” JEA’s Donald Wucker said. “Local governing is a fundamental aspect of public power. It provides the necessary latitude to make local decisions regarding the community’s investment and energy efficiency that best suits local needs and values. Accordingly, as the Commission has recognized in prior proceedings, it is appropriate for the Commission to set goals based on RIM and to defer to the municipal utilities governing bodies to determine the level of investment in any non-RIM based measures.”
According to Kury, the bottom line is that utilities don’t pay for anything.
“Ultimately, it's the people who are paying for everything,” Kury said. “The Public Service Commission has a responsibility to make sure that when the people are being asked to spend their money on these programs, and it is the people who are spending money on these programs, that they are getting a fair return on their investment. And that's where this whole idea of cost effectiveness comes in.”
The PSC is expected to make a final decision on utility conservation goals during a conference this fall. The utilities will then use those goals to inform the types of energy efficiency programs they’ll offer. Then in five years the process will repeat.