Bill Pushes Utilities’ Energy-Saving Efforts ; Proposal Would Allow Firms to Recover Some Lost Profits

By Copyright 2008 Albuquerque Journal BY JACK KING Journal Staff Writer

Utilities may soon be allowed to recover some of the profits they lose when customers buy less electricity because of energy efficiency programs.

A bill to do just that, amending the 2005 Efficient Use of Energy Act, has been introduced by House Speaker Ben Lujan, for the Governor’s Office.

The bill is based on the premise that the current rate structure discourages utilities from pushing energy efficiency and conservation.

“In Gov. Richardson’s State of the State, he called for electric utilities to invest in energy efficiency programs that will be cheaper and cleaner than new power plants. HB 305 sets new standards to achieve at least 5 percent energy efficiency savings from 2005 electricity sales by 2014 and 10 percent by 2020,” said Allan Oliver, the governor’s deputy communications director.

The legislation adds that a public utility shall “have the option of recovering its prudent and reasonable costs along with commissionapproved incentives for demandside resources and load management programs.”

Energy companies are allowed to recover the costs of specific energy efficiency programs approved by the PRC by tacking on extra charges to customer bills. Examples are a low-income weatherization program and a $500 rebate on insulation work performed by participating contractors.

Utilities have argued that they should also be able to make up the reductions in earnings that occur when customers buy less energy — either because they are using energy more efficiently or generating their own with alternative sources.

The utility companies say the revenue losses serve as “disincentives” to development of energy-saving programs, as opposed to building more power plants.

“One of the challeges we have with programs that manage customer demand, such as energy efficiency, is that there’s no way to earn a return,” PNM spokesman Jeff Buell said.

“Incentives are a way to level that playing field and encourage more energy efficiency programs,” he said.

The legislation introduced by Lujan would amend the Efficient Use of Energy Act.

The new bill says “it is necessary and appropriate to provide rate treatment and financial incentives to public utilities to develop all cost effective and achievable energy efficiency and load management resources.”

It would require the PRC to identify and remove regulatory disincentives or barriers in a manner that balances public, consumer and investor interests, and “provide public utilities an opportunity to earn a profit on cost-effective energy efficient and load management resource development.”

Plans proposed

Companies have proposed several plans to allow them to recover all or most of the lost revenue.

El Paso Electric and Southwestern Public Service have incentive proposals pending before the PRC.

El Paso Electric proposes to figure monthly how much money each rate class is saving through energy efficiency programs, then recover a portion of that through a rate surcharge.

SPS proposes to recover the lost revenues through a “shared savings” program. The company would figure how much per year the company and customers save through energy efficiency. It would then add 15 percent of

that to its proposed rate surcharge for energy efficiency.

Commissioner Jason Marks said he thinks the PRC should consider all aspects of the incentive proposals.

“We should consider reasonable incentives, but we shouldn’t throw money at the utilities,” Marks told the Journal this week.

Mary Homan, PNM’s manager of regulatory affairs, said her company welcomes a PRC investigation of the incentives.

“We certainly are interested in finally getting a handle on what the PRC wants (in terms of incentive proposals),” she said.

Environmental groups also are willing to look at the issue. “It’s great that the commission is finally talking about a business case for energy efficiency,” said Tom Singer, senior policy analyst for the Natural Resources Defense Council.

“What they’re trying to do is develop testimony about a mechanism for putting into effect any future policy,” he added.

Gail Ryba, director of the Coalition for Clean Affordable Energy, said it was “about time” the commission took up the issue. “We continue to allow utilities to get a profit for the development of coal plants. Which do we prefer, new coal plants or energy efficiency?” she asked. Eight states have passed legislation mandating incentives to utilities: Arizona, California, Connecticut, Massachusetts, Minnesota, Nevada, Rhode Island and Vermont. Peter Gould of the New Mexico Industrial Energy Consumer said the group hasn’t take a position. “We’ll … look at anything they bring forward,” he said. “In general, we’re not in favor of giving incentives to utilities for doing what they should be doing anyway,” he said.

(c) 2008 Albuquerque Journal. Provided by ProQuest Information and Learning. All rights Reserved.