Utilities’ Energy Efficiency Spend Varies Wildly, Study Finds

by | Nov 11, 2011

U.S. utilities each spent anywhere from $0.02 to $4.80 per MWh of retail sales on energy efficiency programs in 2009, according to a new report from investor advocacy group Ceres.

Benchmarking Electric Utility Energy Efficiency Portfolios in the U.S. finds that Pacific Gas & Electric had the highest relative spending out of the 50 utilities benchmarked, with $4.80 per MWh – 240 times the level of bottom-ranked Ohio Edison, with $0.02.

PG&E was followed by Massachusetts Electric, Narragansett Electric, Western Massachusetts Electric and Seattle City Light, while Ohio Edison was joined at the bottom by Alabama Power, Indianapolis Power & Light, United Electric Coop Service and Georgia Power.

The report, written by consultants M. J. Bradley & Associates, also found that the 50 utilities achieved energy savings ranging from less than 0.1 percent to nearly 2 percent of total retail sales. The 10 highest-ranked utilities all achieved energy savings of 1 percent or more.

Ranked by relative savings, the top utilities were Southern California Edison, PG&E, Nevada Power, Sacramento Municipal Utility District and Puget Sound Energy, with Massachusetts Electric in sixth, Narragansett Electric in 11th, Seattle City Light in 12th and Western Massachusetts Electric in 14th.

The bottom utilities were Ohio Edison, Indianapolis Power & Light, Metropolitan Edison, Mississippi Power and Alabama Power.

State policies have been a major driver of utility spending, especially for regulated, investor-owned utilities, Ceres said. It said the three necessary policies are performance-based financial incentives, a commitment to pursue all cost-effective energy savings and decoupling of utilities’ financial success from increases in electricity use.

But it noted that state policies don’t always spur utilities to invest in efficiency.

Ohio, for example, passed an energy efficiency standard in 2008. This requires investor-owned utilities to achieve savings of 1 percent of annual electricity sales by 2014 and 2 percent by 2019.

But while Duke Energy Ohio and American Electric Power subsidiary Ohio Power achieved 140 percent and 280 percent of the required targets in 2010, FirstEnergy subsidiary Ohio Edison achieved only 60 percent of the target. Ohio Edison’s savings were also due mostly to programs that it started before the efficiency standard was passed, while Ohio Power and Duke launched new programs.

Total ratepayer energy efficiency spending in the U.S. is projected to increase from $5.4 billion in 2009 to $12.4 billion by 2020, Ceres said.

The report was based on 2009 data submitted by utilities to the Energy Information Administration, with utilities selected to represent a cross-section of geography, electricity deliveries, rates, ownership type and regulatory structure.

But Ceres said several factors made comparing programs between utilities difficult. These include differences in measuring and accounting for energy savings; regulatory structures; geographic region of operation; customer composition; electricity rates; and utility energy efficiency program implementation experience.

In related news, San Diego Gas & Electric has been ranked the most intelligent utility in the country in the annual UtiliQ rankings by IDC Energy Insights and Intelligent Utility magazine. SDG&E is followed by PG&E, Austin Energy, APS and Southern California Edison.

The rankings rated 78 American utilities on five main criteria: operational efficiency, commitment to renewables, smart energy initiatives, demand response/energy efficiency programs, and IT investments that support business process improvements, as well as commitment to sustainability.

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