The Assistant Attorney General, Steven W. Smith, in a memo to Washington UTC staff dated March 21, 2014, says that meeting a minimum conservation target is not necessarily the same as “pursuing all cost-effective conservation.” In other words, this memo indicates that utilities achieving their minimum biennial targets in terms of kWh could still be out of compliance with I-937.
This is new territory, and begs the question, “How should regulators interpret whether a utility has pursued all cost-effective conservation?” In fact, this question was the root inquiry (originally from UTC staff to the AG) behind Smith’s memo. According to Smith, utilities have to demonstrate that they are “adaptively managing conservation programs and portfolios, including… exploring new [opportunities]”.
I find this advisory opinion both liberating and scary for utilities. Liberating because it acknowledges that targets are based on best available information at a snapshot in time, and that this information changes over time. It relieves utilities from the notion that they must stick strictly to the measures that were available when they did their conservation potential assessment and set their targets. For example, when utilities’ 2014/15 targets were set, the expected incremental cost of a LED bulb was probably much higher than what we are actually seeing in the market today, due to step-change cost reductions in the manufacturing process. In other words, more measures are cost-effective today than expected, and utilities have the flexibility to pursue them.
On the scary side, the language opens the door for subjectivity. Perhaps most specifically, how will regulators define “pursue”? Must a utility merely attempt to acquire all cost-effective conservation resources? We know from BPA’s 2013 “6th Going on 7” research project that utilities significantly over-achieved on commercial and industrial lighting measures (to the tune of 99 aMW over three years), consumer electronics (26 aMW) and irrigation scheduling (14 aMW), relative to their identified potential. Presumably all of these savings contributed to WA utilities satisfying their mandates—as they should—and it all came at nice, low cost. Unfortunately, during this same time frame other end-uses such as residential space heating (-70 aMW), water heating (-48 aMW) and refrigerated storage (-21 aMW) fell short. Did these measures fall short because the planning expectations were unreasonable, or were they not pursued because they were more difficult or expensive than other options?
I find this fascinating and innovative. I admit, I was of the impression that once a utility had amassed enough kWh to satisfy their conservation targets they could ramp things down (“tap the brakes”, as some say), hit pause, and wait until the next two-year period to acquire more conservation. Smith’s memo makes it clear that this is not the case.
Full memo from Smith, and the draft revised language regarding IOU rules for I-937 can be found here: UE-131723 – Pursue All Memo 3-21-14.