Order
Contents
1
INTRODUCTION
1.1
The Applicant
1.2
Approvals Sought
1.3
Regulatory Process and Participants
2
BACKGROUND
2.1
Previous DSM Initiatives
2.2
Overview of Legislative Framework
3
EE&C PLAN
3.1
Plan Participants
3.2
Overview of Programs
3.3
Forecast Savings and Budget
3.4
Cost Effectiveness Testing
3.5
Evaluation and Verification
4
SYNAPSE REPORT
4.1
Consistency of Term with Industry Standards
4.2
Reasonableness of Projected Savings and Participation
4.3
Estimate of Financial Costs and Benefits to Customers
4.4
Plan for Apportioning Costs and Benefits
4.5
Other Issues
4.6
Comments from PEIEC
5
COMMISSION FINDINGS
Order
1
INTRODUCTION
On June 29, 2018, the Prince Edward
Island Energy Corporation ("PEIEC") submitted an application to the Island
Regulatory and Appeals Commission ("IRAC" or the "Commission") seeking
approval of an electricity efficiency and conservation plan (the "EE&C Plan"
or the "Plan") for a three year term from 2018 to 2021. The application and
proposed EE&C Plan were submitted voluntarily by PEIEC, in accordance with
subsection 16.1(2.1) of the
Electric Power Act, R.S.P.E.I. 1988, c. E-4
(the "Act").
The EE&C Plan consists of
electricity efficiency and conservation programs that have the primary
objective of reducing electricity usage from what would have occurred absent
energy savings measures. The EE&C Plan, if approved, will be administered by
efficiencyPEI ("ePEI"). ePEI is a service agency that already provides
energy efficiency services for PEIEC.
1.1
The Applicant
PEIEC is a Crown corporation created
pursuant to the Energy Corporation Act, R.S.P.E.I. 1988, c. E-7. It is
generally excluded from the definition of a "public utility" contained in
section 1 of the
Act, and is therefore generally exempt from regulation by
the Commission (see Act, s. 1(3); see also Energy Corporation Act, s. 2(6)).
PEIEC is, however, a public utility
for the purpose of section 16.1 of the
Act (see
Act, s. 1(4)). This means
that PEIEC may be ordered by the Commission to submit a DSM plan for review
and approval, or that PEIEC may voluntarily submit a DSM plan to the
Commission (see
Act, ss. 16.1(2), (2.1)).
In the present application, the EE&C
Plan was submitted voluntarily by PEIEC, in the absence of a Commission
order.
1.2
Approvals Sought
PEIEC is seeking approval of the
EE&C Plan as filed with the Commission. Specifically, PEIEC seeks approval
of the proposed EE&C programs, the proposed annual investment for each year
of the Plan, and certain approvals relating to cost effectiveness testing
and the evaluation of the proposed programs.
A comprehensive list of the
regulatory approvals requested is set forth in Section 10 of the EE&C Plan
and are discussed herein.
1.3
Regulatory Process and Participants
The EE&C Plan was filed with the
Commission on June 29, 2018. A Notice of Application was posted on the
Commission website on July 6, 2018, and also published in local newspapers.
The Notice of Application invited
members of the public to comment on the EE&C Plan by submitting written
comments to the Commission on or before September 7, 2018. The Notice also
advised that a public hearing would not be held unless it was deemed
necessary by the Commission. In the absence of a public hearing, the Notice
stated that the Commission would finalize its review of the Application in
the form of a written Order.
Following publication of the Notice,
the Commission received written comments from four interested members of the
public. Mr. Roger King also submitted written questions to PEIEC. All
comments, questions and responses were posted on the Commission website and
provided to PEIEC.
Upon receipt of the EE&C Plan,
Commission staff retained the services of Synapse Energy Economics, Inc.
("Synapse") to assist in the review of the Plan.
Between August and November 2018,
Synapse and Commission staff submitted a number of written questions to
PEIEC in the form of interrogatories. All interrogatories and PEIEC's
responses were posted on the Commission website.
In February 2019, Synapse completed
its expert report which included a detailed assessment of the proposed EE&C
Plan. The Synapse report also included a number of recommendations relating
primarily to the evaluation of program performance and reporting
requirements.
The Synapse report was provided to
PEIEC for review and comment. PEIEC provided written comments to the
Commission and was generally agreeable to the recommendations made by
Synapse.
Upon review of the record and, in
particular, the Synapse report and the response of PEIEC, the Commission
determined that the outstanding issues were narrow and could be resolved
without an oral hearing.
2
BACKGROUND
2.1
Previous DSM Initiatives
In 2015, Maritime Electric Company,
Limited ("Maritime Electric") filed a proposed DSM plan with the Commission
(Commission Docket UE21406). In November 2015, the Commission issued Order
UE15-02 with respect to the proposed DSM plan. The Commission approved only
the public outreach and education components of the DSM plan for the years
2015 to 2020 inclusive, with an annual cost of $167,500. The Commission did
not accept the balance of the DSM plan as filed.
2.2
Overview of Legislative Framework
PEIEC is a "public utility" for the
purposes of energy efficiency and demand-side resource measures. As a
result, PEIEC is subject to Commission regulation on matters of energy
efficiency and demand-side management.
Section 16.1 of the
Act governs the
Commission process to review and approve a proposed energy efficiency and
demand-side resource plan. As the EE&C Plan was voluntarily submitted by
PEIEC, it must meet the requirements set forth in subsection 16.1(5.1) of
the
Act. Subsection 16.1(5.1)
provides:
An energy efficiency and
demand-side resources plan that is submitted to the Commission by a public
utility under subsection (2.1) shall
(a)
be for a term that is consistent with
industry standards;
(b)
satisfy the Commission that the particular energy efficiency
and demand-side resource measures contained in the plan are
reasonably likely, on implementation, to achieve the results forecast in the
plan;
(c)
contain a reasonable estimate of
(i)
the financial costs, for each public utility
named in the plan and its customers, to be incurred on implementing the plan
and over the course of its term, and
(ii)
the financial benefits, for each public utility
named in the plan and its customers, to be achieved on implementing the plan
and over the course of its term; and
(d)
contain a plan for apportioning the costs and
benefits referred to in clause (c) between the public
utilities named in the plan.
[emphasis added]
If the Commission is satisfied that
the EE&C Plan submitted by PEIEC meets these requirements, then the Plan may
be approved by the Commission. Section 16.1(6) of the
Act
provides:
On receipt of an energy
efficiency and demand-side resources plan from a public utility, the
Commission may approve the plan if the Commission is satisfied that
(a)
in the case of a plan submitted pursuant to an order under
subsection (1), the plan has been submitted for approval within such time as
the Commission required in the order made under subsection (1) directing the
submission of the plan; and
(b)
the plan meets the requirements of
subsection (5) or (5.1), as the case may be.
[emphasis added]
As a result, the Commission may only
approve the EE&C Plan if it is satisfied that each of the following
requirements is satisfied:
(a)
The proposed EE&C Plan is for a term that is consistent with industry
standards;
(b)
The particular energy efficiency and demand-side resource measures
contained in the EE&C Plan are reasonably likely, on implementation, to
achieve the results forecast in the Plan;
(c)
The EE&C Plan contains a reasonable estimate of the financial costs
and financial benefits for each public utility named in the Plan and its
customers; and
(d)
The EE&C Plan contains a plan for apportioning the financial costs
and benefits between the public utilities named in the Plan and the
apportionment is reasonable.
If the EE&C Plan is approved, the
Commission is required to issue an Order to each public utility named in the
Plan requiring the public utility to pay the costs as set out in the Plan
(see
Act, s. 16.1(8.1)).
The evaluation of program
performance is an integral part of any DSM plan. As a result, if the EE&C
Plan is approved, PEIEC will be required to report annually to the
Commission on matters such as program implementation, the results achieved,
and other information that may be required by the Commission. Such annual
reporting is legislatively required by subsection 16.1(13) of the
Act, which provides:
After the approval of the
energy efficiency and demand-side resources plan of a public utility, the
public utility shall, within three months after the end of the public
utility's fiscal year in each calendar year or part of a calendar year
occurring during the term of the approved plan, prepare and submit to the
Commission a report for that calendar year, or part of a calendar year, as
the case may be, that contains such information respecting the
implementation of the plan, including the results achieved, as may be
required by the Commission.
3
EE&C PLAN
The proposed EE&C Plan has a
three-year term, from 2018/19 to 2020/21. The Plan as filed with the
Commission deals only with electricity savings, as the
Act is concerned only
with the reduction or modification of electricity consumption (see
Act, s.
1(1)(e)).
3.1
Plan Participants
The EE&C Plan, if approved, will be
available to customers of both Maritime Electric and Summerside Electric.
Although Maritime Electric is a "public utility" and is subject to
regulation by the Commission, Summerside Electric is not subject to
regulation by the Commission. As a result, the Commission does not have
jurisdiction to issue an Order to Summerside Electric requiring the utility
to participate in the Plan or to pay any portion of the costs associated
with the Plan.
Although Summerside Electric is not
subject to Commission regulation, PEIEC and Summerside Electric have entered
into a Service Delivery Agreement, a copy of which has been filed with the
Commission on a confidential basis. In accordance with the Service Delivery
Agreement, PEIEC agrees to provide energy efficiency and conservation
services to Summerside Electric, and Summerside Electric agrees to
contribute proportionately to the EE&C Plan expenditures approved by the
Commission. The Service Delivery Agreement is conditional on IRAC approval
of the EE&C Plan.
PEIEC states in the Application that
there may be some variation in programs offered to Summerside Electric
customers, particularly during the first year or two of the EE&C Plan. PEIEC
does not state what these variations may be.
3.2
Overview of Programs
The EE&C Plan has savings
initiatives in two sectors: residential programs and business programs.
Residential programs specifically
target energy use within the home, and include:
In an effort to assist low and
modest-income Islanders, the program will offer a special incentive tier
with rebates approximately 1.8 times higher for low-income participants.
Participants who heat their home
primarily with electricity will also have access to rebates for building
envelope upgrades.
-
New Home Construction: The program offers a rebate
for new home construction which achieves an ENERGY STAR/R2000 rating and/or
an EnerGuide rating that demonstrates improved performance compared to
code-built homes.
-
Winter Warming: The program will be offered to
low-income Islanders and includes the installation of low-cost residential
energy efficient upgrades at no cost to participants.
-
Instant Energy Savings: The program provides
in-store rebates on energy efficient products. Rebates will be offered on
both larger appliances and smaller purchases, such as light bulbs and
thermostats.
PEIEC notes in the Application that
additional programs may be added to the residential sector beyond the
timeline of this Plan to address gaps in program offerings, such as
appliance retirement and changing behavior.
Business programs take a diversified
approach to energy savings and incentives that could lead to small or large
savings opportunities. The business programs include:
-
Business Energy Rebates:
The program offers rebates
to businesses that purchase qualifying energy efficient equipment. There are
several mechanisms through which to offer rebates, including mail-in rebates
and instant point-of-sale rebates (or discounts). The product mix will
include lighting, HVAC, refrigeration, motors, and more, but will initially
limit the number of eligible products to allow ePEI to manage the program
budget and gage uptake of the products.
-
Business Energy Solutions: The program offers
subsidies for energy assessments for eligible businesses, and substantial
rebates for completing eligible energy efficiency improvements.
-
Custom Energy Solutions: The program offers
incentives for both new construction and large retrofits in existing
facilities. Unlike the Business Energy Rebates and Business Energy Solutions
programs, the Customer Energy Solutions program is intended to offer a more
customized approach and program for larger businesses with unique energy
usage. The program will specifically target high electricity users.
3.3
Forecast Savings and Budget
The EE&C Plan proposes an
expenditure of $2.77 million for 2018/2019 with forecast first year
electricity savings of 5.4 GWh of energy and 1.4 MW of demand. The Plan
includes an investment of $4.66 million in 2019/2020 with forecast savings
of 10.8 GWh of energy and 2.6 MW of demand, and an investment of $5.88
million in 2020/2021 with forecast savings of 13.1 GWh of energy and 2.9 MW
of demand.
In April 2021, at the conclusion of
the three-year term, PEIEC projects that the total annual electricity
savings resulting from implementation of the Plan will be 29.3 GWh of energy
and 6.9 MW of demand.
Table 1 shows the proposed savings
broken out by program for each year of the three-year plan. Table 2 shows
the proposed budget by program for the three-year term.
PEIEC proposes that the funding for 2018/2019, in the total amount of
$2.77 million, be shared as follows:
-
$600,000 contribution by Maritime Electric and Summerside Electric;
-
$1,149,500 contribution by ePEI; and
-
$1,019,500 contribution from the federal government.
It is proposed that, of the EE&C
Plan costs recoverable from electricity customers, Summerside Electric would
contribute approximately 10 percent of the total recoverable Plan costs, and
Maritime Electric would contribute approximately 90 percent. This estimate
is based on the percentage of sales of electricity in the Province.
PEIEC has advised that the proposed
federal funding is available to ePEI via the Low Carbon Economy Leadership
Fund. Provincial government funding is required to access the federal Low
Carbon Economy Leadership Funds.
According to the Application,
federal funding from the Low Carbon Economy Leadership Fund is available
until March 31, 2022. PEIEC expects that Provincial funding will also be
available until March 2022, as it is required to obtain federal funding.
3.4 Cost Effectiveness Testing
Cost effectiveness testing directly
informs EE&C planning and decision-making processes. The cost effectiveness
test provides an analytical framework to ensure that the use of ratepayer
funds for EE&C results in sufficient benefits.
There are three common tests used to
determine cost effectiveness. These tests are the Total Resource Cost Test,
the Societal Cost Test and the Program Administrator Cost Test ("PAC Test").
PEIEC proposes that the PAC Test be used to determine cost effectiveness of
the EE&C Plan.
The PAC Test compares the utility's
value of energy savings (the present value of long-run avoided energy and
capacity costs) to the utility's EE&C expenditures. The test is fully
symmetrical, comparing only the program administrator's costs to its
benefits, with all of the costs and benefits identified monetarily. PEIEC
proposes that the cost effectiveness be assessed at the portfolio - rather
than the program - level.
PEIEC recommends that the cost
effectiveness testing use the Government of Prince Edward Island's long-term
cost of borrowing for the discount rate. At the time of the Application, the
long-term cost of borrowing was 3.2%.
3.5
Evaluation and Verification
The purpose of the evaluation and
verification process is to assess the impacts of energy efficiency programs
and suggest opportunities for improvement.
PEIEC proposes to file evaluations
with the Commission on an annual basis. The evaluations will be conducted by
an independent evaluation consultant obtained through an RFP process. The
evaluator will be contracted for a three-year period to perform evaluations
during the term of the EE&C Plan.
During the term of the EE&C Plan,
PEIEC proposes to focus on impact evaluations, rather than market and/or
process evaluations. An impact evaluation determines the impact of the
program, typically in terms of energy and demand savings.
4
SYNAPSE REPORT
Synapse was retained on behalf of
Commission staff to assist in the review of the EE&C Plan. Synapse was asked
to review the proposed EE&C Plan and provide an opinion as to whether the
Plan satisfies the requirements in subsection 16.1(5.1) of the
Act. In
particular, Synapse was asked to opine on each of the following issues:
1.
Is the proposed EE&C Plan for a term that is consistent with industry
standards?
2.
Are the particular energy efficiency and demand-side resource
measures contained in the EE&C Plan reasonably likely, on implementation, to
achieve the results forecast in the Plan?
3. Does the EE&C Plan contain a reasonable estimate of the financial
costs and financial benefits for each public utility named in the plan and
its customers?
4. Does the EE&C Plan contain a plan for apportioning the costs and
benefits referred to above between the public utilities named in the plan
and is the apportionment reasonable?
Between August and October 2018,
Synapse posed fifty-one (51) written interrogatories to PEIEC for the
purpose of gathering additional information with respect to the Application.
PEIEC responded to the interrogatories in a timely manner and to the best of
its abilities.
Three of the interrogatories posed
by Synapse related specifically to Maritime Electric's general rate
application, performance incentive mechanisms, and earnings adjustment
mechanism. As PEIEC did not have the information necessary to respond to
these questions, Maritime Electric voluntarily submitted the requested
information.
Synapse thereafter finalized its
report and filed a copy with the Commission. Its findings are summarized
below.
4.1 Consistency of Term with Industry Standards
Synapse concluded that the proposed
three-year term is reasonably consistent with industry standards. It noted
that a three-year term is common for EE&C programs, and that except for
single-year plans in 2015 and 2018, Nova Scotia has used three-year plans.
According to Synapse, a multi-year
term can foster confidence and continuity in the marketplace. In this way,
it may provide a better environment for market transformation than plans
with shorter terms. Also, a plan with a longer term can more easily take on
large projects or comprehensive measures that require multi-year support.
In PEI, annual reporting on the
results of plan implementation is required, in accordance with the
Act.
Since this is a new portfolio, reporting within the three-year term of the
Plan will be important. Synapse recommends that the types and formats of
information to be reported should be discussed with stakeholders and
established early on, so that consistently defined results can be monitored
over time.
4.2 Reasonableness of Projected Savings and Participation
In determining whether the EE&C Plan
is reasonably likely, on implementation, to achieve the results forecast in
the Plan, Synapse considered both the forecasted savings and forecasted
customer participation.
Savings
Synapse noted that its assessment of
the reasonableness of the savings estimates depends in part on the soundness
of the load forecasts. However, information on the load forecasts for the
utilities have not been provided or are not available. Instead, PEIEC
provided 2018-2022 sales forecasts for Maritime Electric and Summerside
Electric in response to an information request.
PEIEC plans to attain a large amount
of savings as a percent of sales (0.41 percent) in 2018/19, the first year
of the plan. In the following year, savings increase by a smaller increment
(0.33 percent) to 0.74 percent of sales. From 2019/20 to 2020/21, savings
under the Plan level out relative to sales at 0.74 percent. Table 3 shows
the savings as a percent of sales for the three-year term based on the sales
forecasts.
Synapse recommends that PEIEC
consider increasing savings targets as a percent of sales in the third year,
as many jurisdictions have recently achieved savings above two percent of
sales.
Participation
PEIEC's estimates of participation
are based on several factors: participation results for Nova Scotia's mature
programs, the eligible PEI population, ramp-up time needed to develop/expand
a program, and potential upcoming appliance/equipment standards.
Synapse concludes that this approach
appears to be reasonable for PEI, depending on the specific methodology and
assumptions about ramp-up rates. Table 4 summarizes the anticipated
participant uptake and the eligible customers by program.
Synapse recommends that PEIEC
establish processes and data collection mechanisms to understand who is
participating. The unit of participation (e.g., a customer, an account, a
measure installed, a rebate) should be clearly defined at least at the level
of the program, if not more granularly (e.g. by measure).
Further, it is important to
establish whether participation will be tracked separately by year or over
the term of the EE&C Plan. If the number of customers is not tracked for a
program, PEIEC should plan on periodic analysis of participation of the
sector to ensure that the portfolio is reaching a significant share of
customers across all rate classes and a representative share of customers
who are typically less likely to participate in EE&C, such as low-income and
small commercial customers.
4.3
Estimate of Financial Costs and Benefits to Customers
Savings
A commonly referenced benchmark for
assessing a jurisdictions' commitment to energy efficiency is the amount of
EE&C spending as a percent of utility revenue. Synapse estimates that the
total EE&C budget as a percent of revenue starts at 1.2 percent in 2018/19,
rises to 2 percent in 2019/20, and reaches 2.4 percent in the final year of
the Plan. On average, states in the United States spend 1.7 percent of total
electric revenue on electric efficiency programs, according to the 2018
ACEEE scorecard analysis.
Relative to overall EE&C spending,
Maritime Electric and Summerside Electric ratepayer contributions are much
lower than utility spending in other jurisdictions because of financial
support from the provincial and federal governments. The total proposed
utility funding is just 0.3 to 0.4 percent of projected total revenues for
all Plan years. This suggests that costs are not the primary constraint on
the portfolio for the term of the Plan, and that a more aggressive ramp-up
of savings from 2019/20 to 2020/21 could be considered.
Synapse recommends that PEIEC
increase the targeted savings in the third year to be more in line with
higher achieving states in the United States. In 2017, the top 15 states in
the United States averaged spending as a percent of electric revenue of 3.8
percent, with the top three states spending over 6.5 percent.
Synapse also recommends that
Summerside Electric develop a revenue forecast, preferably by rate class, to
inform current and future EE&C efforts.
Cost Effectiveness
Synapse notes that the Plan does not
provide information on MECL's methodology for developing avoided costs.
Further, Summerside Electric's avoided costs are not available. Synapse is
therefore unable to determine whether the avoided costs are reasonable.
Assuming the avoided costs are
reasonable, Synapse concludes that the proposed EE&C Plan is cost-effective
at the portfolio level. All programs are cost-effective based on the Program
Administrator Cost Test (PAC), which PEIEC recommends as the primary
cost-effectiveness test. The results of the PAC and Total Resource Cost
(TRC) tests are displayed in Table 5.
Based on the TRC Test, the only
program which is not cost-effective is the Home Insulation Rebates program,
with a TRC ratio of 0.8. Nevertheless, Synapse suggests that this program is
likely to provide benefits that are not reflected in this score. For one,
the Home Insulation Rebates program will likely provide significant
non-energy benefits (such as reduced arrearages and improved comfort), which
have not been included in PEIEC's analysis. Also, the results of the audit
performed through the insulation program can be used to encourage
participation in other programs. As a result, Synapse suggests it is
reasonable to include the insulation program in the portfolio even with its
low TRC score.
4.4 Plan for Apportioning Costs and Benefits
According to the Application, the
majority of the funding for the EE&C Plan (79 percent) is intended to come
from the provincial and federal governments. Ratepayers will contribute the
balance of approximately 21 percent.
Synapse notes that there appears to
be adequate assurance that the federal funding will continue throughout the
term of the Plan, and beyond. Federal funding is available through March 31,
2022. Provincial funding is required to obtain the federal funding and is
included in PEI's operating budget. Because cutting provincial funding would
jeopardize federal funding, it is unlikely that the province would cut
funding for the program.
Synapse notes that the long-term
viability of the programs will depend on ongoing funding sources. An abrupt
shift to a greater percentage of expenses being recovered from ratepayers at
the end of the Plan term could lead to a noticeable increase in rates.
Recovery through Separate Line Item
To recover the ratepayers' portion
of costs of the EE&C programs, PEIEC recommends recovery through a separate
line item on electricity bills. Synapse recommends against this approach.
According to Synapse, energy
efficiency is an electricity resource, just as generation, transmission, and
distribution facilities are electricity resources. There is no need to
separately present the costs for energy efficiency resources to customers,
any more than there is a need to break out all the costs necessary to pay
for generation, transmission, or distribution.
Further, Synapse submits that
presenting the energy efficiency charge separately on customers' bills can
be misleading. This is because the charge would include the costs of the
efficiency resources but it would provide no indication of the benefits that
they offer in terms of reduced generation, transmission, and distribution
costs.
Amortization of Expenses
PEIEC recommends that program costs
be expensed as incurred (rather than amortized over several years). Synapse
agrees with this approach, especially since the ratepayer contribution is
relatively small over the term of the Plan.
Tracking of Costs and Benefits
PEIEC recommends tracking
expenditures and electricity savings separately by utility and by rate
class. As noted in the Application, allocating and recovering costs by rate
class may lead to significant variations in the charge from year-to-year.
Thus, PEIEC recommends that riders be set and held for the three-year term
and that there be a true-up by rate class at the reset of the EE&C rate
rider. Synapse agrees that this approach is reasonable.
The allocation of costs between
Maritime Electric and Summerside Electric (90 percent and 10 percent
respectively) is based on sales. Synapse notes that PEIEC does not appear to
have a plan for monitoring savings and costs by utility to ensure that
customers get benefits commensurate with their contributions. The
Act
requires that the EE&C Plan contain a plan for apportioning costs and
benefits between the public utilities and their customers, and thus appears
to require an accounting of costs and benefits by utility. Synapse
recommends that PEIEC track the costs and benefits for each utility.
4.5
Other Issues
Synapse notes that the proposed EE&C
Plan provides more savings from residential programs than business programs,
especially in the first year. This contrasts to sales, which are evenly
split between the residential and commercial sectors. Synapse recommends
that the EE&C budget be allocated proportionately across residential and
commercial sectors as soon as possible.
Synapse also notes that the EE&C
Plan is not designed to target peak load, even though peak demand is
projected to grow. This concern was also raised by interested members of the
public. Synapse recommends that the EE&C Plan should place a much higher
priority on programs targeting measures that reduce peak load growth, and
also suggests that PEIEC revise the Plan for years two and three to better
incorporate peak load considerations.
Synapse further notes that utilities
that are dependent on electricity sales for revenue may not support EE&C
measures. Instead, the reduction in revenue creates a disincentive for
utilities to support energy efficiency. To address this problem, many
jurisdictions introduce some form of decoupling. Decoupling allows a utility
to recover fixed revenue requirements through an annual rate adjustment
mechanism and breaks the link between revenue and sales. Synapse therefore
recommends reconciling Maritime Electric's forecast revenues with actual
revenues on an annual basis.
4.6 Comments from PEIEC
A copy of the Synapse report was
provided to PEIEC for their review. PEIEC was specifically asked to provide
any comments they may have with respect to the recommendations made by
Synapse.
PEIEC filed written comments in
response to the recommendations made by Synapse. PEIEC was generally
agreeable to the recommendations, subject to the following exceptions:
-
PEIEC does not agree with the recommendation that it should consider
modifying the Plan in the second and third years, and specifically does not
agree that it should consider increasing savings as a percent of sales in
the third year. In response, PEIEC notes that this is an initial three-year
plan and that the targets set out in the Plan are reasonable and achievable.
PEIEC advises that the Plan as proposed is intended to balance "the
appropriate considerations of achieving ambitious electricity efficiency
and conservation targets with a focus on affordability."
-
Although PEIEC recommends that the ratepayer portion of EE&C costs
should be shown as a separate line item on electricity bills, Synapse
disagrees with this approach. In response, PEIEC notes that this was a
recommendation received from a stakeholder during the consultation process.
However, PEIEC is prepared to support the recommendation made by Synapse.
-
Synapse recommends that the EE&C Plan should place a much higher
priority on programs targeting measures that reduce peak load growth. In
response, PEIEC recognizes the need and value of programs to reduce peak
load. However, the EE&C Plan focuses on load reduction (rather than peak
load reduction), for several reasons. PEIEC notes, for example, that
although thermal storage can be an effective measure of load reduction,
customer uptake is unlikely without a corresponding rate incentive, such as
a time-of-use rate. PEIEC also notes that load control, such as direct
control of electric water heaters, requires substantial management by the
utilities. Instead, PEIEC has proposed to initiate programs it can primarily
manage itself with cooperation from the utilities.
-
Synapse recommends the provision of further information by both
Summerside Electric and Maritime Electric. While PEIEC agrees that the
provision of this information would be of assistance in administering the
EE&C Plan, it notes that it is not in a position to require either utility
to provide the suggested information.
5
COMMISSION FINDINGS
The Commission is satisfied that the
EE&C Plan as filed meets the requirements set forth in subsection 16.1(5.1)
of the
Act. In particular, the Commission is satisfied that:
-
The EE&C Plan is for a term that is consistent with industry
standards;
-
The particular energy efficiency and demand-side resource measures
contained in the EE&C Plan are reasonably likely, on implementation, to
achieve the results forecast in the Plan;
-
The EE&C Plan contains a reasonable estimate of the financial costs
and financial benefits for each public utility named in the plan and its
customers; and
-
The EE&C Plan contains a plan for apportioning the financial costs
and benefits between the public utilities and the apportionment is
reasonable.
The EE&C Plan is therefore approved
as filed for the three-year period from 2018/2019 to 2020/2021.
Synapse has made several
recommendations which are intended to result in increased energy and demand
savings if implemented. Although the Commission encourages increased
savings, it accepts that the targets established by PEIEC are reasonable in
the circumstances and represent an appropriate balance between forecast
savings and customer cost, particularly for an initial EE&C Plan.
As noted by PEIEC in the
Application, to meet the PEI Energy Strategy's target for an annual
electricity reduction of two percent in 2020/2021 would require an annual
investment of approximately $10 million to $11 million. This amount is
almost double the budget proposed by PEIEC in the third year of the Plan.
Although the Commission encourages PEIEC to consider programs that may
increase savings for subsequent EE&C plans, the Commission is satisfied that
the initial EE&C Plan reaches an appropriate balance between DSM measures
and affordability.
Synapse and interested members of
the public expressed concern over the lack of EE&C programs that are aimed
specifically at addressing peak load demand. The Commission shares these
concerns. As peak load is anticipated to grow annually, it is imperative
that steps are taken to reduce peak demand. The Commission directs PEIEC to
consider targeted programs that may reduce peak load as part of the DSM
Potential Study, and expects that such programs will form part of PEIEC's
subsequent EE&C plans.
The Commission recognizes that a
reduction in peak demand may require coordination and cooperation between
PEIEC, Maritime Electric, and Summerside Electric, and encourages PEIEC and
the utilities to begin working on EE&C programs that will reduce peak load
demand for inclusion in the next EE&C plan.
The evaluation of program
performance is an integral part of any EE&C plan. As this is the first
comprehensive EE&C plan to be implemented in the Province, it is critical
that a clearly defined evaluation framework be defined at the outset so that
program performance can monitored over the term of the Plan.
As noted by Synapse, performance
evaluation should be ongoing and should not be performed only at year-end.
As a result, the Commission directs PEIEC to develop a comprehensive
evaluation framework to be filed with the Commission on or before October
31, 2019. The evaluation framework should incorporate the recommendations
made by Synapse and, in particular, should:
-
track program performance on a quarterly and annual basis;
-
clearly define the financial costs and financial benefits by utility
and sector; and
-
establish processes and data collection mechanisms to understand who
is participating, including clearly defined units of participation (e.g. a
customer, an account, a measure installed, a rebate).
This list is not exhaustive.
In the event the evaluation
framework identifies programs that are not performing as expected, either in
terms of savings or participation, the Commission expects that PEIEC will
seek to address the issues during the term of the EE&C Plan. This may
include applying to the Commission to amend or modify the approved Plan to
ensure that customers receive benefits commensurate with their
contributions.
The Commission accepts the proposal
by PEIEC that it shall establish a rate rider for each of Maritime
Electric's rate classes and that the rate riders shall be set for the term
of the Plan. In the event a "true-up" is required for any of the rate
classes at the end of the term, it can be considered by the Commission as
part of subsequent EE&C plans.
The Commission directs that the rate
rider shall be included in the rates for electrical service charged by
Maritime Electric, and shall not be identified as a separate line item on
customers' bills. Although the Commission does not have jurisdiction over
Summerside Electric, it would encourage it to also follow this practice for
the reasons set out by Synapse.
Upon approval of the EE&C Plan,
PEIEC is required to report annually to the Commission. This requirement is
set forth in subsection 16.1(13) of the
Act, which provides:
After the approval of the energy
efficiency and demand-side resources plan of a public utility, the public
utility shall, within three months after the end of the public utility's
fiscal year in each calendar year or part of a calendar year occurring
during the term of the approved plan, prepare and submit to the Commission a
report for that calendar year, or part of a calendar year, as the case may
be, that contains such information respecting the implementation of the
plan, including the results achieved, as may be required by the Commission.
Synapse has developed a
comprehensive framework for triannual, annual and quarterly reporting. A
copy of the framework is attached as Appendix "A" to the Synapse report. The
Commission directs PEIEC to use the framework in preparing its annual report
to the Commission, and to include with its annual report all (or
substantially all) of the information suggested by Synapse.
Order