STATE OF VERMONT PUBLIC UTILITY COMMISSION Case No. 18-2867-INV Investigation into the regulation of energy efficiency utilities in the State of Vermont Order entered: 08/15/2018 ORDER OPENING INVESTIGATION I. Introduction Energy efficiency has been a focus of Vermont energy policy for decades. As articulated under Section 202a of Title 30, it is the general policy of the State to (1) encourage the efficient use of energy resources and cost-effective demand-side management, and (2) to identify and evaluate resources that will meet Vermont’s energy service needs in accordance with principles of least-cost integrated planning. 1 In today’s Order, we open an investigation to consider anew our regulation of Vermont’s energy efficiency programs and to evaluate whether such regulations should be updated to facilitate progress towards Vermont’s energy goals in a costeffective manner. II. Background In 1990, the Vermont Public Utility Commission 2 (“Commission”) determined that there was a large potential for cost-effective energy efficiency measures that could reduce electricity consumption in Vermont. Therefore, the Commission directed Vermont regulated electric and natural gas utilities to develop and implement comprehensive programs that would maximize the cost-effective acquisition of energy efficiency resources. 3 1 Pursuant to Section 218c, a “least-cost integrated plan” for a regulated electric or gas utility is a plan for meeting the public’s need for energy services, after safety concerns are addressed, at the lowest present-value lifecycle cost, including environmental and economic costs, through a strategy combining investments and expenditures on energy supply, transmission, and distribution capacity, transmission and distribution efficiency, and comprehensive energy efficiency programs. 2 Pursuant to Section 9 of Act 53 of the 2017 legislative session, the Vermont Public Service Board’s name was changed to the Vermont Public Utility Commission, effective July 1, 2017. For clarity, activities of the Vermont Public Service Board that occurred before the name change will be referred to in Commission documents as activities of the Commission unless that would be confusing in the specific context. 3 Investigation into least-cost investments, energy efficiency, conservation, and management of demand for energy, Docket 5270, Order of 4/19/90, Vol. IV. Case No. 18-2867-INV Page 2 In 1999, the Commission determined that a new approach to energy efficiency was needed for Vermont ratepayers to realize the maximum cost-effective savings associated with reduced energy consumption. Accordingly, the Commission approved the creation of energy efficiency utilities (“EEUs”) focused on maximizing cost-effective energy efficiency savings, independent of distribution utility control. The Commission concluded that the implementation of energy efficiency programs by an EEU would be more efficient and effective than implementation by individual regulated distribution utilities.4 The statewide EEU would be an independent entity unaffiliated with any of the state’s electric or gas utilities and would be under contract to the Commission. The administration of the statewide EEU contract was assigned to a contract administrator, and the funds to support the EEU activities – paid by ratepayers and collected by the distribution utilities – were to be managed by a fiscal agent. The initial focus of the EEU was to implement a set of “core” programs proposed by the Department of Public Service (“Department”) aimed primarily at acquiring “lost opportunity” savings. 5 The scope of the EEU program was increased in 2008 to support the delivery of energy efficiency services to Vermont heating and process fuel consumers. 6 Changes in Vermont law required that proceeds from the sale of credits under the Regional Greenhouse Gas Initiative (“RGGI”) cap and trade program and net revenues above costs associated with payments from the New England Independent System Operator for energy efficiency capacity savings would be used to fund the expanded scope of EEU services. In 2008, the Commission initiated a proceeding to consider a new EEU structure in which an EEU could operate pursuant to an order of appointment rather than under contract to the Commission.7 The Commission concluded that, based on the increased responsibilities assigned to the EEU since its creation and the experience gained by the Commission and other parties, additional benefit to Vermont ratepayers would be provided by moving to the order-ofappointment model. That model changed the relationship of the EEU with the Commission and other entities. In particular, the EEU moved from a three-year contract to a twelve-year 4 Investigation into the Department of Public Service’s proposed Energy Efficiency Plan, Docket 5980, Order of 1/19/99 at 44-53. 5 Docket 5980, Order of 9/30/99 at 7-8. 6 Act No. 92 (2007, Adj. Sess.). 7 Investigation into Petition Filed by Vermont Department of Public Service re: Energy Efficiency Utility Structure, Docket 7466, Order of 9/11/08. Case No. 18-2867-INV Page 3 appointment. The Commission concluded that the additional program stability provided under the order of appointment would better serve ratepayers. The Commission performed initial overall performance assessments (“IOPAs”) of the two incumbent EEUs – Vermont Energy Investment Corporation (“VEIC”) and the City of Burlington Electric Department (“BED”) 8 – and found that cause did not exist to unseat the incumbents. 9 Accordingly, the Commission issued orders of appointment to VEIC and BED and also issued a document entitled “Process and Administration of an Energy Efficiency Utility Order of Appointment” (the “P&A Document”) 10. Because the two EEUs would operate under orders of appointment and there would no longer be a contract administrator, the Commission reassigned the former contract administrator’s responsibilities to the EEUs, the Department, and to the Commission itself. 11 In 2010, the Commission initiated a proceeding to appoint a natural gas EEU to provide services to Vermont Gas Systems, Inc. (“VGS”) customers. The Commission performed an IOPA of VGS and determined to grant it an order of appointment. VGS has operated as the natural gas EEU since 2015. III. Discussion Nearly ten years have passed since the Commission initiated the EEU structure investigation, and nearly eight years have passed since the first orders of appointment and the first P&A Document were issued. Additional experience in the administration, implementation, and regulation of EEU programs in Vermont has been gained. Meanwhile, other third-party energy efficiency program administrator models have been adopted and evolved in other states and countries. By many measures the implementation of Vermont’s innovative EEU program has served Vermont’s ratepayers well. Vermont’s peak demands have changed, electricity loads are flat or declining, and new, highly efficient technologies have been introduced into the Vermont market. However, we will not rest on these past successes. Vermont has adopted meaningful laws, 8 VEIC operates as the statewide EEU doing business as Efficiency Vermont. BED operates as the EEU within its service territory. 9 Docket 7466, Order of 8/20/10. 10 The P&A Document is a comprehensive document that describes the entire EEU program structure. It sets forth the procedural and administrative framework for all EEU Orders of Appointment. 11 Docket 7466, Order of 10/6/10. Case No. 18-2867-INV Page 4 policies, and goals that are essential to reducing greenhouse-gas emissions, fossil fuel consumption, and associated climate impacts. Continued aggressive energy efficiency programs will be necessary to achieve Vermont’s goals. Accordingly, it is our goal, as has been the case since 1990, to achieve the maximum available cost-effective energy savings through investments in efficiency. IV. Conclusion We initiate this investigation to ensure that our regulation of the EEU program results in optimal program delivery and outcomes. We have attached to this Order a list of potential topics within the scope of this proceeding, and we invite comments on these topics as well as recommendations for additional topics. The scope of the proceeding is intentionally broad and yet focused on a singular goal: to ensure that Vermont’s programs are tuned to optimize energy efficient outcomes. This matter is assigned to Thomas Knauer, PUC Policy Director, who will serve as hearing officer in this case pursuant to 30 V.S.A. § 8. We direct the Hearing Officer to take comments, conduct workshops, and convene other proceedings as necessary. Interested persons and entities should file their comments and recommendations on topics within the scope of this proceeding, as well as recommendations for a sequence in which those topics should be addressed, by no later than August 31, 2018. The Hearing Officer will establish the scope and schedule for this investigation following the consideration of all recommendations filed by that date. This proceeding will be conducted in ePUC using case number 18-2867-INV. Participants are encouraged to submit their filings using ePUC, the Commission’s online document management system. Interested persons should contact the Clerk of the Commission at puc.clerk@vermont.gov to request to be added as a participant in this case. More information about ePUC is available at: https://epuc.vermont.gov/. SO ORDERED. Case Page 5 No. l8-2867-lNV 15th day of August, 2018 Dated at Montpelier, Vermont, this r Z. Roisman PusI-rc Urrlrrv ) ) Covttr¡lsstoN garet Cheney ,-.€a'r..ú ) ) ) OF VERMONT Sarah Opprc¡ oF THE CI-enr Filed: August 15, 2018 A Clerk of the Notice to Readers: This decision is subject to revision oftechnical errors. Readers are requested to notifu the Clerk of the Commission (by e-mail, telephone, or in wrìting) of any apparent errors, in order that any necessary corrections may be made. (E-mail addr es s : pltg" cl erh@v errftont. goJ) Case No. 18-2867-INV Page 6 Appendix A – Potential Topics for Proceeding 1. Fiscal Agent – Pursuant to Section I.3 of the P&A Document, the Fiscal Agent receives and disburses funds raised by the EEC and other revenues (such as RGGI and FCM). The roles and responsibilities related to the Fiscal Agent – including invoicing, remittances, reporting, and regulatory review – should be explored. 2. Demand Resources Plan Proceeding – the DRPP is a non-contested case proceeding that results in a set of long-term EEU-specific assumptions pursuant to which each EEU operates. Specifically, the DRPP is the process by which EEU budgets, modeled savings, and QPIs/MPRs are established. The DRPP process should be scrutinized, with alternative processes or ammendments to the current process considered. 3. Monitoring, savings verification, and evaluation – All aspects of these tasks should be appraised to ensure that they are meaningful, efficient, cost-effective, timely, and transparent. 4. Compensation and payment – All aspects of compensation and payment under Section IV of the P&A Document should be evaluated to ensure that they fit with the current order of appointment model. 5. Administration – Aspects of budgeting, financial management, reporting, and planning as discussed in Section V of the P&A Document should be considered. PUC Case No. 18-2867-INV - SERVICE LIST Parties: James Porter, Director of Public Advocacy Vermont Department of Public Service DPS-PA@vermont.gov Other Entities Receiving Notice: Docket 8817 e-mail list Vermont Electric Distribution Entities (for Vermont Department of Public Service)