Natural Gas Energy Efficiency Programs in the Regulatory and Policy Environment: The National Perspective

Transcription

1 Natural Gas Energy Efficiency Programs in the Regulatory and Policy Environment: The National Perspective Market Transformation Symposium Washington, DC March 30, 2009 Courtney K. Brown Public Policy Analyst

2 The American Gas Association, founded in 1918, represents 202 local energy companies that deliver clean natural gas throughout the United States. There are more than 70 million residential, commercial and industrial natural gas customers in the U.S., of which almost 93 percent more than 65 million customers receive their gas from AGA members. Today, natural gas meets almost one-fourth of the United States' energy needs. 1

3 Natural Gas: Clean, Abundant, Domestic, Efficient 2

4 Residential Natural Gas: Consumption vs. Number of Customers Average Total Natural Gas Residential Consumption Average Number of Households Served 6,000 5,000 4,926 4, Bcf per year 4,000 3,000 2,000 Millions of Households , Sources: U.S. Energy Information Administration and American Gas Association 3

5 U.S. Natural Gas Customers Lead in Reducing Greenhouse Gas Emissions Number of Households Tg CO 2 Emissions Sources: EIA, Gas Facts, EPA (Inventory of US Greenhouse Gas Emissions & Sinks ). 4

6 Declining Use per Natural Gas Residential Customer Since 1970 MCF per Year Sources: U.S. Energy Information Administration and American Gas Association Note: Data is weather normalized or adjusted to reduce the impact of abnormally warm or cold weather. 5

7 Natural Gas Utility Energy Efficiency Programs In the 2007 program year, gas utilities in the U.S. budgeted nearly $500 million for energy efficiency programs About a third ($163 million) was budgeted for residential programs Program budgets have more than doubled since 2006 Source: Nevius M, Krouk J, Griffith S, Lasky C, Reaching Higher: Annual Industry Report 2008, Consortium for Energy Efficiency,

8 Natural Gas Utility Energy Efficiency Programs Impacts of gas utility energy efficiency programs in 2007: 218 million therms saved Nearly 1.3 million tons of CO 2 prevented from being released into the atmosphere Source: Nevius M, Krouk J, Griffith S, Lasky C, Reaching Higher: Annual Industry Report 2008, Consortium for Energy Efficiency,

9 Traditional Rate Design Rate Designs Still Matter Have an inherent objective of increasing sales volumes Contain a disincentive for promoting energy efficiency and conservation Non-Volumetric and Decoupled Rate Designs Remove financial disincentives for utilities for selling less natural gas by breaking the link between distribution service cont recovery and energy usage of customers Enable recovery of lost margins and costs incurred from having energy efficiency programs 8

10 March 2008: States with Decoupled Natural Gas Utility Rates Approved revenue decoupling (14) Pending revenue decoupling (4) Source: AGA, February

11 March 2009: States with Decoupled Natural Gas Utility Rates Approved revenue decoupling (16) Pending revenue decoupling (5) Source: AGA, February

12 March 2009: States with Natural Gas Energy Efficiency Programs Allow earnings on energy efficiency Source: AGA, February

13 ARRA Funds for Energy Efficiency: an Opportunity and a Challenge Weatherization Assistance Programs Funding increase from $227 million to $5 billion State Energy Conservation Block Grants Authorized in EPACT 2007, but not appropriated ARRA appropriates $3.2 billion State Energy Programs (SEP) Increase from $44 million to $3.1 billion Funding for state energy efficiency programs if governor gives written assurance that state will: 1) Consider decoupling utility rates 2) Adopt modern building codes for new buildings; and 3) Prioritize grants to existing state and utility programs 12

14 Decoupling in ARRA SEC ADDITIONAL STATE ENERGY GRANTS. (a) IN GENERAL. Amounts appropriated under the heading Department of Energy Energy Programs Energy Efficiency and Renewable Energy in this title shall be available to the Secretary of Energy for making additional grants under part D of title III of the Energy Policy and Conservation Act (42 U.S.C et seq.). The Secretary shall make grants under this section in excess of the base allocation established for a State under regulations issued pursuant to the authorization provided in section 365(f) of such Act only if the governor of the recipient State notifies the Secretary of Energy in writing that the governor has obtained necessary assurances the following will occur: (1) The applicable State regulatory authority will seek to implement, in appropriate proceedings for each electric and gas utility, with respect to which the State regulatory authority has ratemaking authority, a general policy that ensures that utility financial incentives are aligned with helping their customers use energy more efficiently and that provide timely cost recovery and a timely earnings opportunity for utilities associated with cost-effective measurable and verifiable efficiency savings, in a way that sustains or enhances utility customers incentives to use energy more efficiently. 13

15 Decoupling in ARRA What does this mean? a general policy that ensures that utility financial incentives are aligned with helping their customers use energy more efficiently and that provide timely cost recovery and a timely earnings opportunity for utilities associated with cost-effective measurable and verifiable efficiency savings, in a way that sustains or enhances utility customers incentives to use energy more efficiently. = decoupling or non-volumetric rate design A carrot, not a stick 14

16 Other Energy Efficiency in ARRA $30 billion for energy efficiency, smart grid, and battery research $20 billion in tax incentives for renewable energy and energy efficiency $3.4 billion for R&D for carbon capture and sequestration $5 billion for weatherization $5 billion for federal building efficiency $4 billion for energy efficiency for federally funded homes $3 billion in basic research $3.4 billion for fossil fuel R&D $11 billion for smart grid $6.3 billion for energy efficiency grants 15

17 In the Future Natural gas has a trend to build on Large potential from stimulus funds exists, but will require changes in the way utilities operate their energy efficiency programs and strengthening partnerships with local and state governments. Climate change legislation is coming consequences of residential customers being included under the cap Increased interaction of regulators, state and local actors, businesses Increased consideration of fuel-type interchangeability Increased attention to aligning utility financial incentives with efficiency priorities 16

18 Courtney is the Public Policy Analyst for Regulatory Affairs at the American Gas Association (AGA). She has responsibility for developing AGA outrea AGA, Courtney was a graduate student and research assistant at Georgetown Public Policy Institute, and served as editor for the Institute s academ Relations from the University of Wisconsin-Madison. Courtney Brown Public Policy Analyst, Regulatory Affairs cbrown@aga.org The American Gas Association, founded in 1918, represents 202 local energy companies that deliver clean natural gas throughout the United States. There are more than 70 million residential, commercial and industrial natural gas customers in the U.S., of which almost 93 percent more than 65 million customers receive their gas from AGA members. Today, natural gas meets almost one-fourth of the United States' energy needs.