F L O R I D A P U B L I C S E R V I C E C O M M I S S I O N

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1 F L O R I D A P U B L I C S E R V I C E C O M M I S S I O N FEECA Annual Report on Activities Pursuant to the Florida Energy Efficiency and Conservation Act As Required by Sections (10), and (2)(f), and , Florida Statutes D E C E M B E R

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3 Florida Public Service Commission Annual Report on Activities Pursuant to the Florida Energy Efficiency and Conservation Act As Required by Sections (10), (2)(f), and , Florida Statutes December 2017

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5 Table of Contents Tables and Figures... iii List of Acronyms... v Executive Summary... 1 Section 1. Florida Energy Efficiency and Conservation Act FEECA History and Implementation FEECA s Influence on the Florida Energy Market Recovery of Conservation Expenditures... 9 Section 2. DSM Goal Setting DSM Programs Cost-Effectiveness and Energy Savings Summary of the 2014 DSM Goal Setting Effect of Efficiency Standards on FEECA Utility DSM Programs Section 3. FEECA Utility Goal Achievements Assessing Goal Achievement Low-Income Programs Investor-Owned Utility Research & Development Programs Section 4. Conservation Cost Recovery Electric IOU Cost Recovery Natural Gas Cost Recovery Section 5. Educating Florida s Consumers on Conservation Commission Consumer Education Outreach Related Websites Appendix 1. FEECA Utilities Conservation Programs Appendix 2. FEECA Utilities Conservation Program Descriptions i

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7 Tables and Figures Tables 1. Energy Sales by Florida's FEECA Utilities in Florida's Electric Customers by Class and Consumption in Estimated Cumulative DSM Savings Since Summary of Cost-Effectiveness Methodologies Commission-Approved DSM Goals DSM Goals Compared to Annual (2016) Achievements DSM Expenditures Recovered by IOUs Residential Energy Conservation Cost Recovery Factors in DSM Expenditures Recovered by LDCs Residential Natural Gas Conservation Cost Recovery Factors for Figures 1. Typical Florida Daily Electric Load Shapes Annual DSM Expenditures Recovered by IOUs Annual DSM Expenditures Recovered by LDCs iii

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9 List of Acronyms C/I Commission or FPSC DEF DOE DSM ECCR F.A.C. FEECA FPL FPUC FRCC F.S. GWh Gulf HVAC IOU kwh LDC Load MW MWh OUC O&M RIM TECO TRC Commercial and Industrial (Customers) Florida Public Service Commission Duke Energy Florida, LLC U.S. Department of Energy Demand-Side Management Energy Conservation Cost Recovery Clause Florida Administrative Code Florida Energy Efficiency and Conservation Act Florida Power & Light Company Florida Public Utilities Company Florida Reliability Coordinating Council Florida Statutes Gigawatt-Hour Gulf Power Company Heating, Ventilation and Air Conditioning Investor-owned Utility Kilowatt-Hour Natural Gas Local Distribution Company Demand for Electricity Megawatt Megawatt-Hour Orlando Utilities Commission Operations and Maintenance Rate Impact Measure Test Tampa Electric Company Total Resource Cost Test v

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11 Executive Summary Purpose Reducing the growth of Florida s peak electric demand and energy consumption became a statutory objective in 1980, with the enactment of the Florida Energy Efficiency and Conservation Act (FEECA). The Florida Energy Efficiency and Conservation Act emphasizes four key areas: reducing the growth rates of weather-sensitive peak demand and electricity usage, increasing the efficiency of the production and use of electricity and natural gas, encouraging demand-side renewable energy systems, and conserving expensive resources, particularly petroleum fuels. Section (2), F.S., requires the Florida Public Service Commission (FPSC or Commission) to establish goals over a ten year period for the FEECA utilities, and a reevaluation review every five years. The utilities are required to develop and submit to the Commission for approval, cost-effective demand-side management (DSM) plans to achieve these goals. The Commission is required by Section (10), F.S., to provide an annual report to the Florida Legislature and the Governor summarizing the adopted goals and the progress made toward achieving these goals. Similarly, Section (2)(f), F.S., requires the Commission to file information on electricity and natural gas energy conservation programs with the Department of Agriculture and Consumer Services. Pursuant to Section (10), F.S., this report on conservation results achieved by the FEECA utilities is due to the Florida Legislature and Governor by March 1, This report reviews the 2016 annual goal results for each of the seven FEECA electric utilities and fulfills these statutory obligations. The seven electric utilities currently subject to FEECA are: Five Florida Investor-owned utilities (IOUs), ranked in order of sales o Florida Power & Light Company (FPL) o Duke Energy Florida, LLC (DEF) o Tampa Electric Company (TECO) o Gulf Power Company (Gulf) o Florida Public Utilities Company (FPUC) Two municipal utilities, ranked in order of sales o JEA o Orlando Utilities Commission (OUC) The Commission regulates the electric rates and energy conservation cost recovery of the five IOUs. In contrast, the Commission does not regulate the rates or conservation program costs of the two municipal utilities for which it sets DSM goals. Report Layout This report presents the FEECA utilities progress towards achieving the Commissionestablished goals and the Commission s efforts in overseeing these conservation initiatives. This report details these efforts through the following five sections and appendices: 1

12 Section 1 provides a brief history of FEECA, and a description of existing tools for increasing conservation throughout the State of Florida. Section 2 discusses the most recent Commission-established goals set for the FEECA utilities. Section 3 reviews the utilities goal achievements and progress towards Low-Income and Research and Development programs. Section 4 provides an overview of the associated program costs recovered through the Energy Conservation Cost Recovery Clause for Section 5 discusses methods the Commission has used to educate consumers about conservation during the prior period, including a list of related web sites. Appendices 1 and 2 provide a list of the currently-offered conservation programs and a description of each program s purpose. Goal Setting Process for the Current Period On November 25, 2014, the Commission approved winter and summer peak demand and annual energy savings goals for the seven FEECA electric utilities beginning in 2015 through The approved goals were based on the Rate Impact Measure (RIM) cost-effectiveness test. This test was used to ensure that all ratepayers benefit from energy efficiency programs due to downward pressure on electric rates. The Commission identified fewer cost-effective energy efficiency programs as a result of more stringent building codes and appliance efficiency standards. The higher the current efficiency standards and codes, the less opportunity there is for utilitysponsored programs to be cost-effective. Additionally, reduced utility avoided costs resulting from relatively low natural gas prices have contributed to fewer programs being cost-effective. For these reasons, the 2014 approved DSM goals for the FEECA utilities were lower than the Commission-approved goals in The 2014 goal setting process is discussed further in Section 2. The November 2014 hearing also resulted in the Commission mandating, in its 2014 Goals Order, that a focus be placed on energy efficiency for low-income consumers. The Commission ordered When the FEECA utilities file their DSM implementation plans, each plan should address how the utilities will assist and educate their low-income customers, specifically with respect to the measures with a two-year or less payback. 1 Further discussion of the utilities low-income programs can be found in Section 3. Following the Commission s establishment of the goals in late 2014, the FEECA utilities filed DSM plans designed to meet the Commission s goals. In mid 2015, the Commission approved each DSM plan. Subsequently, in late 2015, the utilities filed program standards which provide details on how each program will be administered. At the end of 2015, the Commission approved 1 Order No. PSC FOF-EU, Docket Nos EI through EI, In re: Commission review of numeric conservation goals, issued December 16,

13 the program standards, and the utilities implemented the new programs in late 2015 and early This report covers the first full year of the conservation programs in the utilities 2015 DSM plans Achievements and Related Program Costs Since FEECA s inception, it is estimated that DSM programs offered by FEECA utilities have reduced summer peak demand by 7,813 megawatts (MW) and winter peak demand by 7,224 MW. In 2016, all of the FEECA utilities met the Commission s Annual goal of total reduction, with four utilities meeting the Commission s energy and demand savings goals for the residential and commercial/industrial (C/I) customer classes. Florida s FEECA electric utilities also performed over 190 thousand residential and commercial energy audits/evaluations and offered 110 residential and commercial programs focused on energy conservation. 2 Additional detail on each utility s performance is described in Section 3. The Commission has authority by statute to allow investor-owned utilities to recover prudently incurred costs related to conservation. 3 The Commission has implemented this authority through the Energy Conservation Cost Recovery (ECCR) clause. The ECCR clause has been in existence since For 2016, Florida s investor-owned electric utilities recovered approximately $317 million in conservation program expenditures. Conclusion The potential demand and energy savings from utility-sponsored DSM programs are affected by consumer education and behavior, building codes, and appliance efficiency standards. Consumer actions to implement energy efficiency measures outside of utility programs, as well as codes and efficiency standards, create a baseline for a new program s cost-effectiveness and reduce the potential incremental electric demand and energy savings available from DSM programs. Utilities design DSM programs to encourage conservation that exceeds levels set by current building codes and minimum efficiency standards. The level of savings from these types of programs is uncertain because it requires voluntary participation and in some cases changes in customer behavior. Because all customers pay for the utility conservation programs as a portion of their monthly utility bills, the Commission focuses on ensuring that all customers benefit from utility-sponsored DSM programs. Overall, reducing Florida s electric demand and energy usage relies on customer education, and participation in, utility DSM programs, along with each individual s efforts to save electricity. Conservation and renewable energy will continue to play an important role in Florida s energy future. The Commission is continuing its efforts to encourage cost-effective conservation that defers the need for new generating capacity and reduces the use of fuel. These initiatives support a balanced mix of resources that reliably and cost-effectively meet the needs of Florida s ratepayers FEECA utility demand-side management annual reports. 3 Section (11), F.S. 3

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15 Section 1. Florida Energy Efficiency and Conservation Act 1.1 FEECA History and Implementation The Florida Energy Efficiency and Conservation Act (FEECA), emphasizes four key areas: reducing the growth rates of weather-sensitive peak demand and electricity usage, increasing the efficiency of electricity and natural gas production and use, encouraging demand-side renewable energy systems, and conserving expensive resources, particularly petroleum fuels. Pursuant to FEECA, the Commission is required to establish conservation goals and the FEECA utilities must develop demand-side management (DSM) programs to meet these goals. Originally, all electric utilities in Florida were subject to FEECA. In 1989, changes were made to the law limiting the requirement to electric utilities with more than 500 gigawatt-hours (GWh) of annual retail sales. At that time, 12 Florida utilities met this threshold requirement and their combined sales accounted for 94 percent of Florida s retail electricity sales. An additional change to the law encouraged cogeneration projects. In 1996, the Florida Legislature raised the minimum retail sales threshold for subject utilities to 2,000 GWh. Retail sales for FEECA utilities were measured as of July 1, 1993, and two municipal utilities met the threshold of the new law: JEA and OUC. In addition to these two utilities, all five Florida investor-owned electric utilities must comply with FEECA regardless of sales levels. No rural electric cooperatives are currently subject to FEECA. Table 1 lists the seven FEECA utilities, reflects the 2016 retail electricity sales, and the percentage of total electricity sales by each utility. The table also includes the total energy sales for all non-feeca utilities. Currently, the seven electric utilities that are subject to FEECA account for approximately 83.9 percent of all Florida energy sales. Table 1 Energy Sales by Florida's FEECA Utilities in 2016 Florida's FEECA Utilities Energy Sales GWh Percent of Total Energy Sales Florida Power & Light Company 109, % Duke Energy Florida, LLC 38, % Tampa Electric Company 19, % JEA 12, % Gulf Power Company 11, % Orlando Utilities Commission 6, % Florida Public Utilities Company % FEECA Utilities Total 198, % Non-FEECA Utilities Total 37, % Total Statewide Energy Sales 236, % Source: Commission's "Statistics of the Florida Electric Utility Industry" (Table 26) published in October

16 Section (2), F.S., requires the Commission to set demand-side management (DSM) goals at least every five years for the seven electric utilities subject to FEECA. The Commission sets goals with respect to summer and winter electric peak demand and annual energy savings over a ten-year period, with a re-evaluation review every five years. Once goals are established, the seven FEECA utilities must submit, for Commission approval, DSM plans containing costeffective programs intended to meet the goals. In 2008, the Florida Legislature amended the FEECA statute, placing upon the Commission additional responsibilities when adopting conservation goals. These responsibilities included the consideration of the benefits and costs to program participants and ratepayers as a whole, as well as the need for energy efficiency incentives for customers and utilities. The Commission must also consider any costs imposed by state and federal regulations on greenhouse gas emissions. The FEECA statute also allows the Commission to provide appropriate financial rewards and penalties to the utilities over which it has rate-setting authority. Additionally, the Commission has the authority to allow an IOU to receive an additional return on equity of up to 50 basis points for exceeding 20 percent of its annual load growth through energy efficiency and conservation measures. To date, the Commission has not awarded financial rewards or assessed penalties for IOUs through FEECA. 1.2 FEECA s Influence on the Florida Energy Market FEECA s mission is important to Florida s overall energy market. Florida s total electric consumption ranks among the highest in the country due to its sizeable population and climateinduced demand for cooling. When compared to the rest of the country, Florida s energy market is unique. The distinction is largely due to the state s climate, high proportion of residential customers, and the reliance on electricity for heating and cooling. Florida is typically a summer-peaking state. On a typical summer day, the statewide demand for electricity can increase from roughly 15,000 MW to nearly 30,000 MW over the span of hours. 4 Additionally, 88 percent of Florida s electricity customers are residential, consuming approximately 52 percent of the electrical energy produced. In contrast, nationally residential customers account for only 36 percent of total electric sales, while commercial customers represent 35 percent of electric consumption and industrial customers represent 26 percent. 5 The remaining 3 percent of national electric consumption is direct use. Table 2 shows the makeup of Florida s Electric Customers by Class and Consumption. 4 Ten-Year Site Plan responses provided to the Commission by the IOUs in the 2015 first Data Request. 5 Retail sales of electricity to ultimate consumers, annual, by sector by provider. 6

17 Table 2 Florida's Electric Customers by Class and Consumption in 2016 Customer Number of Percent of Energy Sales Percent of Sales Class Customers Customers (GWh) Residential 9,197, % 123, % Commercial 1,134, % 85, % Industrial 28, % 20, % Other* 134, % 6, % Total 10,494, % 236, % *Street and highway lighting, sales to public authorities, and interdepartmental sales. Source: Commission's "Statistics of the Florida Electric Utility Industry" (Table 26) published in October Figure 1 shows the daily load curves for a typical Florida summer and winter day. In the summer, air-conditioning demand starts to increase in the morning and peaks in the early evening; a pattern which aligns with the sun s heating of buildings. In comparison, the winter load curve has two peaks the largest in mid-morning, followed by a smaller peak in the late evening which correspond to heating loads. Figure 1 Typical Florida Daily Electric Load Shapes 100% Average Hourly Demand as Percent of Seasonal Peak 95% 90% 85% 80% 75% 70% 65% 60% Summer Winter 55% 50% Hour Source: Ten-Year Site Plan responses provided to the Commission by the IOUs in the 2015 first Data Request Residential load patterns are rapidly shifting and have high peaks to trough variation. In contrast, commercial or industrial loads demonstrate more consistency throughout the 24 hour day and experience fewer spikes in demand. 7

18 Utilities dispatch additional generating capacity throughout the day to follow the customer load patterns. Peaking generating units, which are dispatched during high peak demand periods of the day, are less fuel efficient than baseload or intermediate generating units. Utility demand-side management programs play a role in reducing energy usage and shifting peak demand; and therefore reduce the need to dispatch relatively fuel inefficient generating units. 6 Over time, the need for additional generating capacity has grown in Florida, in large part due to population growth. In addition to providing fuel savings at existing generating units, utility-sponsored demand-side management programs and conservation efforts by individual consumers can avoid or defer the need for new electric generating capacity. In order to meet FEECA requirements, the Commission and utilities must ensure that the demand-side management programs created to reap the benefits of reduced fuel usage and deferred generating capacity are cost-effective, i.e. less costly than generation. The Commission s methodologies to determine the cost-effectiveness of demand-side management programs are explained in detail in Section 2.1. FEECA has been successful in reducing the growth rates of weather sensitive peak electric demand and conserving expensive fuel resources. Since its inception, FEECA utility-sponsored DSM programs have cumulatively saved 7,813 MW of summer peak demand and 7,224 MW of winter peak demand, referenced in Table 3. This reduction in peak demand has helped offset the use of peaking units that rely on expensive fuel sources and deferred new generating capacity. In 2016, FEECA DSM programs saved over 674 gigawatt-hours (GWh), enough electricity to power approximately 49,000 homes for a year. 7 In addition, some FEECA utilities have also implemented programs, such as community solar, which allows customers to voluntarily participate in the development of solar generation and other renewable options. Table 3 Estimated Cumulative DSM Savings Since 1980 Savings Summer Peak Demand 7,813 MW Winter Peak Demand 7,224 MW Annual Energy Reduction 10,694 GWh Source: Florida Reliability Coordinating Council Load and Resource Plan 2017, S-3, S-4, S-5. Currently, the FEECA utilities provide in total, 110 programs for residential, commercial, and industrial customers. Programs focus on either reducing energy use at a given moment, which shifts/reduces demand, or toward reducing overall energy consumption over a period of time. Utility-sponsored DSM programs are an important means of achieving demand and energy savings and these programs are designed to encourage customer conservation efforts. 6 Electric generating units typically are categorized as baseload, intermediate, or peaking. Aside from planned and forced outages, baseload units are scheduled to operate continuously. Intermediate units generate power to follow load for periods of time, but are not planned to operate nonstop. Peaking units supplement baseload and intermediate power, operating during high-demand, or peak, periods. 7 Average Florida annual household kwh use is 13,692 kwh. Data from forms EIA-861-schedules 4A-D, EIA-861S and EIA-861U. 8

19 Additionally, home and business energy audits, required by Section (11), F.S., serve as an avenue to identify and evaluate conservation opportunities for customers and identify opportunities to implement many DSM and conservation programs. During 2016, Florida s FEECA utilities performed more than 181,800 residential audits. Though FEECA does not require commercial energy audits, Florida s FEECA utilities also performed more than 14,300 commercial energy audits in Recovery of Conservation Expenditures Administrative costs, equipment, and incentive payments are all costs of implementing a DSM program. The IOUs are allowed by Florida Statute to recoup prudent and reasonable expenses for DSM programs approved by the Commission through the Energy Conservation Cost Recovery (ECCR) clause, established by Commission Rule , F.A.C. Before attempting to recover costs through the ECCR clause, a utility must prove its DSM programs are cost-effective. Utilities must have Commission approval for any program modifications prior to seeking cost recovery. Commission Rule , F.A.C., also permits natural gas distribution companies to seek recovery for costs related to Commission-approved conservation programs. Even though natural gas local distribution companies (LDCs) offer conservation programs to their residential and commercial customers, the Commission does not currently set conservation goals for LDCs. Natural gas conservation programs have historically focused on providing rebates to residential customers that support the replacement of less efficient appliances with new, energy efficient gas appliances. However, many LDCs have recently expanded their rebate programs to commercial customers. 8 Each year, the Commission conducts financial audits of these expenses for both the electric IOUs and LDCs. A full evidentiary hearing is held annually to determine the following year s conservation cost recovery factor to be applied to customer bills. The 2018 conservation cost recovery factors are discussed further in Section 4. 8 Order No. PSC PAA-EG, Docket EG, In re: Petition for approval of natural gas energy conservation programs for commercial customers, by Associated Gas Distributors of Florida, issued January 14,

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21 Section 2. DSM Goal Setting 2.1 DSM Programs Cost-Effectiveness and Energy Savings Section , F.S., requires utility conservation programs to be cost-effective. This statutory requirement is codified in Rule , F.A.C. The rule identifies the cost-effectiveness methodologies to be used and requires that utilities provide cost and benefit information to the Commission when requesting to add or make changes or additions to an existing program. The Commission requires that utilities measure cost-effectiveness from three perspectives, the program participant, the utility s ratepayers, and society s overall cost for energy services. The Participants Test, the Rate Impact Measure (RIM) test, and the Total Resource Cost (TRC) test capture these viewpoints. FEECA utilities are required to provide cost benefit analysis using the three tests when seeking to add or make changes to an existing program. Table 4 summarizes the costs and benefits considered in the three Commission-approved cost-effectiveness methodologies. Table 4 Summary of Cost-Effectiveness Methodologies Participants RIM TRC Benefits Bill Reduction X Incentives Received X Avoided Generation (Capital and O&M) X X Avoided Transmission (Capital and O&M) X X Fuel savings X X Costs Program Costs X X Incentives Paid X Lost Revenues X Participant's Costs (Capital and O&M) X X Participants Test The Participants Test analyzes costs and benefits from a program participant s point of view and ignores the impact on the utility and other ratepayers not participating in the program. The Participants Test includes the up-front costs customers pay for equipment and costs to maintain this equipment. Benefits considered in the test include the incentives paid by utilities to the customers and the reduction in customer bills. Failure to demonstrate cost-effectiveness under this test would infer that rational customers would not elect to participate in this program. 11

22 Rate Impact Measure Test (RIM) The RIM test is designed to ensure that all ratepayers, not just the program s participants, will benefit from a proposed DSM program. The RIM test includes the costs associated with incentive payments to participating customers and decreased revenues to the utility. DSM programs can reduce utility revenues due to reduced kwh sales and reduced demand. The decreased utility revenues typically are recovered from the general body of ratepayers at the time of a rate case. A DSM program that passes the RIM test ensures that all customer rates are lower than rates would be without the DSM program. Total Resource Cost Test (TRC) The TRC test measures the overall economic efficiency of a DSM program from a social perspective. This test measures the net costs of a DSM program based on its total costs, including both the participants and the utility s costs. Unlike the RIM test, customer incentives and decreased utility revenues are not included as costs in the TRC test. Instead, these factors are treated as transfer payments among ratepayers. Moreover, if appropriate, certain external costs and benefits such as environmental impacts may be taken into account. Because incentives and foregone revenues are not treated as costs, electric rates for all customers tend to be higher for programs implemented solely using the TRC test to judge cost-effectiveness. Ensuring Cost-Effectiveness Ensuring utility-sponsored DSM programs remain cost-effective benefits the general body of electric ratepayers. These programs can reduce costs to ratepayers by postponing capital expenditures such as future power plant construction, and reducing current electrical generation costs, including fuel and variable operating and maintenance costs. DSM programs can also benefit customers by improving reliability. When IOUs determine that their programs are no longer cost-effective, the utilities must petition the Commission for modification or discontinuation of the program. In many instances, programs may need to be modified due to the adoption of a more stringent appliance efficiency standard or building code. In contrast, if new efficiency measures become available that are cost-effective, the utility may petition the Commission for approval of a new program. 2.2 Summary of the 2014 DSM Goal Setting The Commission set a schedule in 2013 to establish goals for FEECA utilities by December This action fulfilled the statutory requirement that DSM goals must be reviewed at least every five years. Subsequently, both FPUC and OUC independently filed petitions to use proxy methodologies to establish their goals and be excused from participating in the goals hearing. These utilities stated that costs associated with updating the 2009 Technical Potential Study, performing the subsequent analysis required by the Order Establishing Procedure, and testifying in support of the analysis would represent a hardship to the companies and their ratepayers due to each company s small size. On August 4, 2013, the Commission approved FPUC and OUC s request and excused them from participating in the goals hearing. 9 9 Order No.PSC PAA-EU, Docket Nos EM and EI, issued December 4,

23 On July 21 and July 22, 2014, the Commission heard evidence from the remaining FEECA utilities, FPL, DEF, TECO, Gulf, JEA, and intervenors regarding the proposed DSM goals. Throughout the proceeding there were discussions regarding the FEECA utilities numerical goals, payback/subsidization, consumer education, and solar initiatives. During the goal setting process, the Commission also considered the costs and benefits of conservation programs. Costs are recovered from the general body of ratepayers, and affect both participant and nonparticipant customers. The Commission reviewed the results of all three required cost-effectiveness tests during the hearing. Based on evidence from the DSM goals setting proceeding, on November 25, 2014, the Commission voted to approve goals based on a RIM cost-effectiveness analysis. By using the RIM test to establish goals, the Commission addressed concerns regarding subsidies between individuals who participate in DSM programs and those who do not, and ensured rates would remain the same or lower and that cross subsidies would be minimized. In addition to setting goals, the Commission also voted to allow the IOUs five-year solar pilot programs to end on December 31, The Commission based its decision on evidence in the record that the existing solar pilot programs were not cost-effective and represented a subsidy between the general body of ratepayers and the limited participants in the programs. The Commission also directed each utility to demonstrate in its DSM plan how it would make all customers, in particular low-income customers, aware of energy efficiency opportunities and utility programs. Established Goals The Commission issued the DSM Final Order, Order No. PSC FOF-EU, on December 16, The utilities subsequently filed DSM plans in March 2015 in accordance with Section (7), F.S., to meet the newly set goals. The Commission reviewed and approved the utilities DSM plans in August Around the same time, the FEECA utilities submitted for approval their program standards providing detailed descriptions on the administrative approaches for each DSM program. Beginning in late 2015, the FEECA utilities started to phase out old programs and began implementing the modifications needed to reflect the approved DSM plans. This report covers the first full year of the utilities new DSM plans. Table 5 shows each utility s Commission-approved summer demand, winter demand, and annual energy reduction goals for , established in Order No. PSC FOF-EU. 10 A list of all programs and descriptions provided by FEECA utilities can be found in Appendices 1 and 2 of this report. 10 Order No. PSC FOF-EU, Docket Nos EI through EI, In re: Commission review of numeric conservation goals, issued December 16,

24 Electric Utility Table 5 Commission-Approved DSM Goals Summer Demand Goals (MW) Winter Demand Goals (MW) Annual Energy Goals (GWh) FPL DEF TECO Gulf FPUC OUC JEA Total Source: Order No. PSC FOF-EU. 2.3 Effect of Efficiency Standards on FEECA Utility DSM Programs Federal efficiency standards and state building codes establish a baseline in assessing the costeffectiveness of a potential DSM program. Currently, Florida utility DSM programs offer rebates and incentives for appliances that exceed federally established minimum efficiency standards. However, increases in federal efficiency standards, independent conservation efforts by consumers, and general conservation practices make it more challenging for utilities to achieve demand and energy savings through DSM programs. Moreover, participation rates in the utility programs are driven by the anticipated payback to the participating customer. While utility incentives tend to increase customers take rate in conservation programs, electric rates are also a contributing factor in customers decisions to invest in a more efficient appliance. Thus, low or declining electric prices tend to reduce customer energy efficiency investments. This makes it crucial that the FEECA utilities frequently evaluate conservation programs to ensure that they remain cost-effective. Since 2009, the cost-effectiveness of DSM measures has declined due to several factors outside of FEECA utilities control. First, new federal efficiency standards and state building codes have become more stringent over time. These higher standards and codes decrease the number of costeffective DSM measures that can be offered by the electric utilities. Second, natural gas is the primary fuel source for electricity generation in Florida. The average price of natural gas fell from $8.86/MMBtu in 2008 to $3.73/MMBtu in 2013, the most recent full year before the Commission established the DSM goals. 11 In turn, lower natural gas prices reduced utility avoided costs. 12 Lower fuel prices can impact customer participation in utility-sponsored DSM programs due to reduced monthly electric bills. As a result, customers could have less of an incentive to implement energy efficiency measures. 11 EIA Henry Hub Natural Gas Spot Price Annual Average 12 Current gas prices have remained low at $2.52/MMBtu in

25 State Building Code At the state level, the Florida Building Code is amended annually to incorporate interpretations and clarifications as well as to update efficiency standards. The Florida Building Commission updates the Florida Building Code with relevant new standards every three years. In 2017, the Florida Building Code was updated. Commission staff is evaluating these changes in relation to conservation initiatives. Federal Government Standards At the federal government, the U.S. Department of Energy s (DOE) Building Technologies Office establishes minimum energy efficiency standards for more than 60 categories of appliances and other equipment. 13 According DOE, Products covered by standards represent about 90 percent of home energy use, 60 percent of commercial building use, and 30 percent of industrial energy use. 14 The DOE traditionally provides to Congress a semi-annual update on modification to energy efficiency standards. Staff has confirmed that no updates to Congress have occurred since the prior report. Staff will continue to monitor future developments in this area. Further details can be found on the DOE Office of Energy Efficiency and Renewable Energy s buildings reports website at 13 Pursuant to Section , F.S., the Commission must report the effectiveness of state energy conservation standards established by Sections , F.S. Florida s appliance efficiency standards are mandatory efficiency improvements but have not been updated since 1993, and therefore have likely been superseded by more recent federal efficiency standards

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27 Section 3. FEECA Utility Goal Achievements 3.1 Assessing Goal Achievement Commission rules require separate goals be set for residential and commercial/industrial (C/I) customers, assigning context to measuring goal achievement within these two primary customer categories. Each utility s achievements in these categories are also combined and compared against total goals; the value of a system s demand and energy savings has no relation to the sector C/I or residential in which the savings occur. Each FEECA utility must file an annual report pursuant to Rule , F.A.C., which summarizes demand savings, energy savings, and customer participation rates for each approved program. The report also includes the residential, C/I, and total energy efficiency achievements compared to the approved DSM goals. Each of the utility s 2016 DSM annual reports and prior year reports can be found on the Commission s website: Monitoring annual goal achievements enables the Commission to evaluate the effectiveness of each utility s programs. In addition to reviewing the utilities annual DSM reports, staff may request additional information from the FEECA utilities on their demand and energy saving achievements. Staff s data requests can, for example, seek explanations of factors preventing the utilities from achieving projected participation levels. Each utility s DSM performance in 2016 is discussed below. The 2016 utility achievements have been compared to the 2015 goals established by the Commission in November Table 6 provides a breakdown of each utility s goal achievements for the period. FPL FPL met its 2016 total goals and all individual customer class goals. DEF Overall, DEF met all of its 2016 total goals and all but one of its individual customer class goals. DEF was below its Residential Winter MW goal; achieving 98 percent of the goal. DEF stated the shortfall was due to redirected resources from the Residential Demand Response program toward storm restoration activities, lower than projected eligibility in the Neighborhood Energy Saver program, and from Low-Income Weatherization Assistance Program partners receiving lower funding from the Department of Energy. DEF plans to make necessary adjustments to ensure reaching their DSM Goals. TECO TECO met its 2016 total goals and all individual customer class goals. Gulf Overall, Gulf met its 2016 total goals; however, it did not meet any of its C/I individual customer class goals. Gulf achieved 20 percent of its C/I Winter MW goal, 68 percent of its C/I Summer MW goal, and 49 percent of its C/I Annual GWh reduction goal. When asked about the company s low C/I performance, Gulf stated that low incentive levels are the primary driver. In order to prevent impairing program cost-effectiveness, Gulf is considering other methods to increase customer participation and awareness of their DSM programs. 17

28 Table 6 DSM Goals Compared to Annual (2016) Achievements Utility Winter (MW) Summer (MW) Annual (GWh) Goals Achieved Reduction Goals Achieved Reduction Goals Achieved Reduction FPL Residential Commercial/Industrial Total DEF Residential Commercial/Industrial Total TECO Residential Commercial/Industrial Total Gulf Residential Commercial/Industrial Total FPUC Residential Commercial/Industrial Total JEA Residential Commercial/Industrial Total OUC Residential Commercial/Industrial Total Note: Bold numbers indicate the utility did not meet its annual goals within that category. Source: FEECA utility demand-side management annual reports. FPUC FPUC met its 2016 total goals and all individual customer class goals. 18

29 JEA Overall, JEA met its 2016 total goals and residential customer class goals. However, for the C/I customer class, JEA achieved 63 percent of its Summer MW goal. JEA attributed this to a lower than anticipated participation in the commercial solar net metering program. OUC OUC met its 2016 total goals and all individual customer class goals. 3.2 Low-Income Programs The 2014 Commission DSM Goals Order states When the FEECA utilities file their DSM implementation plans, each plan should address how the utilities will assist and educate their low-income customers, specifically with respect to the measures with a two-year or less payback. 15 In accordance with this order, each FEECA utility has implemented programs within its DSM plan that address low-income conservation efforts. Low income customer participation in energy conservation programs furthers the intent of FEECA by encouraging potential demand and energy reduction in the State of Florida. Customers that participate in these programs benefit through increased knowledge of conservation opportunities, and through rebates on energy saving equipment, resulting in potential bill saving. These programs mainly focus on efforts to provide weatherization opportunities and the installation of energy efficient appliances to residential homes. In many cases, the utilities have established partnerships with government and non-profit agencies. They work together to help identify low-income neighborhoods and distribute information and educate customers on conservation opportunities through energy audits, bill inserts, presentations, and other measures. All of the FEECA utilities submitted programs in 2015 in their DSM plans highlighting how they reach and encourage qualifying customers. Each FEECA utility s conservation efforts with respect to low-income customers during 2016 is discussed below. Customers interested in any low-income programs should contact their electricity provider. FPL FPL uses energy efficiency education targeted at low-income customers. FPL states that its energy audit, the Residential Energy Survey, is available to all customers and is a no-cost way for customers to identify energy-saving opportunities. Participation in FPL s Low-Income Program increased nearly 400 percent in 2016, partially due to an Energy Retrofit channel recently launched in selected neighborhoods. This program assists in the installation of measures that address main areas of energy use (i.e. weather stripping, duct testing, outdoor unit coil cleaning, and pipe wrap). DEF DEF offers information to its customers about energy conservation programs through bill inserts and through the company s website. The company also participates in community outreach 15 Order No. PSC FOF-EU, Docket Nos EI through EI, In re: Commission review of numeric conservation goals, issued December 16,

30 efforts to reach low-income customers. DEF offers the Neighborhood Energy Saver Program which provides information about potential energy efficiency improvements and resources for energy efficiency rebates. These incentives are offered through the Residential Incentive Programs, EnergyWise, and the Low-Income Weatherization Assistance Program. In 2016, DEF saw participation in insulation and HVAC tune-up measures increase. According to DEF, this was due to an improvement in targeting low-income neighborhoods and customers that would benefit from these measures. TECO TECO utilizes a multi-pronged approach of communication and education to reach out to lowincome customers. TECO performs door-to-door advertising and has Service Team members participate in local community events and fairs. TECO also works with Senior Outreach and Elder Affairs Centers to promote, educate, and advise on energy efficiency. In addition, TECO offers programs that target low-income customers. The Neighborhood Weatherization program for low income offers a package of conservation measures to reduce energy use at no cost to the customer, and has served nearly 30,000 customers. The company anticipates that this program, along with the Energy Education Awareness and Agency Outreach program, are expected to continue to grow over time. Both programs have benefited from increased visibility and information sharing opportunities resulting from recent company actions to increase availability throughout the Hillsborough County Neighborhood Service Centers. Gulf Gulf states the increased educational effort has focused on low-cost and no-cost efficiency practices that may not be directly tied to particular DSM programs or measures. The company works with local assistance agencies to present energy conservation information through an energy literacy curriculum to low-income customers. Gulf stated that while its efforts have been valuable to the community, it is difficult to quantify the impact of these education efforts on low-income program participation. Gulf provides energy conservation installations at no cost to low-income families through its Community Energy Saver Program. In addition, Gulf offers home energy audits through which company representatives provide advice on opportunities to lower electricity consumption. Gulf also presents energy efficiency advice as appropriate when customers call or visit as well as through its website. FPUC FPUC continues to partner with the Florida Department of Economic Opportunity s approved Low Income Weatherization Program operators located in their service territory. These operators offer energy surveys and weatherization contractor training, provide energy efficient literature and host events that are specially geared towards low-income households. FPUC s partnership ensures low-income customers are aware and have access to their conservation programs. JEA In addition to JEA s presence in the community, the utility has maintained its focus on lowincome customers through their Neighborhood Energy Efficiency Program. The program 20

31 provides the installation of conservation products and provides energy education packets that give energy savings ideas and information about other JEA programs as well as community conservation programs. OUC OUC offers education and direct installation of energy efficient measures at no cost to income qualified customers through its residential efficiency program. Because almost half of OUC s service territory represents multi-family housing, OUC is continuing to focus on a partnership with the Orlando Housing Authority to promote OUC s multi-family efficiency program. In order to improve participation in low-income initiatives, OUC has recently started using the Home Utility Report program to reach low-income customers, a free service that educates customers on energy, water, and financial savings through direct mail and Investor-Owned Utility Research & Development Programs In addition to specific DSM programs that provide measurable energy savings, the five IOUs conduct conservation research and development initiatives to evaluate emerging DSM opportunities. In these programs, Florida s IOUs often partner with universities or established industry research organizations. With the constant arrival of new electricity consuming products and new technologies, research and development from Florida s IOUs creates a unique opportunity to identify emergent opportunities to conserve electricity. The recent initiatives undertaken by the IOUs are discussed below. FPL FPL s Research and Development program for tracking and evaluating emerging DSM technologies is the utility s Conservation Research and Development (CRD) program. The program features many ongoing projects conducted in both laboratory and field settings. In 2016, Phase II of the FPL co-funded, multi-year U.S. Department of Energy (DOE) Building America Program was completed. The study found that there are several retrofit technologies that might be economically justifiable as part of a deep retrofit package. One is the Variable Speed Pool Pump; the study concluded that it averaged 69 percent in energy savings (2,846 kwh annually), and had an annual rate of return of 38 percent. The study also states that Variable Speed Pool Pumps should be considered a desirable area for conservation programs due to the saturation of swimming pools in the area and lack of customer knowledge on potentially large energy savings. DEF DEF continued to conduct field studies and research on projects throughout Four of DEF s projects focus on CTA-2045 technology, a port that enables appliances to connect and receive and execute commands, and its potential for energy conservation programs. These projects apply to various CTA-2045 enabled appliances that are currently being field tested. Other projects include partnering with the University of South Florida to investigate available technologies for a Building IQ System for commercial buildings and benefits of energy storage technologies for renewable energy sources. 21

32 TECO TECO s Research and Development Program explores potential areas to benefit from energy conservation. In 2016, TECO continued to study thermal energy storage, including residential heat pump water heaters and hybrid water heaters in its Residential Price Responsive Load Management (Energy Planner) Program. The company also started evaluating battery storage for commercial/industrial facilities and the ability of these technologies to shift peak usage. The R&D Program also began evaluating the benefits and measurable savings of a commercial low-income weatherization program, similar to the residential Neighborhood Weatherization Program. This new program would specifically target smaller to mid-size commercial customers that lack the financial flexibility to take advantage of commercial rebate programs already offered by TECO. Examples of potential energy savings measures identified by the company include: LED lighting, programmable/learning thermostats, insulated water lines, and ductwork sealing. Further research and review on the Commercial Low-Income Weatherization Program is ongoing. TECO states it has also continued to focus on efforts surrounding Electric Vehicles (EVs). Research is being conducted in collaboration with the University of South Florida Center for Urban Transportation Research with hopes to have research completed in early Objectives of the study are to evaluate EVs, understand the potential impacts EVs may have on energy conservation, and to evaluate any potential DSM opportunities. DSM Programs that could result from this research fall into categories of Demand Response, Load Management, or leveraging/controlling the charging of EVs through a time-of-use or dynamic pricing program. Gulf In 2016, Gulf completed three projects in its Conservation Demonstration and Development Program. Two of the projects, the 10 Ave North Hair Salon Heat Pump Water Heater Project and the Azalea Trace Heat Pump Water Heater Project, focused on water heaters and their ability to meet consumer needs while attaining energy cost savings. Both concluded positive results that a high-efficiency, high power water heater can reduce overall energy cost savings to customers. The third project, the University of West Florida Best House Project, discovered various findings related to solar and battery technology efficiencies, attic insulation techniques, and window technology. FPUC While no projects were completed in 2016, FPUC recently began working on a Distributed Battery Technology Pilot Program. The company states the program will test the viability of using battery storage to improve customers electric system reliability and resiliency. The pilot will also test whether the technology can be used to lower FPUC s power supply cost and to facilitate integrating renewables into FPUC s power purchase portfolio. 22