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Using benchmarking to help a small gas utility identify a reasonable amount of energy efficiency savings as a percent of sales and corresponding annual budgets

Background

A small gas utility had never run formal energy efficiency (EE) programs when legislation passed in one of its states that required it to engage a statewide, quasi-regulatory stakeholder process and to develop, file with the regulator, fund, and implement a gas EE plan. The stakeholder process advanced an ambitious EE agenda that included lofty EE savings as a percent of utility sales. With no EE program experience, the utility decided that it would benefit from assistance in determining what programs would be cost-effective and market appropriate as well as what size (i.e., budget and savings) would be reasonable. The client called on MCR to apply our familiarity with gas utilities, gas energy efficiency and the setting of savings as a percent of sales goals to develop goals that made sense for it, and to engage the regulatory and stakeholder processes with them.

Solution

The quasi-regulatory stakeholder process had engaged consulting services from a firm that was generally viewed as a strong EE and renewable energy advocate to develop a statewide EE potential study to, in turn, drive a recommendation regarding savings as a percent of sales goals. To help the client establish a position on EE goals, MCR developed a detailed benchmarking study. The existing potential study and goal-setting process was heavily influenced by similar such activity in neighboring geographic areas with a long history of aggressive EE, so an initial question was, “Is this geographically appropriate?”

MCR looked at the US Energy Information Administration (EIA) climate zones and Census regions and identified that the client’s utility in question was in a different climate zone and Census region than the states upon which the stakeholder body’s proposed goals were based. The states the client was generally being compared to were colder than the client’s state and experienced significantly higher heating degree days. This meant there was a more substantial heating load and thus opportunity, perhaps need, for gas EE in those states than in the client’s state. In fact, states adjacent to or near the client’s state, and in the same climate zone and Census region, included states of a moderate to warm climate.

Next, we used American Council for an Energy Efficient Economy (ACEEE) and American Gas Association (AGA) data to benchmark gas EE savings and spending by state and Census region or division. Overall, the broad Census region where the client was located had 2016 EE savings goals of 0.26% of sales and a neighboring Census division had only two states showing programs at all, at a target of 0.10% of sales. This was in sharp contrast to the initial goals of 0.2%, 0.3% and 0.5% of sales per year proposed for the first three years of gas EE implementation in the client’s state. To assist the gas utility with developing a more reasonable counter proposal, MCR again looked at national data by state and this time by utility to find a gas utility of similar size, situation, and climate to use as a basis for alternate savings levels. We developed a five-year ramp-up to eventually get to the 0.5% of sales proposed for our client by the stakeholder body and its consultant, based closely off the filings and plans of a comparably-sized gas-only utility in a moderate to warm climate.

Results

MCR’s work equipped our client with analysis to counter the annual goals proposed by the quasi-regulatory stakeholder board and its consultants along with a credible alternate proposal. Furthermore, since the client had no EE experience, our work became a platform for significant education on the politics and process of EE planning and goal setting.