June 2, 2008
KCC Frames Energy Efficiency Policy
Emphasizing a collaborative approach to energy efficiency that will yield programs that will mitigate "inevitable price increases", the Kansas Corporation Commission today issued an order establishing a policy framework for the review and evaluation of energy efficiency programs. Today's action formalizes the Commission's efforts to encourage and provide guidance to Kansas utility companies to meet future energy needs.
The Commission noted that Kansas electric and natural gas prices are below the national average. But also pointed out that increasing demand for energy, the need for additional generation and transmission, and environmental compliance costs coupled with increased fuel and other commodity costs are certain to increase our energy costs. This is evident with the recent filing of rate cases by many Kansas utilities. Just this past week, Westar Energy, the largest electric utility in the state, filed a $177.6 million rate increase request.
In its order, the Commission is emphatic in its belief that energy efficiency programs, in the broadest and most forward-looking sense, are a viable clean energy resource. Working collaboratively with utility companies and utilizing a balanced approach in planning how best to meet the future energy needs by using traditional and renewable energy sources, such as wind; and energy efficiency programs, the Commission hopes to minimize rate impacts to consumers.
The Commission recognizes that for energy efficiency programs to be a success, they must be cost effective and efficient. This order sets forth the means that the Commission will use to assess the costs and benefits of a program before it is implemented and the effectiveness of a program as it progresses.
This framework is consistent with and furthers goals previously set by Governor Kathleen Sebelius to reduce overall energy consumption by 5 percent by 2010, and to produce 10 percent of our energy from the wind by 2010 and 20 percent by 2020. In fact, the Commission has already approved several programs, primarily demand response real-time pricing programs, as the majority of the major utility companies responded to the Governor's call for statewide voluntary consumer education and conservation efforts to reduce consumption.
The framework includes preliminary parameters for benefit-cost analysis and standards to be applied to demand response (DR) and demand side management (DSM) programs; real-time (dynamic) pricing; program evaluation, measurement and verification (EM&V) standards; efficiency program design guidelines; and education programs.
The Commission stated it believes dynamic pricing, one form of demand response, is a crucial component of energy efficiency programming. Dynamic pricing is intended to influence customer behavior through price signals. Demand response programs in general are intended to shift demand away from peak usage periods when the demand for power is greatest and the cost of providing that power is highest.
The Commission also emphasized that energy efficiency programs should be available to all customer classes, including those that might require some type of special program, such as low income consumers and consumers in rental properties.
Utilities are encouraged to develop educational programs in order to enable consumers to make informed and responsible decisions regarding energy use. The Commission expressed particular interest in utilizing monthly utility bills to provide information to consumers.
All programs must include an EM&V plan for the Commission's review and approval. Based on the experience of other states, EM&V cost for a program may not exceed 5 percent of the program costs.
The Commission acknowledges that energy efficiency programs and the associated issues are a relatively new area where regulation needs to be able to accommodate innovation and experimentation. Rather than limit a company in the development of innovative approaches to new programs, the Commission has provided for flexibility and a procedure for companies to submit additional issues they feel need to be addressed and resolved with respect to energy efficiency programs.
The Commission also commended utilities serving Kansas customers for their cooperation and efforts to move forward with energy efficiency programs.