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BPA Looking Ahead Mark Ohrenschall Con.Web, October 29, 2004

Outlines Emerge for BPA Post-2006 Conservation,
Including Targets, Policy Guidelines, but Many Key Details Remain Vague

Some outlines are apparent for Bonneville Power Administration's post-2006 energy conservation plans, but many details remain sketchy.

BPA has pledged to pursue its load-based share of regional energy-saving targets set by the Northwest Power and Conservation Council--an estimated 56 average megawatts a year starting in fiscal year 2007, more than 25 percent higher than the current annual target of 44 aMW. Bonneville officials anticipate $80 million annual budgets for post-2006 conservation acquisitions, similar to current spending levels.

Bonneville has offered other broad guidelines for its 2007-2011 energy-saving efforts, notably including focuses on low costs (a projected goal of $1.3 million per average megawatt saved), minimal wholesale rate impacts, verifiable savings directly beneficial to BPA, regional collaborations and local initiatives. Acquisition is a main watchword.

BPA is also leaning toward more limited qualifications for any future rate discount, compared to the present Conservation and Renewables Discount Program. These potential standards, as currently broached by BPA, would eliminate credits for renewables and for utility donations to the Northwest Energy Efficiency Alliance.

Meanwhile, numerous other post-2006 BPA conservation topics remain somewhat more uncertain. These include specific program features, BPA oversight requirements, small utility options and the key policy decision of how conservation savings affect utility shares of low-cost BPA wholesale power.

BPA and a regional advisory group have started to address Bonneville's post-2006 conservation future, with the intent to develop general and specific recommendations over the coming year.

BPA's Role
In BPA's proposed power supply role for fiscal years 2007-2011 , the federal power marketing agency pledged its ongoing commitment to energy conservation but offered only broad guidelines for its post-2006 blueprint. "BPA envisions some form of collaborative planning process in which experienced individuals can develop a fully defined proposal for conservation that can then be brought to the entire region for consideration," said the proposal.

The resulting work group for BPA post-2006 conservation consists of more than 50 members, primarily from utilities but also from other conservation interests. It is charged with first proposing a general program approach and direction for BPA energy-saving ventures, and then moving into program design and implementation. Five subcommittees have been formed, addressing funding mechanisms and levels, small utility options, oversight and evaluation, creative strategies and program design.

BPA hopes to roll out its post-2006 conservation offerings by fall 2005, allowing a transitional period before they formally begin in October 2006.

Some Parameters
From background materials and discussion at the work group's first meeting, Oct. 7 in Spokane, some parameters for BPA's future conservation are apparent.

BPA energy efficiency implementation manager John Pyrch reaffirmed for the group that Bonneville will target its proportional share (based on loads it serves) of Council energy-saving goals, which projects to about 280 aMW over five years, or some 56 aMW annually. Pyrch said the agency is on track to meet its 220 aMW goal over the 2002-2006 rate period.

Starting in 2007, "We've got to deliver our conservation at a 27-percent level higher than we are right now," he said, adding, "I don't envision our budgets being increased substantially." About $80 million a year are tentatively earmarked for BPA conservation acquisitions in 2007-2011.

BPA energy efficiency vice president Mike Weedall spoke about regional utility pressure on Bonneville to control costs and keep down rates. "We need to be pursuing the cost-efficient megawatts," he told the work group. "Therefore, that is pointing us to a direction we have to be in a [conservation] resource acquisition mode … for the foreseeable future."

This cost concern is especially likely to influence the fate of C&RD, which Pyrch described as "an infrastructure establishment program getting folks re-engaged in conservation. We allowed a lot of things under that program we would probably not allow under an acquisition program."

C&RD conservation credits are based on a measure's system value, which, Pyrch said, "is substantially higher in a lot of cases than what it costs to put the measure in place." Some utilities have used that differential for non-conservation purposes, which he called "perfectly fine, legal" but not appropriate for an energy-saving acquisition emphasis.

Established for the 2002-2006 BPA rate period, the C&RD now allows some 3,200 qualifying measures, according to Pyrch. That number would drop to about 1,200 to 1,500 under proposed cost-effectiveness criteria.

A BPA handout listed other desired conditions for any future rate credit in its conservation portfolio, including elimination of green power/renewable generating resources, which would take the R out of C&RD.

BPA also is considering getting rid of rate credits for qualifying donations other than to low-income weatherization, Pyrch said.

Among other consequences, this would render ineligible utility funding earmarked for the Alliance. Alliance executive director Margie Gardner called this "a big issue," because numerous public-power utilities have indicated they wouldn't financially support the Alliance without a rate credit. At least two other work group members also expressed concern about this proposal.

However, BPA has pledged $10 million annually in direct Alliance funding through 2009. Pyrch also referenced the Council's recommendation to substantially expand regional market transformation, which he said raised for BPA the question of whether it should "supplement the market transformation budget beyond what we're already doing."

Other BPA rate discount "leanings" for conservation include options for small utilities as long as those "contribute to BPA's conservation acquisition efforts," allowance of utility administrative, marketing and education costs, and program designs aimed at considerable "lost opportunity" conservation.

BPA also prefers "a consistent payment structure" for conservation throughout its programs.

The future of Bonneville's other key energy-saving initiative, Conservation Augmentation, was less prominently discussed at the meeting and in materials. Pyrch called it "a good program" that has gained about 62 aMW already this rate period for about $1.3 million per average megawatt. He allowed that ConAug may have excessive BPA oversight requirements, while C&RD may have too much slack in that regard.

Among Bonneville's "key policy directives" for post-2006 conservation are that BPA-funded savings directly benefit the agency, and that those negawatts, and dollars, are carefully accounted.

BPA's post-2006 conservation policy outlines are described in a handout as "firm direction regarding BPA's leanings. There would have to be very compelling reasons to deviate from these guidelines."

However, this still leaves considerable discretion for the structure of BPA initiatives come FY 2007. Pyrch said BPA wants to carry forward "the best features" of current BPA offerings, "to help us get the new megawatt targets." As examples, Pyrch later said many utilities like the reporting features, multiyear funding and local control inherent in C&RD, while for ConAug, BPA appreciates the rigorous verification of savings.

One vital policy issue outside the work group deliberation involves whether conservation-minded utilities would somehow get a lesser share of relatively cheap BPA wholesale power as a result of successful energy-saving efforts. This issue, described as "BPA's allocation and net requirements determinations under the new power sales contracts," will be addressed in the Regional Dialogue process, along with BPA conservation beyond its direct loads. Renewables rate credits will be separately determined as well.

Stakeholder Thoughts
Representatives of utilities and other stakeholders have expressed recent thoughts on Bonneville's post-2006 conservation, as summarized in BPA documents.

Local control and flexibility are deemed "huge issues" for utility customers, but with different meanings. Some want a hands-off conservation role for BPA, while others are interested in an array of BPA programs from which to choose.

Many stakeholders indicated a desire for stable BPA programs and funding, and simplicity for program implementation.

A number of commenters believe BPA's planned threshold of $1.3 million per average megawatt "is too low to acquire the needed energy conservation or is too low to acquire residential conservation," according to a BPA summary. Many people believe BPA should pay for utility administrative costs.

On the C&RD, the vast majority of commenters who expressed an opinion thought it should continue, at about the same funding amount. Quite a few people thought the credits too liberal. Several wanted to keep renewables eligible.

Related Pages:
BPA Post-2006 Conservation