Rewarding Successful Efficiency Investment in Three Neighboring States:The Sequel, the Re-Make and the Next Generation(In Vermont, Massachusetts and Connecticut)

摘要

This paper examines energy efficiency portfolio performance incentive ("PI")mechanisms in Vermont, Massachusetts and Connecticut. While different in structure anddesign, all are aimed at similar policy objectives. After advancing principles for guiding thedesign of effective performance incentive mechanisms for administrators of efficiencyinvestment portfolios, the paper traces the evolution of the three states' incentive mechanisms. Itthen compares and contrasts them in the context of the suggested design principles, concludingwith findings and recommendations on common features to include in future efficiencyadministrator performance incentive mechanisms .In 2002, Vermont's energy efficiency utility, Efficiency Vermont ("EVT"), negotiated athree-year extension to its initial performance contract with the State of Vermont Public ServiceBoard ("VT PSB"), originally designed in 2000 to reward it for superior achievements ofVermont's multiple policy objectives. Foremost among the goals of Vermont's $14 millionannual energy efficiency portfolio are maximizing resource benefits, electricity savings andmarket transformation, all while delivering equitable distribution of benefits throughout the stateacross customer groups. Toward these broad ends, EVT's 2003-2005 performance incentivemechanism defines new targets for peak savings, as well as minimum performance requirementsconcerning distributional equity. This paper considers both the original 2000-2002 mechanismand the 2003-2005 "sequel."Also in 2002, Massachusetts electric utilities and non-utility parties agreed on a newperformance incentive mechanism which was incorporated into each program administrator's2003 energy efficiency plan. This is the "remake" of the original Vermont mechanism, as itborrowed many of the latter's basic features. Like Vermont's revised mechanisms, the newMassachusetts formula gives major weight to net resource benefits and peak demand savings.The new focus on total resource benefits requires administrators to incorporate non-electricbenefits into economic analysis for planning and implementation, something Massachusettsutilities had not done previously.In 2003, the Connecticut Office of Consumer Counsel ("CT OCC") reported onperformance incentives to utility administrators of the state's $88 million annual conservationand load management ("C&LM") investments. Having previously opposed incentives, the CTOCC report recommends a new performance incentive mechanism, modeled on EfficiencyVermont's current version, and emphasizes targeted savings in constrained areas. Because itbuilds on the Vermont "sequel," we consider the proposed Connecticut model "the nextgeneration." The Connecticut Department of Utility Control's ("CT DPUC") review anddecision on CT OCC's recommended mechanism is expected sometime in 2004.