Benefits and Costs of Aggressive Energy Efficiency Programs and the Impacts of Alternative Sources of Funding: Case Study of Massachusetts

摘要

Increased interest by state (and federal) policymakers and regulatory agencies in pursuingrnaggressive energy efficiency efforts could deliver significant utility bill savings for customersrnwhile having long-term implications for ratepayers (e.g. potential rate impacts). Equity andrndistributional concerns associated with the authorized recovery of energy efficiency programrncosts may necessitate the pursuit of alternative program funding approaches.rnIn 2008, Massachusetts passed the Green Communities Act which directed its energyrnefficiency (EE) program administrators to obtain all cost-effective EE resources. This goal hasrntranslated into achieving annual electric energy savings equivalent to a 2.4% reduction in retailrnsales from energy efficiency programs in 2012. Representatives of electricity consumer groupsrnsupported the new portfolio of EE programs (and the projected bill savings) but raised concernsrnabout the potential rate impacts associated with achieving such aggressive EE goals, leadingrnpolicymakers to seek out alternative funding sources which can potentially mitigate these effects.rnUtility administrators have also raised concerns about under-recovery of fixed costs whenrnaggressive energy efficiency programs are pursued and have proposed ratemaking policies (e.g.rnDecoupling) and business models that better align the utility’s financial interests with the state’srnenergy efficiency public policy goals. Quantifying these concerns and identifying ways they canrnbe addressed are crucial steps in gaining the support of major stakeholder groups - lessons thatrncan apply to other states looking to significantly increase savings targets that can be achievedrnfrom their own ratepayer-funded energy efficiency programs.rnWe use a pro-forma utility financial model to quantify the bill and rate impacts onrnelectricity customers when very aggressive annual energy efficiency savings goals (～2.4%) arernachieved over the long-term and also assess the impact of different cost recovery approaches thatrnintegrate alternative revenue sources. We also analyze alternative lost fixed cost recoveryrnapproaches to better understand how to mitigate the erosion of utility shareholder returns inrnstates that have adopted (and achieved) very aggressive savings targets.