Beware that when Southern Company claims it’s doing a lot about energy efficiency it is, but SO is using it’s own definition that is much more restrictive than it could be.
SACE wrote 26 February 2013, Southern Company: Squirreling the Energy Efficiency Debate
Southern Company has a solid track record of squirreling the definition of energy efficiency to avoid debate. And Southern Company has good reason to avoid the debate: Its utilities consistently advocate what is considered by national experts to be the “most restrictive” approach to designing energy efficiency programs.
Just how restrictive, you ask? The energy efficiency programs that are acceptable under Southern Company’s standard generally need to have benefits that are at least three times the cost to deliver the energy savings.
This restrictive standard is known in the industry as the “Rate Impact Measure” test, or RIM test. In contrast, most utilities use a cost-effectiveness test that sounds pretty reasonable. Benefits are measured in terms of cost savings: Number of power plants not built and fuel not burned, essentially. Costs are measured in terms of the utility’s efficiency program costs and, often, also include customer out-of-pocket expenses. Even though a simple “pass” is all that regulators usually require, utility programs are so cost-effective that they typically have benefits that are at least double the costs.
The difference between the “limited” programs that pass the RIM test and the more commonly used benefit-to-cost tests is dramatic. For example, when the Georgia Public Service Commission directed Southern Company utility Georgia Power to expand its energy efficiency programs beyond strict adherence to the RIM test in 2010, commission announced that the change would help their state “out of the bottom of national and regional comparisons on energy efficiency.”
Bravo GA PSC! So did Georgia Power actually make that change? And how much did it help? And how much does that one change explain SO CEO Tom Fanning’s claims about increased energy efficiency since 2010?
We are optimistic that Kim Greene, the new CEO of Southern Company Services, will work to convince Southern Company staff to adopt this definition. We’ve got two reasons for optimism. First, as a senior manager with responsibilities for finance and generation at the Tennessee Valley Authority, Ms. Greene has seen firsthand how energy efficiency has helped to position TVA to better manage customer costs over the long term.
Second, Ms. Greene can point to Southern Company’s own engagement in national discussions around energy efficiency. For example, Susan Story (whom Ms. Greene is replacing) was one of the members of the Leadership Group that authored the NAPEE “Framework for Change,” including that definition. Southern Company also has a longstanding commitment to support the Alliance to Save Energy, an organization whose name just might suggest that energy efficiency is about using less kilowatt-hours. Because, of course, kilowatt-hours is how one measures electric energy.
That’s SACE being optimistic. Here’s SACE being realistic about what needs to change:
Here’s the bottom line: Southern Company is out of step with the mainstream perspective on energy efficiency. Their definition of cost-effective energy efficiency demands that programs reduce energy costs by well over three times what the programs themselves cost to operate. And then they have the hubris to claim that they are “championing energy efficiency.”