Senator Thibodeau and Representative Fitts,
The Natural Resources Council of Maine opposes the primary features of this legislation, and believes, if implemented, the bill would significantly undermine Maine’s long-term ability to capture available energy efficiency savings. Energy efficiency remains one of the most important and cost-effective means to meet Maine’s energy needs. In undermining efficiency strategies, the bill would impede our ability to decrease pollution, minimize Maine’s dependence on fossil fuels, improve our economy, and reduce burdensome energy costs for Maine homes and businesses.
I would like to focus on four key issues:
1. Efficiency Maine is working to deliver enormous, measurable benefits to Maine consumers through lower energy costs. It is structured to be flexible and consumer-oriented, and focused on performance of long-term energy saving goals. Independent evaluations show major successes in both innovative and long-standing program areas. Efficiency Maine is already way ahead of the programs mandated in the bill related to heating equipment, with programs, loan funds, and pilot projects contemplated therein already happening and in more effective ways.
2. The bill would strip the Efficiency Maine Trust of its independenceâindependence which, with clear oversight primarily from the PUC, was a very important and intentional part of the legislative design of the Trust and has yielded excellent resultsâand replace it with much more politicized direct control by the Administration. That control would include leadership, budgets, and ultimately programs and strategies.
3. In multiple ways, the bill would jeopardize energy efficiency funds currently available to help consumers lower their energy costs. It would make the budget far more vulnerable to raiding during the biennial budget process, mandates diversion of money from more cost-effective programs to less cost-effective ones (both SBC and RGGI), jeopardizes benefits for Maine ratepayers from the Forward Capacity Market, and shifts ratepayer funds from consumer benefits to utility profit margins.
4. The electrification portion of the bill represents a massive change in how conservation funds have been used, putting utilities ahead of consumers, with significant uncertainties about the impacts on rates and the electric grid. Although we are quite prepared to support strategies on efficient electric heating, the elements in this bill include highly anti-competitive favoritism for electric utilities that would waste ratepayer dollars.
Maine is already on the right track with efficiency
Last year alone, Efficiency Maine’s programs helped homeowners, businesses, industrial facilities, municipalities, and others make cost-effective efficiency investments that will ultimately save them $450 million. Achieving those savings cost a total of $118 million, for a net savings of roughly $332 million. If not for Efficiency Maine’s efforts, Maine energy consumers would spend $332 million more on electricity and other fuelsâalmost all of which would have ultimately been imported into the state.
Over the last year or two, the Trust has placed significant emphasis on independent evaluation. They have increased the frequency and depth of program evaluations compared to historical practices, as a result of statutory guidance, PUC oversight, and the Board’s governance. These evaluations, whether for residential or commercial programs, re-affirm the basic conclusions that Trust programs are highly cost-effective and are leveraging resources to achieve large savings that would not otherwise be captured.
Three attached charts illustrate Maine’s level of success in different measures. The first quantifies electrical efficiency savings in comparison to the output of a power plant. (As the committee is well aware, a kilowatt-hour saved is a substitute for a kilowatt-hour generated.) The amount of annual electricity savings for Maine consumers is growing as we install efficiency equipment that provides savings for many, many years. Today, these annual savings are roughly equivalent to the output of a 110 MW power plantâonly these savings are “generated” for a fraction of Standard Offer rates.
The second chart shows how efficiently Maine is currently saving energy (again, electrical energy in this case). Efficiency Maine is saving energy at the lowest cost per unit of energy saved of any New England state. We’re getting a terrific bang for our buck (1).
Finally, Maine is leveraging RGGI dollars for enormous consumer benefit. A completely independent analysis of the economic and energy impacts of RGGI across the Northeast (led by a former PUC chairman from the region) showed that Maine had among the highest levels of per capita consumer benefits from RGGI â vastly outweighing any costs â specifically because of how we were using almost all of our RGGI revenue to support highly cost-effective energy efficiency investments.
All thisâand much more evidence that we don’t have time forâindicates the simple fact that Efficiency Maine is not the least bit broken. Why the Legislature would contemplate major and risky changes after the Trust had completed its most successful year ever is a real puzzle.
Efficiency Maine Trust is independent for good reasons
In 2009, the Legislature established the Efficiency Maine Trust in a bipartisan manner after months of deliberation, including on different structures that would meet goals of accountability and consumer benefits. Maine now enjoys some basics elements that we share with every other state that has an energy efficiency program administrator using public benefit funds, including having that administrator exist outside of “state agencies” and oversight and accountability to a PUC (which has traditional oversight over ratepayer matters). The most successful efficiency structures also include elements of the Maine model, including development of a detailed 3-year plan and involvement of a stakeholder board that helps develop that plan and represent different consumer interests.
The independent board of Efficiency Maine is serving Maine consumers well. (See results above.) There are many reasons why Maine, like every other state, uses an independent structure. It comes down to the fundamental fact that the Trust staff and board can focus on their core long-term mission of helping consumers save money and do so with an emphasis on measurable cost-effectiveness. The funds come from energy consumers, and they should go back to helping consumers, based on sound principles (from statute), professionally developed program strategies, and oversight focused on detailed evaluation of consumer costs and benefits (by the PUC). The clear consensus has been that Maine consumers are best served by a generally apolitical approach.
This bill jeopardizes that independence by giving the Governor’s Office direct control over the Board and the budgetâand in turn, control over the budget is, of course, control over program allocations and strategies. The bill would give the governor complete discretion over the budget and subject Efficiency Maine to the full force of political battles over the biennial budget. In the best case this would mean significantly more bureaucracy and wasted staff time that could better be spent serving energy consumers; in the worst case it would erode confidence from the public and efficiency businesses who work with Efficiency Maine and see funds diverted to unrelated budget needs or energy whims of the day.
The current governor’s feelings about energy efficiency have been well documented in the media and through public appearances. He has belittled efficiency in general, exaggerated costs, and attempted to divert millions from efficiency to LIHEAP. But the last governor had his pet projects and energy strategies de jour, too. For example, he sought to train hastilyâand, in hindsight, poorlyâscores of energy auditors in response to high oil prices, which had multiple negative results.
Don’t needlessly jeopardize efficiency funding or maximum consumer benefits
This bill would in several ways jeopardize the long-term funds that are needed to help consumers lower their energy costs. First and foremost, Section 2 of the bill would make the entire budget subject to easier raiding. Legislators know well that the biennial budget process is a complicated and highly political oneâalthough Maine has a recent tradition of some bipartisan compromise, many trade-offs happen in the process. And they happen on the second floor of the State House, away from the expertise on energy and cost-effectiveness. The idea that these are consumer funds that should directly benefit energy consumers would quickly be lost. This is not hypothetical. Raids from otherwise dedicated funds happen each year, and the governor has made no secret of wanting to re-deploy Efficiency Maine funds for different uses.
Related to this, treating Efficiency Maine’s budget like a state agency makes year-to-year predictability much more difficult, and this could potentially hinder Maine’s ability to bid into the Forward Capacity Market (FCM). The FCM represents commitments to provide (in this case, avoid) capacity usage in future years. Efficiency Maine receives a couple million dollars each year from this source that is re-invested into efficiency programs. A political budget setting process could jeopardize both past and future FCM revenue.
Second, several sections of the law that might otherwise appear innocuous have the effect of diverting money from more cost-effective uses to less cost-effective ones. The heating equipment rebate program in Section 8 is an example. NRCM absolutely supports a heating equipment rebate program if it is carefully developed to maximize measurable, additional benefits. In fact, the Trust already ran such a program last year. It was marginally successful. Because it was funded with ARRA money, when that ran out the Trust faced the decision of whether to continue it with their limited sustained funding sources. They concluded those sustained funds (i.e. SBC, RGGI) would achieve larger total benefits for consumers if used elsewhere. That is the purpose of loading up their guiding statute with requirements about “cost-effectiveness”: you get that kind of rational decision-making. Incidentally, it is likely that if passed, the Trust would use RGGI dollars to fund this program, which would fly in the face of other statutory guidance that says RGGI money should be spent on the most cost-effective uses.
Third, the electric heating program as described would re-direct SBC funds away from core programs that are highly cost-effective, such as lighting or motors. Instead, the Trust would spend a portion of those funds (potentially a significant portion over time) on this program, primarily the cost of supporting utility profit margins. In addition to the anti-competitive problems with this (below), there is the simple fact that this shift would reduce total benefits for consumers from the same amount of spending. In particular, electricity consumers would suffer.
Anti-competitive provisions put utilities ahead of consumers and create unknown risks
Efficient electric heating systems are potentially of significant benefit to Maine consumers and the environment, but the approach in this bill is unneeded, risky, unfair and ultimately harmful to consumers. In contrast to standard practice of bidding out program implementation competitively, the bill would require the Trust to use utility capital to support a heat pump loan programâand require the Trust to compensate utilities at a high guaranteed rate of return (2). It allows the utilities to set the terms of financing. How could it possibly be in the public interest to force the Trust to use utility funds under these mandated terms, when a competitive approach is the alternative?
This provision could have enormous consequences for electricity customers. First, it would mean that EMT would need to divert money from its core efficiency programs to compensate utilities. That means less support for lighting or other measures that have extremely high cost-effectiveness. The more enticing the loan program, the more funds will be drained from programs that are working to maximize benefits for consumers.
Second, the impacts on transmission and distribution to ratepayers overall is uncertain. To the extent that this approach builds load and/or peak load, the impacts on rates and costs is uncertain. For example, heat pumps could add a significant amount of summer air conditioning load, which could increase our peak load and impact costs both long- and short-term. Challenges like this require significantly more analysis and might be surmountable, but passing this approach in haste is risky, even on top of the subsidization of utility profits, which is wholly unjustified.
Finally, Efficiency Maine already operates a fully-funded loan program for which efficient electric heating equipment is eligible (the PACE loan program). If fuel switching to efficient electric heating systems is in consumers’s interests, they already have that option.
In conclusion, this legislation includes several major departures from existing energy policies in Maine, in some cases with uncertain and potentially significant consequences. Given the late date and the incredibly short time frame for hearing public input, conducting needed analysis and having thorough deliberations, we believe it would be a significant mistake to contemplate passing this legislation this session. The hasty and ill-conceived policies proposed in this bill are in stark contrast to the significant amount of time and experience represented in existing energy efficiency policies. Over the last decade, this committee has typically been deliberative and conservative in making major policy changes. That approach would serve you well in this case, because the bill threatens to undermine one of the most important and successful energy strategies currently at work in Maine, namely fostering cost-effective energy efficiency investments through the Efficiency Maine Trust.
I encourage you to vote Ought Not to Pass on LD 1864.
1 The primary reason why other states are reaping larger total savings from efficiency efforts is because each of the other Northeastern states invests more per capita on efficiency than Maine, in most cases two to five times more. We may be a little smarter about how we invest a dollar to save kilowatt-hours, but they have mastered the lesson that if you are getting $3 for every $1 you spend, you should probably invest more in that strategy.
2 It is interesting to note that the State and Local Committee is hearing testimony today on an OPEGA bill, LD 1843, which provides general guidance to independent authorities on good governance practices. EMT is already well positioned to meet those standards, which includes “using competitive bidding whenever feasible.”
Maine’s energy efficiency “power plant”
Annual Energy Efficiency Production Costs: Dollar per MWh
Economic Value Added From RGGI