BPA Integrated Program Review
Energy efficiency talking points
NW Energy Coalition
July 13, 2012
The Bonneville Power Administration is setting its budget for the 2014-15 rate period. BPA’s proposed energy efficiency budgets are of particular concern to clean and affordable energy advocates.
BPA’s budget-setting process consists of the Integrated Program Review (IPR), covering expense funding (direct annual spending) and the Capital Investment Review (CIR), covering capital investments (spending that utilizes borrowing). The following talking points focus primarily on the IPR expense levels. However, because BPA’s energy efficiency program comprises both expense funding (25% of total efficiency savings and support to capital programs) and capital investments (75% of savings), addressing just one aspect of the program budget is problematic. Thus these comments also encompass capital spending plans for 2014-15.
Through the energy efficiency expense budget, BPA helps the region’s four states and recognized Tribes improve the energy efficiency of qualified low-income residences. The needs of this critically important program are discussed in detail below.
BPA energy efficiency programs benefit the region, BPA customers and all bill payers
- The Northwest Power Act defines energy efficiency as the priority resource. That means that when acquiring resources to meet anticipated future loads, the BPA administrator first must pursue cost-effective energy efficiency in accordance with the Northwest Power and Conservation Council’s regional plan. Additionally, BPA’s Long-Term Regional Dialogue Policy is to pursue all cost-effective conservation, identified by the Council’s regional plan, in the service territories of public utilities served by BPA.
- BPA contributes substantially to regional progress on energy efficiency by coordinating and helping achieve public power’s share of the Council targets during each planning period.
- Savings achieved keep electric bills affordable for customers throughout the Pacific Northwest and help BPA utility customers stay in Tier I (the lowest power purchase rate) as long as possible.
- Energy savings lead to surplus power that BPA sells on the open market, increasing sales revenues and helping to keep rates low.
- Low-income weatherization assistance helps people across the region reduce their energy bills. The U.S. Department of Energy estimates that low-income households receiving weatherization services see their energy bills drop by an average of $437 a year. These savings make all the difference for Northwest families and communities struggling through tough economic times.
- While the agency does face short-term budget challenges, it is in its interests and those of the entire region to maintain its focus on the long-term energy efficiency benefits.
BPA’s proposed investment for 2014-2015 inadequate
- Proposed expense spending (along with capital expenditures outlined in Section 9 of the 2012 Capital Investment Review initial publication) is insufficient to achieve either BPA’s asset management objectives or the agency’s overarching commitments under the Long-Term Regional Dialogue Policy to meet public power’s share of cost-effective conservation under the Council’s regional plan.
- Proposed spending levels fall short of near and long-term energy efficiency investment needs and fail to deliver all the long-term financial benefits of the cost-effective energy efficiency available to us.
- BPA provides $5 million for weatherization programs for low-income households across the region. This funding level has not changed since 2007.
- Demand for low-income assistance is reaching record levels throughout the Northwest. In Oregon alone, 30% of the population is eligible for low-income assistance.
- Low-income ratepayers pay for all conservation programs in their rates, but are not able to take advantage of most because typical programs require substantial participant contributions. It is a simple matter of fairness to provide low-income funding proportionate to their rate contribution.
- The American Reinvestment and Recovery Act added needed funding for low-income weatherization in all four Northwest states. However, the temporary ARRA funds have been invested, and agencies are struggling to meet ever-growing demand.
- Federal low-income weatherization assistance (U.S. Department of Energy, Weatherization Assistance Program and LIHEAP) funding is falling dramatically. WAP’s budget took a 63% cut in 2012; LIHEAP has been cut 32% over the past two years. This funding has represented a large proportion of the weatherization dollars serving BPA’s service territory.
- $5 million dollars for BPA’s entire service territory is too little. Particularly as low-income agencies providing weatherization services indicate their strong need for additional funding given their long waiting lists.
Recommended budgeting approach for 2014-15
- BPA should budget to the Council Plan’s high caseenergy savings target instead of to the medium case used in current practice. Energy efficiency spending is 2% of BPA’s power revenue requirements.
- Budgeting to the high case for energy efficiency ensures that funds are available to capture all available cost-effective savings. If the cost-effective savings are not available, any leftover funding can carry over to future years or be credited back to customers. It is better to prepare for meeting the demand for cost-effective energy efficiency than to end up turning away good energy saving projects.
- For the 2010-2014 period covered by the Sixth Northwest Power and Conservation Plan, the high case for regionwide energy efficiency is 1,400 average megawatts for the region. Public power’s 42% share would be 588 aMW (as opposed to the 504 aMW share calculated under the medium case). BPA should budget to acquire the additional cost-effective savings in 2014.
- BPA should use the plan’s high case efficiency savings to recalculate expense and capital budgets for 2015 through the end of the IPR’s 10-year period.
- The 5-year savings achievement calculation should not include carry-over savings from the previous 5-year budget and savings target period.
- We recommend increasing low-income weatherization funding to $10 million per year.
- Increasing this budget by $5 million would have very little effect on overall BPA rates. Currently, the low-income program spending proposed for FY2014 represents just 4% of the overall (including capital investments) energy efficiency budget.