New PA law will reduce energy demand and consumption and expand alternative energy sources

October 16, 2008 · Filed Under Electric Power, Tax Incentives & Legislation 

PUC Commissioners Direct Implementation of House Bill 2200 (PUC Press Release 10/9/08)

HARRISBURG – The Pennsylvania Public Utility Commission (PUC) unanimously approved a Motion October 09, 2008 to begin implementation of House Bill 2200, which expands the PUC’s oversight responsibilities and imposes new requirements on the Electric Distribution Companies (EDCs), with the overall goal of enhancing procurement; reducing energy demand and consumption; and expanding alternative energy sources.

Last week both the Senate and the House overwhelmingly passed House Bill 2200, which Governor Ed Rendell subsequntly signed on October 15. Commissioners Kim Pizzingrilli and Robert F. Powelson said, “As with the passage of any significant piece of legislation, the Commission will convene an internal working group to develop an implementation plan to ensure that guidance is provided to EDCs and that consumers realize the benefits of energy efficiency and conservation measures.  The Commission recognizes the importance of implementing this law in a prompt manner, and will move forward with all deliberate speed, while allowing for stakeholder participation and input.”

In a Statement, PUC Chairman James H. Cawley said, “Thanks to the Governor and the legislature, demand-side resources will now be a true part of Pennsylvania’s energy future.  This Commission has a lot of work to do.  The legislation gives the Commission nine-and-a-half weeks to adopt provisions to shape an energy efficiency and conservation program for the Commonwealth.  Fortunately, the Commission has already scheduled an en banc hearing for Thursday, Nov. 13, 2008, on energy conservation and related issues.  Yesterday’s passage of HB 2200 necessarily and dramatically changes the focus of that hearing.  My colleagues and I will now consider whether to issue a new set of questions for the hearing focusing on specific issues in the new legislation, including required contents of the utility plans, the review process, the evaluation requirements, the cost benefit analysis, the Commission’s forecast of utility retail sales for June 1, 2009, through May 31, 2010, the cost recovery mechanism, the registry of conservation service providers, and other provisions in the new law.”

On Oct. 3, the PUC released a secretarial letter with information about its special public hearing on Thursday, Nov. 13, on alternative energy resources, energy conservation and efficiency, and demand side response (DSR) tools and programs to assist consumers.

Highlights of House Bill 2200 include the following:

  • Directs the PUC to adopt an energy efficiency and conservation program to require EDCs to submit and implement plans to reduce energy demand and consumption within each service territory.  Effective energy efficiency and demand response may reduce the magnitude of needed, but costly, investments in new electric generation and transmission infrastructure.
  • Requires the EDC to file a plan for smart meter procurement and installation; requires the installation of smart meters in new building construction and upon customer request if the customer agrees to pay the cost of the meter; and in accordance with a depreciation schedule.  It also requires EDCs to submit time-of-use rates and real-time price plans which may be offered to those customers with smart meters.  Smart meters and time-based rates are essential components of any plan to reduce peak demand.
  • Confirms that EDCs must obtain energy through a prudent mix of contracts, with an emphasis on competitive procurements to ensure that adequate and reliable electricity is supplied at the least cost to customers.
  • Encourages energy independence by providing greater incentives for the development of Pennsylvania biomass energy resources and regional hydropower resources.
  • Imposes an affirmative obligation on electric distribution companies to seek monetary damages from energy suppliers for market misconduct, and to refund any monies recovered to ratepayers.

Pennsylvania law tries to cut electricity usage (AP 10/16/08)

HARRISBURG, Pa. – Pennsylvania has begun a major effort to cut electricity use, requiring the state’s 11 utilities to not only stop power usage from rising, but to cut it starting in 2011.

Legislation that Gov. Ed Rendell signed Wednesday requires the utilities to cut annual electricity usage by at least 1 percent by May 31, 2011, based on usage estimates made by state regulators, who can take into account a major anomaly, such as an unusually hot summer or a substantial surge in demand from a new user, such as a factory.

To ensure that utilities take the task seriously, the new law allows up to $20 million in penalties for failure to meet the benchmarks for electricity usage cuts.

“That certainly should get the companies to look at what’s been going on around the country and adopt some of the more successful programs,” said Sonny Popowsky, the state’s utility consumer advocate and a supporter of the new law.

Utilities will have to find ways to get people and businesses to use less electricity on the hottest summer days, when electricity is the most expensive. That could include enrolling the owners of homes and office buildings in a program to temporarily switch off hot water heaters or air conditioners.

To cut electricity usage at all other times, utilities will have to get more fluorescent lamps into light sockets to replace less efficient incandescent bulbs.

They will have to figure out how to entice people to insulate their homes to save electric heat and replace old, energy-sucking refrigerators and other appliances with newer, more efficient models.

Electricity usage in the Pennsylvania and the United States grows at a rate of about 1 percent to 2 percent annually.

By May 31, 2013, utilities have to cut usage by at least 3 percent, as well as slash 4.5 percent from electricity usage during the 100 highest-use hours of the year.

Utilities said they are still in the early stages of developing proposals for how they will approach the mandate and did not want to speak about their specific plans.

They acknowledge that the law will force them to adopt new usage-reduction tactics beyond a raft of education programs they have, including Web sites that dissect each residential customer’s electric usage and how to reduce it.

“It’s a big number. It’s going to take some changes in terms of what we do and what we’ve done in the past, but it’s not an insurmountable number,” said Scott Surgeoner, a spokesman for FirstEnergy Corp., the Ohio-based power company that owns Pennsylvania Electric Co., Pennsylvania Power Co. and Metropolitan Edison Co.

By July 1, each utility must file a plan with the Pennsylvania Public Utility Commission to achieve the cuts. The commission must hold a public hearing on each plan and has about four months to approve or reject them.

The electricity conservation efforts will be expensive, and utilities can bill rate payers for that cost, up to 2 percent of their revenue from 2006. Utilities must be able to show that savings from the plans will pay their own cost , at least , within 15 years.

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