H. B. 4363
(By Delegates Manypenny, Fleischauer, Staggers,
Guthrie, Talbott, Doyle and Fragale)
[Introduced January 31, 2012; referred to the
Committee on the Judiciary then Finance.]
A BILL to amend the Code of West Virginia, 1931, as amended, by adding thereto a new article, designated §24-2G-1, §24-2G-2, §24-2G-3, §24-2G-4, §24-2G-5, §24-2G-6, §24-2G-7, §24-2G-8, §24-2G-9, §24-2G-10 and §24-2G-11, all relating to energy efficiency for electric and gas utilities and their customers; defining terms; establishing required energy efficiency programs and plans; setting forth time tables; establishing targets and goals; identifying certain metering and grid technologies; providing for revenue sharing; establishing penalties; providing for customer self direct option; allowing for administration by third-party entities; and providing for $600,000 in special license fees for implementation purposes.
Be it enacted by the Legislature of West Virginia:
That the Code of West Virginia, 1931, as amended, be amended by adding thereto a new article, designated §24-2G-1, §24-2G-2, §24-2G-3, §24-2G-4, §24-2G-5, §24-2G-6, §24-2G-7, §24-2G-8, §24-2G-9, §24-2G-10 and §24-2G-11, all to read as follows:
ARTICLE 2G. Energy Efficiency.
§24-2G-1. Short title.
This article shall be known as the "West Virginia Energy Efficiency Act."
§24-2G-2. Findings and purpose.
The Legislature finds and declares that:
(1) Energy efficiency is among the least expensive ways to meet the growing electricity demands of the state; and
(2) To provide affordable, reliable and clean energy for consumers of West Virginia, it is the goal of the state to, based on electricity consumption for calendar year 2010, achieve the following energy efficiency, conservation and demand response targets:
(A) Savings of fifteen percent of 2010 electricity sales by the end of 2025; and
(B) Savings of fifteen percent of 2010 peak demand by the end of 2025.
As used in this article:
(1) “Demand response program” means a program established by an electric utility that promotes changes in electricity usage by customers from their normal consumption patterns in response to:
(A) Changes in the price of electricity over time; or
(B) Incentives designed to promote lower electricity use at times of high wholesale market prices or when system reliability is jeopardized.
(2) “Commission” means the West Virginia Public Service Commission.
(3) “Cost effective” means a standard that is met for an energy efficiency program if, on a life cycle basis, the total avoided supply-side costs to the utility, including representative values for electricity or natural gas supply, transmission, distribution, and other associated costs, are greater than the total costs to the utility of administering and delivering the energy efficiency program.
(4) “Electricity consumption” and “electricity consumed” mean the sum of retail electricity sales to all customers and reported electricity losses within the electric distribution system.
(5) “Peak demand” means the highest level of electricity demand in the state measured in megawatts during the period from January 1 to December 31 of a year on a weather-normalized basis.
(6) “Plan” means an electricity savings and demand reduction plan and cost recovery proposal.
§24-2G-4. Energy efficiency programs required.
(a) Beginning with the 2013 calendar year and each year thereafter, the commission shall calculate:
(1) The electricity consumption for each year; and
(2) The peak demand for each year.
(b) Subject to review and approval by the commission, each electric utility shall develop and implement programs and services to encourage and promote energy efficiency improvements and conservation of energy by consumers, commercial and industrial end users and electric utilities.
(c) As directed by the commission, each municipal electric utility and each electric cooperative that serves a population of less than fifty thousand in its service territory shall include energy efficiency and conservation programs or services as part of the services provided to its customers.
(d) The commission shall:
(1) Require each electric utility to establish a program or service that the commission finds appropriate and cost-effective to encourage and promote energy efficiency improvements and conservation of energy; and
(2) Adopt rate–making policies that provide cost recovery for all energy efficiency and demand response programs approved by the commission under subsection (e) of this section and, in appropriate circumstances, reasonable financial incentives for gas utilities and electric utilities who implement programs and services that successfully achieve customer energy efficiency improvements and conservation of energy.
(e) Except as provided in subsection (c) of this section, by December 31, 2012, by rule or order, the commission shall:
(1) To the extent the commission determines that cost-effective energy efficiency and conservation programs and services are available, for each affected class, require each electric utility to:
(A) Provide cost-effective energy efficiency and conservation programs for its electricity customers; and
(B) To achieve through such programs, at a minimum, verifiable electricity savings equivalent to the following cumulative percentages of electricity consumed in the electric utility’s service territory during the year 2010:
(i) Five percent of 2010 sales by the end of 2013;
(ii) One and one-quarter percent of 2010 sales by the end of 2014;
(iii) Two percent of 2010 sales by the end of 2015;
(iv) Three percent of 2010 sales by the end of 2016;
(v) Four percent of 2010 sales by the end of 2017; and
(vi) Five percent of 2010 sales by the end of 2018.
(2) Require each electric utility to:
(A) Implement a cost-effective demand response program in the electric utility’s service territory; and
(B) Achieve, through demand response and energy efficiency programs, relative to the peak demand of electricity consumed in the electric utility’s service territory during the year 2010, a targeted cumulative reduction of:
(i) One-half percent of 2010 peak demand by the end of 2013;
(ii) One and one-quarter percent of 2010 peak demand by the end of 2014;
(iii) Two percent of 2010 peak demand by the end of 2015;
(iv) Three percent of 2010 peak demand by the end of 2016;
(v) Four percent of 2010 peak demand by the end of 2017; and
(vi) Five percent of 2010 peak demand by the end of 2018.
(f) By December 31, 2017, the commission shall:
(1) Review the performance of the utilities in achieving the targets set forth in subsections (e)(1) and (e)(2) of this section, together with information about future energy savings potential, and develop recommendations as to whether there should be any adjustments, up or down, in the following cumulative energy efficiency and peak demand reduction targets proposed for 2019 through and including 2025:
(A) Six and one-quarter percent of 2010 peak demand and six and one-quarter percent of 2010 electricity sales by the end of 2019;
(B) Seven and one-half percent of 2010 peak demand and seven and one-half percent of 2010 electricity sales by the end of 2020; (C) Eight and three-quarter percent of 2010 peak demand and eight and three-quarter percent of 2010 electricity sales by the end of 2021;
(D) Ten percent of 2010 peak demand and ten percent of 2010 electricity sales by the end of 2022;
(E) Eleven and six-tenths percent of 2010 peak demand and eleven and six-tenths percent of 2010 electricity sales by the end of 2023;
(F) Thirteen and three-tenths percent of 2010 peak demand and thirteen and three-tenths percent of 2010 electricity sales by the end of 2024; and
(G) Fifteen percent of 2010 peak demand and fifteen percent of 2010 electricity sales by the end of 2025.
(2) Provide any other recommendations for improving the ability of West Virginia to achieve the state goal of saving the equivalent of fifteen percent of 2010 electricity sales and peak demand by the end of 2025.
(3) After providing opportunity for public comment, report its findings to the interim Joint Committee on Economic Development.
(g)(1) By September 1, 2012, and every three years thereafter, an electric utility shall:
(A) Consult with the commission regarding the design and adequacy of its plan to achieve the electricity savings and demand reduction targets specified in subsection (e) of this section; and
(B) Provide the commission with any additional information regarding the plan that the commission requests.
(2) By September 1, 2012, and every three years thereafter, each electric utility shall submit its plan to the commission that details the electric utility’s proposals for achieving the electricity savings and demand reduction targets specified in subsection (e) of this section for the three subsequent calendar years.
(3) Each electric utility shall provide annual updates to the commission on plan implementation and progress towards achieving the electricity savings and demand reduction targets specified in subsection (e) of this section. As part of these updates, each utility shall follow evaluation guidance provided by the commission under subsection (g) of this section.
(4) Each plan shall include:
(A) A description of the proposed energy efficiency and conservation programs and services and the proposed demand response program, anticipated costs, projected electricity savings and any other information requested by the commission; and
(B) Energy efficiency programs for residential, commercial and industrial sectors, as appropriate, including low-income communities and low-to-moderate income communities.
(5) The commission shall review each electric utility’s plan to determine if the plan is adequate and cost-effective in achieving the electricity savings and demand reduction targets specified in subsection (e) of this section.
(6) The commission may request additional information from an electric utility regarding its plan.
(h)(1) The commission shall establish rules for evaluating the savings from energy efficiency and demand response programs, seeking to balance accuracy and cost and based on best practices from other states.
(2) In monitoring and analyzing the impact of a program or service under paragraph (1) of this subdivision, if the commission determines that the outcome of the program or services may not be providing the best possible results, the commission shall direct the electric utility to include in its annual update, under subdivision (3), subsection (f) of this section, specific measures to address the findings.
§24-2G-5. Energy efficiency program reports.
(a) On or before January 1 of each year, the commission shall report to the Legislature on:
(1) The status of programs and services to encourage and promote energy efficiency improvements and conservation of energy, including, to the extent possible, an evaluation of the impact of programs and services on energy use, energy costs and jobs in the state. In addition, specific sections in the report shall discuss the energy efficiency programs and services directed to low-income communities, low-to-moderate income communities, businesses and other particular classes of ratepayers;
(2) A recommendation for the appropriate funding level to adequately fund these programs and services; and
(3) The electricity consumption and the peak demand for the previous calendar year.
(b) By December 31, 2013, the commission shall:
(1) Study the feasibility of setting energy savings targets in 2016 and 2021 for natural gas companies; and
(2) After providing opportunity for public comment, report its findings to the Senate Committee on Finance and the House of Delegates Committee on Finance.
§24-2G-6. Smart meter and smart grid technology.
The commission shall evaluate whether advanced meter technology, commonly known as “smart meters”, and digital automation of the components of the entire power supply system, commonly known as “smart grid”, are cost–effective in reducing consumption and peak demand of electricity. If smart meter or smart grid technology are found to be cost–effective, the commission shall allow appropriate cost recovery for any electric utility to implement cost-effective smart meter or smart grid technology in its service territory.
§24-2G-7. Revenue sharing.
(a) The commission shall establish performance incentives under this article by which the utility and the customer share the economic benefits of energy conservation. Such performance incentives shall be structured to:
(1) Require that the utility meet at least ninety percent of its energy savings goal in a given year in order to receive an incentive for that year;
(2) Preclude the utility from receiving compensation for revenues lost due to energy efficiency program savings in any year for which actual electricity sales exceed the sales forecast upon which rates were set;
(3) Ensure that the utility engages in incremental conservation efforts to meet and maintain energy efficiency requirements;
(4) Require the utility to demonstrate that the reduced usage reflected in revenue sharing adjustments are specifically linked to the utility’s promotion of energy efficiency programs; and
(5) Base incentives on the utility's performance in achieving energy efficiency targets with the incentive structured as a percentage of the utility's energy efficiency spending. Incentives shall begin as performance targets are approached and the incentive increased as targets are reached and further increased as targets are exceeded. Such incentives may not exceed, in the maximum case, twenty percent of utility spending on energy efficiency programs.
(b) The commission may authorize a utility that spends a minimum of one and one-half percent of total retail sales revenues in a year on commission-approved energy efficiency programs to implement a symmetrical revenue decoupling true-up mechanism that adjusts for sales volumes that are above or below the projected levels that were used to determine the revenue requirement and set retail rates authorized in the utility’s most recent rate case. The commission may authorize such decoupling regardless of whether the utility’s energy efficiency programs are administered by the utility or an independent energy efficiency program administrator under section ten of this article.
§24-2G-8. Special license fee.
(a) (1) Notwithstanding any other provision of this code, for fiscal year 2012 only, in addition to the amounts appropriated in the budget bill for fiscal year 2012, the commission may establish up to $600,000 as a special license fee for the commission and its Consumer Advocate Division to accomplish the requirements of this article.
(2) Of the $600,000 that may be collected under subdivision (1) of this subsection:
(A) Up to $500,000 may be expended in accordance with an approved budget amendment for consultants, personnel and related expenses of the commission as it determines is necessary to accomplish the requirements of this article; and
(B) Up to $100,000 may be expended in accordance with an approved budget amendment for consultants, personnel and related expenses of the Consumer Advocate Division as it determines is necessary to accomplish the requirements of this article.
(3) The special license fee shall be imposed only on those electric utilities otherwise subject to the license fees under section six, article three, chapter twenty-four of this code. The amounts collected shall be deposited in the Public Service Commission Fund.
(4) The amount of the bill sent to each electric utility subject to the special license fee shall be that amount resulting from multiplying:
(A) The amount authorized to be collected under this subsection; and
(B) The ratio of gross operating revenues of the entity subject to the special license fee to the total gross operating revenues for all entities subject to the special license fee.
(b) It is the intent of the Legislature that, beginning with fiscal year 2012, the annual state budget include amounts for the commission and the Consumer Advocate Division for the implementation of this article, including consultants, personnel and related expenses.
§24-2G-9. Self-direct option.
(a) An eligible primary or secondary electric customer may direct up to eighty percent of any energy efficiency charge on electricity usage that the customer would otherwise incur, based on projected energy usage for the duration of the customer's proposed self-directed plan, towards developing and implementing a self-directed energy efficiency plan as provided in this section.
(b) Eligibility requirements for participation in the self-direct option under subsection (a) of this section are as follows:
(1) The customer must have had an annual peak demand in the preceding year of at least two megawatts at each site to be covered by the self-directed plan or ten megawatts in the aggregate at all sites to be covered by the plan; and
(2) The customer must comply with all provisions established by the commission under this section, including subsections (c), (d),(e),(g) and (h) of this section.
(c) The commission shall by order establish the rates, terms, and conditions of service for customers related to this section.
(d) The commission shall by order do all of the following:
(1) Require a customer to develop and file with the provider and the commission a self-directed energy efficiency plan meeting the requirements in subsection (e) of this section and provide evidence each year that it has implemented the self-directed plan; and
(2) Take such additional actions as necessary to effectively implement the self-directed energy efficiency program option in a manner that provides verifiable energy efficiency savings.
(e) All of the following apply to a self-directed energy efficiency plan under subsection (a) of this section:
(1) The self-directed plan shall cover not less than one nor more than three years;
(2) The self-directed plan shall provide for aggregate energy savings from new energy efficiency measures that for each year meet or exceed the energy efficiency performance standards in subdivision (1), subsection (e), section four of this article. The percentage savings shall be computed using the electricity purchases in 2010 for the site or sites covered by the self-directed plan;
(3) Under the self-directed plan, none of the following are included in the calculation of cumulative energy savings:
(A) Changes in electricity usage because of changes in business activity levels not attributable to energy efficiency measures; and
(B) Changes in electricity usage because of the installation, operation or testing of pollution control equipment; and
(4) The self-directed plan shall describe how the customer intends to achieve the energy savings specified in the self-directed plan.
(f) Verified energy savings from energy efficiency measures implemented under a self-directed plan may be attributed to the relevant provider's energy efficiency programs for the purposes of determining annual cumulative savings achieved by the provider under subdivision (1), subsection (e), section four of this article.
(g) Once a customer begins to implement a self-directed plan at a site covered by the self-directed plan, that site qualifies for the up to eighty percent self-direct option described in subsection (a) of this section and is not eligible to participate in the relevant electric provider's energy efficiency programs.
(h) A customer implementing a self-directed energy optimization plan under this section shall submit to the customer's electric provider every year a brief report documenting the energy efficiency measures taken under the self-directed plan during that period and the corresponding energy savings that will result. The report shall provide sufficient information for the provider and the commission to monitor progress toward the goals in the self-directed plan and to develop reliable estimates of the energy savings that are being achieved from self-directed plans. A customer shall promptly notify the provider in its annual report if the customer fails to achieve cumulative energy savings as set forth in its self-directed plan. If a customer submitting a report or notice under this subsection wishes to amend its self-directed plan, the customer shall submit with the report or notice an amended self-directed plan. A report under this subsection shall be accompanied by an affidavit from a knowledgeable official of the customer that the information in the report is true and correct to the best of the official's knowledge and belief. If the customer has retained an independent energy efficiency service company, the requirements of this subsection shall be met by the energy efficiency service company.
(i) An electric provider shall provide an annual report to the commission that identifies customers implementing self-directed energy optimization plans and summarizes the results achieved for each of those customers under these self-directed plans. The annual report shall also describe the steps taken by the electric provider to independently verify the reported energy efficiency measures and the estimated savings. The commission may request additional information from the electric provider. If the commission has sufficient reason to believe the information is inaccurate or incomplete, it may request additional information from the customer to ensure the accuracy of the report.
(j) If the commission determines that the minimum energy efficiency goals under subdivision (2), subsection (e) of this section have not been achieved at the sites covered by a self-directed plan, in aggregate, the customer will no longer be allowed to participate in the self-direct option and must begin paying the full normal energy efficiency charge. In addition, the commission shall order the customer or customers collectively to pay to the provider, for exclusive use in funding energy efficiency programs, an amount calculated as follows:
(1) Determine the proportion of the shortfall in achieving the minimum energy optimization goals under subdivision (2), subsection (e) of this section; then
(2) Multiply the figure under subdivision (1) of this subsection by the energy efficiency charges which the customer or customers collectively avoided under subsection (a) of this section; then
(3) Multiply the product under subdivision (2) of this subsection by a number not less than one nor greater than two, as determined by the commission based on the reasons for failure to meet the minimum energy efficiency goals.
§24-2G-10. Third-Party Administration.
In place of utility-specific programs developed pursuant to section four of this article, the commission may, after notice and opportunity for hearing, provide for the development, implementation and monitoring of gas and electric energy efficiency and conservation programs and measures, including programs and measures delivered in multiple service territories, by one or more entities appointed by the commission for these purposes. The commission may specify that the implementation of these programs and measures satisfies a utility's corresponding obligations, in whole or in part, under section four of this article and under any prior orders of the commission. If such an independent third-party entity administers energy efficiency programs in lieu of the utility under this section, the annual incremental energy savings requirements described in section four of this article shall apply to that third-party administrator for any years that this entity administers such programs. The commission has the authority to fund energy efficiency and conservation programs developed, implemented and monitored by an independent entity under this section via a volumetric charge to customers. The charge shall be known as the energy efficiency charge and shall be paid to a fund administrator appointed by the commission. Funds collected through an energy efficiency charge shall not be funds of the state, shall not be available to meet the general obligations of the government and shall not be included in the financial reports of the state. The commission will annually provide the Legislature with a report detailing the revenues collected and the expenditures made for energy efficiency programs under this section.
The provisions of this article are severable and if any phrase, clause, sentence or provision is declared to be invalid or is preempted by federal law or regulation, the validity of the remainder of this article is not affected.
NOTE: The purpose of this bill is to provide the Public Service Commission the authority to require electric utilities to develop and implement plans for the efficient use, conservation and reduction of energy usage. The bill sets forth goals to achieve energy savings equivalent to five percent of 2010 sales by 2018, and directs the Public Service Commission to establish targets through 2025 by December 31, 2017. The bill also requires electric utilities to submit plans for reaching those goals, provides for revenue sharing and the opportunity for financial incentives for gas and electric utilities to establish energy saving programs. Additionally, the bill authorizes a special license fee up to $600,000 to be collected from the affected utilities to implement the bill’s requirements. The bill also provides for a self-direct option for large, energy customers.
This article is new; therefore, it has been completely underscored.