Opting Out of Energy Efficiency Plans – Is it Right for You?

Art Malatzky

At least several states with energy efficiency surcharges in their electric rate schedules now allow customers to opt-out of these charges if they can show they have implemented their own plans that provide measurable results. Ecova customers are beginning to ask what these surcharges are, under what conditions can they opt-out and, most importantly, is opting out right for them. The answers to those questions are both utility and customer specific but a general discussion is in order.

Many states have mandated, whether through legislation or regulation, that their utilities provide support to energy efficiency efforts, primarily focused on reducing electricity usage and demand by their customers. The desire to have these programs is driven by the presumed benefits of limiting demand for new generating capacity as well as for environmental improvement, primarily a reduction in greenhouse gas emissions. These programs tie in with—but are not necessarily directly related to—support for renewable energy, even though these programs and costs collectively are often referred to as “societal benefit programs.” Revenue collected through surcharges is used to fund rebates and subsidies for energy efficiency improvements by their customers. Many of these programs simply add an additional charge per kilowatt-hour to a customer’s bill, without limitation on how much any single customer can contribute to the program, and therein lies the problem for larger, primarily industrial, customers. Programs tend to be designed to help residential and commercial customers, with few if any programs specifically targeting larger users. Large customers thus pay into the programs with little or no benefit directed toward them and, with the growth of these programs over the years, larger customers
have seen increased costs to subsidize others while also putting their own funds into their own
efficiency efforts.

In recent years, large customers have worked with utilities and regulators to develop an opt-out provision for all or part of these surcharges. In states such as Ohio, Virginia and North Carolina, some customers are allowed to opt out of these surcharges if they can show they have their own energy efficiency programs in place and that these programs provide an equal or greater benefit than the utility program provides. The idea is that larger (again, primarily industrial) customers have a greater incentive to conserve energy due to competitive pressures and can provide a bigger bang for the investment buck if they self-direct funds to their own efforts rather than direct those funds to support a large pool of diverse, much smaller customers. Most such programs require significant documentation and annual verification of investment and returns.

To answer the question being asked by some Ecova customers – “should we opt out?” – We would have to say “maybe.” If a customer already has a well-documented, in-house energy efficiency program that can prove significant annual investment and energy savings in a specific utility within a state that allows opt-outs, the answer could be “yes.” Otherwise, the work involved in measurement and verification for smaller customers is generally not worth the effort given the surcharge amounts paid. The benefits in rebates and other utility programs often outweigh the costs of participation. That being said, it is always wise to ask the question and allow Ecova to evaluate your specific case. The question alone may suggest that the customer may not be taking full advantage of available programs and Ecova may be able to identify new areas of energy efficiency opportunity.

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The information in this page is offered only for general informational and educational purposes. It is not offered as and does not constitute legal advice.

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