A Battle is Brewing Over Industrial Energy Efficiency in the Keystone State

Posted by Daniel Bloom and JR Tolbert on Nov 3, 2016 1:34:07 PM


On Oct. 25, the Pennsylvania Senate passed Senate Bill 805, which would exempt large industrial and commercial energy users from participating in the Commonwealth’s efficiency programs, under Act 129, by a vote of 35-13. The vote was largely symbolic, since the House is not expected to act on SB 805 in the last two days the legislature will be in session, Nov. 14 and 15. That means the bill will not become law, at least this year. But it does set the stage for a battle next year over letting statewide efficiency gains – and utility bill savings for all customers – become subject to corporate whim.

As the biggest customers of their electric utilities, large industrials are typically the biggest beneficiaries of energy efficiency programs. In the Duquesne Light Co. service territory, industrial companies received $1.4 million in incentives for energy efficiency investments last year. Large commercial and industrial (C&I) customers in the PECO service territory have received a total of $8.5 million in benefits since Act 129 went into effect. But some industrial customers object to paying into energy efficiency funds when they can manage their own energy upgrades themselves. In that case, provisions can be structured in a manner that gives large consumers more leeway to manage their own efficiency investments while also supporting making such options available to other customers, both C&I and residential.

As currently structured, SB 805 would allow some of Pennsylvania’s largest companies to no longer pay into a pool of funding that finances energy efficiency upgrades at not only their own facilities, but also across the small commercial and residential sectors. If you pull the largest electricity consumers in the state out of Act 129, it means that small businesses and households will take on a disproportionate amount of responsibility needed to meet Act 129 energy conservation targets.

Instead, SB 805 will give industrials the option of withdrawing from Act 129 entirely – essentially taking their ball and going home. Big companies pulling out of Act 129 will undermine efforts to encourage small business and residential ratepayers to make energy efficiency improvements, and undercut a growing industry that now employs 53,000 Pennsylvanians. It will also potentially unravel Pennsylvania’s energy efficiency programs, which have been successful in saving energy and lowering energy bills for participants while reducing the cost of additional utility investments for all.

Considering the long value chain behind energy efficiency investments, local jobs at stake include those in the manufacturing, construction, engineering, architecture, craft trades, software development, and financial sectors. But the full extent of job losses that would result from SB 805 is largely unknown because the Senate passed the bill without a single public hearing, independent economic analysis, or opportunity for public and expert input, even though it’s been pending since it was introduced in May 2015 by principal sponsors Senators Patrick Browne (R-District 16) and Lisa Boscola (D-District 18).

Look what’s happened in other places that have pulled the plug on successful energy efficiency programs. In 2014, Indiana – a state with a similar energy portfolio to Pennsylvania’s – ended its Energizing Indiana program at the behest of a few large industrial users that pushed for an opt-out, placing in jeopardy more than 19,000 jobs created under the program, according to an independent evaluation.

It doesn’t have to be this way. In order to develop a more thoughtful dialogue about ways for energy efficiency programs to benefit Pennsylvania’s industrial sector, Advanced Energy Economy Institute (AEE Institute) and our partner in Pennsylvania, the Keystone Energy Education Fund (KEEF), have convened roundtable discussions with utility leaders and advanced energy executives to discuss opportunities and challenges for industrial efficiency in Pennsylvania.

The most recent Industrial Energy Efficiency Roundtable was held in Philadelphia on June 23. That forum brought together 20 leading thinkers on industrial energy efficiency, including regional utilities, local energy users, and efficiency service providers. Participants stressed the importance of using industrial efficiency as a way to save money for large energy users and to enhance grid reliability, providing customer savings and driving economic growth in Commonwealth. With Pennsylvania’s industrial customers consuming 34% of total electricity generated in the state, energy efficiency has a lot to offer all parties.

In contrast, if the legislature moves forward with an opt-out that favors a small set of industrial customers over all Pennsylvania ratepayers, the state can expect to see a large reduction in energy efficiency investment, higher electricity bills for all, more price volatility in fuel costs, and decreased grid reliability, as the outdated approach of every customer using more and more electricity continues apace.

As the 2017 legislative session approaches, AEE and the Keystone Energy Efficiency Alliance, AEE’s state partner in Pennsylvania, will work to ensure that the successor bill to SB 805 gets a full vetting during the committee review process – and its flaws, from both the jobs and ratepayer perspectives, exposed.

Last year, the PUC’s decision to extend Phase III of Act 129 through 2021 was a victory for Pennsylvania electricity users. The PUC is also the right body to say how, if at all, Act 129 should be tailored to the needs of large consumers without depriving residential and small commercial customers of help in making energy efficiency investments that lower their electricity bills. In the coming year, AEE and its state partner, Keystone Energy Efficiency Alliance, will be hard at work trying to stop this ill-considered bill in the legislature, and pushing the conversation about industrial energy efficiency in more productive directions.

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Topics: State Policy