Presentation at the Energy Efficiency Programs Workshop Taking Utility Energy Efficiency Programs to the Next Level in New Mexico Howard Geller Presentation at the Energy Efficiency Programs Workshop Santa Fe, NM Dec. 4, 2007

Electric Utility DSM Funding in the Southwest Continues to Grow State DSM program budget (million $ per year) 2002 2004 2005 2006 2007 (est) 2008 (est) AZ 4 10 19 32 42 CO 11 21 24 18 25 NV 3 14 30 36 48 NM 1 UT 9 16 20 33 WY ~0 Region 29 54 70 93 127 166

Energy Savings Are Growing Too Xcel Energy (CO) reducing electricity use by ~0.5% per year, but proposing to achieve savings of 0.75% per year Rocky Mountain Power (UT) reducing electricity use by ~0.6% per year and still expanding programs and savings Nevada Power Co. (southern NV) achieved savings of 0.7% in 2006 and expanding Sierra Pacific Power Co. (northern NV) proposing to reduce electricity use by 1.0% per year during 2008-2010

Status of Decoupling and Utility Shareholder Incentives in the Region Nevada utilities earn additional 5% ROI on equity portion of DSM expenditures APS earns a bonus equal to 10% of net economic benefits, capped at 10% of expenditures Colorado legislation directs PUC to provide utilities with a profit opportunity for both gas and electric DSM programs Xcel Energy has proposed receiving a bonus equal to a small percentage of net economic benefits in both CO and NM

Status of Decoupling and Utility Shareholder Incentives in the Region Questar Gas Co. has received approval of gas sales-revenue decoupling on a pilot basis in conjunction with implementing comprehensive gas DSM programs Nevada legislation directs PUC to adopt decoupling for gas utilities

Recommendations for New Mexico Expand utility energy efficiency programs significantly striving for savings of 0.75-1.0% of electricity sales each year Provide utilities with a “carrot” – a performance-based financial incentive if they exceed certain energy savings targets Adopt a shared savings approach whereby utilities are allowed to “keep” a small percentage of net economic benefits (or a small percentage of expenditures), with the % increasing as energy savings increase

Example of Potential Incentive Structure

SWEEP: Dedicated to More Efficient Energy Use in the Southwest Resources available online at: www.swenergy.org Howard Geller, Executive Director Southwest Energy Efficiency Project (SWEEP) 303-447-0078 hgeller@swenergy.org