“Energy Efficiency in Buildings” (Some things to keep in mind as the day unfolds) Joanna Prukop, Cabinet Secretary NM Energy, Minerals and Natural Resources Dept. Taking Utility Energy Efficiency Programs to the Next Level Office of the Governor NM Public Regulation Commission NM Energy, Minerals and Natural Resources Department 4 December 2007

2 This workshop intends to… debunk a few myths around energy efficiency: Energy efficiency is not reliable enough for utilities to be able to treat it as a resource similar to a supply generation resource. Since its effectiveness is determined by the utility’s customers and not the utility, it’s a “soft” resource that utilities can’t rely on as a means to reduce or delay new supply generation resources. Customers could change their energy using behavior at any time – quickly and substantively increasing loads  leaving the utility lacking adequate generation resources

3 Debunking the EE myths Utility Energy Efficiency Programs only benefit those customers that are able to and do take advantage of the EE incentives offered by the utility. All other customers are worse off because they: just pay more in their utility bills because of the EE tariff. are, in essence, subsidizing those customers that take advantage of the incentives. Utility EE Programs unfairly hurt low income families the most.

4 Energy Efficiency is Real and Reliable ? One slide says it all…. 30 years of documented, sustained delivery of effective EE

5 We’re not “charting new territory” here…. EE has 3 decades of proven track record. * 30 years ago California “parted ways” with the rest of the country and aggressively pursued EE Reliable: California electric utilities’ system operators do NOT live in constant fear that the California load line will jump to the U.S. load line overnight! Cost Effective: EE is less than half the costs in ¢/kwh than new supply generation. How much higher would California electric rates be if EE wasn’t embraced 30 years ago? How many more billions $ would California utility customers have spent during those 3 decades? How much lower would recent NM utility rate increase requests be if NM had also embraced EE 30 years ago?

6 Released on July 31, 2006 at the National Association of Regulatory Utility Commissioners meeting Goal: To create a sustainable, aggressive national commitment to energy efficiency through gas and electric utilities, utility regulators, and partner organizations Over 50 member public-private Leadership Group developed five recommendations and commits to take action Additional commitments to energy efficiency – exceeds 90 organizations November 2007 NAPEE “Vision” for 2025 Report: Achieve all cost- effective EE National Action Plan for Energy Efficiency Recommendations 1.Recognize energy efficiency as a high- priority energy resource. 2.Make a strong, long-term commitment to implement cost-effective energy efficiency as a resource. 3.Broadly communicate the benefits of and opportunities for energy efficiency. 4.Provide sufficient, timely and stable program funding to deliver energy efficiency where cost-effective. 5.Modify policies to align utility incentives with the delivery of cost-effective energy efficiency and modify ratemaking practices to promote energy efficiency investments. National Action Plan for Energy Efficiency

7 NAPEE Findings: Despite Proven Cost-Effectiveness, Utility Sector Energy Efficiency Declined between (indicates reality of existing disincentives) Annual Spending on Utility Sector Energy Efficiency Programs Source: Data from ACEEE 2005 Scorecard adjusted for inflation using U.S. Department of Labor Bureau of Labor Statistics Inflation Calculator

8 National Action Plan for Energy Efficiency - Key Findings July 2006 U.S. DOE and EPA EE programs are saving energy at an avg. cost of ½ of the cost of new electric power sources and about 1/3 the cost of providing natural gas. (1-3) Electric EE: 2-4 ¢/kwh Gas EE: $ /MMBtu EE can meet a significant portion of load growth PacNW region met 40% of its load growth with EE over past 2 decades Calif. PUC EE Goal: EE displace >50% of projected load growth (forgoing 3,500 MW power plants)

9 A Key NAPEE Finding to Understand: Realizing and accounting for the system-wide cost-effective benefits of EE requires patience! Historic utility commission rate making focused primarily on comparatively short-term rate setting. EE’s cost-effective ability to forego the need for costly new supply generation (often 10+ years out) is not taken into consideration. “A short-term focus on low rates can lead to costly missed investment opportunities and higher overall costs of electricity service over the long run” (p. 2-10). Akin to buying a $6, one year life garden hose every year, when a $20, ten year life one is available. Each year, the $6 purchase seems like the cost-saver.

10 EE benefits accumulate over time, not immediately During the initial years, of utility EE expenditures, only those customers that take advantage of the EE programs offered will see bill reductions. “Over the long-term, benefits can extend to all customers.” (p.2-10). Especially for low-income customers. “A commitment to EE means accepting a new cost in rates over the short-term (e.g. the EE tariff) to gain greater system benefits and lower long-term costs…” (2-10). Historic rate-setting “myopia” must be replaced with an approach that recognizes the cumulative role EE can play in keeping both rates and customers’ bills lower over the long- term.

11 Other NM EE in Buildings Initiatives Complementing Utility EE Programs Lead by Example Executive Order for State Buildings Governor’s New Energy Efficiency Executive Order setting statewide EE targets EE Building Codes for New Construction Cost-effective measures that go beyond the IECC 2006 code Construction Industries Division establishing a new Green Building Bureau Sustainable Building Tax Credits Commercial and 1 st in the nation residential Appliance and lighting standards – 2008 legislation Banning the incandescent heat (light) bulb! EE HVAC systems tax credits – 2008 legislation Funding for low income weatherization