Successes, Opportunities and Challenges Marsha Smith Commissioner, Idaho Public Utilities Commission President, National Association Regulatory Utility Commissioners EPRI Summer Seminar August 4, 2008

Successes Near Universal Utility Acceptance As A Resource Many Successful Program Models Spanning all customer segments Utility operated and non-utility programs Improved Building Codes & Appliance Standards i.e Energy Act phase out of incandescent bulbs Move towards “Smart Grids”

Successes Idaho Governor, Public Utilities Commission, Energy Division and Department of Environmental Quality: Fixed-cost adjustment mechanism pilot, expanding by 6 times money available for low-income weatherization, 2007 Idaho Energy Plan requires cost-effective conservation, EE and demand response as priority resources in IRP filings. California MOU (also captures Governor, Utilities, State Government): EE institutionalized as first priority resource for IOUs and POUs; CPUC adopted new performance- base EE risk/reward mechanism; new Big Bold EE Strategies extends goals through 2020; continued support for best practices database NJ Board of Public Utilities: With other state agencies, set goal to reduce projected energy use by 20% by 2020 NY PSC: Energy Efficiency Portfolio Standard (EPS) for a 15% reduction in electricity usage below the 2015 forecasted level; to establish goal for gas Hawaii PUC: EE Order determined cost recovery and incentives mechanisms Vermont Public Service Board: 2008 budget is 76% higher than previous EE statutory cap; EE and DSM receiving capacity payments in ISO-NE

Successes BPA: on track to achieve its higher 260 aMW 5-year target savings Duke Energy: hosted Energy Efficiency Summits and stakeholder collaboratives in its five states; increased efficiency program offerings Entergy: new programs in Arkansas; co-funding New Orleans collaborative Exelon: expanded program offerings across sectors Great River Energy: savings goal of 1.5% of annual energy sales MidAmerican Energy Company: 2006 program savings of 36 MW and 160,000 MWh of electricity, and 457,000 Mcf of gas PNM Resources: EE and DR evaluated and modeled consistent and comparable to supply-side resources in IRP; joined with 7 other utilities under Clinton Global Initiative to focus on EE as strategy to reduce GHG emissions. Seattle City Light: Efficiency is "Resource of First Choice" in IRP—140 average MW of cost effective EE over the next 20 years Southern Company: Recent IPR process resulted in 6 new Georgia Power efficiency initiatives, increasing annual spending by $9.4 million

Successes - Idaho Idaho Power: Irrigation Peak Rewards Program Voluntary, 75 horsepower or larger Weekdays, 4-8 p.m. Incentives : $4.36 per kW demand for 3 days/week $3.36 per kW for 2 days per week $2.01 per kW for 1 day/week Nearly 20% of qualifying irrigators participate Average peak reduction of 28.9 MW Maximum peak reduction of 37.4 MW Avista Third-Party Contracting Avista seeks out third-party contractors to augment its programs when specific measures or market segments can benefit from their specialized expertise. HVAC efficiency program, commercial refrigeration, government buildings and multifamily residential customers. This represents approximately 20,000 MWh (10%) of Avista's annual DSM savings.

Opportunities Address Capacity as well as Energy Demand response efforts AC cycling - Idaho Power’s Cool Credits Program Building Codes and Appliance Standards - continue upgrading Market Transformation Compact Fluorescent Bulbs In PNW Pricing Options AMI enhances multiple options Automation Of End Use Controls Occupancy sensors, set back thermostats, Smart Homes - Stagger timing of high demand applications delay water heating if household demand is already high Federal, State, Municipal and Utility Buildings As Demonstrations Overall “Green” movement Conservation is boring; Green is trendy.

Challenges Market Transformation Make EE standard consumer practice Cities with most major buildings lit all night long. Look at buildings you visit – are they using EE?? Lack of Management Commitment/Priority Misperception that energy efficiency is not a guaranteed, reliable cost effective resource Actions not equal to words - Funding allocations may not reflect claimed priorities Possible Solutions Fixed Cost Recovery Third party implementers; Energy Trust of Oregon, Wisconsin Energy Conservation Corporation New Regulatory Approaches???

Challenges, continued Uncertainty - What is the marginal cost? Is nuclear acceptable, financeable, reliable, economical? Will carbon capture be an option? When? Volatility of natural gas prices. Conflicting Studies/Reports McKinsey Study - “How Much At What Cost” – Supports More EE CERA Study – “The Cost of Energy Efficiency Investments” – Questions low EE cost claims Improve evaluation/analysis tools How much EE really is available at any specific price? Setting Appropriate Incentive Levels Most DSM currently acquired at a utility cost that is well below marginal cost. Are higher incentives prudent? Are we cream skimming? Constrained Delivery Resources Staff needs growing while experienced staff is retiring