1. Regulation Reform in the Electricity Industry and its Effects on Energy Efficiency April Kinghorn, Tim Murphy, Stefan Piech, Leah Tivoli, Phelps Turner Supervisor: Prof. George McCourt Client contact: Dr. Mounir Gouja

2. Overview Context Research Question / Hypothesis Case Studies: Argentina, California, Alberta –Price –Demand –Nature of Programs –Expenditures –Savings Conclusions / Recommendations

3. Energy Efficiency: Definitions “An encompassment of all changes that result in decreasing the amount of energy used to produce one unit of economic activity or to meet the energy requirements for a given level of comfort” “Associated to economic efficiency and includes technological, behavioral and economic changes” Context

4. Structure of the Electricity Industry (Brennan, A Shock to the System, 1996)

5. Context Regulation Reform: A Synopsis from our Three Case Studies

6. Research Question: What is the impact of electricity regulation reform on energy efficiency in the residential sector? Hypothesis: Electricity regulation reform will lead to the decline of energy efficiency in the residential sector.

7. Case Studies: Argentina, California and Alberta Price Demand Nature of Programs Expenditures Savings

8. Case Study 1: Argentina

9. Price Tariff Structures for Greater Buenos Aires (Pistonesi, 2000)

10. Price Average Residential Prices in Greater Buenos Aires (Pistonesi, 2000)

11. Demand Electric Power Consumption (kwh per capita) (Pistonesi, 2000)

12. Nature of Programs Only for past 3-4 years Aimed at improving or realigning incentives Short-lived/Ineffective

13. Federal Level: –National Entity for Electricity Regulation –Secretary of Energy –National Office of Rational Energy Nature of Programs

14. Donor, Multilateral, and Bilateral Assistance Programs: Involve institutions, companies, research organizations, technical assistance agencies and NGOs Major players include: The World Bank Inter-American Development Bank (IADB) U.S. Department of Energy (DOE)

15. Expenditures Governmental budgetary allocation to energy efficiency is unknown Total spending by International Donors on energy efficiency is unknown

16. Savings There are currently no programs that have resulted in measurable end-user savings These savings may be seen in the future as programs become more effective

17. Case Study 2: California (CEC, 2002)

18. Price spikes prevented by caps and rate freezes Increased costs absorbed at the wholesale level, leading to utility bankruptcies Price (CEC, 2002)

19. Increases in demand after deregulation do not represent departures from the long-term trend Demand (CEC, 2002)

20. Nature of Programs Before regulation reform: –1974: creation of the California Energy Commission –1974-1998: energy efficiency programs in full swing demand-side management

21. Nature of Programs After regulation reform: Similarities: –Utilities and non-profit organizations advance information on energy efficiency Energy Star™ appliances, electronics, etc. Educational/financial incentives and rebates Low-income weatherization programs

22. Nature of Programs After regulation reform: Differences: –New venue (Internet) –Organized by governmental, independent bodies –Funded by residential consumers –Performance-based regulation affected

23. Expenditures (CPUC, 2001)

24. Savings 1998-2001: Residential and total savings (of MWh) have increased since deregulation (CPUC, 2001)

25. Case Study 3: Alberta

26. Price (Ministry of Energy, 2002)

27. Demand (Ministry of Energy, 2002)

28. Nature of Programs 1995: privatization of the Energy Conservation Branch of the Department of Energy 1995-2002: few energy efficiency programs in existence, especially residential sector No discernable difference in quantity/quality of programs before and after regulation reform

29. Nature of Programs Utility Programs Very little incentive to provide customers with options for energy conservation Information-based efficiency initiatives are part of marketing strategies Atco EnergySense

30. Nature of Programs Government Programs Provincial: all programs are information-based Municipal: none for residential sector EXCEPT “Energy Awareness Week” October 19 th -26 th, 2002 City of Edmonton

31. Nature of Programs Private Programs Several small, regionally focused programs do exist in the Province Destination Conservation –Founded 1987 –171 primary schools across Alberta

32. Expenditures and Savings No data has been compiled Possible area of future research

33. Conclusions and Recommendations

34. The Effects of Regulation Reform

35. Conclusion 1: –NO universal model for regulation reform –Uncertain impacts on energy efficiency –Evidence non-transferable, place specific Recommendation 1: –To governments: Use caution when considering regulation reform Develop endemic strategy –To consumers: Be wary of government promises Explore options for improving home efficiency

36. Conclusion 2: –Difficulties in quantifying energy efficiency –Lack of data –Need for clearer categorization of data –Regulation reform too recent to draw definite conclusions Recommendation 2: –To client: advocate for more stringent reporting mechanisms

37. Conclusion 3: –Electricity sector is unique –Countless uses for electricity –Reform in regulation has widespread effects Recommendation 3: –Avoid comparisons to other network utilities, such as airlines and telecommunications

38. Conclusion 4: –Free market approach enjoying increased popularity –Strong public policy remains equally important Recommendation 4: –To government: Full deregulation optimal Allow price to reach natural equilibrium Public benefit requires explicit attention –To client: Advocate strong public policy regardless of regulatory structure Push for more practical energy efficiency programs Advocate provisions for low income households

39. Questions?