Nebraska's low energy efficiency ranking no surprise to LPPD leader

Oct 14 - McClatchy-Tribune Regional News - Columbus Telegram, Neb.

 

A report naming Nebraska as one of the worst states for its energy efficiency standards didn't yield new information for Loup Public Power District CEO and President Neal Suess.

Suess said the conditions aren't right at the local utility's or government level to invest in energy efficiency.

"It does not surprise me that Nebraska's ranked that low," he said.

The report, released by the American Council for an Energy-Efficient Economy, rates Nebraska at 47th in a ranking of states according to the quality of their energy efficiency programs and policies. The report measures a wide range of aspects, from the effectiveness of government-led efficiency initiatives to appliance/equipment standards, as well as the quality of efficiency policies promoted by individual utilities.

The report estimates the amount of electricity saved by just customer-funded energy efficiency programs alone topped 18 million megawatt-hours in 2010. But just .4 percent of this savings occurred in Nebraska.

Nebraska Public Power District (NPPD) reported an energy savings of 80,000 megawatt-hours that same year. Loup Public Power District's customers have saved 4,637 megawatt-hours so far this year, according to Steve Zach, NPPD energy efficiency supervisor.

Zach said last year NPPD saved $23 million due to efficiency programs. Loup Public Power District realized savings of $4 million of which due to more efficiency energy initiatives and $500,000 was spent on incentives driving these initiatives.

Suess said one of the key difficulties in driving energy conservation policies is that energy rates are low. The savings realized by energy efficiency programs would be immediately offset by the cost of funding those improvements.

Suess said any increase in rates would have to retain pricing that's comparable to what customers currently pay. This would result in increased rates that would drag out over an extended period of time when customers are looking for more immediate gains.

Suess used the example of an industrial operation purchasing compact fluorescent light bulbs for an entire facility, a project that could total $60,000 paid in increments of $6,000 per year. The energy and cost savings would be realized after a decade.

"But these users are looking for payback in two or three years," he said. "That's just the way business works."

"To save money, it costs something. Energy efficiency programs, and -- especially for large industrial entities -- they need to have a payback in a number of years," he said. "(The low rates) make it difficult to get that payback."

On the utility's side, low rates also make the spending necessary for those energy efficiency improvements unattractive because of how long Loup would have to wait to pay off the improvements while maintaining a similar rate structure.

"If you have low rates, that's good, but then you get dinged for energy inefficiency," Suess said. "But if we (implemented those programs), it would just take too long for the payback to come back."

Suess said funding these improvements at the low rates also would strain the utility's budget because the district would have to pay for these improvements with reduced power sales. Because the utility operates as a nonprofit, Suess said the utility charges only what's necessary to provide its service, so a reduction in sales would mean an increase in the rates to match revenues with expenditures.

Suess said preliminary figures on the district's expenditures for this fiscal year are $86.4 million, while revenues were $93 million.

Because revenues match expenditures so closely, Suess said some reserve money exists for capital improvements, but little flexibility exists within this reserve to create new improvements.

Loup spent just devoted $.5 million this year on energy efficiency incentives. In 2011, $16.5 million was spent on more efficient service statewide, according to the Nebraska Power Association, roughly two-tenths of a percent of the $5.9 billion spent nationally the same year. Spending in efficiency programs for both natural gas and electricity programs rose 27 percent nationally from 2010 to 2011.

Suess said Loup has taken advantage of NPPD's EnergyWise programs.

The study cites Nebraska's absence of legislation that sets energy use targets -- 24 states have adopted these standards, the strongest being in Massachusetts and Vermont, which require savings of 2.5 percent annually -- as well as a lack of programs that reward successful energy efficiency programs.

Suess' argument that reduced power sales would create reduced revenue for Loup reflects a traditional model for establishing rates, which is being revised in certain states using a number of regulatory mechanisms. The report notes that one common way of doing this is by encouraging utilities to set a "revenue per customer" target and fine tune rates accordingly.

The report adds that the most successful regulatory efforts are installed alongside financial incentives for effective efficiency programs that would create the funding necessary to invest in capital assets like new power plants and equipment.

Suess said the state support necessary to defray the substantial costs of making these improvements is not currently present. He said reports like the one released by American Council for an Energy-Efficient Economy -- which gave Nebraska its low rating in part for a lack of financial commitment to efficiency programs -- are not sensitive to the financial constraints of individual utilities.

"They said, 'We need to improve,' and that means dollars," he said. "I have difficulties with reports that say you're in the bottom because you don't spend very much. Just looking at it from a dollar standpoint is a difficulty I have."

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