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 20062007 (est)

2008 (est)

AZ 4 4 10 19 32 42

CO 11 21 24 18 25 32

NV 3 11 14 30 36 48

NM 1 1 1 1 4 10

UT 9 16 20 25 30 33

WY ~0 ~0 ~0 ~0 ~0 1

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

0

5

10

15

20

25

0.7-0.8 0.8-0.9 0.9-1.0 1.0-1.5

Annual electricity savings (% of sales)

Bo

nu

s (

% o

f n

et e

con

om

ic b

enef

its)

SWEEP: Dedicated to More Efficient Energy Use in the Southwest

Resources available online at: www.swenergy.org

Howard Geller, Executive DirectorSouthwest Energy Efficiency Project (SWEEP)

303-447-0078hgeller@swenergy.org