October 23, 2006
Susan Hudson, Clerk
Vermont Public Service Board
120 State Street
Montpelier, Vermont 05620
RE: EEU Participation in the Forward Capacity Market
Dear Ms. Hudson,
The Board has asked parties participating in the Act 61 EEU workshops to comment on
the proposal to have the Vermont Energy Investment Corporation (“VEIC”) be the
responsible entity to participate for Vermont in the New England capacity market.
Specifically, the Board has asked the parties to comment on whether VEIC is the
appropriate entity and to make recommendations on the use of any payments received for
capacity value created by the programs of Efficiency Vermont (“EVT”). This memo is
the response of the Department of Public Service to that request.
Although the final rules have not been developed, it appears that in order to receive
capacity credit for DSM activities, significant levels of measurement and verification
(“M&V”) and evaluation will be required to document program activity and program
savings. Because of that, the Department feels that VEIC is the most logical entity to
participate for the State of Vermont. As the EVT contractor, they have been closely
involved with the design and implementation of their programs, and measurement of the
results. By participating in the development of the regional rules and protocols for the
demand resources M&V, they will be in an excellent position to inform that process as it
unfolds at ISO New England.
The revenues collected through participation in the FCM should be put in the fiscal
agent’s account and future energy efficiency charges should be adjusted to reflect
revenues received through this process. In this way, the value of the capacity savings is
appropriately returned to the ratepayers. The Board should set the budget of the
Efficiency Utility as a separate activity from raising the necessary funds to support those
activities. Revenues from the sale of efficiency products should go to pay the budget of
EVT. As the Board has noted, VEIC should be compensated for its reasonable expenses
in participating in and developing this market. To the extent that the ISO-NE M&V
process requires the DPS to conduct evaluation beyond that already undertaken in
fulfillment of the requirements of 30 209 (e)(10), any additional expense should be
funded through the FCM revenue received by VEIC.
The Department would also recommend that the Board convene a workshop or other
proceeding to assess the overall efficacy of participating in this market once the rules
have been more fully developed. In this way, it can be determined if participation is a
benefit to Vermont ratepayers, and to what degree. For example, if the net ICR to be paid
by Vermont’s utilities increases as a result of their claiming, and being compensated for,
DSM savings, it is this net cost or benefit which should drive our participation in this
market. Since the rules for DSM evaluation have not been fully developed at this point,
the Departments recommends further considering this issue at some point in the future.
Sincerely
Riley Allen
Director for Regulated Utility Planning
Cc - Act 61 - EEU Budget Service List