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August 28, 2007
VIA EMAIL
Susan Hudson, Clerk
Vermont Public Service Board
112 State Street, Drawer 20
Montpelier, Vt 05602
RE: Strengths and Weaknesses of Current Energy Efficiency Utility (“EEU”) Structure
Dear Ms. Hudson:
The following are Green Mountain Power’s (“GMP”) comments in response to
the initial meeting of the EEU Structure Working Group on August 9, 2007. At that
meeting attendees agreed to circulate via email comments regarding the strengths
and weaknesses of the current EEU program structure.
GMP believes that the current EEU structure, principally consisting of a
three-year contract with the Public Service Board (“PSB”, “Board”) with an option of
an additional three years, has served the State very well to date. GMP agrees with
the PSB that now that the EEU has gained firm footing in the Vermont electric
utility landscape it would be wise to review the current structure.
The current contract structure’s principal strength is its recognition that
delivery of energy efficiency is a competitive service. As the DPS has pointed out,
the characteristics of a natural monopoly or essential service do not exist in this
market. Encouraging competition among potential suppliers is the penultimate way
to ensure that services are delivered efficiently, at lowest cost, and with the highest
customer satisfaction. Other strengths of the current structure include contract
provisions that are designed to be performance-based. The contract model provides
the Board, the DPS and other stakeholders with an opportunity to focus on EEU
performance on an on-going basis. Examination of EEU performance to date has
included the EEU’s role, the EEU budget, bidding on the EEU contract,
modifications to the EEU role (i.e. Forward Capacity Market (“FCM”), Geographic
Targeting), EEU Annual Plan, DPS Measurement and Verification procedures.
The Board’s July 13, 2007 memorandum and August 14, 2007 Revised Task
Statement identified several weaknesses in the current structure. In addition to
those identified by the Board, the current contract cycle may also cause unintended
consequences that undermine the EEU’s effectiveness:
1. The current contract cycle may not provide adequate incentives to promote
competitive bidding for the EEU contract. The fact that only two providers
have bid on the EEU contract suggests that the contract model is not
optimally designed to encourage competitive suppliers to participate in the
contract bidding process.
2. The current contract cycle does not permit the EEU to optimize planning,
programming and commitments that could benefit Vermont electric
consumers.
3. The current contract cycle has presented challenges in evaluating
performance of the EEU in a timely manner that coincides with the contract
bidding process.
4. The current contract cycle presents challenges for multi-year programs and
optimizing cost-effective spending.
Some stakeholders have indicated that accountability, transparency and
oversight of the EEU could be improved. If the current structure does not provide
Vermont’s electric customers with a high and sustained level of confidence that the
EEU is operating efficiently and effectively in serving customer needs, this is a
weakness that should be addressed. Vermont customers will be paying in excess of
$30 million per year to fund the EEU. Customers’ confidence that the entity (or
entities) receiving and spending customer funds are operating transparently, with
appropriate accountability. This is critical to the long-term success and
sustainability of the EEU model.
The best EEU structure will be one that provides the most effective method
for delivering value from the funds provided by customers through the energy
efficiency charge. It may be useful, therefore, for the Board to seek out and
consider the views and recommendations of a variety of competitive providers of
efficiency services regarding how such providers would be encouraged to compete
for the opportunity to deliver efficiency services under various alternative EEU
structures.
Finally, it bears re-emphasis that the EEU model has served Vermont
effectively. EVT, as the contractor, has delivered millions of dollars of efficiency
savings to Vermont consumers during its term as the contract provider. We
strongly support the cost-effective delivery of efficiency services and we look forward
to working with the Board. the Department, EVT and other stakeholders in
reviewing and potentially improving upon the excellent track record that Vermont
has demonstrated as a national leader in promoting and implementing energy
efficiency programs.
Thank you for the opportunity to comment. If you have any questions about
these comments or if we can provide additional information to assist the Board,
please let me know. Otherwise I look forward to our discussions at the next
scheduled meeting, this Friday, August 31, 2007.
Sincerely,
David P. Martin
David P. Martin
cc:
EEU Structure Email Service List