Detroit Edison Program S ummary One of the most common models of energy efficiency programs at the state level involves the state government imposing energy savings targets on utilities operating within the state. Each affected utility is then legally obligated to achieve those savings. The Midwestern state of Michigan follows this model.This is the case for Detroit Edison (DTE), Michigan’s largest electric utility, is an investor-­‐owned, regulated electric utility in the southeast part of the state serving about 2.1 million customers withDetroit Edison has an annual production of 42 TWh and serves about 2.1 million customers. The state legislature established an energy efficiency resource standard (EERS) in 2008 and authorized the Michigan Public Service Commission (MPSC) to set energy savings targets for all electric utilities. DTE has contracted the delivery of its energy efficiency programs to a third party administrator though it continues to use internal staff to manage the collection of fees from customers. If program savings exceed 115% of goal, DTE can earn an incentive equal to 15% of program funding. DTE offers prescriptive rebates to industrial customers for installation of common high-­‐efficiency systems. Custom incentives are available for projects outside the scope of prescriptive measures and are paid on a $/kWh per year basis for claimed energy savings. Program Information Program Title Detroit Edison Type of Program Resource Acquisition – Utility Obligation Target Group Size • All industry Industry focus • All industry Start and End Date 2009 -­‐ present Geographic Coverage GHG emission source covered Michigan, USA •
Electricity Objective(s) Fulfill obligation to acquire cost effective energy resources Program Funding Source "Energy Optimization" surcharge on consumer electric bills Total Program Funding $44.1 million (2010) Implementation Details Operating Mechanism Michigan Public Service Commission (MPSC) established an energy efficiency resource standard (EERS) with targets for electric utilities to achieve annual savings of 0.3% in 2009, ramping to 1% in 2012 and natural gas utility targets are annual savings of 0.1% in 2009, ramping up to 0.75% in 2012. To meet these targets, each utility is required to file an “energy Optimization” (EO) plan to the MPSC that lays out the following: i. programs the utility plans to offer to each customer class ii. the amount of funding needed iii. plans for cost recovery iv. cost effectiveness of the efforts v. independent third-­‐part to verify savings DTE’s Energy Optimization is funded through a Public Benefit Fund (PBF) that is assessed on all electricity sales. These fees are collected by DTE and paid to its implementation contractors to provide energy efficiency services. A third party evaluates overall program performance and reports to DTE and MPSC. Energy management System None Program Offerings for Industry Like many energy resource acquisition programs in North America, DTE’s offers the same incentives and services to commercial and industrial customers. The majority of financial assistance is provided in the form of prescriptive rebates: direct cash payments of predetermined amounts (e.g.: $/unit or $/horsepower) to customers who purchase and install specific types of energy efficient equipment. DTE has six categories of prescriptive rebates: • Lighting • HVAC • Water heating • Motors and variable speed drives • Food service • Miscellaneous DTE also offers a custom incentive program for more complex energy savings projects. Program delivery staff work with business customers to determine the potential energy savings of projects and the incentive is paid on a $/kWh saved per year basis. Prescriptive rebates are responsible for approximately twice the savings as custom program. Savings for both custom and prescriptive measures in 2010 were evaluated by an independent third party who verified 99% of the claimed savings. A self-­‐direct option was made available in 2009 to large customers with at least 2 MW of peak demand (ramping down to 1 MW in 2014). Under this option, the customer must spend at least the same amount on energy projects that it otherwise would have paid into the energy efficiency fund. Self-­‐direct customers still have to pay the portion of the public benefit fee that funds programs for low-­‐income consumers, but don’t pay into the general energy efficiency fund. Supervising Agency Michigan Public Service Commission Implementing Agency Detroit Edison 2 Implementing Agency Type M&V requirements on industry Private for-­‐profit utility Energy savings for common energy savings measures such as lighting projects, high-­‐
efficiency motors, and variable speed drives are determined by DTE using a “deemed savings” approach, a predetermined amount or ratio of energy savings that is assumed based on the number and size of the project. This value is validated by a third party M&V contractor hired by DTE to verify program performance. The M&V contractor also reviews custom project applications and verifies savings with on-­‐site surveys. In Michigan, each utility is required by law to file a plan to hire an independent expert to evaluate the results of its programs. DTE has retained Opinion Dynamics Corporation for this purpose. The MPSC reviews all verification reports. The program evaluator reviews incentive applications and conducts on-­‐site surveys of incentive M&V requirements on the recipients to determine if claimed savings are accurate. program The cost effectiveness of the program is also routinely assessed. Cost effectiveness is defined using the “utility system resource cost test”(USRCT) which is a standard cost effectiveness test designed to show if the total cost of running an energy efficiency program costs less than the total cost to the utility. Program Flow Chart Impacts and Results Metric Annual incremental GWh electricity Target/goal for the companies 227 GWh (2010) Analytic base for target (or target setting mechanism) Electric utilities are required to save 1% of the previous year’s sales through energy efficiency from 2012 onward. 3 Savings (recent year) 403 GWh (2010) Savings (program total) MPSC estimated that for every dollar utility energy efficiency programs spent in 2010, customers saved $4.88 for a lifetime savings of $554 million. The commercial and industrial programs (C&I) represent approximately a fourth of these savings. Savings (Share of overall demand) Average unit cost of energy saved Non-­‐energy benefits (co-­‐
benefits) Not reported Not reported Not reported Other Information (*1) Although DTE Energy is the owner of both Detroit Edison and MichCon Gas, this report uses DTE as shorthand to refer to the electric utility Detroit Edison. Detroit Edison website: http://www.dteenergy.com/ ACEEE state policy – Michigan webpage: http://www.aceee.org/sector/state-­‐policy/michigan Michigan Public Service Commission website: http://michigan.gov/mpsc/ Michigan’s 21st Century Electric Energy Plan: http://www.michigan.gov/documents/mpsc/21stcenturyenergyplan_185274_7.pdf p6 Links and Report On The Implementation of the P.A. 295: References http://www.michigan.gov/documents/mpsc/implementation_PA295_renewable_energy2-­‐15-­‐
2012_376924_7.pdf Case No. U-­‐16359, submitted April 15, 2011 to MPSC http://efile.mpsc.state.mi.us/efile/docs/16359/0001.pdf The Detroit Edison Company’s Application for Approval of the Reconciliation of Its 2010 Energy Optimization Plan Expenses for the Plan Year 2010 Useful reports Footnotes 4