PRIORITIZE DEMAND-SIDE MANAGEMENT PROGRAMS

Implementation of demand-side management (DSM) programs that prioritize load reductions when fossil-fuel assets are the marginal electricity generators, that prioritize load shifting when renewable resources are generating, and that establish a comprehensive on-site energy efficiency program that can be utilized across sectors to increase energy efficiency have the potential to reduce Nevada’s greenhouse gas (GHG) emissions. While Nevada has multiple energy efficiency and demand response (DR) programs, it does not currently have DSM or DR programs that optimize management of electricity generated by renewables.

DSM programs consist of the planning, implementing, and monitoring activities of electric utilities that are designed to encourage customers to modify their level and pattern of electricity usage. DSM includes programs for energy efficiency and conservation, as well as programs that will produce benefits in peak demand and energy consumption. Energy efficiency encompasses the deployment of end-use appliances, such as higher-efficiency boilers and air conditioners, more-efficient lighting, and better-performing windows. Energy efficiency achieves the same or greater function to the customer (e.g., the refrigerator still keeps food cool), while reducing the energy required to achieve that result. DR programs reduce energy in response to either system reliability concerns or increased generation costs. DR generally must be measurable and controllable to be relied upon by the electric utility. DSM programs for both energy efficiency and conservation fall within the purview of the Nevada Public Utilities Commission (PUCN). 

A recent study commissioned by NV Energy indicates the utility is aware that shifting load from evening peak hours to daylight hours when solar is generating electricity could improve the value of solar resources. In related testimony, the consultant indicated that “changes in load could improve the Effective Load Carrying Capability (ELCC) of solar resources, thereby reducing the amount of solar capacity that must be added to ensure reliability.” He added that “[i]f the timing of high load events shifted from evening peak hours to daylight hours, either through building pre-cooling or other measures, then the ELCC for solar photovoltaics (PV) could increase.” This indicates that the utility needs to take action to more-effectively integrate large quantities of solar into its generation portfolio.

Nevada electric utilities must file a demand-side plan, which includes proposals for energy efficiency and conservation and DR programs as part of their integrated resource plan (IRP) with the PUCN on or before June 1 every three years. The next IRP is due June 1, 2021. The IRP must set forth a three-year action plan to meet demand for electric service in an efficient, reliable, and sustainable manner over a 20-year planning period. 

The PUCN also establishes each utility’s goals for energy savings from energy-efficiency programs implemented each year. The goals set by the PUCN drive what is included in a demand-side plan, which must meet or exceed PUCN expectations. For the period January 1, 2022, through December 31, 2024, the amount of energy savings resulting from implementation of energy-efficiency programs by the electric utility must result in an average reduction of 1.1% of the forecasted weather normalized sales of the electric utility for that period. After January 1, 2025, the amount of energy savings is determined by the PUCN in an IRP order.

NV Energy Demand-Side Management Programs

NV Energy has implemented multiple DSM programs, including rebates for energy-efficient lighting, pool pumps, appliances, air-conditioning repairs and replacements, on-site energy efficiency audits, and DR programs. NV Energy administers DR programs for its residential and commercial customers to manage demand and energy use during times of peak energy use or emergency conditions. NV Energy’s residential DR program allows NV Energy to interact with its customers’ air conditioners. NV Energy’s commercial DR program allows NV Energy to interact with its commercial customers’ air conditioner and end-use lighting loads.

Greenhouse Gas Implications

Expanding DSM and DR to shift loads will optimize the use of renewably-generated electricity. Coupled with robust energy-efficiency programs for residential, commercial, and industrial customers, this has the potential to reduce GHG emissions. 

In fact, in 2019, NV Energy stated it had approximately 225 hundred kW and 327 million kWh of demand and energy savings, respectively, as a result of its DSM programs, for a total CO2 emissions reduction of approximately 232 million lbs. For its DR programs, NV Energy reported it had approximately 176 hundred kW and 32 million kWh of demand and energy, respectively, equating to a total CO2 emissions reduction of approximately 210 million lbs. Further, NV Energy indicated that residential energy audits resulted in a total CO2 emissions reduction of approximately 6 million lbs.

Although reductions are expected, specific estimates of GHG emissions reductions cannot be accurately assessed until details are known about the utility design of such a program. 

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Climate Justice

Reducing the energy burden of low-income customers is a benefit of DSM programs. Until the utility designs DSM programs that factor in renewable generation patterns, it will be hard to predict economic impacts to ratepayers, including any potential burden on low-income households. However, Nevada law does require that at least 5% of the expenditures related to energy efficiency and conservation programs in the demand-side plan must be directed to energy efficiency and conservation programs for low-income customers of the electric utility.

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Integrated Economic Assessment

The costs to the state are unknown with respect to administering DSM programs that prioritize load reductions when renewable resources are not generating, that prioritize load shifting when renewable resources are generating, and that establish a comprehensive on-site energy efficiency program that can be utilized across sectors to increase energy efficiency. However, it is likely that additional resources will be required. 

However, it’s worth noting that NV Energy was able to return money to customers as a result of energy savings in 2019. Nevada Power Company (NPC), NV Energy’s Southern Nevada utility, expended $33.2 million in program costs in 2019 and reported achieved savings of 232,653,028 kWh (1.15% of weather-normalized retail sales). The Sierra Pacific Power Company (SPPC), NV Energy’s Northern Nevada utility, expended $11 million in program costs and reported achieved savings of 94,562,194 kWh, (1.04% of weather-normalized retail sales). Because both NPC and SPPC over-earned in 2019, the utilities returned to customers $3.8 million and $1.1 million, respectively, of revenue collected under the Energy Efficiency Implementation Rate (EEIR).

The annual budgets for energy efficiency and conservation programs also are approved through the demand-side plan. The PUCN determines cost effectiveness of the programs in the plan and its regulations offer a bit of flexibility, meaning that the PUCN may approve a demand-side plan that consists of programs that are individually not cost effective, so long as the plan as a whole is cost effective. 

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Implementation Feasibility

The PUCN has authority to consider programs that prioritize load reductions when renewable resources are not generating, that prioritize load shifting when renewable resources are generating, and that establish a comprehensive, cross-sector, on-site energy efficiency program. There are no limitations in statute or regulation that would prohibit the electric utility from proposing such programs for PUCN approval in its next IRP. The utility, however, does face a few regulatory requirements that do not appear to be insurmountable. For example, as noted above, the statute mandates that the plan be cost effective (NRS 704.7836).  However, not every program is required to be cost effective, so long as the PUCN determines that the energy efficiency plan as a whole is cost effective. Also, the program must be technically feasible (NAC 704.934(2)(b),(c)). Energy efficiency and conservation programs, including DR, relied upon to reduce peak demand on a firm basis must include an assessment of the savings in the costs of transmission and distribution (NAC 704.934(5)(b)).

Beyond approval of cost recovery and lost revenue for demand-side programs in the Energy Efficiency Program Rate (EEPR) and EEIR rates, the PUCN may have another tool to incentivize programs that prioritize load reductions when renewable resources are not generating or that prioritize load shifting when renewable resources are generating. SB 300 requires the PUCN to adopt regulations allowing an electric utility to apply for approval of an alternative ratemaking plan. Alternative ratemaking mechanisms represent a shift from the traditional cost-of-service ratemaking that the PUCN and most other state utility commissions have applied to electric utilities for decades. The electric utility industry is changing rapidly, and as a result, regulators across the country are evaluating whether changes in ratemaking are required to align regulatory mechanisms with those industry changes. SB 300 includes a menu of possible alternative ratemaking mechanisms, including, but not limited to, performance-based rates, subscription-based pricing, formula rates, decoupling, earnings sharing mechanisms, and multiyear rate plans. 

The PUCN opened Docket No. 19-06008 on June 6, 2019, in response to SB 300. In the docket, the Presiding Officer recently released Procedural Order No. 10, asking stakeholders to evaluate various alternative ratemaking mechanisms, including performance incentive mechanisms for peak load reduction, amongst other requests for comment. While it is not clear at this time if SB 300 will result in the adoption of an alternative ratemaking plan for the utility, the PUCN has a means to incentivize utility behavior beyond the traditional ratemaking tools currently set forth in statute and regulation. 

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