LETTER FROM THE CHAIR

To Governor Lincoln D. Chafee, Senate President M. Teresa Paiva-Weed, House Speaker Gordon D. Fox, and the Members of the General Assembly, 

On behalf of the Energy Efficiency and Resource Management Council (“EERMC” or “Council”) please accept this April 2011 Annual Report to the General Assembly, for the period April 16, 2010 to April 15, 2011, the Council’s fourth year of operation. As required by R.I.G.L. § 42-140.1-5, this Annual Report includes a summary of the “activities of the Council, its assessment of energy issues, the status of system reliability, energy efficiency and conservation procurement and its recommendations regarding any improvements which might be necessary or desirable.”

2010 was a great year for championing energy efficiency. Energy efficiency has been recognized as a critical solution to some of Rhode Island’s most pressing issues – rising energy costs, high unemployment rates, energy independence, and climate change. Energy efficiency is the easiest, most cost-effective way to:

1. collectively reduce our energy bills;
2. stimulate economic growth and job creation;
3. stem the flow of our energy dollars out-of-state;
4. reduce greenhouse gas emissions;
5. enhance energy security; and
6. reduce the need for additional costly generation plant construction and transmission and distribution infrastructure.

Since 2008, Rhode Island has risen from being ranked 11th in the nation by the American Council for an Energy Efficient Economy to 9th in 2009 and 7th in 2010. These gains are due to the General Assembly’s foresight in 2006 in adopting Least Cost Procurement legislation which established an economic model requiring investment in all cost-effective energy efficiency before more expensive supply, in order to reduce Rhode Island’s energy costs. This strategy is
“least cost” because energy efficiency costs less than traditional energy supply. Energy efficiency costs approximately 4¢ per kilowatt-hour (kWh) while electric supply costs between 8¢ and 12¢ per kWh. For every $1 invested in energy efficiency, more than $3 in savings is realized. These savings are an important part of resolving our state’s economic crisis by reducing customer costs, generating economic activity, reducing the flow of energy dollars outside of Rhode Island, and improving our global competitiveness by lowering the cost of doing business in the state.

The EERMC is extremely supportive of the General Assembly’s efficiency legislation passed in 2010 – which contained three key policy reforms to remove barriers to efficiency and ensure investment in cost-saving energy efficiency resources.

First, the General Assembly established the policy of “revenue decoupling” to break the link between the amount of energy that gas and electric utilities sell and their revenues. This removes the utilities’ disincentive to support cost-saving energy efficiency and better aligns the utility’s bottom line with their customers’ economic interests. Second, the General Assembly passed amendments that direct the RI Public Utilities Commission to approve funding for all energy efficiency measures that are cost effective and cost less than traditional supply resources, provided that the EERMC review and approve the plans’ cost-effectiveness. Third, the General Assembly required the utility to invest in all cost-effective natural gas energy efficiency for its customers, expanding Least Cost Procurement from just electric efficiency to natural gas efficiency as well and opening the door to greater investments in cost-saving efficiency through measures such as insulation, air sealing, and more efficiency heating and hot water systems. As noted in the policy section there is a legislative technical correction needed this session to ensure investments in all cost-effective natural gas efficiency that is cheaper than supply are made, saving natural gas customers tens of millions of dollars and creating hundreds of in-state jobs.

The EERMC is committed to working cooperatively with legislators and all of Rhode Island’s energy stakeholders to ensure the implementation of these policy reforms and continue the state’s leadership in the realm of energy efficiency.

This 2011 Annual Report contains a summary of the activities of the EERMC over the past year including its role in:

1. The implementation of the 2010 Energy Efficiency Procurement Plan;
2. The development of guidelines and recommendations for System Reliability Procurement;
3. Identifying and quantifying opportunities for cost-effective energy efficiency in Rhode Island; and
4. the development of electric and natural gas energy savings targets for 2012-2014.

The Annual Report also includes the Council’s assessment of energy issues and its recommendations for improvements that will benefit the energy consumers of Rhode Island and the state’s economy.

The Council is excited that 2011 marks the third year of the 2009-2011 Least Cost Procurement Plan for energy efficiency. The reach and breadth of Rhode Island’s energy efficiency programs continues to grow. Enabled by the 2010 energy legislation passed by the General Assembly, the 2011 Electric Energy Efficiency Plan submitted by National Grid, reviewed and supported by the EERMC and the Division of Public Utilities and Carriers, TEC-RI, and Environment Northeast, and approved by the Commission unanimously on December 22, 2010 will serve many more customers than last year and achieve greater savings for each customer. Total projected participation will increase by over 64 percent in 2011. Moreover, the 2011 Plan includes a statewide marketing campaign designed to ensure that all customers are aware of the opportunities and encouraged to participate in the costsaving energy efficiency programs. Other improvements in the 2011 Electric EE Plan include: (1) low interest loans for heating system upgrades, (2) increasing participation of local independent weatherization contractors, (3) targeting lighting and heating opportunities to hard-to-reach customers who have never participated in energy efficiency, (4) delivering energy assessments and installing measures door-to-door to small businesses, (5) integrating gas and electric measures into comprehensive projects for large commercial and industrial customers.

The efficiency programs carry out the General Assembly’s far-sighted, nation-leading 2006 mandate to ensure that it is Rhode Island policy to invest first in low-cost, clean efficiency resources (at 3-5¢ per lifetime kWh saved) before buying more expensive supply (8-12¢ per kWh).

However, in order for these benefits to be realized, the EERMC recommends a technical change be made as soon as possible to the Least Cost Procurement legislation to fully effectuate the purpose of the May 2010 legislation and clarify and align the funding provisions for electric and natural gas energy efficiency with all the provisions of the least cost procurement statute. In particular, the EERMC recommends that the General Assembly approve Senate Bill 293 and House Bill 5281, which eliminate the unintended inconsistency and ensure that the funding provisions for electric and natural gas energy efficiency are consistent and run concurrently with all the Least Cost Procurement provisions in R.I.G.L § 39-1-27.7 in order to save consumers tens of millions of dollars and create hundreds of local jobs.

The 2010 Energy Efficiency Procurement Plan was part of a larger 3-year “Least Cost Procurement Plan,” for 2009, 2010, and 2011 that was approved by the PUC in April 2009. The 3-year plan encourages National Grid to significantly increase investments in cost-effective energy efficiency measures for homeowners and businesses when they are cheaper than supply. The plan calls for steadily expanding the depth and breadth of Rhode Island’s energy efficiency programs. Successful implementation of the programs approved over the 3-year period will generate well over $469 million in net lifetime benefits for ratepayers, save 2,979,198 MWh over the lifetime of the energy efficiency measures, and avoid 1,446,645 short tons of greenhouse gas emissions. The EERMC is looking ahead to the next 3-year Least Cost Procurement Plan for 2012-2024, which will deliver even greater savings and economic benefits to Rhode Island electric and natural gas customers.

We look forward to continuing to work together to improve the affordability, efficiency, and economic benefits of Rhode Island’s energy system in the year to come.

Respectfully Submitted,

S. Paul Ryan, Chair