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 2012 Annual Report to the General Assembly, for the period April 16, 2011 to April 15, 2012, the Council’s fifth year of operation. As required by RIGL § 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.”

2011 was a positive year in the fulfillment of our mission. Continuing a positive trend started in 2008, Rhode Island has once again risen in the rankings and is now among the top five states in the nation for energy efficiency policies and implementation. This is a tribute to the General Assembly for adopting Least Cost Procurement in 2006 and setting the state on a path to a low cost, clean energy future. Least Cost Procurement is an economic strategy for reducing Rhode Island’s energy costs by investing in cost-effective energy efficiency that costs less than traditional energy supply. This strategy is “least cost” because energy efficiency costs approximately 4¢ per kilowatt-hour (kWh) while electric supply costs between 8¢ and 12¢ per kWh.

It is important to note that energy-saving investments made through Least Cost Procurement play a vital economic role for Rhode Island. For every $1 spent on energy efficiency, Rhode Island receives electric and natural gas benefits of more than $3. This return demonstrates that Least Cost Procurement programs are a powerful agent in resolving the state’s economic crisis: they reduce our energy bills, stimulate economic growth and job creation, stem the flow of our energy dollars out of state, and make Rhode Island more competitive by lowering business operating costs.

We hope this report underscores the important role of the EERMC in providing ratepayer participation and oversight for the economic and environmental well being of the state. It is in this context, then, that we urge the state legislature to exercise caution in re-directing Least Cost Procurement resources — resources paid by the state’s ratepayers — as part of a solution to close the state’s budget gap. While the EERMC is committed to ensuring that there is a strong Office of Energy Resources, real damage could be done to the state’s Least Cost Procurement effort if the body of knowledge, experience and expertise gained by the EERMC since its inception is weakened. It will not only stall the momentum we have all worked so hard to achieve, but would represent unsound economic policy as well.

The EERMC is grateful for your support in the past and looks forward to enjoying your continued support in the coming years. We are committed to working cooperatively with legislators and all of Rhode Island’s energy stakeholders to continue the state’s leadership position in the important national energy efficiency effort.

This 2012 Annual Report contains a summary of the activities of the EERMC over the past year including its role in:

1. The implementation of the 2011 Energy Efficiency Procurement Plan;
2. The development and approval of the 2012–2014 Energy Efficiency and System Reliability Procurement Plans;
3. Fostering key partnerships in Rhode Island to achieve deeper and broader energy savings for all customer sectors; and
4. The development and approval of the 2012 Energy Efficiency and System Reliability Program Plans.

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

The Council is excited that 2012 marks the first implementation year of the 2012–2014 Energy Efficiency and System Reliability Procurement Plans. The reach and breadth of Rhode Island’s energy efficiency programs continues to grow, and benefits to Rhode Islanders increase. Enabled by the Least Cost Procurement legislation passed by the General Assembly, the 2012 Energy Efficiency Program Plan submitted by National Grid, reviewed and supported by the EERMC and the Division of Public Utilities and Carriers, TEC-RI, and ENE (Environment Northeast), and approved by the Commission on December 21, 2011 will serve many more customers than last year and achieve greater savings for each customer. Total projected participation will increase by over 60% in 2012. Moreover, the 2012 Plan proposes implementation strategies to deliver on the following four themes:

1. Creating energy efficiency opportunities for every Rhode Island customer;
2. Making energy efficiency work for different types of customers;
3. Using the latest innovations, technologies, and best practices from around the nation; and
4. Creating economic benefits for Rhode Island through work force development and program participation.

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).

The 2012 Energy Efficiency Procurement Plan is part of a larger 3-year “2012–2014 Energy Efficiency Procurement Plan,” that was approved by the PUC on December 21, 2011. The 3-year plan supports National Grid to significantly increase investments in 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 to reach nation-leading energy savings goals. Successful implementation of the 3-year plan will generate well over $785 million in net lifetime benefits for ratepayers, save 5,116,966 MWh and 13,263,671 MMBTU over the lifetime of the energy efficiency measures, and avoid 2,555,451 metric tons of carbon dioxide.

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