LETTER FROM THE CHAIR

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

On behalf of the Energy Efficiency and Resource Management Council (“EERMC” or “Council”) please accept this April 2014 Annual Report to the General Assembly, for the Council’s seventh 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.”

The Council is pleased to report that 2013 was another positive year in the fulfillment of our mission. Rhode Island was ranked second in the nation for energy efficiency policies and programs and among the top ten across a range of energy efficiency issues. 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. It is also an indication of the level of effort that National Grid, the EERMC and the Office of Energy Resources have put into making this law a powerful tool for building a stronger Rhode Island. 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 in 2014, Rhode Island receives electric and natural gas benefits of more than $2. 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.

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 2014 Annual Report contains a summary of the activities of the EERMC over the past year including its role in:

1. The implementation of the 2013 Energy Efficiency Program Plan, which achieved significantly over 100% of the savings targets;
2. The development and approval of the 2014 Energy Efficiency and System Reliability Program Plans;
3. Developing and submitting to the RI Public Utilities Commission proposed savings targets for the next Three-Year Plan covering 2015-2017
4. Providing support and guidance on the myriad of positive energy efficiency efforts across Rhode Island in conjunction with the Office of Energy Resources, the DSM Collaborative and other key stakeholders.

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.

As required, this Annual Report also discusses a number of policy issues and makes specific recommendations for legislative and institutional action in 2014. This year the EERMC re-emphasizes the need for new creative and effective financing strategies to help Rhode Island ratepayers get access to affordable capital to implement efficiency measures that will save them significant amounts of money. Additionally, focus on Grid Modernization and appliance standards is encouraged, as well as preliminary suggestions to start reviewing extension of Least Cost Procurement beyond 2017. See “Policy Recommendations” for our detailed recommendations.

This year marks the final 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 2014 Energy Efficiency Program Plan submitted by National Grid, reviewed and supported by the EERMC and the Division of Public Utilities and Carriers, The Energy Council of Rhode Island (TEC-RI), and Environment Northeast (ENE), and approved by the Commission on December 24, 2013 will serve many more customers than last year and achieve greater savings. As always, the Council will actively support expanding the number of participants and higher energy savings goals in a manner that ensures quality delivery and is cost-effective and cost-efficient.

The primary goal of the 2014 Energy Efficiency Program Plan is to create economic value and cost savings for Rhode Islanders through energy efficiency. To achieve this goal, the plan includes 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).

This year, a main focus of the Council will be to guide and support the development of the next planning cycle that will culminate in the filing of the “2015– 2017 Energy Efficiency Procurement Plan” on September 1, 2014. The gas and electric savings targets that were proposed will put Rhode Island at the forefront nationally in pursuing energy efficiency as the best means to meet energy needs. The 3-year plan will support National Grid’s delivery of prudent increases of investments in energy efficiency measures for homeowners and businesses when they are cheaper than supply. The plan will steadily expand the depth and breadth of Rhode Island’s energy efficiency programs to reach nation-leading energy savings goals.

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