To: Members of the Pennsylvania Senate
From: John Walliser, Pennsylvania Environmental Council
Re: Concerns with Senate Bill 805 (P.N. 922)
On behalf of the Pennsylvania Environmental Council (PEC), I am writing to express our concerns with Senate Bill 805 (P.N. 922), currently before the Consumer Protection and Professional Licensure Committee. This legislation allows large commercial and industrial customers to opt-out of the Act 129 Energy Efficiency and Conservation Program.
Senate Bill 805 threatens the effectiveness of Act 129, which requires the state’s electric distribution companies (EDCs) to invest in energy efficiency measures across all sectors to meet specific electricity savings targets by year. The program has been very successful in lowering electricity rates for all Pennsylvanians. In fact, total avoided costs in Phase I of the program were $4.2 billion, while implementation costs totaled $1.75 billion. These figures do not account for associated water and natural gas savings, nor do they include environmental and public health benefits.
The proposed opt-out provision in S.B. 805 has the potential to radically alter the effectiveness of the program. We believe this legislation is not in the public interest for the following reasons:
- Energy efficiency improvements under Act 129 benefit all users across the system through lower electricity costs. The Sponsor Memorandum states that large customers are more likely to be able to make efficiency improvements independent of the Act 129 program and therefore should not have to participate. However, by allowing this, S.B. 805 permits these users to continue to benefit financially from the program without contributing to it. This means less assistance is available for customers who need the financial support of the Act 129 program to make efficiency improvements. These smaller customers include homes, churches, small businesses, and schools.
- According to PJM, demand response reduced consumer electricity costs by $11.8 billion in the 2013-2014 residual auction. Large industrial and commercial users are those most likely to participate in the Demand Response portion of Act 129. Allowing large customers to opt-out of the program reduces the potential for these benefits to all Pennsylvania ratepayers.
- Allowing large customers to opt-out of participation will decrease benefits available to other participants, including small businesses, schools, and families. This is because energy efficiency improvements at large commercial and industrial sites typically cost less per kilowatt hour saved than those at smaller customer sites. By allowing EDCs to bundle large and smaller customer projects, they are currently able to reap greater energy savings while staying under the spending cap. S.B. 805 would end these efficiencies.
- EDCs are not currently mandated to meet a separate target for large industrial customers. Therefore, if an EDC’s approved plan includes a significant portion of energy savings resulting from this sector, an opt-out by those customers would drastically reduce the total amount of energy savings, defeating the original intent of the program.
- Finally, the proposed legislation would change the length of Act 129 Phase III implementation from five years to three years. This change means that more resources are used on plan development and review, rather than on program implementation that results in actual energy savings.
In short, taking large customers out of the mix negatively impacts the overall program. We believe this legislation, as currently written, will only benefit a small number of customers and is not in the best interest of Pennsylvania. We urge you to oppose it.
Thank you for your consideration.