SD11 - Report: Study to Determine Achievable and Cost-effective Demand-side Management Portfolios Administered by Generating Electric Utilities in the Commonwealth

Executive Summary:
In accordance with Chapters 752 and 855 of the 2009 Acts of the Virginia General Assembly, the State Corporation Commission (“Commission”) conducted an evidentiary proceeding to consider achievable, cost-effective energy conservation and demand response targets that could realistically be accomplished by Virginia’s electric generating facilities. The General Assembly also directed the Commission to make the following determinations: (1) to determine the range of consumption and peak load reductions that are potentially achievable by each electric generating utility; (2) to determine a just and reasonable ratemaking methodology to be employed in the implementation of demand side management programs; and (3) to determine which industry-recognized test should be given the greatest weight when conducting a cost-benefit analysis of demand side management proposals. This Report summarizes the conclusions reached by the Commission following the completion of the statutory mandated evidentiary proceeding.

The Commission did not receive any evidence demonstrating that the existing policy of the Commonwealth regarding a 10% reduction in electric energy consumption through demand side management, demand response and energy efficiency programs is unrealistic or unachievable. We have considered a number of factors in preparing this Report, including the magnitude of recent rate increases borne by ratepayers, (*1) and while we acknowledge that additional reductions in electrical energy consumption through demand side management (“DSM”) programs appear to be possible, such reductions could potentially come at additional cost to ratepayers. We also recognize that there are potential offsetting cost savings associated with efficiency programs that result in the reduction of energy consumption and peak load; however, attempting to quantify with specificity such cost savings based on the record before us would be speculative.

Absent any change in the statutory framework that governs Commission proceedings, the Commission will give the greatest weight to the Ratepayer Impact Measure and Total Resource Cost Tests, which are the most consistent with the Commission’s current statutory mandates, in evaluating the costs and benefits of specific utility proposals. Consistent with the Commission’s existing DSM Rules, the data from the Participant and Utility Cost tests should also be explored to fully evaluate any demand side management proposal.

Due in large part to time constraints and the resulting limited evidence presented in the Commission’s proceeding, current economic conditions and rate impact implications, the Commission is not recommending herein any specific mandate to utilities regarding particular targets to be achieved, programs to be required, specific technologies to be used, or narrowly-tailored analyses to be performed. Unless otherwise directed by the General Assembly, the Commission will evaluate proposals on a case-by-case basis, under the applicable statutes, and anticipates that each utility will work toward achieving the Commonwealth’s stated consumption reduction goal individually, with programs and technologies tailored to the specific need of the utility and its customers.

Furthermore, while the analysis contained herein is general by necessity given the abbreviated schedule required by the statute, the Commission is open to further analysis should the General Assembly so direct. Such analysis could include the interplay of energy efficiency and demand side management with other Commonwealth policy, such as integrated resource planning or gas decoupling; additional analysis of rate design methodology and the impact of changes in rate design on energy consumption; assessment of utility bill presentation and any impact on consumption from changes in the amount or quality of information presented to customers; or interim analysis of consumption and peak load reductions, and proposals regarding revision of the ten percent goal previously established by the General Assembly.
(*1) See Charts on page 30 of this Report.