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New York State Public Service Commission. WG-1: Customer Engagement Committee. July 10, 2014. Agenda. Customer Engagement Committee (CEC) Overview Barriers to Customer Engagement: The Customer Barriers to Customer Engagement: The ESCO Effective Customer Engagement

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WG-1: Customer Engagement Committee

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New York State Public Service Commission

WG-1: Customer Engagement Committee

July 10, 2014


Agenda

  • Customer Engagement Committee (CEC) Overview

  • Barriers to Customer Engagement: The Customer

  • Barriers to Customer Engagement: The ESCO

  • Effective Customer Engagement

  • The Community Choice Aggregation Model

  • Wrap-up


CEC Overview: Structure

CEC consisted of over 158 individuals from 90 organizations which were organized into the following groups:

  • Utilities

  • Energy Service Companies (ESCOs)

  • Government

  • Large Customers

  • Commercial Customers

  • Other


CEC Overview: Structure

  • Other included over 50 representatives with a myriad of interests including:

    • Aggregators

    • Behavioral science experts

    • Business advocates

    • Consumer advocates

    • Energy efficiency providers

    • Energy, demand response and smart grid trade associations

    • Environmental advocates

    • Non-profit research institutions

    • Real estate boards and companies

    • Solar providers

    • Technology providers.


CEC Overview: Objective

  • Identify barriers to participation by all customer groups in the new markets and opportunities created by the REV initiative, and to identify and recommend solutions where appropriate.


CEC Overview: Process

  • CEC convened seven conference calls

  • Identified barriers to customer engagement by affinity group which prompted more targeted discussions surrounding the importance of those barriers.

  • Topics covered included:

    • Time-of-Use rate structures

    • ESCO and Utility billing processes

    • Demand Response (DR) programs

    • Master-metered buildings

    • On-bill recovery


CEC Overview: Process

  • Staff identified a subset of targeted issues and met with individual parties to discuss topics such as data access, community/municipal choice aggregation, and customer segmentation and marketing.

  • The presentations identify certain barriers and possible approaches to enhance customer engagement.  They do not reflect agreement or consensus of the parties and are not meant to reflect a comprehensive analysis of the benefits, costs, and concerns associated with the identified methods and approaches to customer engagement.


Agenda

  • Customer Engagement Committee (CEC) Overview

  • Barriers to Customer Engagement: The Customer

  • Barriers to Customer Engagement: The ESCO

  • Effective Customer Engagement

  • The Community Choice Aggregation Model

  • Wrap-up


Barriers to Customer Engagement: The Customer- Overview: DER Deployment Requires Motivated Customers

  • Industrial and many large commercial customers are motivated by intense external and internal competitive pressures to identify and evaluate economically feasible DER alternatives

    • Efficiency investments and practices

    • Behind the meter distributed generation

  • Additional opportunities will be assessed if barriers are addressed

  • The challenge of motivating other customers


Barriers to Customer Engagement: The Customer- The Details Matter: Principles for Mitigating Existing Barriers to DER Development

  • Offer products that customers want

  • Address basic pricing problems

  • Align rates with cost causation

  • Rates and value propositions matter


Barriers to Customer Engagement: The Customer

  • Inadequate Customer Understanding/knowledge

    • Limited access to real time usage data

    • Not all utility meters are smart meters

    • Electric tariffs are complex, making the cost-benefit analysis for ECMs difficult

    • No direct way to access PSC-approved submetering technology

  • Regulatory Barriers

    • Product Innovation: DR programs Require Flexibility

    • Cost of participating in DSPPand value-added products/services

    • Standby tariffs and capacity restrictions undermine large DG investment

    • Difficulty in accessing TOU rates statewide and existing rates may not provide adequate value

    • Air emissions permitting for emergency generators participating in DR

  • Equity and Fairness Considerations

    • Uniformity of Utility Business Rules

    • Low income social justice issues

    • Fair allocation of costs for AMI, new technologies, pilot programs

    • Inconsistent or short term funding of outreach, education and incentives inhibit engagement


Barriers to Customer Engagement: The Customer- Barriers to Demand Response as DER (Dispatchable or Not)

  • Most existing DR programs focus on reliability, rather than on reducing peak loads and prices

  • Energy, capacity and ancillary service performance metrics are defined to mimic generator performance criteria which may not accurately capture the value of DER

  • Clear and stable rules are needed to encourage customer participation


Barriers to Customer Engagement: The Customer- Product Flexibility is Key to Addressing DR Barriers

  • Responsive Demand is not the same as Demand Response.  Allow customers to optimize based on their own motivations in combination with market opportunities.

  • Retail DR should be designed to align customer load and load shape potential with defined REV objectives (e.g., improve system load factor)


Agenda

  • Customer Engagement Committee (CEC) Overview

  • Barriers to Customer Engagement: The Customer

  • Barriers to Customer Engagement: The ESCO

  • Effective Customer Engagement

  • The Community Choice Aggregation Model

  • Wrap-up


Barriers to Customer Engagement: The ESCO- Key Barriers

  • Absence of full smart meter deployment

  • Lack of real-time access to data from meter (including from some existing interval meters)

  • Real-time access to two-way functionality

  • Limited billing options

  • Other regulatory and rate-making issues


Barriers to Customer Engagement: The ESCO- Meter Functionality and Access to Data

  • Most DER works optimally with smart meters (with appropriate access to data and functionality)

    • Traditional energy efficiency (EE) is an exception

  • Possible end-state solution: Full deployment

    • Not all stakeholders agree that 100% deployment is cost-justified

    • Material concerns regarding data privacy/confidentiality and possible health impacts


  • Barriers to Customer Engagement: The ESCO- Meter Functionality and Access to Data

    • Near-term options build case for longer-term solutions

    • Maintain flexible approach early in REV effort

    • Possible near-term solutions:

      • “Voluntary” deployment

      • Third party deployment

      • Smart meter alternatives

      • Other in-home devices

      • Retail Demand Response Load Profiles

      • Identify possible “early wins” from data validation/EDI work streams

      • Giving customers key data can shape behavior even without full functionality


    Barriers to Customer Engagement: The ESCO- Billing Optionality

    • Lack of comprehensive billing relationship with customer is a barrier to engagement

    • Possible solutions:

      • ESCO consolidated billing (though lots of debate on continuation of other options)

      • More flexible, bill ready utility billing

        • Multiple products and price plans


    Barriers to Customer Engagement: The ESCO- Other Regulatory Issues

    • Net metering protocol limits ESCO ability to integrate DG into ESCO portfolio

    • Some rules limit ESCO-customer relationship

      • Inability to do an ‘apples-to-apples’ comparison

      • Need account number to switch suppliers

  • Customer inertia itself may be a barrier

    • Considerable differences of opinion on utility role in commodity supply


  • Barriers to Customer Engagement: The ESCO- Summary

    • Customer engagement will flow from proper market structure

    • Major barriers relate to directness of ESCO relationship with customers

    • ESCOs confident in ability to engage mass market if barriers materially resolved

      • Well-positioned to seamlessly integrate DER into customer-friendly offerings

      • ESCOs have powerful incentive to simplify behind-the-scenes complexity


    Agenda

    • Customer Engagement Committee (CEC) Overview

    • Barriers to Customer Engagement: The Customer

    • Barriers to Customer Engagement: The ESCO

    • Effective Customer Engagement

    • The Community Choice Aggregation Model

    • Wrap-up


    Effective Customer Engagement: Introduction

    CEC sought to identify and address barriers to participation by all customer groups in the markets and new opportunities created by the REV initiative.

    Goals include:

    • Barrier Identification

    • Discussion on Effective Customer Engagement Opportunities

    • Market Design Principles


    Effective Customer Engagement- Classes of Customer Engagement

    The customer engagement strategies discussed by the committee can be organized into four general classes:

    • General Education and Outreach

    • Regulated Programs

    • Customer Products and Services

    • Incentives and Financing

      Historically funded through approved program budgets, system benefit charges

      REV has identified future funding as an open issue

      “Best Practices” can be identified for traditional approaches; “Market Design” principles applicable to new approaches.


    Effective Customer EngagementI. General Education and Outreach

    General Education and Outreach strategies include:

    • General market information

    • Customer education about market changes

    • Education about system operations and impacts

    • Analogies from air quality campaigns and retail choice


    Effective Customer EngagementII. Regulated Programs

    Regulated Programs have included:

    • Demand-side management portfolios

    • Demand response and direct load control

    • Energy efficiency measures

    • e.g., utility programs, statewide education campaigns


    Effective Customer EngagementIII. Customer Products and Services

    Customer Products and Services represent:

    • “Market-based, sustainable products and services that drive a customer-oriented industry”

    • A resource for education and customer engagement

    • Customer engagement and education funded by market participants through operations

    • Requires successful “market animation”

      Focus on “market design” (not “best practices”)


    Effective Customer EngagementIV. Incentives and Funding

    Incentives and Funding represent:

    • Another channel for customer engagement that supports and complements the others

    • Particularly relevant within New York

    • e.g., rebates, incentives, grants, loans, on-bill recovery and other financing


    Effective Customer Engagement- Examples of Customer Engagement


    Effective Customer Engagement- Components of Customer Engagement

    Staff Report notes, “A strategy for engaging customers should have three main components:

    • Products

    • Information

    • Enabling Technology

      DSPP will “create markets, tariffs and operational systems”

      Achieving “market animation” will require coordination between customer engagement strategies, markets, pricing, and platform technologies


    Agenda

    • Customer Engagement Committee (CEC) Overview

    • Barriers to Customer Engagement: The Customer

    • Barriers to Customer Engagement: The ESCO

    • Effective Customer Engagement

    • The Community Choice Aggregation Model

    • Wrap-up


    The Community Choice Aggregation Model- What is a CCA?

    • CCA is one model for engaging customers

    • A CCA is an optional buying group organized by a municipality to benefit electric customers

    • A CCA would enter into electricity supply contracts for all customers who remain on default service within a given municipality

    • Customers are automatically enrolled, unless they opt out

    • Customers can participate in long-term fixed rates and greener power supply options


    The Community Choice Aggregation Model- Benefits of Community Choice

    • Choice – An alternative to utility default rates and other supplier pricing

    • Control – Town sets its own energy goals, e.g., long term fixed rates, or a higher mix of renewable energy

    • Stability – Town can seek long-term rates to avoid gas market volatility

    • Financing – Have been run without additional staffing or burden on local budgets. Administration of the program should be outsourced to energy professionals

    • No penalties for customers – Opt out anytime and go back to default or choose another ESCO

    • Leverage – Larger buying group attracts attention


    The Community Choice Aggregation Model- Benefits of Community Choice

    • Pro-Customer – Contract terms and conditions are designed to protect customers.

    • Public Oversight – Local officials hold ESCO and Consultant accountable

    • Professional Expertise – Retaining qualified consultants ensures a smooth roll-out of program

    • Green Power – Town can “green-up” entire supply portfolio, or offer “opt-in” green products to customers

    • Public education and engagement - Decisions are made in public forums, providing transparency as well as opportunities for public education and participation. Opt-out notifications also provide an opportunity for public education.  


    The Community Choice Aggregation Model- Some Concerns

    • PSC would need a policy change to allow for “opt-out” programs

    • Program should be authorized by a local governing authority

    • Safeguards must be put in place to maximize transparency and minimize the potential for unethical conduct by anyone involved in administering the program

    • Local governments may currently lack the resources to administer the program and may need to hire or engage experts

    • ESCOs are not prevented from marketing to customers who participate in a CCA

    • ESCOs keep existing customers – CCA can’t take away customers and put them into an aggregation

    • Although opt-out aggregation has historically attracted large ESCOs with hedging desks, smaller ESCOs are not precluded from participating in bidding process


    The Community Choice Aggregation Model- Some ESCO Concerns

    • Concerns about Government involvement in retail markets.

    •  CCA programs will pick certain winners through government intervention and may inhibit customer access by the remaining ESCOs.

    •  An ESCO participating in a government sponsored program will have the benefit of opt-out, while an ESCO participating in a private aggregation program will be subject to opt-in.

    •  Public aggregation has not been implemented in a jurisdiction like New York where the utility (default) rate changes each month in response to market costs.


    The Community Choice Aggregation Model- Case Studies

    • Lowell, MA

      • Pop. 100,000

      • ESCO purchased RECs covering 100% of energy needs from Maine hydropower resources

      • All-in price was 20% lower than default price

  • Lancaster, MA

    • Pop. 8,000

    • Non-profit ESCO purchased RECs from town-owned solar farm

    • Town uses revenue to pay down bond on solar farm

      Marlborough, MA

    • Pop.  38,500 

    • Suspended CCA Program

    • Program suspended after utility rate fell beneath CCA fixed rate in 2012, due to dramatic decline in natural gas prices in 2012


  • The Community Choice Aggregation Model- Road Map for Implementation: The Aggregation Plan

    • Purpose: Describe approach and demonstrate that plan meets all regulatory requirements.

    • Key elements:

      • Customer protection: Customers may opt-out at any time; no hidden fees

      • Price protection: Program will offer firm, fixed rate pricing

      • Flexibility: Decisions about term and price will be made only after bids are received. Leadership is not locked into making a commitment

      • Strong customer education

      • Green option

      • Coordination with local energy efficiency initiatives

      • Local power sources

      • Billing: Customers will continue to receive one bill from utility


    The Community Choice Aggregation Model- Road Map for Implementation: Roles and Responsibilities


    The Community Choice Aggregation Model- Road Map for Implementation: Three Action Points for Local Government

    • Local governing authority passes resolution/referendum/ordinance

    • RFP/Choose Consulting Firm

    • Public Hearing on “Community Choice Power Supply Plan” documents


    Agenda

    • Customer Engagement Committee (CEC) Overview

    • Barriers to Customer Engagement: The Customer

    • Barriers to Customer Engagement: The ESCO

    • Effective Customer Engagement

    • The Community Choice Aggregation Model

    • Wrap-up


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