WG-1: Customer Engagement Committee

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.

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)

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

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 Engagement IV. 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

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

WG-1: Customer Engagement Committee