Iowa Industrial Energy Group Spring Conference 2013

1. Iowa Industrial Energy Group Spring Conference 2013 Energy Efficiency and Industrial Customers Jennifer Easler and Fasil Kebede Iowa Office of Consumer Advocate

2. Presentation Format • Criteria for Iowa energy efficiency plans • New plan development process – IPL as an example • Applying cost-effectiveness requirement and associated benefit-cost tests • Emerging opportunities for nonresidential sector EE • Collaboration efforts on C&I programs • Results of C&I focused industrial research • Q&A

3. Criteria and Requirements for Iowa Energy Efficiency Programs • Electric and gas public utilities shall offer energy efficiency programs • Include range of programs tailored to needs of all customer classes • Establish EE goal based upon assessment of potential, and establish cost-effective EE programs designed to meet the EE goal • An energy efficiency plan as a whole shall be cost-effective; the Board shall apply the societal test, utility cost test, rate-payer impact test, and participant test. • Energy efficiency for qualified low-income persons and for tree planting programs, educational programs, and assessments of consumers’ needs for information to make effective choices regarding energy use and energy efficiency need not be cost-effective and shall not be considered in determining cost-effectiveness of plans as a whole.

4. New Plan Development • Joint Utility Assessment of Potential conducted June 2011-January 2012. The Board determines specific capacity and energy savings performance standards for each utility. • New Plans Developed and submitted by utilities: IPL November 2012; MidAmerican February 2013; Black Hills April 2013 • Among other items, new plans include proposed energy efficiency plans and associated budgets and impacts. The utility “shall submit an EE plan which shall include economically achievable programs designed to attain approved energy and capacity standards.” • The Board shall conduct a contested case for review of energy efficiency plans and budgets filed by regulated IOUs.

5. IPL Benefit-Cost (Electric)

6. IPL Benefit-Cost (Gas)

7. IPL Proposed Budget

8. Non-Residential Opportunities • Industry-specific focus • Industry-specific program outreach that specialize in that customer group. They would be most effective if providing a single point of contact for customers within the industry. • Establish ongoing opportunities for customers within industry groups to interact with and learn from their peers. • Behavior-based efficiency • Energy performance improvements and management practices • http://www.superiorenergyperformance.net • http://www.energystar.gov/index.cfm?c=guidelines.guidlines_index • Building Benchmarking • Establishing baselines is integral part of understanding what can be achieved through comprehensive, strategic EE planning

9. Benefit Cost Tests

10. Differences in B/C tests • Societal Cost Test includes costs and benefits experienced by all members and society. It differs from TRC in taking account of non-monetized externalities, such as environmental costs • Total Resource Cost (TRC) includes costs and benefits experienced by all customers and participant. It differs from Utility Test by also capturing other participant benefits, such as avoided water cost, reduced O&M, improved comfort, health and safety, etc. • Utility Test focuses on costs and benefits experienced by the utility; consistent with the way that supply-side resources are evaluated by vertically integrated utilities. • Participant Test focuses on benefit and costs to participant • Ratepayer Impact test measures impact of EE programs on utility rates; it considers impact of lost revenues

11. Choice of Discount Rate • The choice of discount rate to use for calculating present values of costs and benefits has significant implications for cost-effectiveness of energy efficiency programs. This is because program costs are typically incurred in the early years, while program benefits are enjoyed over the life of the energy efficiency measure. • For the Societal Test, the social discount rate is used; in Iowa this is the 12-month average of 10-year and 30-year Treasury Bonds (3.56) • For Utility and RIM B/C, use utility’s average cost of borrowing a/k/a weighted average cost of capital (debt and equity) • For Participant Test, use consumer lending rate • Additional Resources: National Action Plan for EE, Understanding C-E of EE Programs (EPA 2008); Best Practices in EE Screening (Synapse Energy Economics July 2012)

12. 2009 C&I Collaboration

13. 2010 C&I Collaboration

14. Collaboration – monitor progress on C&I research Targeted research for additional energy efficiency and demand response opportunities and approaches in the following • MidAmericanIPL • Primary metals Food and Kindred Products • Secondary Metal Primary Metal • Machinery Paper and Allied Products • Food Processing Rubber and Misc. Plastics • Plastics This research will be used to educate and train staff and account management staff as well as developing market segmentation approaches for the appropriate industry.

15. Industrial EE Research Results – December 2010 • Strong customer awareness and participation in EE programs: EE projects in the 4 sectors captured 26.3 million kWh for IPL; half of each sector using programs for MEC. Still much to do. • IPL/MEC identified several opportunities to increase energy savings with industrial customers in these industries • Lighting, Waste/Waste water, Motors/VSDs, HVAC/water heat, low voltage distribution transformers • Using input from key customers in each industry, developed better understanding of the barriers faced by customers and areas where utility assistance would be beneficial • Still hard to move EE projects even with relatively short payback periods • IPL will develop a more systematic market segment approach for each industry: education, case studies, training, more trade allies