Energy Biz - September/October 2008 - (Page 118) » leGal eaGle the utility capitalizes all program costs in its rate base and shareholders earn both the allowed rate of return and bonus rate of return on the equity portion of its efficiency regulatory asset. The virtual power plant or save a watt model includes an energy-efficiency rider that essentially folds cost recovery, recovery of lost margins and performance incentives into a single mechanism rather than treating them separately. Under this approach, the utility is compensated for investing in energy efficiency based on the avoided cost of new capacity. Although this approach has not yet been implemented, allowing the utility to recover some portion — perhaps as much as 85 percent — of the costs avoided by “saving watts” rather than building a new supply source is currently under discussion. This structure creates an incentive to both minimize costs and to invest in energy efficiency. As utilities begin to make major investments in energy efficiency and to rely more on it as the fifth fuel in their portfolio of energy sources, the issues involving cost recovery, lost revenue recovery and performance incentives loom large because the impacts become much more significant. As with any major investment, providing a reasonable degree of certainty about the rules of the game may, in itself, be the largest single motivator for utilities to invest in efficiency programs. In addition, if efficiency is indeed to be treated truly as the fifth fuel, then the utility must have some degree of control over the investment. As we confront the dual challenge of mitigating climate change and reacting to an ever-costlier operating environment, we can candidly say in 2008 that energy efficiency is here to stay and no longer is a passing fad as it may have been in the 1980s and early 1990s. The joint commitNewsFlash ment by utilities, regulators MiDWest Regional and customers to making eMissions efficiency a permanent Midwest states and prominent part of our should attempt to limit regional emissions thinking must be real and of greenhouse gases long term. This is why starting in 2012, according to Wisconsin we need new regulatory Gov. Jim Doyle. policies that align customer, “Given that the federal government utility and investor interests. simply has not been Efficiency needs to be a moving strongly in this direction, it is important fundamental component that the various of utility business strategy regions of the country going forward. get to work,” Doyle said. His comments were reported in the Milwaukee Journal Sentinel. Lisa V. Wood is executive director of the Institute for Electric Efficiency, part of the Edison foundation. New Jersey catches rays STATE EMERgES AS CALiFORNiA EAST By gARy M. STERN new Jersey, preViously known for Atlantic City and Bruce Springsteen, is fast building a reputation as something completely different: a leader in solar energy. While California has been number one in subsidizing and encouraging solar power generation, New Jersey now ranks second in solar installations and solar capacity in the country. What specific policies has New Jersey introduced to spur solar growth, and what can other states learn from its practices? “While most people think of the sun states like Florida and the Southwest, New Jersey has been a leader in promoting solar use,” stated Monique Hanis, a spokesperson for the Solar Energy Industries Association, which is based in Washington. The rise in solar use results from state policies; it won’t happen by itself, she added. New Jersey’s renewable energy programs are proving that solar will be built if prices are subsidized and reduced. The impetus for New Jersey’s encouraging solar was based on 1999 legislation that established what came to be called the New Jersey Clean Energy Program, noted Jeanne Fox, president of New Jersey’s Board of Public Utilities. The program’s goals were for energy efficiency and reducing carbon emissions through clean generation and renewable energy. It offered two renewable energy programs revolving around rebates and energy-trading certificates. In fact, New Jersey’s Customer On-Site Renewable Energy rebate program, which launched in 2001, distributed more than $213 million for solar use as of June. The money covered 2,355 residential systems, 330 commercial systems, nearly 70 schools and 70 other facilities, amounting to 2,825 projects. By the end of this year, more than 3,000 solar systems will be installed in New Jersey compared to six installations as of 2001. Ratepayers were charged $5 a year on their electric bill, and those funds were funneled into a special utility fund to spur solar use, noted Rick Brooke, the president of the Mid-Atlantic Solar Energy Industries Association. Residential and commercial customers who installed solar systems and applied for rebates 118 E n E rgyB i z September/October 2008 http://www.energycentral.com
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