Is a Poor Energy Efficiency Program Better Than No Program at All?

energy efficiency program
A Zondits Opinion by Gita Subramony, May 18, 2015. Image credit: Cooper0

Last year, Indiana’s state legislature voted to eliminate their energy efficiency program (Energizing Indiana). Governor Mike Pence allowed the bill to pass but promised to revisit energy efficiency in this year’s legislative session.

The Indiana legislature has now rolled out a new energy efficiency plan, but it seems more and more likely that this new plan will be detrimental to ratepayers’ wallets and the state’s ability to comply with the US EPA’s Clean Power Plan.

The new energy efficiency bill allows the utility companies to create their own energy reduction goals and craft their own programs. Although the state’s Utility Regulatory Commission will be in charge of approving programs and goals, it is unclear how much oversight the body will actually have. It might be possible for some utilities to get away with setting meager goals, hampering Indiana’s ability to comply with the EPA Clean Power Plan, which puts regulations on greenhouse gas emissions from coal-fired power plants. Additionally, utility-crafted programs have no incentive to set aggressive energy reduction targets and no incentive to be cost-effective under this plan. The lack of oversight will result in wasteful and ineffective programs. Some might argue that any energy efficiency program is better than none, but with such lax goals and no oversight, the programs are set up for failure. Poor performance and cost-ineffectiveness could have the damaging effect of tarnishing other programs in other regions.

Another key problem with the new efficiency law is that as compensation for providing energy reduction programs, utilities will be allowed to charge customers for lost revenue to make up for energy they are not selling. Indiana has not imposed any limit on the amount of lost revenue that utilities can recover, which means that ratepayers are likely not going to see cost savings from these energy efficiency programs.

Instead of having a functional and cost-effective energy efficiency program through Energizing Indiana, the state legislature and the governor have instituted a system ripe for failure. Some state senators who voted to dismantle the former efficiency program indicated that they thought the goals under Energizing Indiana were unrealistic and not achievable. The replacement plan, however, will only achieve higher costs for customers and no appreciable savings. At this stage would Indiana be better off without any efficiency programs rather than a poorly designed set of programs?