Utilities must move towards a business model in which revenue is tied to the delivery of efficient, clean energy.
Published in Politico on 4/2/2020
EFFICIENCY FEEDBACK — The Board of Public Utilities on Wednesday heard feedback on its straw proposal on energy efficiency and peak demand reduction programs, in line with the goals under the state’s Clean Energy Act. Many urged the BPU staff to reconsider the cost recovery structure to fully encourage energy efficiency and to rethink the way that, under the proposal, utilities would be able to have recovery “of and on” their costs, if they meet performance targets — starting at a reduction of return on equity by 100 basis points. Many, including Tom Churchelow of the New Jersey Utilities Association, Karen Reif of PSE&G and Karen Alexander of the New Jersey Utility Shareholders Association, submitted feedback criticizing the 100 points mechanism. They said the mechanism discouraged investments in energy efficiency, as they would earn less than investments in infrastructure. Erin Cosgrove of the Energy Efficiency Alliance of New Jersey suggested a full decoupling mechanism. “In order for the state to achieve its energy efficiency and broader climate goals, utilities must move away from a business model in which revenue is tied to volume of electrical sales, and towards a business model in which revenue is tied to the delivery of efficient, clean energy,” wrote Cosgrove. The uncertainty caused by the coronavirus pandemic also raised concerns regarding the future of setting and achieving efficiency targets, consumer acceptance and how utilities might be expected to take on financial risk. — Samantha Maldonado