Con Edison Commits to Significant New Efficiency Programs

A diverse coalition negotiating Con Edison’s rates and services for 2017 through 2019—including Department of Public Service (DPS) staff and Con Edison representatives—agreed to a joint proposal, released today, that includes a significant commitment by the utility to implement new energy efficiency programs, as well as performance incentives that will reward Con Edison’s shareholders for achieved electricity savings.

Now, it is up to the New York Public Service Commission to vote on the proposal, whose signatories in addition to DPS Staff and Con Edison include a number of environmental groups including the Natural Resources Defense Council, energy affordability advocates such as the Association for Energy Affordability, large energy consumer representatives such as the New York Energy Consumers Council, and the City of New York. (The Natural Resources Defense Council participated in the settlement discussions only with regard to its development of programs for energy efficiency and system peak reduction, and accordingly signed onto only those portions of the proposal without taking a position on the remainder.)

While further action is still necessary for New York to achieve energy savings levels on par with those being achieved by neighboring states like Massachusetts that are leading the nation on energy efficiency, Con Edison’s commitment to new programs is an important step in the right direction. The Public Service Commission should approve Con Edison’s new portfolio of energy efficiency programs, and take further action to build on these programs in the near future.

The joint settlement proposal includes a commitment by Con Edison to implement $99 million in new energy efficiency programs over the next three years, which by 2019 are anticipated to yield more than 300 GWh of savings per year, and to continue to save customers that much each year for many years beyond into the future. That’s enough electricity to serve more than 70,000 of Con Edison’s typical New York City residential customers. The programs are a win-win for customers and the environment because they will reduce customers’ bills and create jobs while simultaneously reducing emissions of CO2 and other dangerous pollutants emitted by power plants.  

Con Edison’s new programs will also make it easier to achieve the 50-percent-by-2030 renewables requirement established by the Commission’s recent Clean Energy Standard Order by reducing the total amount of electricity needed to run the system. That’s because as we’ve discussed previously, when the “electricity demand pie” is smaller overall, it takes fewer supplies to bake it.

The joint settlement proposal is significant for two reasons: First, it includes a commitment to develop new, first of their kind performance incentives that will reward Con Edison’s shareholders for energy savings regardless of their source. NRDC supports approaches like this to help reform the utility business model so as to better encourage utilities to deliver and facilitate more energy savings for customers. The new incentives will motivate Con Edison to engage in all actions that save electricity, regardless of whether those savings are explicitly attributable to any particular Con Edison program. For example, Con Edison could receive the new incentives by helping the New York State Energy Research & Development Authority (NYSERDA) execute one of its own energy savings initiatives, or by working with efficiency developers in its service territory to make it easier for them to carry out projects. The details of these performance incentives will be developed later this year, so as to allow for input from the Clean Energy Advisory Council (CEAC), an advisory body created by the Public Service Commission to provide advice on energy efficiency-related issues. NRDC is an active member of the CEAC and is currently working with other stakeholders such as NYSERDA, utilities and energy efficiency companies to develop recommendations regarding the details of how to structure these performance incentives.

Second and most importantly, if adopted, the proposal will set a new precedent for funding energy efficiency programs through utility rate cases. Historically, New York has not funded utility energy efficiency programs in this manner. Instead, the State has previously implemented such initiatives through a separate Energy Efficiency Portfolio Standard program, and more recently, through each utility’s “Energy Efficiency Transition Implementation Plan” or “ETIP.” This joint proposal, if enacted, will mark the first time that a utility will engage in significant energy efficiency efforts beyond its ETIP through a rate case. That is welcome news, because all utility ETIP programs approved by the Commission (including Con Edison’s) were far too small. Through its new energy efficiency portfolio proposed in the joint proposal, by 2019 Con Edison will achieve energy savings of roughly .7 percent of its total load, more than twice the roughly .3 percent savings it would otherwise achieve from its ETIP alone (assuming ETIP levels are held constant in 2019).

The joint proposal is a step in the right direction and represents significant progress as compared to the status quo. But New York will need to significantly expand upon these efforts in order to achieve its energy efficiency potential and further decrease costs and carbon emissions. As we explained in a previous post, utilities in neighboring states that lead in energy efficiency such as Massachusetts are achieving roughly 3 percent annual savings, more than four times Con Edison’s savings even with its new portfolio. While a direct comparison between utility efforts is not completely appropriate because New York also carries out a number of non-utility energy efficiency efforts through NYSERDA, even if all of the savings anticipated from NYSERDA’s initiatives materialize, a significant gap in total savings remains between these states.

Chart provided by Synapse Energy Economics, Inc. Since the current ETIP is approved only through 2018, this figure assumes constant ETIP achievement levels for 2019. NYSERDA targets are extrapolated from the New York Public Service Commission’s Order Authorizing the Clean Energy Fund Framework, Case 14-M-0094 (Jan. 21, 2016). Because that Order provides statewide 10-year targets rather than utility-specific annual goals, we have assumed proportional savings allocated to Con Edison’s service territory and constant annual achievement under NYSERDA’s programs. This illustrates the rough amount of savings anticipated from NYSERDA programs in the state despite the fact that with this data we cannot fully accurately capture NYSERDA’s planned activities affecting Con Edison’s service territory. NYSERDA’s most recently submitted Clean Energy Fund investment plans suggest that these assumptions are generous and true annual savings for years 2017 to 2019 will be significantly lower.

A report released by Synapse Energy Economics Inc. this April concluded that were New York to set aggressive energy efficiency targets ramping up to 3 percent annual savings like those being achieved in Massachusetts and fund programs to achieve those targets, costs for New York State’s electricity customers could be reduced by roughly $3 billion. While Con Edison will need to significantly expand upon the programs proposed in the joint settlement in order to begin to achieve energy savings at the magnitude of those examined in the Synapse report (and similar actions are need by the state’s other utilities), Con Edison’s commitment to go beyond its existing portfolio of programs is a significant step forward that will yield cost savings for customers while benefiting the environment. 

NRDC joined with other environmental and affordability advocates in issuing this press release, which discusses the energy efficiency programs further.