The Honorable John G. Rowland                                              February 14, 2003

Governor of Connecticut

State House

Hartford, Connecticut 06106

 

Dear Governor Rowland,

 

As you and your administration return to office in Connecticut, the undersigned would like to take this opportunity to provide you with information regarding the economic and environmental value of energy efficiency programs in your state, as well as in other states that make up the New England Power Pool (ISO-New England).

 

In presenting this information, we hope that you will recognize the importance of energy efficiency programs as you set your economic, energy and environmental policy priorities for the coming year.  We also stand ready to assist you in any way we can to help Connecticut achieve its policy goals.   

 

In mid-November, Northeast Energy Efficiency Partnerships, Inc. (NEEP) [1] convened an energy efficiency policy summit that included the undersigned and other organizations, all of which have an interest in energy efficiency as an important public policy.  This summit provided the opportunity to assess the post-election landscape in the Northeast, to share ideas and develop thoughts about how to ensure that energy efficiency continues to be a key component in Connecticut public policy.  

 

The following are 10 reasons developed by summit participants as to why energy efficiency continues to represent sound economic and environmental policy for Connecticut and the region:

 

 

  1. Energy Efficiency WORKS – It provides true and demonstrable savings to Connecticut’s residents and businesses. 
  2. Energy Efficiency Programs Benefit All Customer Sectors – Residential, small, medium and large commercial and industrial customers, and low-income customers all benefit.
  3. Energy Efficiency Helps to Retain and Create Jobs, Supports Local Economies, and Increases Gross State Product – Business margins are improved, consumers keep more disposable income and energy dollars stay in-state.
  4. Energy Efficiency in State Facilities Saves Taxpayer Dollars – As Connecticut struggles with its budget deficit, energy efficiency in state facilities saves taxpayer dollars.
  5. Energy Efficiency Investments Improve Reliability of the Electricity System – By reducing demand during peak use periods, the reliability of local transmission and distribution networks is enhanced, especially in constrained “bottleneck” areas.
  6. Energy Efficiency Helps Lower Wholesale Market Clearing Prices and Creates Permanent Peak Demand Reductions – By reducing demand during times when the price of electricity is at its most expensive, all customers in the region benefit, including those in Connecticut.
  7. Energy Efficiency Improves Energy Security – By lessening the dependence on foreign energy sources and diversifying its energy resources, Connecticut enhances its energy security in a time of economic and geopolitical uncertainty.  
  8. Energy Efficiency can Help Achieve Climate Change Action Goals – Energy efficiency programs help the region avoid hundreds of thousands of tons of carbon emissions, aiding Connecticut and the region in achieving the goals of the landmark Climate Change Action Plan adopted by the Conference of New England Governors and Eastern Canadian Premiers in 2001.
  9. Energy Efficiency Improves Air Quality – In addition to greenhouse gases, emissions of nitrogen oxides (precursors of ozone) and sulfur dioxide (cause of acid rain) that would otherwise be emitted from power plants are also avoided.
  10. Energy Efficiency Program Savings Can Be Locked In – Energy efficiency product standards further the benefits of energy efficiency programs and provide even greater savings to residents and businesses.

 

Over the past decade, energy efficiency programs and policies have captured a wide range of benefits for Connecticut and the region, as described in more detail in the attachment to this letter.  As you and your staff develop the state’s economic recovery plans, we strongly encourage you to include energy efficiency policies as a short-term and long-term investment in the context of creating a sustainable energy system for Connecticut and the region, and by setting energy efficiency policies consistent with the opportunities and developments described herein. 

 

Going forward, we are happy to offer you any assistance and information we can provide as you develop your administration’s economic, energy and environmental policy priorities for this term.  Please do not hesitate to contact NEEP or any of the undersigned parties for more information or questions.

 

Sincerely,

 


Susan E. Coakley

Executive Director

Northeast Energy Efficiency Partnerships, Inc.

 

Penni McLean-Conner

Vice President of Customer Care

NSTAR Electric & Gas Corporation

 

Timothy Stout

Director, Energy Efficiency Services

National Grid – USA Companies

     Massachusetts Electric

     Nantucket Electric

     Granite State Electric

     Narragansett Electric          

 

Kerry J. Kuhlman

President and Chief Operating Officer

Western Massachusetts Electric Company

 

Ashok Gupta

Air and Energy Program Director

Natural Resources Defense Council

 

Stephen Cowell

Chairman and CEO

Conservation Services Group

 

Steve MacAusland

Co-Founder

Massachusetts Interfaith Power & Light

Chair, Interfaith Committee on Faith & Environment

Episcopal Diocese of Eastern Massachusetts

 

Robert Mahoney

Chairman

Cape Light Compact

Selectman, Town of Dennis

 

Warren Leon

Executive Director

Northeast Sustainable Energy Association        

 

Daniel Sosland

Executive Director

Environment Northeast

 

Sue Jones

Energy Project Director

Natural Resources Council of Maine

 

Steven Nadel

Executive Director

American Council for an Energy-Efficient Economy      

 

Rob Sargent

National Association of State Public Interest Research Groups (PIRGs)

 

Sierra Curtis-McLane

New Hampshire PIRG

 

Frank Gorke

MassPIRG

 

Kate Strouse Canada

Rhode Island PIRG

 

Christopher Phelps

Connecticut PIRG

 

Kelly Warner

Executive Vice President

Power Delivery Systems

KEMA-XENERGY

 

Michael Mernick

Vice President             

ICF Consulting

Warwick RI

 

Marc Breslow

Massachusetts Climate Change Action Network

 

Adam Markham

Executive Director

Clean Air Cool Planet, Inc.

 

Deborah Donovan

Manager

New England Clean Energy Project

Union of Concerned Scientists

 

Martha Marks

National Coordinator

Republicans for Environmental Protection

 

Vicki Webster

Massachusetts State Coordinator

Republicans for Environmental Protection

 

Woody Bliss

Connecticut State Coordinator

Republicans for Environmental Protection


 

 

ENERGY EFFICIENCY: KEY TO ECONOMIC, ENERGY AND ENVIRONMENTAL PUBLIC POLICY GOALS

 

 

ECONOMIC   

 

  1. Energy efficiency programs[2] save homeowners, businesses, governments, schools, hospitals and other institutions real money, and provide a significant economic stimulus by putting more disposable income into the hands of consumers while also improving the operating margins of businesses in the short- and long-term.  Examples from various states in New England include:

 

·          Massachusetts’ energy efficiency programs provided $40 million in annual bill savings to customers in 1999 and 2000 combined.  These savings will accrue over the life of the implemented energy efficiency measures to nearly $600 million over 15 years. 

·          In New Hampshire, the electric utilities have set goals of saving 765 million lifetime kilowatt hours – enough energy to power the entire city of Concord for two years – as a result of energy efficiency investments made over a period of less than two years.  The benefits of these investments to customers in the state will be more than three times the initial investment, demonstrating how cost-effective energy efficiency programs can be. 

·          A recent study in Maine has estimated the potential net dollar benefits from pursuing electricity conservation totals more than $502 million over the period 2003-2012.

·          Studies in various New England states have further shown that from a cost per kilowatt-hour (kWh) perspective, the cost of conserving electricity is 40 to 55 percent cheaper than the cost of a comparable electric supply. 

·          In Connecticut, energy efficiency programs are the single most effective and lowest cost tool in addressing that state's electricity congestion problems.  Energy efficiency programs in 2003 will target the most congested transmission and delivery areas and are expected to avoid 100 megawatts of demand – enough relief to provide the expected margin of reliability in the system.

 

This magnitude of savings shows how energy efficiency can serve as a key tool for helping customers lower their electricity bills.  In states where electric company standard offer service rates soon expire, energy efficiency investments are especially important as they can help customers offset electricity price increases and provide price stability as default (or last resort) service rates take effect.  

 

  1. Energy efficiency is also an equitable strategy for helping all types of customer sectors save money, including residential, small, medium and large commercial and industrial customers, as well as low-income customers.  Programs in Connecticut and throughout the region are offered to different customer sectors, thus providing an opportunity for all customers to save money.  In several states, legislation or commission mandates include minimum levels of funding for low-income programs: 

·          In Massachusetts, energy efficiency program administrators invested $11 million in low-income programs in 2000, resulting in an estimated $15 million in bill savings to participating low-income customers over the life of the measures. 

·          In Connecticut, low-income customers will save 187 million lifetime kilowatt-hours (kWh) from the energy efficiency investments, providing them $18.7 million in savings over the life of the measures installed.

·          In New Hampshire, low-income customers each receive $5,900 in energy efficiency products and services (from ratepayer-funded program and DOE Weatherization Program funds combined). 

 

Residential customers are not alone in reaping the benefits of energy efficiency programs, many of which target key business customer sectors.  Energy efficiency savings are especially important for small businesses, helping to increase their operating margins and keep energy dollars in-state. Others focus on large commercial and industrial users, as well as schools and other institutions. Each focuses on overcoming barriers to participation so as to ensure that benefits are equitably distributed among all customer sectors.

 

  1. Energy efficiency helps to retain and create jobs, supports local economies and increases gross state product. 

 

·          A total of $575 million was budgeted for energy efficiency program spending in the Northeast (including New York and New Jersey) in 2002. These energy efficiency investments play an important role in saving businesses money and allowing them to retain jobs that otherwise might be lost.  Studies by the American Council for an Energy-Efficient Economy (ACEEE) have shown that at least 10 and as many as 30 new jobs are created for every $1 million spent on energy efficiency.  This translates to as many as 17,250 jobs being created in the region each year as a result of energy efficiency investments.  Several state-specific studies in the region also estimate the economic impact of energy efficiency investments in terms of employment earnings associated with creation of jobs.  For example, in Rhode Island, investments in energy efficiency over the period 1990-2000 are estimated to have produced 3,050 jobs over the lifetime of measures installed during the 10-year period, creating $85 million in employment earnings. 

·          In Connecticut, a number of municipalities have expressed their support for energy efficiency programs as a means of allowing their businesses to expand or even stay in state, while maintaining local tax bases in difficult economic times.

·          Improving the efficiency of buildings and homes helps to support local economies in Connecticut not only by increasing disposable income for consumers (affording them more money to spend on local goods and services), but also by increasing Connecticut’s Gross State Product (GSP) or its energy intensity (energy use per dollar of GSP).  For example, a recent study conducted by RAND Corporation showed that the Massachusetts economy would have been nearly 5 percent smaller than it actually was in 1997 as a result of energy efficiency program investments and implementation of the state’s energy building code over a 20-year period.  The benefit in 1997 to the Massachusetts state economy from improvements in industrial and commercial energy intensity since 1977 ranged from $1,664 to $2,562 per capita.[3]    

 

  1. Energy efficiency in state facilities saves taxpayer dollars. 

 

·          As Connecticut struggles with its budget deficit, it can save millions of taxpayer dollars through improved energy efficiency of state buildings and procurement policies that require that specific products and equipment purchased by state agencies be energy efficient.

·          For example, New York Governor George Pataki issued an executive order in 2001 requiring state procurement of high efficiency products.[4]  Similarly, New Jersey Governor James McGreevey issued an executive order requiring that all new school designs incorporate the guidelines developed by the United States Green Building Council known as "Leadership in Energy & Environmental Design ("LEED"), Version 2.0 to achieve maximum energy efficiency and environmental sustainability in the design of schools.[5]  

 

ENERGY SYSTEM RELIABILITY 

 

  1. Energy efficiency investments improve reliability of the electricity system.

 

·          By reducing electricity demand during peak usage periods, energy efficiency investments contribute to system reliability in terms of supply adequacy within a particular area or region, and can enhance reliability of local transmission and distribution (T&D) networks, especially in constrained “bottleneck” areas. Given that costs for transmission system upgrades are likely to be borne locally by those states that benefit directly from such upgrades, rather than regionally, it is increasingly important that the role of cost-effective energy efficiency and demand-side resources be considered in transmission planning.

·          In southwestern Connecticut, one of the most congested areas in the Northeast, the state's energy efficiency programs are being targeted to the towns that face the most serious congestion problems.  Because efficiency programs can be deployed quickly, these investments will have rapid impacts in relieving congestion on the T&D system and providing the margin of comfort that could prove the difference between emergency brown-outs and having sufficient T&D capacity.

·          State administrators, regulators, and legislators in New England have the opportunity, as proposed by the Federal Energy Regulatory Commission (FERC), to work together to develop a coordinated oversight organization to address wholesale and retail electricity market and T&D reliability issues in the region (i.e., formation of a Regional State Advisory Committee, RSAC, as proposed by FERC in its Standard Market Design for Regional Transmission Organizations).  The National Governor’s Association has endorsed the concept of forming such multi-state entities, and discussions are currently underway in New England regarding the creation of such a regional organization. We encourage further investigation of the formation of an RSAC, whose responsibilities could include assessing the potential contribution of cost-effective demand-side resources (i.e., energy efficiency, demand reduction, load management, distributed energy resources) to meet Connecticut’s short-term and long-term needs regarding local and regional power system needs including cost-effective T&D reliability issues.

 

  1. Energy efficiency helps lower wholesale market clearing prices and creates permanent peak demand reductions.  

 

·          By reducing demand during peak periods when the price of electricity can be significantly more expensive in the whole electricity market, energy efficiency programs benefit all customers in the region, including those in Connecticut.  For example, studies by the Massachusetts Division of Energy Resources show that demand reductions due to Massachusetts energy efficiency programs in 1999 and 2000 helped to avoid $400,000 to over $6 million, respectively, of wholesale electricity costs in a single day, where the impact depended largely on the adequacy of electricity supply.  (The magnitude of these savings would have been considerably higher if the demand reduction impacts of energy efficiency programs throughout all of New England had been included in the analysis.)  Further, these demand reductions are not just temporary, but remain in place over the life of the energy efficiency measures installed, thus providing permanent savings to all customers in New England that cumulate as more energy efficiency investments are made.

 

  1. Energy efficiency can help improve energy security. 

 

·          Energy efficiency investment is one of the best tools available to reduce consumer costs, prices, and risks, and enhance energy security in a time of economic and geopolitical uncertainty. Not only do energy efficiency programs help to mitigate risks associated with electricity system and transmission and delivery reliability (see above), and with climate change impacts (see below), they can also address risk associated with electricity pricing in states with restructured electricity industries.  The value that energy efficiency provides in terms of ensuring adequate energy resources in the region (i.e., less reliance on oil, especially from foreign sources) directly supports increasing awareness and concerns about homeland security. 

 

 

 

ENVIRONMENTAL 

 

  1. Energy efficiency reduces greenhouse gas emissions.

 

·          This past August, the Conference of New England Governors and Eastern Canadian Premiers signed a breakthrough agreement and reinforced its commitment to reduce our region's greenhouse gas emissions as put forth in its Climate Change Action Plan.[6]  The Conference passed the "Resolution 27-7 Concerning Climate Change" which directs the Committee on the Environment and the Northeast International Committee on Energy to evaluate and recommend options for reducing greenhouse emissions from the electricity sector and increase the amount of energy saved through conservation programs in a cost-effective manner.  This resolution demonstrates the importance and value that energy efficiency plays in helping states address climate change goals, which in turn affect the health of the region’s economy and its citizens. 

·          According to a report released this fall by the New England Regional Assessment (NERA) Group, New England is already seeing impacts of climate change, and more are predicted in the future.  Tourism is a dominant industry in the region: skiing would suffer as the snow-pack is reduced and man-made snow comes with high monetary and environmental costs.  Species decline due to migrating forests (i.e., loss of sugar maple) would impact commercial forestry, fall foliage displays, and maple syrup production.  Alpine areas and temperature-sensitive species such as spruce are declining.  Forestry, fisheries, and specialty agricultural crops will also be impacted by a changing climate. Human health is also of major concern in the region, particularly air quality and heat stress. 

·          Energy efficiency programs in Connecticut, Massachusetts and Vermont show that in 2000 alone, over 780,000 tons of CO2 emissions were avoided, roughly equivalent to the emissions of 158,000 cars and light vehicles.  Over the lifetime of energy efficiency measures installed in 2000 in these states, the avoided emissions will accrue to significantly large levels, helping states in New England meet their climate change goals. 

 

  1. Energy efficiency helps to improve air quality. 

 

·          In addition to reducing greenhouse gas emissions, energy efficiency programs reduce emissions of nitrogen oxides (precursors of ozone) and sulfur dioxide (cause of acid rain) that would otherwise be emitted from power plants. 

·          Studies conducted in Connecticut, Massachusetts, and Vermont demonstrate the role that energy efficiency can play to help reduce these hazardous pollutants, thereby improving the quality of air, forests, lakes, streams and the health of the state’s and the region’s citizens.  Over a period of two years, the energy efficiency programs in these states reduced NOx emissions by 1,494 tons and SO2 by 5,324 tons. 

·          The NOx emission reductions are equivalent to the emissions of approximately 172,000 passenger cars, while the SO2 reductions are roughly equal to avoiding the burning of nearly 380,000 tons of bituminous coal, the primary type of coal burned for electricity generation. 

·          The air quality benefits from these energy efficiency activities will continue over the long-term.  Thus, funding for energy efficiency programs presents a “win-win-win” policy for New England states as it provides substantial long-term environmental and public health benefits that are achieved through actions that lower energy bills and improve the economy.

 

ADDITIONAL POLICY OPTIONS

 

  1. Upgrading energy efficiency product standards “lock in” the savings from energy efficiency programs, and can yield significant benefits to Connecticut and the region in lower electricity costs, greater electric system reliability and fewer harmful emissions.  In New England, standards for 10 readily available products would reduce electricity consumption by about 4,000 gigawatt-hours (gWh) by 2020.  This is equivalent to the electricity needed by 8,000,000 homes. In addition, peak electricity demand would be reduced by 1,130 megawatts (MW), or the equivalent of four mid-sized power plants. From a regional power pool perspective, standards can play an important role in system reliability. Economically, standards would result in savings to residents and businesses in the region that total almost $3 billion through 2020.  And, as an environmental measure, standards would help New England avoid 700,000 metric tons of carbon dioxide (CO2) emissions, equivalent to removing 550,000 cars from the road, and avoiding 850 tons of nitrogen oxides (NOx) and 2,000 tons of sulfur dioxide (SO2) emissions annually. 

 

For Connecticut alone, enacting standards for 10 products would reduce annual electricity use by 800 gWh, save businesses and residents $ 750 million, reduce electricity demand by 200 megawatts and avoid emissions of 100,000 metric tons of CO2, 110 metric tons of NOX and 380 metric tons of SO2. 


[1] NEEP is a non-profit regional organization founded in 1996 whose mission is to steadily increase energy efficiency in homes, buildings and industry in the Northeast United States.  NEEP is supported by funding from electric utilities and other energy efficiency program administrators, the Environmental Protection Agency, the Department of Energy, and funding from foundations.

[2] All New England states have energy efficiency programs funded by electric utility customers through a small per unit kWh charge that is mandated either by legislation or by their regulatory commission.  Several natural gas utilities also have energy efficiency programs.  See attached summary of energy efficiency funding by state for 2002.

[3] The Public Benefit of Energy Efficiency to the State of Massachusetts; 2002; Mark Bernstein, Christopher Pernin, Sam Loeb, Mark Hanson; RAND Science and Technology

[4] Executive Order No. 111: “Green and Clean” State Building and Vehicle Guidelines.  New York Research & Development Authority (NYSERDA).  December 2001. See http://www.nyserda.org/exorder111guidelines.pdf.

[5] State of New Jersey, Executive Order #24, July 29, 2002. See http://www.state.nj.us/infobank/circular/eom24.htm

[6] The Climate Change Action Plan adopted by the Conference of New England Governors and Eastern Canadian Premiers presents two potential goals and areas for reducing greenhouse gas emissions related to energy:  reduction of greenhouse gases from the electricity sector by 20%, and increasing the amount of greenhouse gas emission reductions achieved through conservation programs by 20% by 2025.