Arizona Energy Policy UpdateJeff Schlegel, The Southwest Energy Efficiency Project

USGBC Arizona Chapter; March 17, 2011

Southwest Energy Efficiency Project (SWEEP)

• Public interest initiative founded in 2001• Promotes greater energy efficiency (EE) in AZ and SW• Board of Directors includes utility, state government,

national laboratory, and private sector representatives• Funding provided by the Energy Foundation, Hewlett

Foundation, Edwards Mother Earth Foundation, U.S. Department of Energy (DOE), and U.S. Environmental Protection Agency (EPA)

www.swenergy.org

Energy EfficiencyDelivers Benefits for:

Customers (Consumers & Businesses)

The Utility System (Electric & Gas)

Our Economy

Our Environment

Arizona Energy Policy Forums

Arizona Corporation Commission

Arizona State Legislature

Salt River ProjectBoard and Managers

Governor’s Office& State Administration

Cities & Counties Congressional Delegation

Arizona Corporation Commission (ACC)

• 5 elected commissioners

• Has jurisdiction over qualityof service & rates chargedby public service utilities

• Regulates 14 electric utilities including APS & TEP, not SRP

• Approves/denies manyutility actions (i.e. rates)

• Can establish rules further governing utilities

38%

36%

13%

13%

Arizona Electric Sales by Utility, ‘08

Arizona Public Service Company (APS)

Salt River Project (SRP)

Tucson Electric Power Company (TEP)

Other

Recent Policy Developments at the ACC

① Electric Efficiency StandardRequires 22% energy savings by 2020

② Gas Efficiency StandardRequires 6% energy savings by 2020

③ Decoupling Policy StatementAllows investor-owned electric and gas utilities to file specific decoupling proposals to align utility financial interests with the interests of customers and the public (which supports EE, RE DG) (Decoupling “de-couples” utility revenues from energy sales)

④ Integrated Resource Planning RulesAllows meaningful opportunities for EE & RE to compete on a level playing field with conventional resources.

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What is the Electric Efficiency Standard (EES)?

• Approved unanimously by ACC in July 2010

• Requires investor-owned utilities to:– Achieve cumulative annual energy savings of 22% by 2020– Includes a 2% credit for peak reductions from Demand Response

• Electric Coops required to meet 75% of standard

• Countable energy savings include:– Savings from combined heat and power (CHP)– 1/3 of measured savings from building energy code support

Gas Efficiency Standard Approved Unanimously

Requires 6% Savings by 2020 Savings from CHP, building energy codes, & standards

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EES Impact on Retail Sales

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 202025,000,000

30,000,000

35,000,000

40,000,000APS' Retail Sales, 2010-2020

Retail EnergySales Forecast

Reta

il En

ergy

Sal

es (M

Wh)

APS’ energy sales growth reduced from 2.8% to 1.1% per year TEP’s energy sales growth reduced from 1.5% to -0.2% per year

Energy SalesForecast with EES

The Effect of Much Higher EE Savings

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37%

33%

24%

6% 0%0%0%

Coal

Natural Gas

Nuclear

Conv. Hydro

Renewables

Energy Eff.

Other

19%

24%

18%

4%

15%

20%0%

AZ 2008 AZ 2020

- Energy efficiency becomes one-fifth of the energy “pie” in 2020 - Lower total costs, lower utility bills, more jobs, less pollution- Deferral of 3 large baseload plants from early 2020’s to 2030’s (and by

then renewables, storage, electric vehicles, etc.)- Plus $9 billion in lower customer bills (2011-2030)

EE: ACC Policy Advancements In Action

• TEP 2011-2012 EE Implementation Plan Filed• New programs, expansions of existing programs• Continuation and expansion of new construction

programs• Includes pilot program to support building energy

codes• Also EE programs for existing buildings

• APS 2011 EE Implementation Plan Approved• New programs (including multi-family new

construction) and program expansions

TEP’s Residential New Construction Program

• Uses an incentive schedule that awards larger incentives for more energy-efficient homes

• To qualify, homes must:– Be tested by an approved energy rater

– Meet one of three tiers in the program based on aHome Energy Rating System (HERS) Index Score:

1) Tier 1: ≤ 85 ($400 incentive per home to builder)2) Tier 2 ≤ 70 ($1,500 incentive)3) Tier 3 ≤ 45 ($3,000 incentive)

TEP’s Commercial New Construction Program

• Offers rebates to non-residential customers in TEP serviceterritory who design and/or build new energy efficient facilities

• Two rebate types offered:

1) Design Assistance RebatesPromote EE integration into design process

2) New Construction RebatesPromote incorporation of EE products/practicesduring construction

• Rebate Caps

1) Customer CapsDepends on funding availability & number of program participants

2) Measure Caps Design Assistance: 50% of the incremental cost up to a max of $10K New Construction: 50% of the incremental cost up to max of $75K

New in ’11-’12:High PerformanceWindow Glazing

APS Multi-Family New Construction Program

• Promotes EE in construction/renovation of new multi-family buildings

• Building owners/developers offered an incentive per dwelling unit for installing select packages of EE improvements in each unit.

– Four different packages– One package targets major renovation projects– Three packages target new construction – New construction packages offer progressively higher incentives for projects

that meet higher levels of energy

• Eligibility– All existing multi-family rental housing complexes and new multi-family rental

construction projects within APS service territory with five dwelling units or more are eligible for the program

– No owner-occupied condominiums or townhomes

NEW!

Support Building Energy Code Advancement

ENERGY

70%USED

30% WASTED

Building energy codes ensure our homes& offices are “built right” the first time

Energy efficient homes are more affordable &reduce the risk of defaults and foreclosures

Building energy codes are a cost-efficient policy strategy for reducing energy costs and pollution

Building Energy Codes in Arizona• Arizona is a “home rule state” (local jurisdictions enact

building codes)

• Only 33% of 111 municipalities haveadopted a version of the InternationalEnergy Conservation Code (IECC)

• To date, no single municipality has adopted the 2009 IECC (although several are working on it)

• Also, Green Building Codes and “beyond code” standards

Arizona Legislature

EXAMPLES OF SWEEP ACTION• HB2574 energy districts (PACE) – failed (10)

• HB2332 schools; energy contracts (09) -- (appliance standards)

• HB2496 schools; energy savings (07)

• HB2430 energy savings; state bldgs (06)

• HB2429 solar tax incentives (06)

• HB2390 appliance standards (05)

• HB2703 performance contracting (04)

• HB2324 state energy savings goals (03)• f

Arizona Legislature – Current Session

• SB 1172 – Performance contracting and energy savings accounts for cities and counties (failed in Senate committee but may come back)

• Greenhouse gas “freedom to breath” proposals to prevent action on climate (SB 1393, SB 1394)

• Challenges to ACC authority (HB 2195, HB 2185)• HB 2501 – “ambiguous” rules or laws• “Energy parks” and “energy districts”• Sustainable finance authority• BUDGET