Falling Behind on Energy Efficiency

Maryland has a great deal to gain from smart investments in improved energy efficiency. Energy efficiency can address many of the problems the state faces from high electricity use, including high energy bills, pollution, and reliability issues, while boosting the economy. In fact, every dollar invested in energy efficiency can yield up to $4 in savings for individual consumers.

In order to take advantage of its full potential for energy efficiency, the state adopted the EmPOWER Maryland Act in 2008, establishing clear energy efficiency goals for the state. However, the Public Service Commission (PSC), the agency responsible for overseeing the bulk of EmPOWER Maryland’s energy savings goals, has failed to properly manage efforts by the state’s five investor-owned utilities to meet efficiency targets. If current programs do not improve, Maryland risks missing its 2015 energy savings target by as much as 52 percent. 

To get Maryland back on track, the Public Service Commission must do more to ensure that utility programs are achieving their share of EmPOWER Maryland targets and approve all efficiency programs that deliver a net benefit to Maryland and our economy. 

EmPOWER Maryland addresses critical energy problems in the state.

• High energy prices caused an increase of $400 in annual electricity costs for the average household in the state between 1999 and 2009.
• Future increases in demand for electricity could result in the need for costly high-voltage power lines or new power plants.
• Maryland relies heavily on dirty power sources, such as coal and nuclear power, which emit health-threatening pollution. 

Energy efficiency programs implemented in Maryland in the past two years have already delivered significant benefits for the state.

• Because of efficiency measures adopted in the past two years by more than 150,000 Marylanders through utility and state-run energy efficiency programs, consumers will spend $60 million less on electricity every year and as much as $900 million less over the life of the investments. 
• Energy efficiency job training programs have served more than 1,000 workers.

The EmPOWER Maryland Act required utilities to achieve additional electricity savings, saving more money for ratepayers and decreasing air pollution.

• Utility-run efficiency programs can be very effective when fully implemented. In the last three months of 2010, utilities achieved 35 percent of their electricity savings for the whole year – despite the fact that many programs didn’t launch until the second quarter. 
• By the end of 2010, utilities had saved enough electricity through their EmPOWER Maryland programs to avoid global warming emissions equal to those from 650,000 cars operating for a year.
• Meeting 2015 efficiency goals could save ratepayers $288 million annually, assuming that efficiency savings are spread out evenly across the lifetime of the efficiency measures.
• These investments would also help the state avoid construction of at least one coal-fired power plant and create 8,000 new jobs. 

Based on progress made by utilities in 2009 and 2010, Maryland is likely to miss the 2015 energy savings targets established by EmPOWER Maryland by as much as 52 percent. (See Table 1 in linked PDF)  

• If utility programs achieve the same quarterly savings from 2011 to 2015 as they did in the final quarter of 2010, utilities will achieve only 46 percent of their EmPOWER Maryland electricity savings targets and 72 percent of their peak demand reduction goals in 2015. 
• Non-utility efforts to meet EmPOWER Maryland targets have accomplished relatively little; the bulk of electricity savings in the state so far have been achieved by utilities.
• Even if state and federal programs manage to achieve half of the non-utility share of EmPOWER Maryland targets – an optimistic assumption – Maryland would still fall about 52 percent short of overall targets.*

Actions by the Public Service Commission (PSC) have impaired progress toward meeting the goals of EmPOWER Maryland.

The PSC has delayed implementation of EmPOWER Maryland, preventing delivery of meaningful savings early in the program.

Due to its unclear program guidelines and drawn-out approval process, the PSC delayed program launch for most utility programs for almost a year after EmPOWER Maryland was enacted. 

• The PSC failed to ensure that utilities launched efficiency programs in a timely manner after receiving PSC approval.
• The PSC has not created a system for timely evaluation of utility programs, resulting in planning problems. 
• The PSC has yet to make many specific decisions about program evaluation, which affects the PSC’s ability to discern where utilities are succeeding or failing.

 The Public Service Commission is restrictive in the types of programs it allows utilities to pursue, leaving many efficiency opportunities untapped.

• The PSC has set an unreasonable standard for “cost-effectiveness” and applies it inconsistently, hindering utilities’ ability to design effective programs.
• The PSC does not consider social and environmental benefits of energy efficiency legitimate criteria for program approval.
• The PSC has rejected programs that pass nationally-recognized cost-effectiveness tests, leaving utilities without a clear indication of how to design programs to gain PSC approval.
• The PSC has been hesitant to approve efficiency programs where benefits are not distributed evenly among all ratepayers, which leaves many legitimate efficiency programs on the table.

 The PSC has not held utilities accountable for their electricity savings shortfalls. 

• The PSC has approved utility plans that will not meet EmPOWER Maryland targets and has failed to impose consequences on utilities when they do not hit interim goals.

 The state and the PSC must improve EmPOWER Maryland implementation and support additional efficiency programs. The PSC must do more to ensure that utilities meet their share of the EmPOWER Maryland goals. The PSC should: 

1. Recognize all the benefits of energy efficiency – The Public Service Commission should follow the lead of states that have adopted a broader cost-effectiveness test to capture benefits of energy efficiency that include avoided costs of building transmission lines and power plants, as well as public health benefits of using less energy. 
2. Enforce timelines and targets – Utility failure to meet electricity savings targets or reporting deadlines set by the PSC should have clear consequences for the utility.

In addition, the state should:

1. Restore state funding for energy efficiency – Of the money the state receives for selling carbon allowances in the Regional Greenhouse Gas Initiative (RGGI), the General Assembly set aside 46 percent for energy efficiency investments in 2009. In 2011, this percentage fell to 20 percent.  
2. Create a stakeholder advisory board – Like other states, Maryland should coordinate an independent energy efficiency stakeholder advisory board made up of utility representatives, consumer groups, energy efficiency experts, contractors and other interested parties, that meets regularly to advise the PSC on EmPOWER Maryland program development and implementation.
3. Coordinate programs statewide – Experience in other states teaches us that coordinated programs with a single brand are more effective than separate efforts. When each utility offers different programs, it complicates outreach, education and training for consumers and contractors.
4. Develop natural gas savings goals – Many homes in Maryland are heated by natural gas. We lose significant opportunities to save energy by failing to adopt and work towards a statewide natural gas savings goal. The state should establish a natural gas efficiency standard, and the PSC should cultivate strong natural gas savings programs among utilities.

*Calculations include progress to date from program launch and assumes that utilities achieve the same quarterly savings through the end of 2015 as in the fourth quarter of 2010. It also assumes that state and federal programs achieve at least half of the energy savings and peak demand reduction goals for which utilities are not responsible under EmPOWER Maryland.]