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Consultant spends 13 years, nearly $600,000 drafting energy efficiency rules

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Consultant spends 13 years, nearly $600,000 drafting energy efficiency rules

Sep 21, 2023 | 6:30 pm ET
By Wesley Muller
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Consultant spends 13 years, nearly $600,000 drafting energy efficiency rules
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A consulting firm has charged state taxpayers over a half-million dollars while trying for 13 years to write energy efficiency policy for the Louisiana Public Service Commission. On Wednesday, it approved giving the firm more money and time because the work is still not complete.

In 2010, the LPSC hired Georgia-based consulting firm J. Kennedy & Associates to write the agency’s rules for energy efficiency resource standards (EERS), a policy many other states have enacted to require and incentivize utility companies to implement various energy saving measures and technologies. 

Texas adopted the first EERS standards in 1999. Since then, more than 30 other states have successfully implemented EERS programs, with Virginia being the most recent, according to the National Conference of State Legislatures

Louisiana’s energy efficiency policy is supposed to be part of what’s called the “Quick Start” program, but as Commissioner Craig Greene said at Wednesday’s LPSC meeting, “after 13 years, we can’t call it Quick Start anymore.”

Phil Hayet, a consultant with J. Kennedy & Associates, appeared before the commission to request a roughly $140,000 budget increase on top of the $591,000 the firm has charged since it took on the rulemaking contract 13 years ago. The firm would use the additional money if it needs to continue its work beyond the end of the year. 

Unhappy with the continuous delays, Greene initially moved to reject the budget expansion, saying he feels Hayet has disregarded the commission’s input on what the rules should say. 

“He’s failed to produce an actual rule to be voted on and, in fact, at times even hampering the resolution of this docket,” Greene said. 

The first phase of Quick Start, which the commission adopted in 2012, was voluntary for utility companies and was supposed to last just two years. The rules encouraged utilities to spend small amounts on rudimentary initiatives such as customer rebates for more efficient light bulbs. 

The second phase rules, which the consulting firm is still writing, are supposed to encompass long-term comprehensive efficiency regulations. For example, the rules might require utilities to upgrade to more efficient transmission technologies or to use certain power generation sources during peak load times. 

In every case, the utility companies would be able to recover the costs of implementing the new policy from their customers and have been doing so for years. Entergy Louisiana customers can find the energy efficiency fees on their bill described as “Rider EECR-QS” and “Rider EECR-PE.” 

Despite this, many of Louisiana’s utilities have opposed the LPSC’s adoption of energy efficiency standards. There is an inherent conflict for an investor-owned utility company to encourage its customers to purchase less of its product by becoming more efficient. 

That opposition has been one of the reasons why the consulting firm has delayed its work. There were different members on the commission when Quick Start first began, and they appeared content with allowing the utility companies to lead the way in how the program should be managed. 

After Greene was elected, he began researching the issue and in 2019 started pushing for a policy that uses a third-party administrator to run the program and set the individualized energy efficiency goals for each utility. In May, four of the five commissioners voted to publish a draft rule for an energy efficiency policy that relies on a third-party administrator.

However, the utility companies bombarded the consultant with lengthy filings in opposition to the proposal. Greene said this caused the consultant to back away from the proposal in an effort to try to appease the utilities. 

“Four out of the five of us said, ‘Let’s move in the direction of the commission-led TPA [third-party administrator],’ and it seems like you just didn’t go in that direction,” Greene told Hayet.

Greene pointed out that one should expect nothing less than to see the utility companies oppose projects they believe might dampen their profits. 

In addition to charging energy efficiency fees, utilities want to be able to recover lost revenues on energy they don’t sell because of efficiency improvements. The current draft policy wouldn’t outright deny this, but it would place the burden on the companies to show their revenue losses came directly from energy efficiency. 

Entergy Louisiana called the policy “draconian,” while Cleco Power called it “Frankenstein-esque,” according to public comments the companies filed with the LPSC.

In an email Thursday, Entergy Louisiana offered additional comments on what it called the commission’s “strawman proposal” because of its use of a third-party administrator. 

“Injecting an unknown third party will cause confusion to the customers and result in a loss of momentum in terms of EE [energy efficiency] adoption and acceptance,” Entergy spokesperson Brandon Scardigli said in an email.

The company also opposes the standards because they lack measures of accountability and transparency because they include no cost-effectiveness requirements or energy savings targets, Scardigli said.

The Alliance for Affordable Energy, which has positioned itself opposite the utility companies on this issue, actually agrees with Entergy on that last point about energy savings targets, executive director Logan Burke said. 

Rather than setting actual energy use targets, the policy would measure benchmarks in accordance with how much a utility company spends on energy efficiency. This could be problematic because a company could, in theory, just purchase higher priced equipment as a way to artificially help meet its energy efficiency goals, Burke said. 

The states with the highest ranked energy efficiency standards use actual energy savings targets that utilities are required to meet. Because the Quick Start program uses spending as a measurement, many experts in the field don’t consider it a true energy efficiency resource standard, Burke said. 

Organizations such as the National Conference of State Legislatures and Colorado State University’s Center for the New Energy Economy have excluded Louisiana from its lists of states with energy efficiency resource standards.

Hayet, the consultant, said he did a ton of research to put together four drafts of what has now become a nearly 40-page rule. For his part, Hayet scrapped much of his earlier work when the commission changed its approach to the program four years ago. He did acknowledge utility companies don’t like the current proposal but said there were several legal issues the companies pointed out that needed to be corrected. 

A significant portion of the consulting firm’s allotted budget was for audits Hayet had to perform on the individual energy efficiency programs the utility companies themselves created for the first phase of the Quick Start program, he said. Hayet told LPSC commissioners he hasn’t charged for any of the research and writing he did this year on the second phase rule proposal. 

“Essentially, we’ve worked at no cost to the commission this past year,” Hayet said. 

He declined to offer additional comments to the Illuminator in an email Thursday, but Hayet assured the commissioners his draft of the policy would align with their wishes. The proposal is about 90% complete, he said, and he hopes to have it done by December. 

“Commissioner Greene, I respect you more than you will ever know, and I think that you do an excellent job,” Hayet said. “…I’m not just saying that.”

Greene ultimately withdrew his motion, and the commission voted to approve Hayet’s request. 

“I appreciate the work you’ve done,” Greene said. “I’ve just felt frustrated with not getting it across…I needed to hear from you that you’re committed to getting this across the finish line.”