COVID-19, New Factor in Energy-Efficiency Programs

BPU, utilities still arguing about reimbursing power and gas companies for revenues lost to reduced consumption as pandemic reframes discussion
Credit: Orna Wachman via Pixabay

For much of the past two decades, the state has been trying to figure out how to get utility customers to reduce their gas and electric use, not always successfully.

Now, a nearly two-year-old law is forcing state regulators to create a new energy-efficiency program that significantly ramps up mandates to require utilities to achieve more significant drops in energy use.

While most agree with the goal, there remains wide disagreement over the details, the same issues that have led New Jersey, once a leader in energy efficiency, to lag behind others in getting customers to use less energy. That reduction can cut energy bills, improve air quality and create new jobs in the green economy.

COVID-19 and energy efficiency

Those disputes mostly revolve around how utilities are to be compensated for the revenues they lose when customers use less gas or electricity and how much ratepayers have to pay for those losses. In hundreds of pages of written comments on the latest proposal submitted to the Board of Public Utilities, however, both critics and backers are raising a new issue: how does the COVID-19 pandemic figure into the new program.

The new program, anticipated to be adopted next month by the BPU, is mandated by the Clean Energy Act signed by Gov. Phil Murphy in May 2018. The law requires utilities to cut electric use by 2%; other utilities would have to cut gas use by 0.75%.

But the proposal developed by the BPU staff increases the mandate to 2.56% for electric utilities, according to Tom Churchelow, president of the New Jersey Utilities Association.

“Clearly, they are even more daunting now given how dramatically the pandemic may impact the economy, customer interest in participating in energy-efficiency programs and even our ability to access homes and businesses,’’ commented Churchelow. The latter issue has arisen over a directive from the Murphy administration to utilities to limit contact with customers who are abiding by stay-at-home orders.

Put the brakes on energy-efficiency plan

AARP argued, in its comments from Ev Liebman, associate director for New Jersey, that the state ought to slow down the process of adopting a new energy-efficiency program.

“In this time of the COVID-19 pandemic, government resources should be directed at controlling the disease and saving lives,’’ according to Liebman. “People are conserving energy as they stay at home and restrict activities. Demand and emissions are down and expected to remain down through 2021.”

The most difficult issue, however, in the framing of a new energy-efficiency program remains  the contention by utilities and many clean-energy advocates that the best way  to spur energy savings is to adopt a full decoupling program that allows utilities to recover all losses from a drop in sales revenue.

Instead, the BPU staff has proposed a limited-cost recovery program that stipulates utilities can only recover costs from lost revenue stemming from energy-efficiency programs, and not other factors like warmer weather or a drop in the economy.

“The world has changed dramatically since this process has began,’’ said Steven Goldenberg, an attorney representing large energy users. “The new normal cannot be ignored.’’

Stefanie Brand, director of the New Jersey Division of Rate Counsel, agreed. “Can you imagine if we had full decoupling right now?’’ she asked. “Utility shareholders would be held whole and the average New Jerseyan would have to pay.’’

After the pandemic …

Others, however, argued the state needs to get a robust energy-efficiency program adopted, and ready to go, when the economy revives and the pandemic is under control.

“At a time of unprecedented crisis, the economic development supported good efficiency jobs and bill savings for customers is more important than ever,’’ according to the American Council for an Energy Efficiency Economy.

Erick Ford of the New Jersey Energy Coalition agreed. “When the stay-at-home executive orders are lifted throughout the nation, New Jersey’s economy will compete with every other state for economic activity,’’ he said. “If the return on equity for energy efficiency is better in another state than New Jersey, capital will flow to those states than New Jersey.’’

The staff’s proposal would reduce the return on equity (ROE), a provision utilities and others argue represents another disincentive for a robust energy-efficiency program.