Energy Efficiency Efforts Gaining Traction in Missouri

Missouri has long been viewed as a laggard when it comes to energy conservation. Now, is the state ready to play catch-up?

A recent study highlights plenty of opportunity to cut energy use. Rules finalized by regulators this week could help achieve that potential by giving utilities incentives to invest in promoting energy efficiency.

A draft copy of the study by Burlington, Mass.-based KEMA indicates Missourians could save more than $5 billion in electric and natural gas costs over the next decade by fixing drafty houses, replacing old appliances with more efficient ones and taking other energy-saving measures.

The Public Service Commission commissioned the study last fall. It represents the first statewide assessment of energy-savings potential and one of several indicators of the heightened importance placed on energy efficiency in the Show-Me state.

The issue should be “one of our priorities in improving how we communicate with utility customers and as we plan for future energy needs,” said PSC Commissioner Robert Clayton, who stepped down as commission chairman this week.

It’s yet unclear how such efforts will affect ratepayers in the long term. The new rules aim to compensate utilities, through rate adjustments, for investments in programs encouraging consumers to use less power. The hope is that companies can make the same profits while selling less energy and lowering consumer bills at the same time — no small challenge.

Energy efficiency programs, commonplace on the coasts, are gaining traction in Missouri for good reason. While the state still boasts some of the nation’s lowest electricity rates — thanks largely to a heavy dependence on cheap coal — they’ve been moving steadily higher. Ameren Missouri’s electric rates have risen by more than $400 million since May 2007, and the utility is seeking an additional $263 million increase. What’s more, discussions are under way about the potential for a second nuclear power plant in Callaway County.

Utilities and regulators generally agree that saving a watt of electricity is often cheaper than generating one.

Ameren, Laclede Gas Co. and other Missouri utilities long ago established energy efficiency programs that involved funding appliance rebates and discounting or giving away compact fluorescent light bulbs. The state likewise established a campaign to encourage energy savings.

But those efforts have been slow to expand, in part because decades-old utility rate making policy includes a disincentive for utilities to take actions that reduced energy sales.

According to American Council for an Energy Efficient Economy, a group that rates states for energy-saving programs and policies, Missouri is 43rd in the nation last year and was passed by Arkansas and Louisiana. Illinois, by comparison, ranked 25th.

Senate Bill 376, the Missouri Energy Efficiency Investment Act, which Gov. Jay Nixon signed in June 2009, is meant to jump-start efficiency programs in the state by allowing utilities to earn the same profit on a “cost-effective” efficiency investment as it would on a power plant or other capital investment.

The PSC voted 4-1 on Wednesday to approve final rules needed to implement the law.

“This is a new era of rate making and a new era of policy for the Public Service Commission,” Clayton said.

The next step will be implementing new or expanded efficiency programs at each utility. For that, regulators want to know which investments are most cost-effective, and what sort of payback or incentives are needed to compel consumers to buy energy-saving appliances, new windows or insulate their attics.

The efficiency study is expected to serve as a guidepost during that process.

“We wanted to have an independent assessment of what investor-owned utilities would be capable of achieving,” Clayton said.

The state’s two largest utilities and a coalition of the state’s largest electricity users have raised concerns about some of the data used in the KEMA study as well as its conclusions.

Ameren, for instance, commissioned an exhaustive study of energy efficiency potential in its service area that was published in January 2010. That study showed sizable energy savings are achievable, but more modest than that suggested in the KEMA study.

“We’re very proud of the Ameren Missouri study,” said Rick Voytas, manager of energy efficiency and demand response for the utility. “What we really invested in was public interest surveys to determine what really drives customers to invest in energy efficient alternatives.”

In written comments filed with the PSC, the utility was more blunt: “The KEMA study will do little, if anything, to move the optimal implementation of energy efficiency forward in Missouri. It may do the opposite.”

For all the debate and uncertainty, energy efficiency advocates remain encouraged.

“I think Missouri is starting to turn the corner and embrace energy efficiency,” said Chris Burnette, regulatory affairs coordinator for Renew Missouri, an offshoot of St. Louis-based Missouri Coalition for the Environment.

The combination of new rules to promote efficiency and the implementation of the renewable energy standard approved by voters in 2008 can help defer or offset the need for new power plants in Missouri and create new jobs, he said. What’s more, it could allow utilities to retire older, less efficient coal-fired plants.

Said Burnette: “Any dirty coal plant that we can take offline is a win.”

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