GENE RODRIGUES Board Chair

Gene Rodrigues got the Industry Partners Meeting off to a rousing start with an animated 75-minute presentation that demystified the concept of energy efficiency and made a compelling business case for industry-to-industry partnerships.

What are industry-to-industry partnerships? They are collaborative efforts between the energy-efficiency program “industry” and traditional industries like HVAC, lighting, motors, etc.

Why are industry-to-industry partnerships beneficial? Because they make good financial sense for efficiency program administrators as well as industry stakeholders.

Rodrigues, Director of Energy Efficiency at Southern California Edison and Chair of the CEE Board, explained – in no uncertain terms – how it all comes together, detailing the how, why and where of energy efficiency.

Speaking to the industry representatives in the audience, he said, “Energy-efficiency program administration is a $2.6 billion industry (referring to the estimated public funding for North American programs in 2006).

“Working together, we can put that $2.6 billion to better use – not just for our customers but for your customers.”

Efficiency as an industry
The fundamental premise of Rodrigues’s presentation is that the administration of energy-efficiency programs throughout North America has evolved into a growing, vibrant industry of its own and, as such, is affected by many of the same issues as other industries.

In the beginning, he noted, efficiency programmers were seen as “do-gooders,” people who cared about the environment and were trying to do something about it. That is no longer the case.

“We have come together to form the energy-efficiency program industry,” said Rodrigues. “To understand us is to do business with us. To do business with us is to make money.

“Energy-efficiency program administrators create opportunities that are good for business.”

For industry representatives, he explained, “the energy-efficiency ‘do-gooder’ sitting next to you is actually your next strategic business partner.”

Rodrigues pointed out that energy-efficiency administrators “are business people, too. We should be able to make money doing energy efficiency. We are not forcing our shareholders to bleed dollars. When an industry spends $2.6 billion, it has to deliver the goods.”

Why do energy efficiency?
For the benefit of industry stakeholders in the audience, and other newcomers to the world of energy efficiency, Rodrigues explained the dichotomy of successful efficiency programming that ultimately reduces sales of the product (energy).

There are three basic reasons why selling less energy is good business, he said.

“First, we need to balance supply and demand,” said Rodrigues. “In the energy-efficiency industry, we look at reducing demand first. We’re trying to provide the least cost reliable service.

“Second, we try to help customers save energy and money. You cannot survive in any business if your customers hate you. The only times customers think about us is when rates go up or there are blackouts. We’re trying to provide the best service we can and increase customer satisfaction.

“Finally, we’re also trying to foster a cleaner and greener environment. In light of all the research about global warming and pollution, we have a responsibility to environmental stewardship.”

Energy-efficiency programs are funded by public money and are therefore driven by public policy. “We’re accountable to policy-makers, customers, constituents and fiduciaries,” said Rodrigues.

In addition, reducing demand is almost always more cost effective than increasing supply. Building a power plant is a highly expensive proposition that requires many years of advance planning with an uncertain forecast of actual usage. Energy efficiency is generally the least expensive way to meet increased demand.

In California, for instance, the four investor-owned utilities (Pacific Gas & Electric, San Diego Gas & Electric, Southern California Edison and Southern California Gas) are implementing efficiency programs in 2006-08 that are expected to save enough energy to avoid the construction of three 500 MW power plants.

Funding sources
Twenty-seven states in the U.S. and three provinces, representing more than one-third of the Canada’s population, combined to spend about $2.6 billion in energy-efficiency programming this year.

Where is all the money coming from?

There are three major funding sources, the most common of which is the system-benefits charge (SBC).

The system-benefits (or public-goods) charge is a small fee added to utility bills that is earmarked for energy-efficiency programming. The fee and the programs are mandated by the local state government.

Generally, there is a sunset clause or review period associated with the SBC so the charge can be evaluated and justified. System-benefit charges are subject to local politics and, in some cases, can be redirected to fund other needs of the state.

Procurement funding is another option for utilities. “It’s the new big thing,” said Rodrigues. “The utility must apply to the state for funding as part of a long-term resource plan. It is not subject to state policies.”

“Cap and trade” is a funding method by which polluters pay for the right to produce emissions. In addition to creating a pool of money for energy-efficiency programming, it also provides an incentive to reduce emissions.

Summation
Public policy in many states strongly supports energy-efficiency programming. On the national level, the U.S. Department of Energy and Environmental Protection Agency have teamed up with the National Association of Regulatory Utility Commissioners (NARUC) to launch a National Action Plan for Energy Efficiency. More than 50 organizations nationwide – including utilities as well as public and private organizations – are taking the lead by supporting this effort.

“Our funding levels are up,” Rodrigues said. “Let’s work together to put the money to mutually advantageous use.

“I’d like people to walk away from this meeting and feel like they want to take advantage of this opportunity. Instead of learning from a distance, let’s work together.

“We can monetize energy efficiency and create a sound business proposition for everyone.”

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