How should the RTF be structured?, document 99-1

The Regional Technical Forum and Bonneville's Conservation and Renewable Resource Discount:

How should the RTF be structured?

February 4, 1999 | document 99-1

How should the RTF be structured?

Introduction

During the summer of 1998 the Council released an issue paper aimed at defining the role and general structure of a "Regional Technical Forum" (RTF). This effort was in response to direction from Congress and the Comprehensive Review of the Northwest Energy System. It was also in response to the Council's own interest in finding ways to encourage and facilitate the development of cost-effective conservation and renewable resources in the partially restructured utility environment in which the region finds itself.

Subsequently, the Bonneville Power Administration has initiated plans to provide a rate discount during the FY 2002 - 2006 rate period to encourage customer (utilities and direct service industries) activities in conservation, renewable resource development and low-income weatherization. The planning for the Conservation and Renewables (C&R) rate discount has looked to the RTF to carry out much of the "technical" work needed to support the rate discount program.

It is clear that the responsibilities associated with the C&R discount will increase the RTF's workload and the sensitivity of that work. This has necessitated a re-visiting of the thinking about the RTF. The purpose of this paper is to suggest a different formulation for the RTF in light of the responsibilities it will have with respect to the C&R discount and to seek public comment on that formulation. This public input is intended to assist the Council in the decisions it will have to make about the makeup, governance and administration of the RTF.

Background

The "Original" RTF

Congress had directed Bonneville and the Northwest Power Planning Council (Council) to convene a Regional Technical Forum to develop standardized protocols for verifying and evaluating conservation savings. Congress further recommended that the RTF's membership include individuals with technical expertise in conservation program planning, implementation, and evaluation and that its services be made available to all utilities in the Northwest. The Comprehensive Review of the Northwest Energy System (Comprehensive Review) supported the Congressional directives and recommended that the RTF should, in addition, track conservation and renewable resource goals and provide feedback and suggestions for improving the effectiveness of conservation and renewable resource development programs in the region. The Comprehensive Review also recommended that the RTF conduct periodic reviews of the region's progress toward meeting its conservation and renewable resource goals at least every five years and communicate recommended changes to appropriate decision-makers. These periodic reviews are to acknowledge changes in the market and adjust targets appropriately.

The Council's initial RTF issue paper proposed goals for the RTF; alternatives for its structure and membership; alternatives for funding the RTF; alternatives for its scope of work; and alternatives for providing feedback and suggestions for improving the effectiveness of conservation and renewable resource programs.

Based on the public comment received on this paper, the Council endorsed the formation of an RTF. The RTF would be established as one of its standing advisory committees to provide peer review and advice to the Council. Members of the RTF would be selected by the Council based on expertise and experience from a list of nominees provided by stakeholders. Membership would consist of individuals drawn from utilities, the private sector, Bonneville, public interest, state and local government, academic and national laboratory personnel. It would be supported from the Council's budget with possible augmentation from state public purpose funds and/or individual utilities that would use the RTF's services but that do not contribute proportionately to the Council's funding.

The RTF would collect, review and distribute existing protocols for verification and evaluation, and develop and promulgate new methods in response to new information and/or new approaches to achieving conservation savings. Upon request, the RTF would review whether the appropriate verification and/or evaluation protocols had been applied correctly. For tracking, the RTF would develop standardized forms and data definitions for use by retail electricity distribution utilities, state and local low-income weatherization service providers and renewable resource developers. The RTF would compile the data submitted and publish an annual regional summary. It would also present this summary report to the Council. This summary would compare the level of activity and expenditures reported with the Comprehensive Reviews "public purpose" goals. In addition and clearly more important, the RTF would assess what was being accomplished through those expenditures - electricity savings achieved, low income consumers served, renewable resource production achieved - and at what cost. To provide feedback, the RTF would prepare an annual report that profiled a limited number of successful conservation and renewable resource development programs and activities. The RTF would, on request, also provide peer review services on new program designs or major program re-designs.

The RTF would also take a proactive role to promote effective programs and approaches. For example, it could establish a mechanism for publicly recognizing exemplary conservation and renewable resource development programs. In addition, the RTF would provide its findings and recommendations to local utility governing bodies and/or state regulatory agencies regarding program effectiveness and potential for improvement. In this role, the RTF might serve as a "regional" clearinghouse on successful program design and implementation.

The Bonneville Conservation and Renewable Resource Rate Discount

Subsequent to the development the original concept for the RTF, the Bonneville Power Administration has announced its intent to include conservation and renewable resources rate discount as part of its rates for the 2002 - 2006 rate period. The stated purpose of the discount is to serve as "a catalyst in encouraging its customers to make investments in these important and valuable resources" and "to complement and supplement the efforts of state legislatures and the Council in addressing the regional need to develop these resources."

The amount of the discount would be approximately 0.5 mills/kWh. That is equivalent to approximately $30 million per year. The discount would be awarded on a "dollar for dollar" basis, i.e., a dollar's worth of activity would earn a dollar of discount. An additional 0.25 mills/kWh would be available on a two for one basis if Bonneville is able to build sufficient reserves and certain financial risks in the 2007-2012 rate period are resolved. However, how a "dollar's worth of activity" is defined is, as this is written, still somewhat at issue, as will be discussed further.

To facilitate the operation of the discount program, we are assuming for the purposes of this paper that the RTF would be called upon to make recommendations to Bonneville regarding:

A list of conservation measures and programs, the estimated savings associated with those measures and programs, and the estimated regional power system value associated with those savings.
A process for updating the list as technology and standard practices change and an appeals process through which customers can demonstrate that different savings and value estimates should apply.
A set of protocols by which the savings and system value of measures/programs not on the list could be estimated. These would include complex commercial or industrial projects.
Criteria for renewable resource projects. 5. Recommended protocols for measurement and evaluation of savings or production.

In addition, the RTF would analyze the reporting information submitted by customers to Bonneville to claim their discounts in order to track the kinds of conservation being implemented, the costs and electricity savings achieved and the quantities and types of renewable resource production achieved with the discount. The purpose would be to provide a regional level assessment of the effectiveness of the C&R discount. The RTF would also have the ability to carry out, through staff or contractors, a limited number of targeted evaluations. These evaluations are intended to improve understanding of the cost and performance of technologies or applications that prove to be popular and with which there is relatively little experience. In both instances, the purpose of collecting and analyzing this information is to improve the program effectiveness on a going forward basis, not to penalize customers for past actions.

In assessing the power system value of conservation actions, we are assuming the RTF would rely on Council estimates of "avoided cost" adopted through Council processes with full public involvement. These avoided cost estimates would reflect seasonal and daily differences in the value of power and locational premiums associated with transmission system constraints. The RTF would estimate the value of conservation savings using these avoided cost estimates and would take into account the effects of climate differences where appropriate (e.g., for actions that affect heating and cooling loads). By so doing, local differences in savings and value would be approximated. The estimates would also take into account differences in how measures or programs are delivered if those differences are likely to affect the savings actually produced.

The use to which these value estimates would be put is not fully resolved at this point. Under one approach, customers could claim their actual costs, subject to some restrictions but with no cost-effectiveness cap, up to the total amount of discount for which they are eligible. Under this proposal, the RTF's information would be advisory for the use of customers in their planning. Another approach is intended to provide an incentive to customers to deliver conservation as inexpensively as possible and seek consumer contributions to the cost. Under this proposal, customers could claim their costs plus an incentive equal to a fraction of the difference between the cost and the value of the savings produced. The total they could claim would be capped by the value of the savings produced. (with allowances for activities like administration and advertising that are essential but that do not directly produce electricity savings). A third approach would allow utilities their choice of one or the other of the foregoing proposals. Under the latter two proposals, the work of the RTF could affect how much of a discount a customer could claim for a given activity. Ultimately, however, the amount of the discount allowed will be Bonneville's decision.

Proposed Structure, Make-Up and Decision-making for the RTF

In light of the possible responsibilities described above, the questions of who should be on the RTF, how the should it be structured, and what is its relationship to Bonneville and the Council have become more important. The following is a draft proposal for how the RTF should be structured, who should be on it and how it should make decisions. The Council is seeking comment on this proposal and invites the suggestion of alternatives.

Guiding Goals

In thinking about the RTF, the overriding goals have been credibility and buy-in. The RTF and its products must have credibility with the various interests including the customers, regulators, public interest groups and so on. This means that interests must be satisfied that the RTF is producing high quality, objective technical information, not unduly influenced by one set of interests or another. A related goal is buy-in by the important interests. These groups must be convinced that the RTF provides a fair and open forum in which their views have an opportunity to be heard and given due consideration. Much of the proposal is aimed at achieving these goals.

Structure

Relationship to Bonneville
We propose that the RTF be independent of Bonneville and that its products, as they relate to the C&R rate discount are advisory in nature. Independence is necessary to ensure credibility with the community of interests associated with the C&R discount. The recommendation that its products be advisory to Bonneville reflects the legal requirement that decisions affecting Bonneville's rates must ultimately be made by the Administrator. Consequently, Bonneville will have carry out a process of its own to accept, reject or modify the recommendations of the RTF.

Relationship to the Council
It is proposed that the RTF be constituted as a special Council Advisory Committee. However, the RTF must have independence from the Council in order to be credible with some of the key stakeholders. For the purposes of the RTF's responsibilities with respect to the C&R discount, the Council would provide staffing and logistical support to the RTF. Council staff, augmented as necessary with loaned staff from Bonneville and possibly others, would support the activities of the RTF. This support would include providing the RTF with the Council's latest assessments of conservation and renewable resource technologies and estimates of avoided costs developed through the Council's planning process and providing the RTF with support in carrying out public involvement in RTF processes. Staff would work with the RTF in developing: a list of "standard" conservation measures; qualifying criteria for renewable resource projects; estimates of the performance of "standard" conservation and renewable resource alternatives; proposed protocols for estimating the savings produced by non-standard projects and programs; and protocols for the measurement and evaluation of conservation and renewable resource performance.

The recommendations of the RTF would be adopted by RTF and transmitted to Bonneville. They would not be subject to approval by the Council. The Council might choose subsequently to comment independently to Bonneville on the RTF's product but it would not be a filter through which the RTF's recommendations would have to pass.

Make-up

Appointment
We propose that the RTF be appointed by the Council from nominations made to the Council by stakeholders and the public. We propose further that the members serve two-year terms with a requirement that at least one third and no more than one half of the membership be changed every two years. The intent is to provide a level of continuity while providing for new members over time. Members would be entitled to claim travel and per diem consistent with the Council's policies.

Skills
The Regional Technical Forum's responsibilities are intended to be primarily technical. Its members collectively should bring to the RTF technical experience and expertise in the analysis of conservation and renewable resources, the design of conservation and renewable resource projects and programs, their implementation and their evaluation. The credibility of the RTF's work will depend on the technical credibility of the members. We propose that possession of the requisite skills should be he first priority for membership on the RTF. The experience of the members of the RTF should be specific to particular areas of implementation, e.g. commercial buildings, industrial processes, residential, renewable resources and so on.

Representation
Because the work of the RTF is intended to be primarily technical, representation of specific interests ought not to be a problem. However, the products of the RTF could have implications for the kinds of activities that customers can undertake and the amount of discount that can be claimed for those activities. Consequently, representation in the membership of the RTF will almost certainly be an issue in the degree to which stakeholders buy-in to the RTF's efforts. A model for representation could be something like the Board of Directors of the Northwest Energy Efficiency Alliance (NEEA). The NEEA Board is composed of 18 members, with 6 representatives from each of three groups -- Bonneville and publicly-owned utilities, investor-owned utilities, and public interests including the governors and public interest groups. The state utility commissions are represented on an ex-officio basis.

We propose that the RTF be composed of two groups of 7 members each:

A Bonneville and customer group composed of

A public group composed of:

In addition, representatives of the four state utility commissions would be invited to participate in a non-voting ex-officio capacity. The RTF should also involve key consumer representatives, e.g. industrial consumers, and trade-allies such as energy service providers. It would do this by establishing advisory groups to the RTF.

Decision-making
How decisions are made by the RTF will have a significant effect on the credibility of and buy-in to the RTF. Decision-making by the RTF should strive for consensus. However, consensus may not always be achievable and votes may be necessary. Again, the NEEA by-laws may provide a model for such decisions. Utilities have majority representation on the NEEA board. However, the NEEA by-laws stipulate that decisions of the Board require a super-majority, including representation from each of the groups.

For the RTF, we propose that a 10-member super-majority be required for the adoption of recommendations. This would mean that if either of the groups were to vote as a block, the votes of least 3 members of the other group would be required to adopt a recommendation. The RTF should elect a chair from its membership.

In reaching its decisions, we propose that the RTF process provide opportunities for public input in its decisions. This would involve inviting public comment on its proposed decisions and considering that comment in its decision-making.

Request for Public Comment
The Council is seeking public comment on this proposal for the RTF:

Are the proposed structure, make-up and decision-making processes appropriate?
Are there other alternatives that would better serve the RTF?
If so, what are they and why are they superior.

The timelines for establishing the RTF are tight. Consequently, the Council will take public testimony on this issue paper at its February 23, 1999, meeting in Portland, Oregon and its March 17 work session in Spokane, Washington. The close of comment will be close of business on March 17. The Council will make its decision regarding the formation of the RTF at the April 6 meeting in Boise, Idaho. It is the Council's intent to form the RTF in May.

^ top