PG&E, National Grid Ranked Best Utilities for Investing in Energy Efficiency

PG&E, National Grid Ranked Best Utilities for Investing in Energy Efficiency

Power lines image via Shutterstock

Pacific Gas and Electric Co. is among the biggest proponents of energy efficiency (EE) in its sector, and today the Northern California utility earned kudos for the nearly $410 million it invested in programs in 2009 to help its customers use less energy.

In a ranking of 50 utilities across the country, PG&E topped the list in total spending on EE programs, as well as spending per megawatt-hour of sales. Other top-spending utilities include subsidiaries of National Grid, Edison International and Long Island Power Authority.

In some cases, the EE investment from these utility companies is as much as 50 times higher than others included in the report, "Benchmarking Electric Utility Energy Efficiency Portfolios in the U.S.," released by M.J. Bradley & Associates, LLC, and Ceres.

The worst ranked utilities included subsidiaries of First Energy, Southern Company and Duke Energy.

The report draws a clear distinction between the laggards and leaders, which range from utilities that are just now beginning to offer energy efficiency programs to their customers to those with mature programs with something to offer every customer class.

Efficiency is the cheapest way for the nation to meet its energy needs, according to Edward White, Jr., National Grid's vice president of energy products. In the report, he noted that 26 states have some type of EE resource standard, and some even mandate that utilities invest in EE before power plants.

"The rationale for this is clear," he wrote. "Cost-effective energy efficiency measures allow us to provide customers with one kilowatt-hour of energy savings for between 3 and 5 cents. In comparison, customers around the United States pay between 6.5 cents and 16.5 cents for their electricity, depending on where they live. As a result, investing in energy efficiency can typically produce $3 to $4  of savings for each dollar invested."

Investing in energy efficiency is not without its challenges. Historically, electricity sales and revenues moved in lockstep with one another. Some states, however, have implemented policies that overcome the hurdles, such as decoupling electricity revenue from sales in order to remove the "throughput" disincentives, introducing mandatory savings targets, and shareholder incentives for successful efficiency programs.

The report's authors, too, also faced challenges in their examination. They chose 50 diverse utilities to examine based on factors such as total electricity deliveries, region, rates, ownership type and ratepayer distribution, among others.

The rankings are based on total EE expenditures, EE expenditures per megawatt-hour of retail sales, total incremental savings, and incremental savings as a percentage of megawatt-hours delivered. The analysis is based on 2009 data from the U.S. Energy Information Administration, the last year for which it is available.

Leading the charge is Pacific Gas and Electric, which has spent nearly $410 million on energy efficiency programs, compared to some who have shelled out less than $100,000. When compared to sales, the utility spent $4.76 on energy efficiency per megawatt-hour of retail electricity sales. All told, the company's annualized energy savings from new EE measures approached 1.6 million megawatt hours.

Comparison of energy efficiency spending

The report includes lots of caveats, describing the effort as the first of its kind and faced with many obstacles, such as the lack of available data and the wide diversity in energy portfolios.

But benchmarking in this way is important to a range of groups, the authors contend, including consumers, policymakers and investors.

"A benchmarking analysis can provide tremendous value for stakeholders and regulators who want to compare the magnitude of energy efficiency portfolio budgets and energy savings between electric utility companies, recognize best practices," the report said, "and perhaps most importantly, discover where utilities are lagging behind and identify opportunities for action."

Power lines image via Shutterstock.