Investing in Efficiency

Texans have always been far better at making energy than saving it. But if a proposal before the Public Utility Commission gets approved this year, buildings and appliances in Texas would need to become much more energy efficient.

Under the proposal, electric providers across the state would be required to offset 50 percent of their customers' growth in usage with energy-efficiency measures by 2014. That's well above the current 20 percent requirement set by the Legislature. Utilities that exceed the goals could get bonuses.

In practical terms, this means that electric companies would probably start peppering their customers with a blitz of incentives to swap old refrigerators for new ones, tune up their heating and air-conditioning systems or switch out incandescent light bulbs in favor of energy-sipping compact fluorescents. Builders of new homes could also expect rebates for meeting energy-saving standards.

"This is huge. We're talking about more than doubling the investment in efficiency," said Luke Metzger, the director of Environment Texas. Metzger views the adoption of stricter regulations as "very likely."

The initial comment period for the proposal ended this month. A final version of the proposal should go before the three governor-appointed commissioners sometime this year.

Despite requiring up-front investment, energy efficiency is generally lauded as both a money-saver and an environmental boon. Texas' efforts to date, however, have been middling. The state came in 23rd last year in national efficiency rankings put forward by the American Council for an Energy Efficient Economy, a Washington-based advocacy group. The ranking includes categories such as transportation and building codes in additon to efforts by electric companies. But Texas' utilities, according to the report, do lag far behind those in states like Massachusetts and California, where squiggly compact fluorescent bulbs — love them or hate them — have become a way of life.

The PUC's draft also focuses on reducing peak electricity demand, which has been growing across Texas. Peak demand generally refers to the period late afternoon when air conditioners and other appliances strain the electric system. Reducing peak demand is important because some power plants get turned on only to help meet the peak, and keeping them off would save money. Peak load can be reduced, for example, by cycling air conditioners on and off at critical times (Austin Energy does this for participating customers), or by paying businesses to allow a fraction of their lights to be turned off. In the PUC's recent proposal, the 2014 goal for the utilities is a 50 percent cut in load growth or a one percent reduction in peak demand — whichever is larger.

A 2008 PUC report to the Legislature on energy efficiency found that Texas had the "economic potential" to reduce peak demand by about 23 percent. Certain plants only operate during peak times. A 23 percent drop could permanently idle some of those while reducing the need for construction of plants built to meet demand.

Some electric providers have expressed concern about the PUC's recent proposals. In comments to the regulator filed on Monday, the El Paso Electric Company — which has struggled to meet existing efficiency goals — said that it "definitely" would not be able to meet the 2014 requirements "unless circumstances in El Paso change significantly." It noted that El Paso's median income hovers 31 percent below the state average, making it tough for customers to afford efficiency improvements. Even a proposed interim goal for 2012, which requires meeting 30 percent of load growth with efficiency, would be a stretch, the utility said.

Other utilities are worried about potential caps on what program costs they're allowed to recover from customers.

In some sense, the PUC is simply making up for lost time where the Legislature has tried and failed. Last session, lawmakers introduced several bills to support energy efficiency, an issue that also has received a great deal of attention from the Obama administration. A bill championed by state Rep. Rafael Anchia, D-Dallas, to cut peak electricity demand by 1 percent by 2016 died in conference. Another doomed bill, pushed by former Sen. Kip Averitt, R-Waco, would have boosted statewide building standards and established efficiency requirements for several appliances such as pool pumps.

The lone survivor was a bill designed to enable Texas homeowners to pay for insulation and other retrofit work (as well as solar panels) gradually, through higher property taxes, after their municipality shoulders the up-front cost via a bond issue. This concept, called PACE (for Property-Assessed Clean Energy), is catching on nationally, because it addresses the problem of high up-front costs.

Damien Brockmann, Anchia's legislative director, said his office was "pretty pleased" with the PUC's recent proposal. He noted that in some of its peak demand requirements, it even "goes a little bit further than where we were with our bill."During the session, Brockmann added, "the wheels weren't completely greased. It didn't feel like a priority by certain leadership, and here the [Perry] administration is doing exactly what we wanted last session. It's surprising we weren't able to accomplish this a year ago."

It's not just electric companies that are getting pushed toward efficiency: Texas' building codes — currently out of date compared with many other states' (see map) — could also be in for an overhaul. The State Energy Conservation Office, which is part of the comptroller's office, will put out a draft proposal next week that is likely to recommend bringing Texas' rules up to current international standards. (Under a 2007 Texas law, state building codes get reassessed whenever a Washington, D.C.-based body called the International Code Council issues its own updated code, which happens every three years.)

SECO's budget has meanwhile swelled with federal money poured into energy efficiency. R.J. DeSilva, a spokesman for the comptroller's office, estimated that SECO's federal inflows increased by a factor of 100 or so since the passage of the stimulus package, which directed huge sums to weatherization programs, especially for low-income households. That money is working its way out the door.

Even if the proposals for electric utilities and building codes go through, there will still be ample work ahead, efficiency advocates said. Texas, for example, currently has no state-level efficiency requirements for appliances, unlike the usual suspects: California and Massachusetts. (Federal standards apply for things like refrigerators and washing machines, but many power-sucking contrivances like televisions and hot tubs are not covered federally, so states are filling the gap.)

"There's always more stuff to be done," said Brockmann, who added that the specifics would depend on what regulators end up doing about utility efficiency standards and building codes.

The regulators themselves will also be under review next session, when the PUC gets scrutinized as part of the Legislature's periodic "sunset" review of state agencies. Brockmann's boss, Anchia, is a member of that commission.