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If AEP’s APCo Really Wants to Cut Its Winter Peak Load, Then It Needs to Get Serious

January 29, 2014

In a speech at the Beckley Rotary Club yesterday, APCo CEO Charles Patton bemoaned the fact that West Virginians weren’t working hard enough to reduce their electricity use through energy efficiency investments.  I’ve always respected Mr. Patton, although I don’t agree with him much.  I even met him at a PSC hearing last year and he told me he reads The Power Line.

Here’s how the Beckley Register-Herald reported Mr. Patton’s remarks:

Appalachian Power customers in West Virginia, Virginia and Tennessee set an unofficial all-time peak demand of 8,410 megawatt at 8 a.m. on Jan. 7.

“Days like today, they’re great revenue boosters, but quite honestly, personally, I’d rather have a hot day because a hot day is more equitable” when it comes to power usage, Charles Patton, president and COO of Appalachian Power, said Tuesday.

In a wide-ranging talk before the Beckley Rotary Club, Patton candidly gave his views on coal and gas and their respective places on a local and a global scale, and gave a generally sobering prediction of coal’s future both politically and economically.

But on a day that started around the zero mark in Beckley, Patton said he is frustrated by the challenges his company faces in West Virginia.

“We have a $5 or $6 million energy efficiency program that’s in place right now (and) we’d like to expand it,” Patton said. “In West Virginia we have very bad housing stock, we have too many people who live in manufactured housing, some of it not even designed for this area of the country,” said Patton, who described energy efficiency in the state as “woeful.”

Patton said Appalachian Power will inspect a dwelling and recommend ways to weatherize the home, many times recommending a new heat pump or new cooling system.

“And we say that’ll cost you $4,000. And through our program we’ll give you $2,000. For many West Virginians, it might as well be a million dollars. It just doesn’t happen.”

Mr. Patton implies that APCo’s current energy efficiency programs are a big deal that everyone should be jumping on.  In fact, their programs just aren’t all that attractive, as Mr. Patton indicates.  Other AEP subsidiaries offer far more incentives than APCo has ever offered its customers.

And it’s not as though Mr. Patton hasn’t heard about building a better energy efficiency program.  Here is expert testimony given by expert Cathy Kunkel in last year’s review of APCo efficiency programs:

Yes. WVCAG also recommends that the Company evaluate the cost-effectiveness of a program targeted towards improving the efficiency of electric heating in its service territory. The fraction of electrically-heated homes in the Company’s service territory (50%) is higher than the national average (34%), and about half of those homes are heated with electric resistance heating, which uses about twice as much electricity as heat pumps.7 Such a program would have the added advantage of contributing to reductions in the winter peak. There would be several options for such a program. One option would be to target manufactured housing; the Company’s service territory has a relatively high fraction of manufactured housing (16% versus 7% for the US. as a whole, according to U.S. Census data), which typically come with electric resistance heating rather than heat pumps. The Company could provide upstream incentives to manufacturers to install heat pumps in homes before they are sold. These incentives would be passed on to the buyer to make the cost of the manufactured home comparable to one with electric resistance heating – similar in principle to the design of the Company’s residential lighting program. A comparable program run by the TVA resulted in the sale of 481 ENERGY STAR manufactured homes (with electric heat pumps) and 5.7 GWh of savings in its first year. Another option to address electric heating more generally would be an incentive program targeted at replacing electric resistance heat with ductless heat pumps; see Exhibit CMK-3 for a description of an award-winning program in the Pacific northwest, excerpted from a recent American Council for an Energy Efficient Economy study on national best practice programs.

Did APCo voluntarily agree to this “upstream” pay down of the price of new manufactured housing with more efficient heating systems in its WV energy efficiency programs?  Did the WV PSC order them to create this kind of program?  Of course not.

To give you an idea of the program described in exhibit CMK-3 noted in the passage above, here is the lessons learned section of the report on the program:

Lessons Learned
Throughout the Pilot [program], four clear barriers were identified. First, consumers perceived the cost of DHP to be too high. Second, there was a general lack of awareness that DHPs are a viable heating and cooling solution among consumers, builders and HVAC installers, which ultimately led to a lack of investment in supply chain marketing. The final market barriers involved lack of training for installers, and minimal distribution channels in the Northwest.

Marketing efforts that leveraged word of mouth advertising helped raise awareness in the market and helped consumers to overcome perceptions about cost barriers. With that, utility incentives, government tax credits and market-based financing programs also helped to jumpstart the market in the Northwest. The Project supported and trained trade allies and installers which increased quality installations and customer satisfaction among manufacturers and distributers in the region.

A reduction of market barriers and added project support for supply chain management allows for easier entry into the market and more diversity among manufacturers and distributors while providing consumers with more choices. Project messaging was best delivered as a 1:1 application while explaining that DHPs are a solution to displace ERH in the primary living space of single-family homes for increased comfort and energy bill savings.

It’s not hard.  The power company just have to get serious.  You can read the rest of the description at the end of Ms. Kunkel’s testimony at the link above.

If APCo were serious about real change in WV, they could create a program to allow customers to finance improvements from their energy savings right on their electric billsHere’s how four electric co-ops in KY are offering on-bill financing to their customers:

The program is not a loan or a subsidy, but an extension of the utility services that households or businesses are already receiving. After completing an energy assessment of the property and estimating the potential savings, the utility will oversee the contractor installing the energy efficiency upgrades and provide assurance that the improvements have been correctly installed.

After installation, the program allows customers to make installment payments as part of their monthly utility bills, gradually paying for the efficiency upgrades by using part of the energy savings generated by the retrofit. Immediately, customers will see savings on their typical utility bill. Because the charges remain with the property and not the customer, this approach works for all classes of utility customers — renters, homeowners or business owners.

So Mr. Patton and APCo need to stop whining and offer West Virginians some real energy efficiency programs.  There are lots of examples out there for them to choose from.  They just have to get serious.

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4 Comments leave one →
  1. stacy permalink
    January 31, 2014 2:04 pm

    Bill, i agree with your assesment that apco needs to design a better energy efficiency program. But going after the heat source is only part of the approach. Heatpumps are worthless when you get into freezing temps. emergency electric heat strips kick in to provide heat when there is no relative warmth to harvest from out side air. Heatpumps work great most of the year but wouldnt have made much difference in peak demand on a day when temps are zero.

    In wv housing stock we needa campaign for airsealing to

  2. stacy permalink
    January 31, 2014 2:07 pm

    ….air sealing and insulation are key. Lets say my home is an avg. Wv city home. Its old and drafty. When we put the thermostat down from 66 to 60 on a really really cold day it took about 15 minutes for the home to drop that far in temperature due to air leaks and poor insulation.

    • January 31, 2014 2:45 pm

      I agree wholeheartedly that we need to do much more than heat pumps. My point was that APCo needs to step up with real programs that cover major investments, like on-bill financing. Housing renovation is expensive, but it pays off in reduced electric bills right away. If people could finance their improvements through APCo, the company wouldn’t have to whine about no one taking advantage of their programs. And they should also be funding real energy audits, not just walk throughs.

      • john permalink
        February 4, 2014 11:37 am

        I agree with Bill’s comments. APCo (and even more so First Energy) give lip service to energy efficiency programs, and the PSC cuts them all the slack they want. There are numerous other examples of successful EE programs throughout the country. TVA promoted all manner of demand reduction and energy efficiency programs for residential, commercial and industrial customers in the early 1980s–performing the audits, inspecting the work and financing the improvements in monthly installments on the customers’ power bills.

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