A few weeks ago the Governor of California signed AB802 into law. AB802 is a first-of-its-kind energy efficiency law that calls for the measurement of energy savings to be evaluated based on “normalized metered energy consumption.” As I wrote when the bill passed, this is a major milestone for the measurement of energy efficiency because measuring at the meter, while making adjustments to account for outliers, is a true accounting of how energy efficiency impacts the grid and provides value for ratepayers.
The first step in implementing AB802 is coming quickly, in the form of “high opportunity projects and programs,” which go live in early 2016. To set the table for a 2016 roll out, last week the California Public Utilities Commission (CPUC) released its first indication of what the new rules for measuring at the meter will look like.
“Normalized Metered Energy Consumption”
At the core of the new law are these four words and how they will be interpreted. For those of us in the industry, these four words can mean many different things, but it is the CPUC’s interpretation that matters the most. And the first draft of the CPUC guidance is a promising start.
First, let’s take the most open-ended term, “normalized,” and what this means. According to the CPUC, we can’t ignore the other factors that can impact energy consumption. Normalized energy consumption has to account for the external factors that “can influence energy use trends.” In practical terms, that means variations in rates, commodity prices, or even macroeconomic changes across a service territory. For example, if natural gas prices suddenly rise, a reduction in natural gas consumption is a likely result. You don’t want to accidentally count those reductions as energy efficiency. Accurate measurement should control for these types of external factors and is an important part of providing an accounting for energy efficiency that will be accepted by all stakeholders.
The other three words are a little more straightforward but still require some important parameters. “Metered” makes clear that savings must be tied to a meter. For example, point-of-sale retail programs that allow customers to buy discounted lightbulbs at the hardware store are not eligible for metered measurement. Because those savings cannot be tied back to a meter, we will have to continue measuring those programs with predetermined estimates. Savings also needs real meter data. While estimated meter reads may be acceptable for billing, real meter data is a requirement for measuring energy savings. Real meter data is an important factor for getting measurement correct. Finally, the simplest phrase, “energy consumption” accounts for a change in energy usage as the result of an intervention.
For measurement policy wonks, the important signal is that the CPUC’s approach carefully balances rigorous measurement protocols with the practicality of quickly rolling out high opportunity projects and programs. The starting definition for “normalized metered energy consumption” protects ratepayer dollars and allows California utilities to move quickly and nimbly to roll out programs under the new measurement paradigm. The CPUC is also ensuring that transparency remains a centerpiece of energy savings measurement. Black box approaches won’t meet the test. Considering the importance of getting metered measurement “right,” measurement methodologies will need to be replicable, open to peer review, and well documented. This level of transparency will be critically valuable to an industry that is learning and innovating in this new paradigm for valuing energy savings.
Pay for Performance
In the same document that defines metered measurement, the CPUC has also taken the first steps to outline how pay for performance programs can move forward. Tying together pay for performance and the measurement of metered savings makes good policy sense. Therefore, it is important the rules are written in tandem.
To incentivize energy savings, utilities, contractors, and implementers will need to measure energy savings at the meter and use “normalized metered energy consumption” as a framework for proper energy efficiency measurement. In order to put a value on energy savings, metered measurement must follow clear protocols that protect ratepayers, program participants and industry stakeholders who implement energy efficiency programs. Ensuring measurement is “normalized” and controls for external factors is the type of policy expertise that will provide accurate and defensible measurement to support pay for performance programs.
The Start of a Process
This document is the first step in a long process to truly define metered measurement and pay for performance programs. The CPUC will be hearing from stakeholders on this guidance and this is only the initial phase for high opportunity projects. As California takes the first steps toward metered measurement for energy efficiency, there will be lots of voices at the table and changes shaped by those differing perspectives.
At EnergySavvy, we plan to be part of the discussion. While getting metered measurement perfect is probably impossible, getting it right is required for this experiment in measurement to succeed. The value of energy efficiency is built on the bedrock of measurement, and the future of energy efficiency is built on programs that value energy savings as a resource. Measuring savings at the meter ties those strings together and enables energy efficiency to serve as a resource for the industry and the climate. And one thing is certain: if California is remaking energy efficiency measurement, it is going to impact the entire industry and reverberate around the country.
Jake Oster is EnergySavvy’s senior director of regulatory affairs. This blog originally appeared on EnergySavvy’s website.