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Rural electric cooperatives mixed on energy efficiency performance

Rural electric cooperatives, small utilities formed during the New Deal era of the 1930’s, brought electricity to America’s rural farms and ranches and ushered them into the modern world.  Today’s 850 cooperatives (co-ops) and 65 power generation and transmission co-ops economically provide 12% of the nation’s electricity to 18.5 million customers.

But in one key metric—energy efficiency programs to help customers save energy and money—some co-ops are performing well while others are badly lagging, according to a new report by the Southwest Energy Efficiency Project, Review of Leading Rural Electric Cooperative Energy Efficiency Programs.

“The report examines the key factors that seem to determine whether or not rural co-ops implement strong energy efficiency programs,” said Adam Bickford, senior utility associate at SWEEP and co-author of the report.  “One factor is whether or not a state has goals for energy efficiency savings that apply to co-ops.  Another factor is whether the co-ops in a state work together and develop an infrastructure to provide efficiency programs to their customers.”

Typical co-op programs include home energy audits, discounts on LED lightbulbs and rebates for insulation and efficient appliances. The best-performing co-ops promote and offer rebates for a wide range of energy efficiency measures for all of their customers—residential, commercial, industrial and agricultural. 

The report ranked co-ops in six states and regions for energy efficiency savings between 2010 and 2014.  In states where cooperatives are regulated by an Energy Efficiency Resource Standard (EERS), they achieve maximum energy savings of 1% of retail sales or more. This is the case for the Iowa Association of Electric Cooperatives and for electric cooperatives operating in Minnesota (see the table below).

In states where co-ops work together to provide standardized programs and centralized rebate processing services, energy savings levels are higher than in states where co-ops have to run programs independently. 

States can set goals for co-op energy savings, and they work. In Minnesota and Iowa, where savings goals for co-ops were established and where co-ops work together to design and implement effective programs, co-ops were able to achieve savings of around 1% per year on average during 2010-14. 

This is strong performance considering that all electric utilities in the nation were saving an average 0.7% of sales from energy efficiency programs offered in 2014.  

Co-ops that are required to save energy under EERS legislation find ways to meet the goals and maintain cost effectiveness as long as they are empowered to design and implement effective programs, said Bickford.  In Arizona, the state EERS includes savings requirements for specific co-op utilities, but utility commissioners did not approve the proposed programs during the study period, which curtailed energy savings.  

Collaboration with other co-ops also boosts the chances of success. Many co-ops are small and physically isolated and don’t have the resources to offer incentive programs unless they work together to plan programs.  When co-ops pool their resources and coordinate their efforts, they are able to achieve high levels of savings, the report found. 

“Achieving program success is a combination of supportive policies, leadership and planning, clear goals, and customer education,” said Bickford.

Along with its analysis, the report made several recommendations to support co-op energy efficiency programs for the communities they serve: 

Adopt Policies that Support Co-op Energy Efficiency

Legislative action was critical to the expansion of programs offered by co-ops and generation and transmission organizations in Minnesota and Iowa. In Minnesota, minimum savings requirements apply to co-ops as well as investor-owned utilities.  They all are required to file plans every three years, track data and report results. 

Plan Like Regulated Utilities Do

Generation and transmission organizations and larger co-ops can plan the optimal mix of power resources needed to meet customer demand just like their bigger cousins, the regulated investor-owned utilities, do.  An Integrated Resource Plan (IRP) helps utilities examine a variety of power resources and weigh the value of energy efficiency and demand-side management programs alongside power produced by baseload power plants, peaking power plants, cogeneration and renewable energy. For instance Tri-State files a triennial IRP with the Colorado Public Utility Commission. In other states, such as Iowa, cooperatives estimate achievable savings. 

Emphasize Least-Cost Sources of Power

In addition to an IRP, a number of states or regulatory commissions have adopted a Least Cost Procurement (LCP) requirement so that utilities will use the least-cost mix of electric resources that can reliably meet customer demand.  This usually favors energy efficiency. 

Bickford pointed out four things that the analysis and report found that all co-ops can do to boost energy efficiency:

Develop Effective Program Leadership

Most co-ops are small and have limited capability to do extensive planning, tracking and reporting of results.  Ideally, leadership in energy efficiency will come from the larger generation and transmission providers or a collective of several co-ops. Hoosier Energy, an Indiana electric co-op, devotes executive, program management and administrative staff time to setting and achieving energy efficiency goals.  With leadership and commitment, co-ops can be innovative.

Gain Customer Support

While most co-ops educate customers about the energy efficiency programs and rebates they offer, they often don’t tell why these programs are important tools for keeping energy costs low over the long run.  Education can be used to build customer appreciation and support for funding these programs.

Leverage Funding Sources

Besides funding energy efficiency through a surcharge on a customer bill, co-ops have several other funding options that they can leverage to expand programs without raising utility bills.  The U.S. Department of Agriculture offers grants through its Rural Energy for America Program, for instance.  The report lists several other sources of funding.

Develop Contractor and Vendor Support

In rural areas, it can tough for co-ops to find trained contractors for energy efficiency audits and upgrades.  Some co-ops are working directly with trade schools and community colleges to train contractors while others, like Hoosier Energy, have developed an online lighting products store for customers.  The report lists several other ways that co-ops have overcome this hurdle. 

Suzanne Pletcher is Director of Communications for the Southwest Energy Efficiency Project (SWEEP).  The Southwest Energy Efficiency Project is a public interest organization dedicated to advancing energy efficiency in AZ, CO, NM, NV, UT and WY. 

Suzanne Pletcher's picture

Thank Suzanne for the Post!

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