Energy Efficiency Utility Creation and Structure

Electric Utility Delivery of Energy Efficiency Programs

Historically, Vermont's electric utilities were required to deliver comprehensive energy efficiency programs to their customers. However, this system did not work as well as intended for two reasons. First, those utilities that are investor-owned had mixed incentives – their profits increased when they sold more electricity, yet they were expected to promote investments that would reduce their sales of electricity. Second, it was administratively inefficient for each of Vermont's 22 electric utilities to provide their own energy efficiency programs. It was clear to policymakers that a new means of delivering energy efficiency services to Vermonters was needed.

1999 Settlement Creating Energy Efficiency Utility

In 1999, the Public Service Board ("Board") approved a settlement among all Vermont electric utilities, the Vermont Department of Public Service ("DPS"), and other interested parties, that provided for the creation of a new statewide Energy Efficiency Utility ("EEU") that would deliver energy efficiency services to Vermonters throughout the state.  Board order approving settlement

A related bilateral agreement provided that the City of Burlington Electric Department ("BED") could submit a proposal to the Board to provide EEU services in its service territory; the Board subsequently approved BED's proposal.  Board order approving BED proposal

This settlement and related bilateral agreement set out the basic structure for the program that was in effect through 2010.  It provided for a statewide energy efficiency provider (which has operated under the name Efficiency Vermont), a Contract Administrator, and a Fiscal Agent, all of whom would be contractors to the Board.  Efficiency Vermont and BED actually delivered the energy efficiency services to customers. The Contract Administrator helped the Board administer its contract with Efficiency Vermont by tracking Efficiency Vermont's compliance with the terms of the contract and by mediating any disputes that arose related to the EEU. The Fiscal Agent provided the accounting function of managing the Energy Efficiency Utility Fund (this is explained more below). The settlement also provided that the DPS would be responsible for monitoring and evaluating Efficiency Vermont's service offerings.  Collectively, these entities comprised the Energy Efficiency Utility program, while entities providing efficiency services, such as Efficiency Vermont and the City of Burlington Electric Department, are sometimes termed "EEUs".  Chart showing the relationships of the various contractors, the Board, the DPS, and the electric distribution utilities

The 1999 settlement also provided for the creation of an Advisory Committee made up of electric utility, public interest, and other representatives appointed by the Board. The Advisory Committee's purpose was to serve as a channel of communication between Efficiency Vermont and key stakeholder groups; it was not a Board of Directors, and had no authority over Efficiency Vermont.

Change to Order of Appointment Structure

In 2007, the Board initiated a year-long workshop process to consider changes to the EEU program structure given the lessons learned after more than seven years in operation.  This was followed by a formal investigation into a petition filed by the Vermont Department of Public Service regarding changing the EEU structure.  This investigation culminated in a November 24, 2009, Board Order determining that the EEU program structure should be altered from a contract-based model to an Order of Appointment model.  In this Order, the Board recognized that the EEU program had served ratepayers admirably since its creation in 2000.  However, the increased responsibilities that were assigned to the EEU since that time, along with the experience gained as the Board and other parties implemented the EEU program, led the Board to conclude that moving to a new model would provide additional benefit to Vermont ratepayers.

The Order of Appointment structure retains the essential functions of the previous EEU structure, but changed the relationship of Efficiency Vermont with the Board and other entities.  In particular, rather than being under a three-year contract with the Board, Efficiency Vermont moved to a 12-year rolling Order of Appointment model that provides additional program stability.  Under this new model, the Board no longer has a contractual relationship with Efficiency Vermont, and Efficiency Vermont has increased responsibilities as well as increased oversight that is accomplished through more transparent proceedings and additional periodic, public reviews.  To ensure continued superior performance from all EEUs, the Order of Apointment model includes the evaluation and review processes that have been conducted since the EEU program's inception, as well as periodic benchmarking reviews and overall performance assessments that will be conducted in proceedings open to the public.

Under the Order of Appointment structure, the Fiscal Agent continues to provide the accounting function of managing the Energy Efficiency Utility Fund, and the DPS continues to be responsible for monitoring and evaluating the EEUs' service offerings.  However, under this structure, there is no need for the Contract Administrator position or the EEU Advisory Committee, and these no longer exist.

After conducting initial overall performance assessments of the incumbent entities serving as EEUs, the Board issued Orders of Appointment:

The Board is currently conducting an investigation into the appointment of an entity to provide natural-gas efficiency services in Vermont; this investigation is taking place in Docket 7676.  As part of this investigation, the Board is considering whether an appointment of Vermont Gas to continue delivering efficiency services would promote the general good of the State.  Order opening investigation

Funding for the Energy Efficiency Utility Program

The Energy Efficiency Utility Program is funded by a volumetric charge on electric customers' bills, known as the Energy Efficiency Charge. The Energy Efficiency Charge rates are set by the Board each year. The Energy Efficiency Charge funds are collected by electric distribution utilities and sent to the Fiscal Agent for deposit into the Energy Efficiency Utility Fund. The Fiscal Agent disburses monies from the Energy Efficiency Utility Fund to pay approved invoices and other approved expenses in accordance with the terms of its contract with the Board. Every year the Energy Efficiency Utility Fund is audited by an independent auditor selected by the Board. Most recent independent audit of the EEU Fund