Grid Efficiency

Interview with Logan Brown of Vermont Energy Investment Corporation (VEIC)
Logan is the Director of Targeted Implementation
His job entails managing project strategy and business objectives during the planning phase of potential contracts.
I headed down to the VEIC headquarters on Lakeside  Ave to interview Logan Brown with a broad set of questions pertaining to how VEIC operates as an energy saving utility.  My questions ended up turning into an hour long highly informative discussion of how business models and policy can be utilized to serve a greater purpose such as responsible energy use through demand-side management.  Here’s what I got from the interview:
VEIC’s initiation into the utility market
·         Before becoming a utility….
o   VEIC had to submit a request for proposal (RFP) over efficiency program/contract every 6 six years.
o   Because of VEIC’s long term project management methods, this 6 year evaluation phase became an obstacle.
o   Ex: If VEIC is working on a 10-year efficiency contract with a business, the mandatory legislative RFP to operate process makes it difficult to plan on a long term model with the business.
o   Eventually VEIC decided that it would be best to assume a solution oriented policy to “be awarded a franchise like that of an electric utility that would allow 12 years before having to go under review by a regulating agency”(Brown, 2013).
·         VEIC operates under a performance based contract.
o   The corporation acquires revenue at fixed rate for their services but to achieve full payment, VEIC must meet certain performance metrics as stated in contract.
o   This makes VEIC different from most supply-side utilities.
·         Supply utilities have to set a price on the energy they are providing through avoided cost rates, cost of operation, consumer demand, etc.
o   In Vermont, because there is no retail choice, these utilities are regulated monopolies in the sense that they don’t have to compete for a customer base, but must meet the guidelines of the Public Service Board.
o   This restricts the amount of profit that can be made. To make a rate change, the utility must go through a legislative process with the PSB and the DPS.
·         Instead of selling electricity, VEIC sells efficiency, or in other words, the cost saved by not using energy
o   Because VEIC is technically not selling physical product, the revenue comes from a service charge on the customer’s electric utility bill.
o   Where VEIC accumulates scrutiny is how effective their programs are at making a return on investment on the rate payer’s funds
o   This return on investment can be extremely difficult to measure based on the different applications of energy saving projects.
§  kWh saved per dollar spent is the most common energy metric
§  VEIC makes claims on energy saved which is reviewed by a regulating agency.
o   The efficiency charge can be confusing for many customers as to why they’re receiving it.
§  It may seem that it is adding onto the utility bill, but by having the charge, utilities can afford to lower their rate. So in effect, the efficiency charge is saving more money on utility bills than it is asking for.
§  A common saying at VEIC is that “consumers don’t pay rates; they pay bills,” so that while an efficiency rate may increase, the overall total of the bill could go down (Brown, 2013).
·         Every customer paying an efficiency charge has the right to access VEIC’s services:
o   Discounted light bulbs, rebates, custom projects, etc.
§  Energy retrofits
·         VEIC’s impact on the electric market can be demonstrated by Vermont’s negative electric load growth (which is extremely uncommon).
o   This means that even though population continues to rise and more energy consumptive practices take place in the state, efficiency measures have actually been able to decrease the amount of energy consumed in Vermont.

Brown, L. (2013, November 15). Interview by G.H. Rinebold [Burlington, VT]. Logan brown: Veic.

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