Forging on from last week’s Arthur Fonzarelli crash into Arnold’s chicken stand, this week I will posit some challenges and problems presented with state takeovers of energy efficiency programs. Per last week’s post, Wisconsin has fallen from 8th place in the nation to 17th place since the state essentially took over its energy efficiency programs. This is according to the American Council for an Energy Efficient Economy, ACEEE, a well respected national think tank (my term) and advocacy organization for energy efficiency.
One problem is the money moves further away from where it is collected. The further program spending is from the point of collection, the less care there is in its cost effective investment and avoidance of waste. This is natural, and it is a fact. A local, charitable non-profit is going to more carefully spend its money because local donors are right there to see the results for themselves. If they want continuing donations, the local charity will be very frugal. Moving on to local government, citizens know school board members, city council members, county commissioners, and so forth. Do you think these representatives are going to be a little more sensitive to their largess when constituents may verbally tear them apart while filling up the tank at Kwik Trip or blast them in front of everyone at the next board meeting?
On the other end, taxing and spending at the federal level comes with very little accountability or care. We have revenue rolling in from all over the country – income, payroll, Medicare, excise, corporate, and a few dozen other taxes and fees – and we have spending at 1.5 times that rate all over the world. Spenders don’t care about taxpayers because they are not personally confronted by them. The people responsible are insulated like mob bosses. Write to one. You’ll get a form letter describing how great their legislation is on an unrelated topic. Nice. Have you ever been around a US senator or house representative? They ooze with goo, and slide like (per my Tennessee friend) a greased eel in a barrel of snot.
When money is collected by a utility and spent for its customers, there is clearly more responsibility in spending that money. For one thing, they are under the eyes and thumbs of the regulators. They are in Wisconsin too, but the regulators hand pick the administrators, and thus there is an inescapable bias – like what is the best car on the market – mine because I selected it and I’m smart. It’s human nature, man. That’s all I’m sayin’.
Utilities have relationships with customers, and those are very important to the utility. For state-run programs, not so much. This presents another round of challenges.
First, good account managers understand their customers’ businesses and needs. They are a tremendous resource and lever in a utility-run program. With utility-administered programs, money is budgeted for account managers to assist with energy efficiency projects, so they are deeply involved in many cases. For state run programs, not only is the budget absent, there is no carrot (goals) for saving customers’ energy. Account manager time is extremely taxed so if it isn’t part of their responsibilities, they simply will not / cannot help.
Another result of not understanding customer business and needs is a lack of deep, structural, and lasting energy efficiency planning. It is akin to the difference between long-term planning for a small business such as ours versus hitting quarterly earnings targets for a large corporation. There is a huge difference between twisting a customer’s arm to replace all their lighting and throwing some program money at them, versus digging in and solving problems, reducing maintenance costs, improving productivity, and increasing profits and operating income – and maintaining and in fact continuing down the road. Account managers live for this stuff. We live for this stuff. Persistence!
As alluded to in last week’s post, Wisconsin’s programs are low-cost and widget based. The programs are very similar to those in Illinois and Michigan. Recall that while Wisconsin slipped from 8th to 17th since 1998, Michigan climbed from 46th to 12th (ouch). Michigan also has low-cost widget based programs, but Michigan is very new to energy efficiency (and programs are run by utilities). Conversely, Wisconsin represents a very mature market for EE.
Meanwhile, utilities in neighboring Minnesota and Iowa, two other mature markets, have moved on to successful industrial, process, retrocommissioning, and new construction programs for commercial and industrial customers. They have vibrant energy analysis programs to assist customers with identifying, planning, and prioritizing implementation of cost effective measures. Wisconsin point-blank shuns this sort of informational / road-map assistance to guide complex customers to higher profit and improved cash flow.
Furthermore, where utilities own the programs there is de facto competition among them to look good to their customers and to the regulators. There is vibrancy. Things change. Things improve. They have to keep pace. They want to be better. In absence of this: same old, same old, until the entire state is compared against others and then the results aren’t liked.
In my 17 years in the business, I can tell you the days of en masse studies and energy audits rotting on the shelf with no ensuing action; and customers not caring about energy cost and not viewing energy as a strategic resource have changed dramatically.
We were even told by one of our major utility clients in a neighboring state that their management sees energy efficiency as a source of income rather than a “red headed stepchild” as it used to be viewed. Times have changed, dramatically. Like Dan York from ACEEE mentioned in his letter to the Cap Times, “neighboring states rank higher than Wisconsin because they continue to push for higher energy savings through increased investments in energy efficiency. Wisconsin, by contrast, is standing still and by doing so, is getting left behind”.
 Widget-based simply means standard option A versus more efficient, somewhat more expensive option B.