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State-Run Programs: The Potemkins

By December 30, 2013November 7th, 2021Energy Efficiency, Energy Rant

This week, I was handed a layup via this opinion piece from a Montanan.  He describes “verification and measurement” as a “cottage industry of consultants  running around figuring out what light bulbs end up in what rooms and what their average hours of use will be. They compile this info, run it through a bunch of formulas and computer programs.”  The evaluation of Northwestern Energy’s programs resulted in them being ordered by the PSC to refund ratepayers $3 million of cost recovery.  My first point is he should be grateful that someone pointed this out.  However, his solution, state-run programs, is loaded with problems I am sure he is not aware of.

I cannot speak for all state-run programs, but I am able to say, ahem, that I have first hand knowledge of the inner workings of such a beast.

You may have heard that laws and policies are made for political reasons, not financial reasons or in the best interest of constituents.  To be blunt, laws and policies are made to get people re-elected, and in many cases it trickles down to political appointees.  If you believe politics doesn’t seep into the energy efficiency machinery in these states, I’ll ask Santa to stop by and exchange the junk you got from the in-laws for something you really want.

The idea that a third-party delivered portfolio of energy efficiency programs is clearly superior to utility-run programs is, itself, very naïve.  The keystone of my argument is that somebody in the government – the commission or political appointees – is responsible for the whole shebang.  It boils down to this: as a result, the entire apparatus has a vested interest in the Potemkin Village.  Nobody (commission, administrator, implementers, evaluators) makes waves.  Everything is wonderful.

This is the problem with state-run anything.  A primary purpose of the state is to ensure people don’t get ripped off, and they do a pretty good job at this.  When the government is delivering the goods, you get the DMV.  They are not going to beat themselves up as happened in Montana.  To do so is politically ugly.  To beat up a utility can be viewed as politically popular.

Consider as a perfect example.  The implementation contractor has not been beaten up.  I don’t know of any firings or financial penalties or anything.  They are not going to beat up their contractor because it would make them look like fools for choosing and mismanaging them – or at least this would be the message from the rooftops by the opposition.  It’s why nothing gets fixed.  Instead, they bring on more experts because that is politically more appealing[1].  In the private sector (e.g. utilities), the opposite rules – crises and underperformance are taken seriously and heads roll when necessary – and in fact, heads rolling can look good, and contractors know it!

Another thing is customer care, which again is on display at the local DMV.  What motivation is there for customer satisfaction?  As one colleague told me about a federal worker he personally knows, “you care too much to be a federal employee.”

The utility relationship with its customers is near and dear to the utility – for every utility for which I’ve worked, on both the implementation and evaluation sides of the fence.  This is crucial, and utilities all the way to the C-suite are very wise to leverage the portfolio to build these relationships.  Utilities and their account managers genuinely want to help their customers be more successful.  DSM programs are great pathways to help make it happen.

In doing so, a primary responsibility of any good account manager is to understand their customers’ business and needs.  There is trust between the account manager / utility and the customer, and the importance of this to leverage results cannot be overstated.  Moreover, if a utility/customer relationship is in tatters, the account manager, likely a new one, will work his/her tail off to win them over again so they too can participate and take advantage of programs.

Consider what would happen if portfolios were turned over to the state, which makes me think of parodies that are too controversial to write down, even for this blog.  All the years and years of utility-customer relationship building are wasted, and it’s worth hundreds of millions of dollars.  Believe me when I say it takes a lot of money to build relationships and trust with big C&I customers, even if you happen to be the smartest, nicest, slickest, man, woman, or child on earth.

Lastly, it seems like a secret but it’s not because I’ve heard it directly from utility executives – that they highly value energy efficiency programs because it makes their customers more successful.  And when customers are successful, they expand, and the utility sells even more electricity.  That’s why they are called efficiency programs and not conservation programs.  Get it?

[1] These scenarios may drive commission staffers crazy, and they may want to throw a contractor down the stairs, but they must get in line behind the political apparatus, their appointed superiors.  Staffers are good people, and they have much more control and are able to do their job where utilities run programs.

Jeff Ihnen

Author Jeff Ihnen

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Join the discussion 2 Comments

  • James Maletta says:

    Your rant is just that –a rant. It is very one sided and really does not take into account a number of things. I have been in this business long enough to have had experience in the field with both Utility run and State run programs. What I have seem with utility run programs is “quick and dirty” offerings to customers of little, inexpensive improvements and 1/2 hour audits without any testing of homes as a way to meet government required minimums for conservation programs. These are often done without adequate supervision or verification that work that was done was done properly.

    State run programs have their issues too. I am not blind to this, but compared to what I have seen of utility run programs around here I’d rather work with the State program. It provides more consistency across the entire State. Those of us who are the boots on the ground don’t have to memorize the rules and regulations of 12 different utility programs. They tend to be more “stable” which actually makes it easier sell the and work with them from year to year so we can actually get more done on the ground when we know who are allies are and what they are doing. Your reference to this as a “Potemkin village” has a subtle and unappreciated inference of “communist” which I do not find to be either a constructive or accurate descriptive choice. Both State and Utility run programs play games with numbers that are highly questionable. Lately our state program has been pushing direct installation of light bulbs and low flow faucet aerators. I watched a contractor replace a 1.5 GPM unit with another 1.5 GPM unit. They’ll count that as a savings measure, but there was no savings. It would have happened with either utility or state run. I’ve seen it done with utility programs too.

    Anything touched by human hands is going to be less than perfect. Neither model is perfect but from my observations of the way things have been going of late I’d have to say we could all do with a lot less political posturing –and unconstructive ranting–and a lot more reasoned, thoughtful and balanced analysis and discussion. I really expect better from Michael’s Engineering than this.

    State run programs

  • admin says:

    Thanks for the comment, James. Respectfully, as you can see in the description of the Energy Rant at the top of the blog, one purpose of this blog is to take a critical look at technologies, programs, and policies – not with the usual rose colored glasses. I back my assertions with personal experience and data.

    It appears that you are from WI and may participate in Focus on Energy programs and support them. I normally don’t name names of companies or states for negative things but I will here to support my point.

    Prior to FOE in 1998, WI ranked 8th in the country. As recently as 2008, I think the first year ACEEE did their comprehensive state rankings, Wisconsin was ranked 13th. In just the past five years, WI plunged to 23rd in the country as measured by the gold standard, ACEEE.

    The first step on the road to improvement is to accept that there is a problem or that things are headed in the wrong direction. That’s what this is about.

    Thanks again.


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