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 healthcare.gov 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.