Originally published January 7, 2013
Burlington, a beautiful college town of 40,000, is a recognized leader in energy efficiency, the largest city in Vermont, and a cultural gem situated in scenic splendor on historic Lake Champlain. Often referred to as the sixth Great Lake, 120-mile long Champlain drains the Green Mountains of Vermont to the east, and the Adirondacks of New York to the west, before flowing north into the Saint Lawrence River near Montreal. Reflecting its rural roots and deeply ingrained, environmental ethic, the Vermont Legislature in 2000 established the first statewide energy efficiency utility in the nation. At the same time, Burlington Electric Department (BED) was uniquely authorized by the Legislature and Vermont regulators to act as its own energy efficiency utility, a tribute to the strength and quality of its programs.
Over the last 20 years, BED and its customers have jointly invested more than $30 million in energy efficiency measures, allowing Burlington ratepayers to save more than $10 million per year on their electric bills. Moreover, as a consequence of its aggressive investment in energy efficiency, BED’s load growth has been brought to a virtual standstill. “We’ve taken energy efficiency seriously for a long time,” said Tom Buckley, manager of customer and energy services. “We now sell about the same amount of electricity we did in 1989. Our rates are among the lowest in New England, and our residential customers’ bills are 25 percent lower than the statewide average.”
Origins of Efficiency Vermont—Starting in the 1970s and early 1980s, there were a few pioneering efforts to establish energy efficiency programs in Vermont. BED, for example, set up a water-heater energy conservation program as early as1983. By the late 1980s, interest in energy efficiency was gathering steam and the citizens of Vermont served notice that they expected their utilities to envision energy efficiency as a rich, untapped resource. “It was still a new idea,” said Buckley, “but it took off after a tough battle over buying hydro power from Canada. The voters said we don't want to do this for a variety of environmental reasons. They said they wanted to pursue energy efficiency and to do so seriously. We then took a major step. In the early 1990s, Burlington became the first city in the nation to use municipal bonds to capitalize a comprehensive program in energy efficiency.”
The bond authority put BED in the vanguard, giving it a propitious head-start and a leadership role in energy efficiency in the state. Burlingotn Electric was better positioned than other utilities for the next big step. “By the mid-1990s, tensions were rising in the state,” said Buckley. “Advocates were saying that utilities were not doing an adequate job in promoting energy efficiency; they said many utilities, especially the IOUs, were too focused on energy sales. As a result, the Public Service Department, which serves as the consumer advocate in our state government, promoted the idea of a statewide energy efficiency function.”
In 2000, the Vermont Legislature, along with the Vermont Public Service Board (PSB) formally established “Efficiency Vermont” (EVt), a new utility focused entirely on energy efficiency. EVt programs were to be statewide, under contract to the PSB, a quasi-judicial regulatory body similar to public service commissions in other states, and funded by a mill-based energy-efficiency charge (EEC) paid by all retail customers, based on their consumption. Budgets would be developed by EVt and approved by the PSB. “This became the paradigm. It has evolved a bit over time, but the basic role of EVt remains the same. In 2010, the Legislature agreed to make the EVt operate a bit more like a traditional utility. It became more independent from the PSB in its decision making processes and is now regulated more at arms length,” said Buckley.
BED’s unique role—From the outset, Burlington Electric Department became the sole exception to the statewide purview of EVt, in large part because it was so far ahead of other utilities when the process began. “We had made a lot of progress and our programs were of high quality,” said Buckley. “We weren’t interested in getting swept up in this statewide process, so we petitioned to keep our own programs. It was quite a battle, but we were successful in that EVt and BED became the only two entities to meet the state’s statutory definition of an energy-efficiency utility. In 2010, we went through another rigorous assessment of our program, essentially the second time through the gauntlet. We were successful again and formally appointed by the PSB to serve for 12 more years.”
BED collects its own energy efficiency charge from its 16,200 residential, 2,875 small commercial, and 835 large commercial customers. It manages its own fund but often works closely with EVt in program development and service delivery. “We have our own bank, so to speak,” said Buckley, “but we actually coordinate a lot with EVt. In lots of areas ,it doesn't make sense to set up a separate administrative mechanism for a city of 40,000. By and large, our customers deal with BED but we have a contract for services with VEIC.” The Vermont Energy Investment Corp. (VEIC) is the parent corporation that owns and operates EVt.
BED has to deal with three regulatory entities. In addition to typical municipal-level regulation by the Burlington City Council, the Vermont Public Service Department is the watchdog. The board oversees and contracts the measurement and verification (M&V) of energy savings to private engineering firms. The Public Service Board is the state agency that reviews the M&V findings. PSB members are appointed by a combination of the legislative and executive branches and run quasi-judicial proceedings on the efficacy of the program. “We try to minimize the amount of time spent in total regulatory activities, but it is difficult. They are proliferating,” said Buckley.
Commercial customers dominate—Burlington’s energy efficiency programs are geared to the unique nature of its electrical load. “We are dominated by the commercial sector, which consumes 75 percent of the electricity in the city,” said Chris Burns, director of energy services. “And commercial is dominated by two large customers, the University of Vermont and the Fletcher-Allen Medical Center. Both have skilled facilities staff that we work with closely. For our part, we have a dedicated engineer who does almost nothing but work with these two customers.”
The university has about 12,000 students on the Burlington campus, which is spread out over 108 buildings. The campus infrastructure poses ongoing challenges since some of the buildings are 150 years old. Students at UVM and the other smaller colleges in the city constitute roughly 30 percent of the population of Burlington.
Fletcher-Allen is the largest medical facility in the state and works in partnership with the University of Vermont’s College of Medicine and College of Nursing. The medical center functions as a regional hub, providing advanced-level care to a population of 1 million people in Vermont and upstate New York. It also serves as the community hospital for approximately 160,000 residents in surrounding counties, and provides primary care services at 10 separate Vermont sites.
Although BED is focused on its two largest customers, it has established a comprehensive program targeting opportunities for commercial customers of all sizes. “We position ourselves to be ready for any number of opportunities from large commercial to the smallest retailer, office building, financial institution, and restaurant. These are businesses without knowledgeable staff in energy matters,” said Burns. “We look for retrofit opportunities where the customer might not be aware that it makes sense to replace something early even though it has some remaining life. There are lots of opportunities when a piece of equipment burns out, or when an old building is being ‘gut-rehabed,’ and of course, with new construction.”
In the early 1990s, the Burlington City Council enacted a series of building codes that were developed in consultation with Burlington Electric. The codes help the utility address energy efficiency in the construction arena. Energy-efficient building codes were established in parallel with the development of BED’s own energy efficiency programs. “It was a brilliant move to stop the bleeding,” said Burns. “We don't want buildings coming on line that are not going to be efficient.”
BED has been successful in incorporating energy efficiency into the heart of the city’s development process, said Buckley. “This is an opportunity that [American Public Power Association] members have that IOUs don’t. We work with every new project coming through the municipal planning pipeline, and energy efficiency is now one of the signoffs in the construction process, right along with things like plumbing and electricity.”
Residential customers—One of the protracted challenges for BED relates to multifamily residential buildings with individual metering for tenants. “We’re a college town and that makes us a little odd in that 60 percent of our customers are renters, and 85 percent of those are individually metered for electric and natural gas,” said Burns. “The problem is compounded by the fact that we turn over 35 percent of our residential customers every year—probably one of the highest rates in the country. We, therefore, have to be very creative with our residential customers. We have a service involving everything from CFLs to refrigerators, air conditioners and dehumidifiers. We are also looking into providing on-bill financing in the future.”
Historically, one of the most significant headaches for BED was the electrical heating load. The utility finally decided to exit the market. “Several years ago, we did a tremendous amount of work to remove all the electric heat load. It was a market filled with customer service problems, one that was driving up our costs, particularly to serve the peak,” said Burns. “We decided it would be easier to cede the heating market to the gas company. At one time about 22 perecent of our residential customers were using electric heat, now we are down to just a couple of percent.”
This not only helped reduce peak load costs, but also worked in conjunction with other measures to curtail load growth. Electricity consumption in Burlington in 2011 was 4.7 percent lower than in 1989. During the same period, statewide use of electricity increased by 8.3 percent. During 2011 alone, total BED efficiency program spending was $2.1 million, and participating customers spent an additional $1 million in their homes and facilities.
BED is focusing current efforts on reducing summer peak demand, caused by air conditioning. o this end, the Public Service Board approved additional incremental increases in BED’s energy efficiency charge funds. Over the 2009-2011 program cycle, BED reduced summer coincident-peak demand by 3,203 kW, about 4 percent greater than the utility’s target.
Growing Importance of M&V—For several years, BED has been taking advantage of a commitment by the Independent System Operator of New England (ISO-NE), to purchase energy efficiency as a resource, an outcome the state of Vermont fought hard to establish. “We are now a bidding entity into the ISO-NE forward capacity market,” said Burns. “They allow us to bid some of our energy savings into the capacity mix and we get paid for achieving it.” The additional revenue stream, at least in theory, would allow BED to keep rates stable and to supplement its energy efficiency funds; recently, however, the Legislature has stipulated that these funds be directed to support complementary fossil-energy conservation measures, such as weatherization.
Working with the ISO-NE puts a solid floor underneath the critical process of measurement and verification (M&V). “The ISOs of the world tend to want very rigorous M&V on energy savings claims. As a result, we’ve had to become much better at how we establish our energy claims, at how we carry out and defend our engineering calculations,” said Burns. “It takes a little extra money and time to do the M&V, but it ultimately works to the benefit of the ratepayer.”
Establishing a process of solid analytics will help municipal utilities like BED manage what Buckley and Burns see as the next major issue in energy efficiency programs, namely that of “persistence of savings.” The longevity of energy efficiency measures, referred to in the industry as persistence or lifetime, is generally not well monitored or controlled, with the inevitable result that energy savings deteriorate with time. “We tend to assign a lifetime measure, say 12 years, to a new HVAC system, but we know that is not likely to be true, especially in the more complicated facilities that have building energy management systems,” said Burns. “Things break, things get reprogrammed, people try to solve comfort problems, and the energy savings begin to slip. Right now there is no feedback loop. We treat our cars better than our buildings.”
Burns sees great potential in “continuous commissioning,” where professionals are hired to monitor and fine-tune the energy efficiency investment on an ongoing basis. “There are a lot of professionals out there who could have eyes and ears on these buildings to give us the persistence we want. That, to me, is the next horizon,” said Burns.
This horizon is likely to become even brighter because, “the building science industry is moving in the same direction,” said Buckley. “At the same time we are working on the smart grid on the utility distribution side, future building control systems are developing rapidly. In time, we will have the ability for these two systems to talk to one another.” This interchange of information will give the professionals involved in continuous commissioning sophisticated diagnostic tools and, perhaps in time, programmable upgrades. Smart grid brings some immediate benefits to customers, but the real payoff “will come when these systems begin to harmonize,” said Buckley.
BED completed installation of smart meters in its service territory in 2012 and expects to have all the features and functionality in place by the middle of 2013. This will open up new platforms for energy savings. “The University of Vermont, for example, is developing an interactive energy efficiency website for us that we’ll launch once our AMI system is completely installed. This will allow customers to interact with one another, providing counsel and advice,” said Buckley. Advanced control systems will also, in time, enable buildings to respond to variable pricing of electricity and automatically adjust building subsystems to reduce load at critical periods.
Innovations in financing—Up-front capital investment remains a major hurdle facing the implementation of energy efficiency programs. In addition to working with local lenders to provide low-interest energy efficiency loans, innovative financing schemes are being developed to help address the problem. The Green Revolving Loan Fund at the University of Vermont is a case in point. The idea is that if an energy efficiency investment by UVM can create a return equal to or greater than the university’s endowment fund portfolio, then why not put the money into its own infrastructure.
“Last winter, the Board of Trustees of the University of Vermont created a $13 million green revolving loan fund for energy efficiency investment, and stipulated that BED needed to sign off on the various projects,” said Burns. This created for facilities staff at UVM a dedicated stream of money to make these improvements to their buildings and a consulting resource for help in making decisions. “Since all incentives and savings will be plowed back into the fund, it is almost a perpetual source of money. In my career, this is one of the biggest milestones I’ve ever seen. It has strengthened the relationship between BED and our largest customer in a very unique way.”
On-bill financing is another mechanism BED will be experimenting with, starting with small commercial customers. “This is the group that always has the hardest time coming up with capital and expertise. Retail stores, small offices and the like are focused exclusively on their businesses and have no facilities staff,” said Burns. The capital investment would typically be amortized over three to five years and be included in the monthly bill. If this proves successful, BED may try to expand the program to residential customers.
A third possibility, Property Assessed Clean Energy (PACE), is a long-term program that is capitalized through a lien on the property and paid through the tax bill, much like a sewer improvement project might be. It allows the obligation to be passed from homeowner to homeowner when the property is sold. According to Burns, getting that program off the ground has been trickier than other financing schemes because it ran into competitive challenges from some parts of the housing finance industry. “Nevertheless, there are real benefits. With PACE, customers can afford to take on higher cost and deeper levels of retrofit, knowing they will only pay a small portion of the total cost annually while they occupy the residence. The remaining cost will be automatically passed on to the new owner, for up to 20 years.”
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BED was awarded a DEED grant for development and implementation of its PACE program. Initial reports are posted in the DEED Project Database. Results from their pilot program are due out later this year. See an article in the DEED Digest issue 30.1 Winter 2012, for more information on their DEED project.
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