September 27, 2004

NB energy efficiency agency would work to maximize savings, cut emissions, costs

The New Brunswick Department of Energy is proposing to establish an energy efficiency agency which would be funded by utilities and tasked with delivering education, promotion and incentive programs to maximize energy savings in the industrial, commercial and residential sectors. The energy efficiency model is the central focus of a White Paper on an Energy Efficiency System released earlier this month by Energy Minister Bruce Fitch.

"Our department has examined many different models in different jurisdictions and we feel that an energy efficiency agency would be very beneficial to our province," Fitch said. "It is far more economical for ratepayers to participate in conservation than it is to construct new power plants, or buy power from other jurisdictions to keep up with increased demand in the years ahead."

New Brunswick Power projects that peak demand will surpass supply by about 120 megawatts (MW) by 2007 and by 190 MW by 2011. Further estimates by NB Power put the potential peak demand reduction at 270 MW, or 8.8%. The total residential electric heat load alone, it says, is about 1,100 MW.

The White Paper notes that New Brunswick is unique in Canada in that it has a high proportion of electric heating in the commercial and residential sectors, which creates a high winter peak load. Consequently, the province is particularly well positioned to benefit from energy efficiency, or demand-side management (DSM, a term which, although often used interchangeably with energy efficiency, is usually specific to the electricity sector). DSM programs have proven effective in generating local employment and in benefiting the environment by lowering air emissions, all at lower risk and lower cost.

The agency would focus on DSM programs by promoting products in such areas as lighting and heating to pushing for more efficient practices in building construction and operations in industrial processing. This would also include fuel switching to more environmentally-friendly and energy efficient fuel sources. Other DSM tools include new electricity rate schemes designed to influence consumer behavior and energy demand.

The agency would be funded by distribution utilities. It would be a performance-based operation with funding related to the energy savings. By regulation, the agency would have to operate at a lower cost than electricity supply. The savings would then be passed on to customers through rates and reduced electricity use. The agency's performance would be assessed by the province's Public Utilities Board.

The government examined a number of models in other jurisdictions, finally basing its proposal largely on the agency operating in the state of Vermont. Its DSM programs are delivered by Efficiency Vermont, which functions separately from the state's distribution utility and is referred to as an "efficiency utility," notes the White Paper. It has been operating for four years and is required to carry out DSM activities which are the least-cost resource or cheaper than new electricity supply. Efficiency Vermont has been achieving energy savings equal to 1% of annual sales; this 1% reduction per year, says the paper, is close to the projected demand growth in New Brunswick.

The energy efficiency model outlined in the White Paper is in step with recommendations made in the government's Energy Policy, released in 2001. Fitch said the department will now undertake a consultation with stakeholders such as the provincial utilities, the Canadian Manufacturers Association, the Conservation Council of New Brunswick, and the province's Market Advisory Committee. A more detailed organizational and regulatory framework will then be prepared, followed by presentation to the government of legislative and regulatory proposals to put the agency in place. The intent is to have it operating in 2005.

In a follow-up commentary prompted by the level of interest generated by the White Paper, Energy Minister Fitch emphasized that "the agency in question would be arms-length from the government and its survival would be entirely dependent on its ability to successfully reduce energy consumption in the province. This, in turn, reduces the need for distribution utilities like NB Power from having to build new generation facilities or purchase expensive power - especially during peaks that come from the coldest days of the year."

This, he said, represents a significant policy shift for New Brunswick's energy sector. Some have commented that NB Power should be delivering more in-depth efficiency programs. The reality in other jurisdictions, however, shows that it is a clear conflict of interest for a utility, whose main goal is to sell electricity, to also be in charge of conserving it.

Responding to concerns already raised about creating another form of bureaucracy, Fitch said the energy efficiency agency, charged with undertaking the most comprehensive energy efficiency program in the history of New Brunswick, would have a clear mandate and be subject to financial review. Moreover, its activities would complement and build on energy efficiency incentives offered through programs delivered by Natural Resources Canada as well as through private-public arrangements with companies like Enbridge Gas NB.

Public response to such programs has been limited because of the extensive promotion and awareness that is needed but not provided, he continued. The proposed energy efficiency agency would be far more global in scope, dedicated to delivering energy savings to homes, commercial and industrial facilities through education, incentives, and by promoting products in such areas as lighting and heating to push for better practices. There would also be greater emphasis on fuel-switching to more environmentally-friendly and energy efficient fuel sources. Collaborating with other organizations promoting energy efficiency will further improve the new agency's benefits to ratepayers in New Brunswick, Fitch added.

Having studied many energy efficiency models in different jurisdictions, it became clear that a stand-alone agency is the best way to achieve the energy savings that are needed to help offset the shortage in supply in the years to come. An agency will be able to provide focus and drive needed to bring success to a full-scale energy efficiency program, he explained. The model from Vermont that most impressed department officials has been able to save $143 million in lifetime value of unused electricity at a cost that is lower than supply. Setting up a new agency is seen by the department as an investment that will pay for itself many times over in the years ahead.

Finally, he noted, because the agency will be funded by the province's utilities, business and home owners who make a concerted effort to save energy will directly save themselves money as a result. A successful program will mean less upward pressure on rates, with resulting benefits for the economy, the environment and individual New Brunswickers.

The White Paper may be viewed on-line at www.gnb.ca/0085/index-e.asp. Comments should be sent to the Department of Energy, PO Box 6000, Fredericton, NB E3B 5H1, E-mail doe@gnb.ca.

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