Southern Company: Squirreling the Energy Efficiency Debate

‘Squirreling’ is banned at the World Schools Debating Championships. What, you don’t know what squirreling is? Or what it has to do with energy efficiency? Well, today is your lucky day!

According to those who set the rules for debate competitions, squirreling is the unreasonable redefinition of a term in debate in favor of the team that opens the competition. In these debates, audiences “come to regard debating as overly technical and confusing” when the contestants begin arguing definitions. But whether in debate competition or in energy policy discussions, debating definitions is a sure-fire way to avoid the subject.

Southern Company has a solid track record of squirreling the definition of energy efficiency to avoid debate. And Southern Company has good reason to avoid the debate: Its utilities consistently advocate what is considered by national experts to be the “most restrictive” approach to designing energy efficiency programs.

Just how restrictive, you ask?  The energy efficiency programs that are acceptable under Southern Company’s standard generally need to have benefits that are at least three times the cost to deliver the energy savings.

This restrictive standard is known in the industry as the “Rate Impact Measure” test, or RIM test. In contrast, most utilities use a cost-effectiveness test that sounds pretty reasonable. Benefits are measured in terms of cost savings: Number of power plants not built and fuel not burned, essentially. Costs are measured in terms of the utility’s efficiency program costs and, often, also include customer out-of-pocket expenses. Even though a simple “pass” is all that regulators usually require, utility programs are so cost-effective that they typically have benefits that are at least double the costs.

The difference between the “limited” programs that pass the RIM test and the more commonly used benefit-to-cost tests is dramatic. For example, when the Georgia Public Service Commission directed Southern Company utility Georgia Power to expand its energy efficiency programs beyond strict adherence to the RIM test in 2010, commission announced that the change would help their state “out of the bottom of national and regional comparisons on energy efficiency.”

Southern Company doesn’t like to discuss energy efficiency when it can’t debate definitions. For example, last year we reported that Southern Company subsidiary Alabama Power refused to be a stakeholder in a state-sponsored stakeholder process to assist the state with “policy and program frameworks to support investment in cost-effective energy efficiency.” Explaining its refusal, Alabama Power squirreled, “Energy efficiency is not using less kilowatt-hours.”

Really? Here’s what the National Action Plan for Energy Efficiency (NAPEE) says about that.

“Energy efficiency” refers to using less energy to provide the same or an improved level of service to the energy consumer in an economically efficient way.

Kim Greene is likely to represent Southern Company on energy efficiency nationally. We are optimistic that she'll work to help Southern Company develop a business model that helps customers reduce energy waste.

We are optimistic that Kim Greene, the new CEO of Southern Company Services, will work to convince Southern Company staff to adopt this definition. We’ve got two reasons for optimism. First, as a senior manager with responsibilities for finance and generation at the Tennessee Valley Authority, Ms. Greene has seen firsthand how energy efficiency has helped to position TVA to better manage customer costs over the long term.

Second, Ms. Greene can point to Southern Company’s own engagement in national discussions around energy efficiency. For example, Susan Story (whom Ms. Greene is replacing) was one of the members of the Leadership Group that authored the NAPEE “Framework for Change,” including that definition. Southern Company also has a longstanding commitment to support the Alliance to Save Energy, an organization whose name just might suggest that energy efficiency is about using less kilowatt-hours. Because, of course, kilowatt-hours is how one measures electric energy.

Southern Company’s definition of energy efficiency is so squirreled that its focus is on customers who do not save energy. This gets a little technical, and for those with an interest, we are happy to explain more about what Southern Company means when it talks about energy efficiency. A good example of their rhetoric, however, is that Mississippi Power argues that it is “opposed to implementing programs” that “harm non-participants.” What this means is that Southern Company is effectively opposed to spending money to help customers reduce electricity waste.

When pressed, Southern Company likes to claim that it is just following local state policy, that its operating companies each adopt their own perspective based on the nature of their customer base, state law or other excuses. Yet Southern Company’s Florida utility, Gulf Power, maintained its preference to limit efficiency even after 2008 legislation formally changed the state’s definition of energy efficiency, essentially arguing that the new law changed nothing. Southern Company cannot claim to be “championing energy efficiency” when its utility operating companies consistently reject the mainstream definition of energy efficiency.

Southern Company’s commitment to resisting mainstream views on efficiency goes beyond simply confusing everyone by using its own definition. Alabama Power not only refused to participate in the Alabama energy efficiency stakeholder process, it attacked the grant, hyperbolically describing the stakeholder process as advancing a “government-mandated reduction imposed only on electricity users.” Well, we know it’s really just about helping customers save money, but sadly for those customers, Southern Company hasn’t figured out how to make energy efficiency work for its own business plan. (Which is not so hard: energy efficiency is working just fine for some other large utilities in the Southeast.)

Here’s the bottom line: Southern Company is out of step with the mainstream perspective on energy efficiency. Their definition of cost-effective energy efficiency demands that programs reduce energy costs by well over three times what the programs themselves cost to operate. And then they have the hubris to claim that they are “championing energy efficiency.”

** For more on what Southern Company staff mean when they promise energy efficiency, read page 2.**

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