Sowing the Seeds of Change: the National Standard Practice Manual in the Midwest

cartoons of a plant growing at 4 different stages

E4TheFuture interviewed various regional energy efficiency organizations (REEOs) about their reflections on the National Standard Practice Manual (NSPM). MEEA's Greg Ehrendreich spoke with E4TheFuture about the NSPM's uptake in the Midwest, and their conversation is excerpted below. To see responses from the other REEOs, read their full blog.    

Two years ago, the National Standard Practice Manual debuted and began to bloom. With spring upon us once again, we asked several of the regional energy efficiency organizations for their key insights thus far on interest, use, and application of the NSPM in their respective regions. Representatives from three REEOs share their perspectives below and discuss progress on states’ efforts to review cost-effectiveness testing practices using the NSPM framework.

1. How many states in your region have taken an interest in the NSPM, and how did they become engaged? 
Ehrendreich: Two Midwest states have taken substantial interest in the NSPM. In Minnesota, the Department of Commerce used dedicated R&D funding from the state’s Conservation Improvement Program (CIP) to commission a study to evaluate the state’s benefit-cost tests using the NSPM framework. In Missouri, an ongoing working group formed under the statewide Missouri Energy Efficiency Advisory Collaborative (MEEAC) has been discussing non-energy impacts (NEIs) and how they could be considered in benefit-cost testing. MEEA is part of that working group and helped to bring the NSPM into the discussion this year.

2. Is there a state that’s particularly interesting in how they’ve considered the NSPM? What has made that process work well, and what are key challenges you’ve encountered? 
Ehrendreich: The Minnesota case study is the most comprehensive consideration of the NSPM in the Midwest. Central to its success was direct funding to complete the study and the report. Cooperation among stakeholders – regulators, utilities and advocates – for details and discussion was also essential.

The challenge now is implementing the recommended changes to Minnesota’s benefit-cost testing. The report provided short- and longer-term work plans for considering these changes; advocates in Minnesota see the opportunity to start on those work plans right away.

In context, Minnesota’s investor-owned utilities were given a one-year extension on their 2017-2019 CIP plans. The next plan will be for 2021-2023. Prior to the plan extension, the Department of Commerce opened dockets to set the statewide inputs for benefit-cost testing in the next natural gas and electric CIP plans Dockets 18-782 and 18-783, respectively). Now, with the extra year before new plan filings, advocate comments from the American Council for an Energy Efficient Economy, the Center for Energy and the Environment, Fresh Energy and the Minnesota Citizens Utility Board have all recommended an extended stakeholder process rather than the currently-expected final decision at the end of May 2019. Key issues for advocates include symmetry between benefits and costs addressed in the tests, discount rates used, and transparency of avoided cost calculations.

Official response to advocate comments remains to be seen, but there is an opportunity to make real progress toward application of the NSPM principles and framework in Minnesota.

3. Generally, have states in your region had any particular data needs with regard to certain impacts (utility system or non-utility system) that are difficult to find/quantify? 
Ehrendreich: Having previously noted that the NSPM doesn’t specify inclusion of NEIs or which NEIs should be part of a state’s test, the NSPM is still one of the most useful tools for the Midwestern states investigating the NEI question. Even established bodies of associated literature for NEIs, like air quality improvements, don’t necessarily provide values that are state-specific or use the most current assumptions. It’s a lot of work to get values for NEIs accepted by stakeholder groups and approved by commissions. The NSPM framework is a way to focus on the impacts that are most relevant to state policies, instead of spending resources to quantify a broad range of impacts, some of which won’t actually impact EE valuation.

In states where utilities have been running efficiency programs for a decade or more, choosing NEIs relevant to a state’s policies will be important to justify programs targeting measures on the benefit-cost margin under the current testing regime. To keep achieving savings as markets change and baseline efficiency standards increase, NEIs will be the ladder to higher-hanging cost-effective efficiency program “fruit.”

In our states that are less experienced with energy efficiency, the NSPM framework adds different value regarding NEIs. Places where commissions are less inclined to approve substantial EE portfolios may face skepticism about the value of efficiency – even if benefit-cost tests show a net benefit. The NSPM proposition for those states is:

  • Deconstruct cost-effectiveness tests so all inputs are well understood;
  • Make sure they are aligned with state policies;
  • Identify impacts that are politically or economically important to stakeholders that aren’t currently considered in EE cost-effectiveness tests, which could demonstrate unrecognized value of EE to regulators.