Last December, Dominion Energy filed their latest DSM application (Phase XII) with the State Corporation Commission. The company is proposing four new programs and seeks to modify two current programs. The VAEEC is a respondent in the case, with our Executive Director, Chelsea Harnish, providing expert testimony..
The four new programs are: Residential New Construction (EE), Residential Smart Thermostat Purchase (EE), Residential Smart Thermostat (DR), and Non-residential New Construction (EE). They also requested to update the eligibility criteria for the Phase VIII Small Business Improvement Enhanced Program to allow for businesses with more than five locations to participate, and to change the Phase VIII Non-residential Energy Efficiency Midstream Program to offer more up-to-date program measures, such as ice makers and dishwashers.
We fully support Dominion’s application. However, we identified several areas for continued improvement
Support for the Phase XII Filing as Necessary but not Sufficient to Meet VCEA targets
The programs and alterations proposed are necessary steps for Dominion to achieve their energy efficiency goals. However, it is still very unlikely that they will go far enough to meet the VCEA EERS targets. Chelsea said in her testimony, “Since this filing is the last opportunity for the Company to propose new programs before the end of 2025, it will need to deploy other resources including: increasing participation rates, utilizing Commission approved, portfolio level marketing funds to increase consumer awareness, and do more to leverage the functionalities of Advanced Metering Infrastructure or AMI.”
Dominion will also need to launch all of its previously approved programs to start accumulating the energy savings needed to meet the VCEA targets, as well as continuing to utilize the stakeholder group to build out implementation plans for the four key recommendations from the Hearing Examiner’s Report. As it currently stands, and depending on the metric used, Dominion will only achieve 3.2% savings in 2024 and 3.7% in 2025, which are significantly short of the mandated 3.75% and 5%, respectively. However, it is critical that the SCC does not address this shortfall by reducing the EE targets – meeting the targets that were adopted in the VCEA, and continuing to mandate stronger goals, are critical to promoting an energy-efficient economy, combating climate change, and providing a safe and healthy environment for all Virginians.
In regards to the New Residential Home Construction Program, we raised concerns about the version being utilized in the program. The Dominion program only requires that new homes are built to Energy STAR 3.1 standards, however, the standard was recently updated to 3.2, which is required for home builders to receive the federal 45L tax credit. Since it has been confirmed by EPA that homes built to 3.2 do meet the standards in 3.1, we asked the Commission to ensure that Dominion allows homebuilders building to version 3.2 can also participate in their program.
Analysis of the Long-Term Plan, Project Management Report
In late 2022. Dominion released a long-term plan (LTP) outlining how the company would meet the energy savings goals in the VCEA. In last year’s filing, the company did not provide specific metrics or quantifiable data on tracking this progress so the Commission recommended they include an LTP Progress Report with this year’s filing. Unfortunately, the report in the current filing continues to be vague while also reporting that the company is making “considerable progress” on the recommendations set forth in the LTP. We provided examples of metrics the company issued in interrogatories, as well as the EE stakeholder group, and asked the Commission to explicitly require quantifiable metrics in future filings so that stakeholders can better assess the true progress that is being made towards the VCEA goals.
Review of Cost-Effectiveness Test Results
Virginia law requires proposed utility EE programs to pass three out of a possible four cost-effectiveness tests in order to be approved by the SCC. These four tests are:
- Participant Cost Test
- Utility Cost
- Total Resource Cost and
- Ratepayer Impact Measure (“RIM”)
These tests were designed in the 1980s and do not take into account any of the technologies or modernizations of the intervening decades. Moreover, the tests vary widely from state-to-state or even program-to-program, with the inputs heavily weighted towards the costs to the utility without considering many of the benefits.
As our members are likely aware, the VAEEC formally supported the SAVE Act in the 2024 General Assembly Session, which requires the Commission to develop a single cost-benefit test following the guiding principles of the National Standard Practice Manual (NSPM). The Governor added an amendment, which will also require the utilities to perform the TRC test in addition to the new test. While this amendment is not perfect, there are opportunities to address the issues this could raise before the new test is implemented in 2029. On April 17th, the General Assembly reconvened for “veto session,” and formally accepted this amendment.
Adopting a new cost-effectiveness test following the guiding principles of the NSPM would ensure that all investor-owned utilities in Virginia are using the same inputs in a transparent and balanced analysis that is forward-looking and aligns with the energy policy goals of the Commonwealth.
Discussion of Net/Gross Savings Metrics
The VCEA codifies “total annual energy savings” as the method-of-choice for determining energy savings, which includes savings from both new measures installed in a given program year, as well as measures installed in previous years that are still actively providing energy savings.
However, there has been an ongoing debate on whether the utilities can use net or gross savings to meet the VCEA targets. Dominion and SCC staff say the utilities should be able to use gross savings while environmental experts state that only net savings should be counted. While the VAEEC does not have a position on this issue, we felt compelled to weigh in this year when the company provided definitions for the two terms that do not align with industry standards.
Gross savings are the difference in energy consumption based on the savings from a particular measure or project vs the baseline consumption without that measure in place – and net savings, is essentially gross savings minus “free riders,”- or customers who would have installed the measure without participation in a utility program, per the EPA Guidebook for Energy Efficiency Evaluation, Measurement, and Verification.
In simpler terms, gross savings are calculated as the energy savings attributable to a particular measure—for instance, by comparing the energy usage of a high-efficiency dishwasher to the energy usage of the ordinary dishwasher it replaced.
In Dominion’s Legal Memorandum on the matter, the company stated the difference was related to whether or not the savings were from a program or specific measure.
“Simply stated, gross savings are the savings from the energy efficiency measure (e.g., savings from a high efficiency light bulb or air conditioner upgrade) while net savings are the savings from the energy efficiency program (e.g., the Residential Home Energy Assessment Program or Non-residential Heating and Cooling Efficiency Program).” Not only is this not an industry-recognized definition, but it is also contradictory to the technical reference materials used in Dominion’s own 2023 EM&V report.
When considering whether to use gross or net savings to calculate progress towards the VCEA goals, the SCC will need to rely on correct definitions cited in industry standard manuals.
Last December, Dominion filed an application with the State Corporation Commission (SCC) for its proposed Phase XI DSM programs. This filing included three new energy efficiency programs, four new EE program “bundles,” one demand response program, and one EV telematics pilot program. The company requested a $149M budget cap with a 15% variance. In addition to the new programs, Dominion asked to permanently close its appliance recycling program and expand its agricultural program to residential customers who run small, family farms. The Company requested to close an additional seven other programs whose measures were being rolled into the proposed program bundles.
Our Executive Director, Chelsea Harnish, filed testimony on behalf of the Virginia Energy Efficiency Council (VAEEC) in support of the Phase XI programs with a few concerns and suggestions for improvement.
Here is a summary of other highlights from our testimony:
- Leveraging functionalities of AMI to enhance the effectiveness of DSM programs
- Expanding program offerings to dual-fuel customers (those with gas heat and electric AC)
- Quantifying whether funding from the Inflation Reduction Act could lower program costs
- Including Non-Energy Benefits (e.g., Social Cost of Carbon) in cost/benefit test scores
- Requiring BPI certification for the Residential Home Retrofit Program Bundle
On May 17, 2023, the case was heard before the Hearing Examiner assigned to oversee the case. The Examiner was very supportive of the stakeholder process and stated several times that parties were “on notice” to vet new program ideas and areas of concern through the stakeholder process. This is the first time that a Hearing Examiner has put such an emphasis on the value of the stakeholder process. We hope the Commission’s Final Order reflects this same sentiment.
Meeting the Goals of the Virginia Clean Economy Act
As part of the application, company witnesses shared the progress towards meeting the Energy Efficiency Resource Standard (EERS) goals of the Virginia Clean Economy Act (VCEA). According to Dominion, the Commission has not made it clear whether they should calculate Gross savings (all savings achieved in a given year) or Net savings (all savings achieved in a given year minus free riders), so they provided calculated savings for both. As seen in the table below, provided by company witness Nate Frost, the company has met the 2022 goal either way but is only able to achieve the 2023 goal with gross savings calculations. For the 2024 and 2025 goals, the company is projected to not meet either goal under either scenario.
| Year |
VCEA Target % |
MWh savings |
Projected/ Actual Gross Savings |
Projected/ Actual Net Savings |
| 2022 |
1.25% |
852,892 MWh |
1.9% |
1.4% |
| 2023 |
2.5% |
1,705,783 MWh |
2.6% |
2.1% |
| 2024 |
3.75% |
2,558,675 MWh |
3.1% |
2.4% |
| 2025 |
5% |
3,411,567 MWh |
3.6% |
2.9% |
In pre-filed testimony, SCC staff witness Andrew Boehnlein noted that Dominion will have a projected shortfall of 1180 GWh in meeting the 2025 energy-savings goal. Mr. Boehnlein also calculated that the proposed Phase XI programs would only cover 5% of the shortfall in 2024 and 7% in 2025. Given that there are no further opportunities for new programs in 2024, the company must prioritize implementing recommendations from its long-term plan filed as part of last year’s filing (Phase X) to bridge the gap in 2024.
Company witnesses identified several market barriers they believe are impeding the company’s success in meeting its goals. These challenges include declining potential and updated building codes. The VAEEC questioned the extent to which these were barriers during the proceeding. For instance, current building codes should only be used as the baseline for determining the savings potential for new construction programs since it is unlikely that homes constructed prior to the last 3-5 years would meet more stringent energy codes. In interrogatories, company witnesses confirmed they only use current building codes for new construction programs. Since the company only has one residential new construction program, current energy-efficient building codes are unlikely to severely affect the company’s ability to meet its EERS goals.
All utilities experience declining potential, the continual reduction of savings opportunities out in the market, especially for lighting products as federal regulations have required more efficient product manufacturing. However, declining potential is not the same for every utility. Utilities that have been implementing programs over several decades find that declining potential can severely affect new program opportunities. However, for Dominion, who only began offering energy efficiency programs in 2009, and has low participation numbers in most of their programs, there is still a lot of potential energy savings to be captured.
As mentioned, Dominion’s participation numbers are low. SCC staff witness Mr. Boehnlein summarized data from the Company’s 2022 EM&V report. In 2021, the average residential program achieved approximately 45% of expected participation and 57% of estimated energy savings. For the non-residential programs, the average was 43% of expected participation and 32% of estimated 2021 savings. Staff surmised that based on previous program performance, the Company’s projected participation rates for the proposed Phase XI programs are higher than any program that has been implemented to date. In other words, the proposed programs will cover less than 5% of the estimated shortfall in 2024 and 7% in 2025.
Mr. Boehnlein also noted that the 2022 EM&V report stated portfolio bill savings for customers were approximately $26.6M while program costs were more than double at about $59.8M with 43% of those costs being administrative in nature.
Hearing Examiner’s Report and Recommendations
On June 16, 2023, the Examiner issued his recommendations to the Commission, which included approval of all programs, with the $149M budget cap and 15% variance, with no program expiration date. While the budget variance request and not having a predetermined closure date are standard in other states, in Virginia, these requests were typically denied by the SCC up until last year.
The Hearing Examiner was thorough in his review of the case and analyzed all of the remaining issues one by one. In most instances, the Examiner validated suggestions and concerns brought up by the VAEEC and recommended the SCC direct the company to address each one via the stakeholder group and require the company to report on these issues in their next DSM filing. These issues include:
- Cost-effectiveness testing: VAEEC recommended analyzing non-energy benefits, such as the societal cost of carbon and health benefits
- Allowing dual-fuel customers to participate in most programs: VAEEC recommended allowing customers who use gas furnaces to heat their homes and electric AC to keep their homes cool should be allowed to participate in most, if not all, programs. The Examiner not only recommended this become a stakeholder discussion but also noted that if the company is projected to miss their 2024 and 2025 VCEA goals, then expanding customer eligibility could have an “immediate and measurable impact on achieving those savings targets….”
- Accelerating program consolidation: In last year’s filing, VAEEC expressed concern with the Company’s plan to not begin bundling programs until existing contracts with implementation vendors end (i.e. 2025 at the earliest). The company took this feedback and offered four new bundled programs in this year’s filing. Other respondents expressed the need to continue bundling programs into the seven overarching programs laid out in the long-term plan, which the company agreed to discuss where practical. The Hearing Examiner agreed that acceleration was critical in order to pursue, “immediate and measurable impact on achieving those savings targets….” in 2024 and 2025.
- Exploring and incorporating full AMI functionality into DSM programs: VAEEC recommended the company leverage AMI functionality in DSM programs. The company is committed to exploring these functionalities via its grid modernization applications. The Examiner noted what little time is left to increase participation levels and savings in the company’s DSM programs to achieve their 2024 and 2025 goals, stating, “I believe the Company does not have the time to sit back and address the issue as part of its grid transformation program, and for that reason, I am recommending that the issue be referred to the Stakeholder Group for consideration and analysis over the upcoming year.” The Examiner also went on to recommend a pilot program to deploy in areas with high concentrations of AMI deployment.
Additionally, the Hearing Examiner made recommendations on the following key issues as well:
- BPI certification- The Hearing Examiner provided an alternative recommendation to what the VAEEC, the environmental respondents, and public witnesses recommended. He recommends that BPI certification should not be required for HVAC measures, but appears to require this certification for contractors performing ductwork in addition to continuing to require BPI certification for thermal envelope measures. In terms of the VA Residential Energy Building Analyst License, the examiner stated that the statute is clear that this license is required for any type of residential energy assessment and suggested the company consult with the VA Department of Professional and Occupational Regulation in regards to whether such license would be required for contractors performing assessments as part of the Residential Home Retrofit Bundle.
- Implementation plan- the environmental respondent witness, Jim Grevatt, recommended the Commission require Dominion to demonstrate how it could meet its EERS goals by filing an implementation plan within 90 days of the release of the Commission’s Final Order. The Hearing Examiner largely agreed with Mr. Grevatt but provided an alternative recommendation suggesting the Commission require Dominion to prepare a Project Management Plan and Risk Management Strategy consistent with the Commission’s Final Order in the 2020 DSM Case detailing completed tasks, tasks to be completed within the next twelve months, and tasks that remain to be completed in order to fully implement the LTP.
- Net vs. Gross calculated savings- Environmental Respondents and Dominion argued over how the EERS goals in the VCEA should be calculated- as either “gross” or “net” savings. In Mr. Grevatt’s testimony, on behalf of the environmental respondents, he argued that the Commission provided direction on this in the Final Order last year stating that, “specific savings that can be reasonably identified, and that were not achieved as a result of Dominion’s programs and measures,” should not be counted towards the EERS goals (i.e. the savings should be calculated as “net”). Dominion disagreed, arguing that the ruling was not clear and that the analysis of “gross” and “net” savings is complex and should be deferred until the first EERS compliance case next year. While the Hearing Examiner agreed with environmental respondents that the Commission explicitly state that the EERS savings should be calculated as “net” savings, he also agreed with the Company that in light of the complexity of the issue, the decision should be deferred until next year, “in a case where the issues are fully developed in an evidentiary record.”
In summary, the Hearing Examiner’s report details a lot of issues and opportunities for Dominion to meet its EERS goals in 2024 and 2025. The VAEEC and our members have worked diligently to provide feedback and support through the stakeholder process and the DSM proceeding and applaud the Examiner for recognizing the importance of stakeholder engagement.
We anticipate the Commission’s Final Order sometime in August. We hope to see most of these recommendations included and we will be ready to get to work.
