Historically, Vermont's electric utilities were required to deliver comprehensive energy efficiency programs to their customers. However, this system did not work as well as intended for two reasons. First, those utilities that are investor-owned had mixed incentives – their profits increased when they sold more electricity, yet they were expected to promote investments that would reduce their sales of electricity. Second, it was administratively inefficient for each of Vermont’s 22 electric utilities to provide their own energy efficiency programs. As a result, policymakers chose to establish a new structure to ensure more effective delivery of energy efficiency services to Vermont electric and gas customers.
History and Structure
In 1999, the Commission approved a settlement among all Vermont electric utilities, the Department, and other interested parties, that provided for the creation of a statewide energy efficiency utility ("EEU") that would deliver energy efficiency services to Vermonters throughout the state.
In its approval of a related agreement, the Commission established the City of Burlington Electric Department (BED) as an EEU serving BED customers.
Historically, the EEU program established a statewide energy efficiency provider (which has operated under the name Efficiency Vermont), a Contract Administrator, and a Fiscal Agent, all of whom were contractors to the Commission. Efficiency Vermont and BED delivered the energy efficiency services to customers. The Contract Administrator helped the Commission administer its contract with Efficiency Vermont by tracking Efficiency Vermont's compliance with the terms of the contract and by mediating any disputes that arose related to the EEU. The Fiscal Agent provided the accounting function of managing the Energy Efficiency Utility Fund.
This original settlement and related bilateral agreement set out the basic structure for the energy efficiency program that was in effect through 2010. The settlement also provided that the Department would be responsible for monitoring and evaluating Efficiency Vermont's service offerings. Collectively, these entities comprised the EEU program, while entities providing efficiency services, such as Efficiency Vermont and BED, are termed EEUs.
The 1999 settlement also provided for the creation of an Advisory Committee made up of electric utility, public interest, and other representatives appointed by the Commission. The Advisory Committee's purpose was to serve as a channel of communication between Efficiency Vermont and key stakeholder groups; it was not a Committee of Directors and had no authority over Efficiency Vermont.
In 2009, the Commission issued a November 24, 2009, Order changing the EEU program structure from a contract-based model to an Order of Appointment model. The Order of Appointment structure retains the essential functions of the previous EEU structure but changed the relationship of Efficiency Vermont with the Commission and other entities. Rather than being under a three-year contract with the Commission, Efficiency Vermont moved to a 12-year rolling Order of Appointment model that provides additional program stability.
Under this new model, the Commission no longer has a contractual relationship with Efficiency Vermont, and Efficiency Vermont has increased responsibilities as well as additional oversight responsibilities that are accomplished through more transparent proceedings and additional periodic, public reviews. To ensure continued superior performance from all EEUs, the Order of Appointment model includes the evaluation and review processes that have been conducted since the EEU program's inception, as well as periodic benchmarking reviews and overall performance assessments that will be conducted in proceedings open to the public.
The Commission has recently amended the Order of Appointment structure such that there is no longer a third-party Fiscal Agent that provide the accounting function of managing the Energy Efficiency Utility Fund. Now the three EEUs perform this function, with independent financial audits performed annually. The DPS continues to be responsible for monitoring and evaluating EEU service offerings. However, under this structure, there is no need for the Contract Administrator position or the EEU Advisory Committee, and these no longer exist.
The Commission issues Orders of Appointment to EEUs and may renew or terminate an Order of Appointment based on the results of an assessment of an EEU's performance. At a minimum, the Commission conducts a comprehensive review of an EEU's performance every six years.