CACI announces PSI DSM Settlement

[Lisa Marina Brooks <lbrooks@essential.org>]

  ******* CRITICAL MASS ENERGY PROJECT *******
  
        Believe it or not, good DSM news once again from Indiana!
  
  
        On November 27,  PSI Energy, Indiana's largest electric utility,
  entered into a settlement agreement with all parties in its pending DSM
  docket regarding the conduct and funding of its DSM programs for the
  period January 1, 1997 through December 31, 1999.  Other parties to the
  settlement included the Citizens Action Coalition of Indiana ("CACI"), the
  Indiana Office of Utility Consumer Counselor ("OUCC"), and the PSI 
  Industrial Group ("PSI-IG").  CACI was advised throughout the negotiations
  by Jimmy Seidita from the Environmental Law and Policy Center ("ELPC") and
  Neil Elliott  from the American Council for an Energy Efficient Economy
  ("ACEEE").
  
        The new agreement is expressly designed to accommodate the
  transition to a competitive marketplace for electric generation and
  end-use efficiciency services, while recognizing that market barriers for
  efficiency services are likely to persist in certain market segments.  The
  PSI settlement also forms the basis for CACI and ELPC to renegotiate and
  extend through 1999 the precedent-setting Energy Efficiency Agreement
  reached in 1993 with CINergy, PSI's parent holding company.
  
       In particular, the PSI settlement calls for ratepayer-financed DSM
  programs for large commercial and industrial customers (with loads over
  500 MW) to be replaced by market-based programs delivered exclusively by
  competitive energy service companies ("ESCOs"), including PSI's newly
  formed affiliate, CINergy Solutions.  For the large C&I market segment,
  PSI retains responsibility only for monitoring, measuring and reporting
  energy efficiency investments made and savings achieved by its customers
  as part of its Integrated Resource Planning ("IRP") process.  By contrast,
  PSI will continue to provide ratepayer-financed incentives for the
  installation of cost-effective efficicency measures by residential and
  small commercial and industrial customers (with loads below 500 MW).  For
  the residential and small C&I market segments, PSI will depend on ESCOs
  and other suppliers to deliver efficiency services to customers while
  providing quality control, market transformation and customer awareness
  support on a centralized basis.
  
   So long as Indiana's Certificate of Need statute and IRP rules remain in
  effect, PSI will continue to be responsible for performing IRP for its
  service territory and assuring that new supply-side resources are added to
  its system only when they are the least-cost alternative.
  
       The new agreement calls for annual DSM expenditures by PSI of $43.6
  million (4.0% of annual revenues), with new spending on incentives and
  support services for residential and small C&I customers of $7.7 million
  annually.   This level of funding will maintain low-income residential
  participation in DSM at current levels, while actually allowing an
  increase in participation of as much as 20% by other residential and small
  C&I customers..  The new agreement also allows great flexibility in the use
  of incentives by ESCOs, including the "buydown" of  both the first costs
  for individual efficiency measures and/or the financing costs of complete
  efficiency packages.   To assure high-quality efficiency services in all
  market segments, PSI will certify and train DSM vendors and conduct audits
  of a representative sample of DSM installations.  To assure continuing
  customer awareness of end-use effficiency, PSI will continue to advertise
  and promote DSM within its service territory.  To reduce ratepayer costs
  and recognize the implications of the transition to competition, PSI has
  agreed to forego both lost revenue recovery and special shareholder
  incentives for its new DSM investment.  However, PSI will be able to
  recover all of its DSM expenditures on a current basis through a  new DSM
  tracking mechanism which replaces the deferred accounting mechanism now in
  place.
  
       The negotiations which culminated in the new agreement were
  protracted and difficult.  At the outset of negotiations in May, 1995,
  both the OUCC  and PSI-IG simply sought to phase out PSI's DSM programs
  entirely by the end of 1996.  However, persistent prodding by CACI and
  effective education by ELPC and ACEEE gradually moved the other customer
  parties to the point where all three were able to make a joint proposal to
  PSI in January, 1996, which established the basic structure for the final
  settlement. Still, nearly a year was required to reach the final
  settlement because of continuing differences over such issues as how and
  where to "draw the line" between "large" and "small" C&I,  the
  relationship between PSI and ESCOs in program delivery, affiliated
  interest restrictions on CINergy's ESCO, the rate-making treatment of past
  DSM expenditures, and the specifics of a DSM "tracker."
  
       A "fast-track" approval process is slated for the PSI settlement,
  with an evidentiary hearing set for December 5 and an IURC approval order
  expected by year-end.
   
  Mike Mullett
  Citizens Action Coalition of Indiana
  317-636-5165
  
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