1 TABLE OF CONTENTS

3.4 Demand

- side Energy Efficiency (EE)

................................ ................................ .................... 2 3.4.1 Energy efficiency opportunity

................................ ................................ ............................ 2 3.4.2 State goal setting

................................ ................................ ................................ .............. 235 3 .4.3 Impacts assessment

................................ ................................ ................................ .......... 373 3.4.4 Analysis considerations

................................ ................................ ................................ ... 418 3.4.5 CHP/cogeneration

................................ ................................ ................................ ............ 423 3.4.6 Other

................................ ................................ ................................ ................................ . 4252 3.4 DEMAND

- SIDE ENERGY EFFICIEN CY (EE)

This section discusses comments related to demand

- side energy efficiency (EE) , including opportunities for demand

- side EE

, annual incremental savings target rate

, demand

- side EE programs as they relate to CHP/cogeneration , and analytical concerns. We have organized the comments in this section under six subsections, 3.4.1 to 3. 4 .6. Responses to the comment topics of these subsections are discussed below along with summaries the specific public comments.

At proposal, we inc luded demand

- side EE in the BSER as building block 4. Consequently, many commenters referred to demand

- side EE as building block 4 in their comments on the proposed rule. Although we have decided to eliminate building block 4 from the BSER in the final rul e, we have retained the commenters original phrasing in the summaries included in this section.

3.4.1 Energy efficiency opportunity

This section includes comments that are both supportive and unsupportive for the inclusion for demand

- side EE as a part of BSER . While we are not including demand

- side EE as a component of the BSER, we are allowing demand

- side EE to be used for compliance.

Commenters have raised a number of issues related to the subsection which are organized by topics (comments) below. Respon ses are provided for these topics. A summary of comments in this section are listed below

• We support EE as a part of BSER

− You should include additional EE programs in the targets, including

- building codes, appliance standards, other innovative programs, etc.

− Need clarity the role between BSER and compliance in state plans

• We do not support EE as a part of BSER

− It’s not adequately demonstrated because a) it’s outside the fence line, b) affected EGUs don’t have control of customer’s voluntary actions, c) k ey state and local factors weren’t considered in goals

− However, we do support EE as a compliance option

• It’s too difficult to achieve the savings the EPA set in the targets for a variety of

reasons

− There are many barriers to implementing EE3 − Building codes and appliance standards reduce the ability to achieve future savings

− Best Practices methodology doesn’t take into account unique state circumstances

Comment 1: Support for DSM/EE and s upport for e xpanded EE

Response 1: Many commenters discuss the wide variety of EE programs available that they have implemented for many years, achieved significant energy savings and opportunity exists to achieve large amounts of energy savings in the future. However the EPA is excluding BB4 from BSER. See section s V.A an d V.B of the final rule preamble of the CPP for the EPA’s response to this comment. Even though DS

- EE is not used in calculating emission performance rates, the final rule gives states the flexibility to use DS

- EE to achieve their emissions performance rat es during compliance. See multiple subsections of section VIII of the final rule preamble of the CPP and the Demand

- side Energy Efficiency TSD for CPP Final Rule for details.

The following are summaries of the specific public comments under this comment:

Commenter s remarked that the reduced demand associated with energy efficiency measures contributes to grid reliability, primarily in terms of supply adequacy. C ommenter s explained that energy efficiency measures can reduce the base load, the amount of e nergy required to be supplied, and the peak power demand. C ommenter s added that energy efficiency can also contribute to reliability at the level of local transmission and distribution (T&D) networks by decreasing the likelihood of failures at those points in the system. C ommenter s pointed out that the benefits of using energy efficiency to defer investments in T&D to address load growth can be substantial. C ommenter s provided an example where Consolidated Edison reduced its projected T&D capital expenditur es after adjusting 10

- year load forecasts for each of its distribution networks to reflect the expected impacts of system

- wide efficiency programs. C ommenter s also described how Consolidated Edison employed geographically targeted efficiency programs to defer upgrades in more than one third of its distribution networks, with the resulting savings providing more than $300 million in net benefits to ratepayers.

C ommenter s stated "energy efficiency remains an under

- appreciated but very important trend in power markets that will lead to structural drags on power demand growth impacting the outlook for competitive power market recovery and where utility capex will need to be allocated." Commenter s stated "Credit Suisse notes that the slowing of demand growth places a great deal of pressure on the economics of utilities not only where it adds to the downward pressure on prices set in markets, but also in regulated s tates, where rate structures have relied on growing demand to ensure recovery of fixed costs ."

Commenter s provided information on ways to incentivize the use of insulation and cited utility programs including rebates for energy efficiency products and sponsorships of home energy audits, low income weatherization programs (HWAPs), and tax credits and deductions.4 Commenter s noted that energy efficiency can be an effective strategy for reducing GHG emissions, stating that every MWh of avoided electric generation may offset a certain amount of carbon

- emitting generation. The Agency accounts for energy efficiency in the proposed rule by factoring it into the denominator, which according to commenter s , means that every incremental MWh of qualifying energy efficiency will enable states to generate additional CO2 emissions equal to their target rate

.
Even if building block 4 is removed from the Agency's BSER determination, however,
commenter s believe d that EPA should accurately estimate and factor increases in energy efficiency into this rule. To do so, commenter s encouraged EPA to closely examine the impact this rule will likely have on deployment of energy efficiency even when those measures are not explicitly part of the Agency's BSER determination.

Acc ording to commenter s , EPA relies on an Energy Information Administration (EIA) demand forecast from its Annual Energy Outlook (AEO) to project the impact of carbon emission rate reductions in the source category. Commenter s noted that by EPA's public estimates, the AEO accounts for some but not all energy efficiency and demand reduction measures already projected to occur regardless of this rule. Commenter s noted that on its website the Agency provides a modified state

- by

- st ate energy efficiency analysis against the AEO so that states can use those numbers to structure their implementation plans under the Clean Air Act.

Commenter s do not disagree that more energy efficiency is possible than in EIA's base case estimate, but ex pect states and power producers to undertake additional energy efficiency measures as a result of this rule. Commenter s also believe d this rule may catalyze changes in technology development and deployment, and in consumer behavior.

Commenter s also noted t hat states and power producers will remain capable of implementing energy efficiency measures to comply with this rule, regardless of EPA's inclusion of energy efficiency in BSER. Such state measures need only be enforceable, measurable, and verifiable. As a result, even without building block 4, commenter s said states would retain the same flexibility that they would have had under the proposed four

- building

- block BSER analysis.

According to commenter s , it is unclear to what degree EIA estimates include th e impact of increasingly strict federal energy efficiency standards for appliances, electric motors, and so on. And, according to commenter s , EIA estimates may not include the impact of structural energy efficiencies like building standards. Commenter s bel ieve d EPA should make a complete accounting of all anticipated efficiency measures and produce the strongest possible projection of future demand. According to commenter s , others will undoubtedly comment constructively on this point, and put forth estimate s that the Agency could rely on when it constructs its projection.

Ultimately, according to commenter s , EPA can use its fully fleshed

- out projection to account for energy efficiency in other parts of the rulemaking package. Commenter s noted that the Agency may factor energy efficiency into its base case demand projections, or as part of calculating the effect of this rule in the accompanying impact analysis. Regardless of what method EPA uses to account for energy efficiency, commenter s believe d based on ou r analysis that removing this Building Block will have little impact on projected and actual CO2 emission reductions.5 Commenter s stated demand

- side EE is an available and cost

- effective mechanism for reducing emissions of CO2 and other harmful pollutant s from the power sector

- and it is a resource that we cannot afford to overlook

.
Commenter s stated EE works because it avoids the need for new generation; it is also the least expensive option.

Commenter s stated that EE is the lowest cost compliance option for West Virginia and a relatively untapped resource in West Virginia; c ommenter s stated there is no EERS in West Virginia, and the state was ranked No. 46 by the ACEEE Scorecard in 2013. Commenter s sta ted that while West Virginians currently enjoy relatively low electricity rates, West Virginia residents and businesses do not enjoy low electric bills because of inadequate access to EE programs and resources. Commenter s stated tapping into West Virginia 's vast EE potential will be central to West Virginia's ability to meet the proposed emission reduction targets.

Commenter s strongly agreed with EPA that the end

- use energy

- efficiency enhancements can substantially reduce electricity usage and the emiss ions generated to provide that electricity. Commenter s stated that regardless of the amount of greenhouse gas emissions to be reduced by EPA Section 111(d), energy enhancements can be a way to achieve immediate and cost effective emissions reductions in t he utility sector. Because 40 percent of all energy is used in heating and cooling homes and buildings, c ommenter s stated there are many opportunities for energy savings and the corresponding emissions reductions. Energy efficiency also supports growth. Commenter s stated the ACEEE recently completed a study of the EE savings that can be achieved in each state, the cost and the benefits of such investments and the policies and the impact of these efficiency investments on employment and grow state product . Commenter s stated that reducing emissions in the utilities sector has several important co

- benefits, including improvements to grid reliability and public health. Commenter s worked with others in our industry to update a 2003 Harvard Study that quantifi ed the public health improvements from retrofitting all under

- insulated homes in the U.S. to current model energy codes. Commenter s stated the researchers will be investigating both the mortality and morbidity improvements that accompany utility emissions reductions, the results of the update will be available in time to include in our formal comments, written comments to EPA.

Commenter s stated they are focused on responsibly transitioning to cleaner, more diverse generation sources while keeping energy affordable; their Transition Plan was developed in conjunction with existing Missouri Integrated Resource Planning, and one of the key el ements include continuing to offer valuable EE programs that encourage customers to consume less
energy.

Commenter s recommended EPA allow states to credit energy savings from demand response measures, enforcement of building codes, federal and state ap pliance standards, and market transformation in a state compliance plan through robust evaluation, measurement, and verification protocols.

Commenters strongly supported the implementation of Building Block 4, such as reducing EGU energy by the use of d emand

- side EE that reduces the amount of generation required (e.g., reduce demand for electricity through building codes, state appliance standards).6 As an inexpensive source of CO2 emission reduction that also saves money for electricity customers, c omme nter s stated that end

- use EE can and should play a critical role in helping the United States meet its emission reduction objectives. Commenter s stated that through the U.S. DOE's Better Buildings, Better Plants Program, 143 manufacturing companies hav e used EE improvements in their facilities to reduce CO2 emissions by 18.5 million metric tons while saving $1.7 billion in energy costs.

Commenter s stated that avoiding new energy generation costs through EE measures remains the cheapest option for a d iverse portfolio in the electricity sector. Many states, but not all, have long

- time EE programs. Commenter s cited 2 recently published studies, one by the ACEEE and the other by LBNL that found savings even in states with long

- term EE programs where many of the easy to achieve savings have already occurred. Commenter s stated both of the studies utilize a LCSE measure, this means the calculation of the cost per kilowatt hour of an efficiency measure when the upfront costs are spread over the lifetime of the investment. Commenter s stated for the ACEEE study, analysis was done on 20 states electricity costs and natural gas data from 10 states, while the LBNL study collected data from 31 states.

Commenter s stated over the 31 states in the LBNL study, the aver age COSE was about 2 cents per kilowatt hour and in comparison, the ACEEE study estimated savings of 2.8 cents. Commenter s stated there can be variation in states savings, but California with long

- term EE program and planning saved 4.5 cents per kilowatt h our in the ACEEE study. Commenter s indicated the states that set aggressive goals for its electric utilities to achieve EE savings may longer term find it harder to achieve savings goals, but the study analysis shows that new energy generation is still two and three times more than efficiency measures.

Commenter s stated evidence indicates that the adoption of financial mechanisms that encourage electric utility investment in EE, similar to those underway in several states, can facilitate the achievement of incremental EE.

Commenter s supported consideration of EE programs both as a basis for setting the stringency of the power plant emission guidelines and as a compliance tool. Commenter s stated EE programs complement other power sector carbon

- reduction strategies, bringing compliance costs down and supporting grid reliability by reducing demand.

Commenter s welcomed the inclusion of EE as an element of the EPA's determined BSER. Between the reinvestment of RGGI auction proceeds and the driving force of our states' existing aggressive EE policies, c ommenter s indicated their states developed an early lead in realizing the benefits of EE as a resource and tool, are frontrunners in the implementation and adoption of EE programs, and eight of the RGGI sta tes report incremental electricity savings and/or cumulative energy savings as a percentage of 2012 retail sales well above the national average.

Commenter s stated the proposed Clean Power Plan charts a bold course for the U.S. electric sector. By including EE as one of the four suggested building blocks for state compliance plans,

c ommenter s stated the U.S. EPA has opted to tap one of the energy sector's most potent and cost

effective resources. Commenter s stated EE has become a cornerstone of the energy mix, and is increasingly being viewed as the fuel of choice around the world. Commenter s stated tapping7 into this resource helps ensure that CO2 abatement tar gets can be met cost

- effectively and in a timeframe that has a meaningful impact on the urgent need to reduce global emissions.

Commenter s believed that states must have flexibility to include demand side EE programs into their state action plans. Comme nter s stated programs designed to help homes and businesses use electricity more efficiently, or use less electricity, should be part of this plan. Commenter s developed its QA Residential Service &Installation (RSI) program to recognize HVAC
contractors an d systems that comply with industry developed quality standards for design and installation, as verified by an objective third party. By relying on contractors vetted for their knowledge, skills, and business practices, c ommenter s stated consumers and util ities are assured of realized reductions in energy use.

Commenter s commended the rule for its flexible design that will enable states and market actors to utilize the most cost

- effective options to reduce power sector GHG emissions, including efforts to increase demand

- side EE. Commenter s stated demand

- side EE can be deployed in a variety of ways, through utility programs, direct investment by companies, state led programs, and third

- party EE projects delivered by private

- sector energy service companies (ESCOs).

Commenter s stated Building Block 4 focuses on EE as a means of meeting electricity demand and reducing emissions from CPP affected sources. Commenter s stated Connecticut has significant experience in administering EE programs to the benefit of rate payers and the environment. Commenter s fully supported the inclusion of EE in the BSER for reducing CO2 emissions from existing power plants. Commenter s pro vided additional information on its leadership in EE over the past decade and Green Bank initiative (See Appendix B of the comment letter). Commenter s noted that Connecticut's wealth of experience implementing EE programs demonstrates that other states, e specially those that have not yet seized the opportunity to invest in such programs, possess largely untapped and substantial potential to achieve energy savings through EE measures. Commenter s reiterated the comments of the RGGI states with respect to pro moting and strengthening the use of EE in the context of the CPP.

Commenter s noted that there are multiple other benefits of EE improvements not mentioned by EPA in the proposed rules including higher productivity in the workplace, job creation and

econ omic development, reduced water consumption, and risk reduction. Commenter s stated for example, under the proposed Clean Power Plan, water consumption by the Texas power sector could be cut by more than 20 percent compared with water consumed in 2012, and this is about 66,000 acre

- feet per year. Commenter s stated the EPA should provide flexibility to states to use their state planning processes to include non

- energy benefits that they would like counted toward a state's emissions reduction target. Commente r s stated for example, some states utilize adders to establish a conservative estimate of the value of non

- energy benefits. Colorado, Iowa, Oregon, and Washington utilize a 10 percent adder for EE programs. Commenter s stated Vermont uses a 15 percent adder and allows for this number to be revised upwards should additional data justify doing so. Commenter s stated other states use exact quantification, through means such as reduced water consumption. Commenter s stated as mentioned, these are conservative esti mates, but the point is that there are multiple approaches, whether adders or exact quantification, to estimate the non

- energy benefits of EE; the EPA should do more than assigning a value of zero to these benefits. Commenter s stated significant research h as been conducted into the application of various cost

- benefit tests and the inclusion of non

- energy benefits. Commenter s stated8 accounting for non

- energy benefits in cost

- effectiveness will unlock significant EE potential across the country, affording sta tes increased flexibility to meet their Clean Power Plan targets in the least

- cost manner. Commenter s stated having the EPA recognize the non

- energy benefits of EE also provides states with greater certainty as to the types of measures and programs that wi ll be acceptable to include in their state implementation plan.

Commenter s stated they are already employing demand

- side management and offer direct load control and EE programs. Commenter s stated they offer a "whole home load management" program, and with 2,200 consumers enrolled, this program provides significant load reductions. Commenter s stated program participants agree to let the cooperative shut off power to their entire home during load management events over the summer months; in return, participating consumers receive a lower rate year round. Commenter s stated the program appears to be very popular and has a waiting list to join. Commenter s offered a Power Shift program that includ es direct load control of: 13,446 water heater switches; 4,694 ale switches; 546 field irrigators; 2202 EM switches; and 16 pool pump switches. Commenter s stated in total, there are 21,000 consumers providing 40.6 MW of peak load reduction across Wabash Va lley's member co

- ops in Indiana, Illinois and Missouri.

Commenter s stated in addition, they have offered EE programs since 2008 when we launched a high performance new residential construction program. In 2010, c ommenter s added commercial and industrial (C &I) programs and residential HVAC, refrigerator/freezer recycling and ENERGY STAR clothes washer to the portfolio, and in 2012, after engaging a program design consultant, they revised their EE portfolio to focus on the most cost

- effective measures from a wholesale power supply perspective. Commenter s stated the current WVPA EE portfolio includes a wide variety of prescriptive offerings for both residential and commercial/industrial members. Commenter s offered a custom incentive program for those C&I accoun ts whose project does not fit into the prescriptive programs if they can still demonstrate cost

- effective kWh and kW savings. Commenter s stated most recently in 2013, an EM&V of our programs revealed that these programs were cost effective with a TRC (tot al resource cost) of 1.7, up from 1.4 in 2012. Commenter s stated their gross annual energy savings were 22,706 MWh, which calculates to 0.0029 percent of WVPA's MWh sales in 2013. Commenter s stated the first year cost of those programs is $.13/kWh, which is in line with nearby utilities and lower than our projection from 2012. Commenter s stated if they equally allocate the 2013 EE program costs across our 350,000 meters, that works out to $8.43 per year per meter.

In 2020, c ommenter s stated their MWh sal es are projected to be 8,720,485 MWh. Commenter s stated using EE to achieve 1.2 percent savings of total sales would give them a target of over 104,600 MWh. If they maintain a cost of $0.13/kWh, Commenter s would need to spend over $13 million to achieve t he annual targeted savings of 104,600 MWh. Commenter s stated if they raise the amount we have to spend on EE programs by 463 percent, then the cost is projected to rise to $38.87/meter per year. Commenter s stated that this cost is taxing for our members. A dditionally,

c ommenter s encouraged USEPA to grant credit for our existing programs in the finalized guidelines.

Commenter s stated there are several active and passive approaches to demand reduction and peak shaving at various stages of development or i mplementation today.9 Commenter s stated EE and demand

- side management (EE/DSM) measures effectively reduce electricity consumption by promoting products or programs that support efficiency or conservation of electricity.

Commenter s noted that New York City recently launched One City: Built to Last, a groundbreaking plan that establishes new and expanded programs to reduce GHG emissions within New York City. Commenter s indicated that components of this plan include: installing 100 megawatts of onsite renewable power sources and investing in other significant energy saving measures at City

- owned facilities; improving operations at City

- owned facilities with robust preventative maintenance programs; providing greater access to GHG reduction program infor mation, research, and financing to communities and building owners; implementing cutting

edge performance standards in the City's energy and building codes for new construction and enhancing code enforcement throughout the City; and developing interim ener gy performance targets for existing buildings to be met with voluntary practices and regulatory requirements.

Commenter s noted that they and their Members are jointly committed to the active promotion of
cost

- effective conservation and EE by Member cons umers. As reflected in a March 2014 filing to the FPSC, c ommenter s stated their Members have implemented a range of EE and energy conservation programs that have reduced Seminole's total demand for electric energy and capacity. However, c ommenter s stated E PA's assumption that Florida, and Seminole, can increase its EE measures to 1.5 percent per year, and achieve this increase year after year, is erroneous, arbitrary and capricious.

Commenter s stated they provide firm wholesale electric service under a sing le wholesale rate structure. Commenter s stated they also provide non

- firm service options to its Members under interruptible rate schedules. Commenter s stated the rate signals contained in Seminole's rate schedules provide a cost

- basis for our Members to gauge the cost effectiveness of demand

- side management and EE programs. Commenter s stated their Members assess the viability of these programs in their respective service areas and Seminole's load forecast of power supply needs reflects the effect of its Members' demand

- side management and EE programs.

Commenter s stated Seminole promotes demand

- side management through two programs made available to our ni ne Member systems. Under the Coordinated Load Management Program, Commenter s stated their members may install and operate direct control load management systems for the purpose of reducing coincident peak demand. Commenter s stated the resulting reductions in Seminole's coincident peak demand lowers Seminole's requirements for system generating capacity (and associated reserves) and provides demand cost reductions to the participating Member systems. Under the Load Management Generator Program, c ommenter s

s tated their member systems may install (or partner with their retail customers to install) distributed peaking generation. Commenter s stated these generators serve a dual need: (1) to enhance reliability by providing back

- up generation during transmission and/or distribution system outages, and (2) to offset and avoid a portion of Seminole's system generation requirements.

Commenter s stated their members have implemented a range of EE and energy conservation programs that have reduced Seminole's total requ irements for electric energy and capacity. Commenter s stated these reductions have not been specifically quantified or estimated but are10 included in Seminole's load history. As such, c ommenter s stated their load forecast effectively extrapolates the growt h of past programs into the future.

Commenter s stated they work jointly with its Members to ensure that cost effective demand

- side management and energy conservation/efficiency alternatives are considered as an alternative resource. Similarly, c ommenter s stated that Seminole and its Members are expanding Member staff training, consumer education, EE, and conservation programs to mitigate growth in kWh usage per consumer. Commenter s stated the focus of Seminole's joint program with its Members is to facilit ate information sharing, evaluate demand

- side management/conservation programs, and expand consumer education programs and information related to EE and energy conservation.

Commenter s stated that including EE prominently in the Plan requirements will e nable states and utilities to meet the emissions reduction goals at least cost and potentially with net economic benefits for households, businesses and the economy as a whole. Commenter s stated in addition to economic and public health benefits, resident ial EE efforts can increase occupant comfort, improve health and safety factors, increase property values, and provide some financial relief to low and middle income households. Commenter s stated commercial and industrial programs can increase worker comfo rt and productivity, reduce waste in production processes, and lower environmental compliance costs. Commenter s stated all of these efforts also conserve our water resources, something that is always a concern in the more arid regions of the country.

Comme nter s stated improving the efficiency with which we use energy already being produced, is, in our judgment, the strategy by which the greatest gains can be achieved with the smallest expenditure of funds. Commenter s stated the state

- by

- state targets fo r improved energy conservation are very modest. According to 2012 data from the Lawrence Livermore Laboratory and the Department of Energy, c ommenter s stated approximately 61 percent of all energy produced in the US is wasted. Commenter s stated residentia l energy use was reported as 10.6 quads, including 4.69 from electricity. Commenter s stated residences wasted approximately 35 percent of the energy delivered. Commenter s stated commercial energy use was 8.29 quads, of which 4.52 came from electricity. Commenter s stated the commercial sector also wasted 35 percent of its energy. Commenter s stated finally, industry consumed 23.9 quads of energy of which 3.35 came from electricity. Industry wasted 20 percent of its energy. Commenter s noted that a recent r eport from a panel of NAS estimates that cost

- effective energy use reductions in buildings of 10 percent by 2020 and 14.7 percent by 2030 are achievable. Commenter s stated the Panel further reported that a 7.7 percent reduction by the industrial sector was possible. Commenter s stated clearly there are opportunities for enormous gains in efficiency. As the Agency works with the states to develop their individual plans to reach established goals, Commenter s strongly encouraged the use of this modality as the prime building block given its lowest cost strategy.

Commenter s stated EE is an embedded and crucial component of a 21 st century electricity system. Commenter s stated EE is a widely used and recogni zed source of reliable and cost

effective emission reductions. Commenter s stated these emission reductions come from a broad variety of EE technologies and services such as utility and state efficiency programs, private

sector

- delivered ESCO services, comb ined heat and power (CHP), and demand response.11 Commenter s offered the following examples as a sampling of the ways in which companies and markets have come to rely on EE: (1) in the ISO

- NE region, EE is being officially forecast and incorporated into the Regional System Plan, with regularly released reports from ISO

- NE that specifically note how much efficiency clears each auction; (2) EE plays a key role in forward capacity markets, with over 1,300 MW of efficiency (not including demand response) clearin g the PJM market in 2014 for resources available to PJM in 2017

- 2018 that go above and beyond efficiency standards, over 99 percent of EE bids cleared the forward capacity market, and additional efficiency will increase the reliability of the system by red ucing strain during periods of peak demand; (3) Energy Performance Contracts provide customers guaranteed savings, as ESCOs are compensated based on the outcome of the efficiency projects installed, and the ESCO market is a significant player in the energy industry, at $4.8 billion in 2012; (4) as of 2013, cloud computing and large data centers accounted for up to 3 percent of U.S. electricity usage, EE consulting and technology services help to reduce energy needs and keep those data centers running reliab ly, and both Google and Microsoft have pursued "chiller

- less" data centers and utilize evaporative cooling systems that use significantly less energy than chillers alone and increase the reliability and longevity of the data centers; (5) EE programs have b ecome such an integral part of investor

- owned utilities' portfolios that many investor owned utilities (IOUs) report on efficiency activities to shareholders, for example, PPL, which includes Kentucky Utilities and Louisville Gas and Electric, includes its efficiency programs in its yearly stakeholder report; (6) during the 2014 polar vortex, PJM hit new winter peaks and had to issue three demand response dispatches over two days to manage the load, and during that same period, ERCOT faced similar peak prob lems and dispatched its demand response program as well as its emergency response program.

Commenter s stated energy efficiency can be an effective strategy for reducing GHG emissions. Commenter s stated every MWh of avoided electric generation may offset a certain amount of carbon

- emitting generation. Commenter s stated the Agency accounts for energy efficiency in the proposed rule by factoring it into the denominator, meaning every incremental MWh of qualifying energy efficiency will enable states to gene rate additional CO2 emissions equal to their target rate. Even if building block 4 is removed from the Agency's BSER determination, however, c ommenter s believed EPA should accurately estimate and factor increases in energy efficiency into this rule. To do so, c ommenter s encouraged EPA to closely examine the impact this rule will likely have on deployment of energy efficiency even when those measures are not explicitly part of the Agency's BSER determination.

Commenter s stated in the proposed rule, EPA relies on an EIA demand forecast from its Annual Energy Outlook (AEO) to project the impact of carbon emission rate reductions in the source category. Commenter s stated by EPA's public estimates, the AEO accounts for some but not all energy efficiency and demand reduction measures already projected to occur regardless of this rule. Commenter s stated in fact, on its website the Agency provides a modified state

- by

- state energy efficiency analysis against the AEO so that state s can use those numbers to structure their implementation plans under the Clean Air Act. Commenter s did not disagree that more energy efficiency is possible than in EIA's base case estimate. Commenter s expected states and power producers to undertake addi tional energy efficiency measures as a result of this rule. Commenter s believed this rule may catalyze changes in technology development and deployment, and in consumer behavior. Commenter s noted that states and power producers will remain capable of impl ementing energy efficiency measures to comply with this rule, regardless12 of EPA's inclusion of energy efficiency in BSER. Commenter s stated such state measures need only be enforceable, measurable, and verifiable. Commente rs stated as a result, even withou t building block 4, states would retain the same flexibility that they would have had under the proposed four

- building

- block BSER analysis. Commenter s stated it is unclear to what degree EIA estimates include the impact of increasingly strict federal ener gy efficiency standards for appliances, electric motors, and so on. Commenter s stated EIA estimates may not include the impact of structural energy efficiencies like building standards. Commenter s believed EPA should make a complete accounting of all antic ipated efficiency measures and produce the strongest possible projection of future demand. Commenter s stated others will undoubtedly comment constructively on this point, and put forth estimates that the Agency could rely on when it constructs its projecti on. Commenter s stated ultimately, EPA can use its fully fleshed

out projection to account for energy efficiency in other parts of the rulemaking package. Commenter s stated the Agency may factor energy efficiency into its base case demand projections, or a s part of calculating the effect of this rule in the accompanying impact analysis. Regardless of what method EPA uses to account for energy efficiency, c ommenter s believed based on their analysis that removing this Building Block will have little impact on projected and actual CO2 emission reductions.

Commenter s stated that energy efficiency is the most effective method for reducing CO2 emissions. The commenter s remarked that the least impactful and most effective way to reduce carbon pollution from elec tricity generation is to reduce demand by making homes, businesses, factories and workplaces, public accommodations, appliances and other goods as energy efficient as possible. The commente rs explained that such investments save consumers and businesses

mo ney and generate local jobs through retrofitting, weatherization and other measures that need to be taken to make homes and businesses energy efficient. Commenter s added that energy efficiency reductions are an all

- around win for wildlife by reducing other harmful emissions and the impacts to wildlife from energy development siting, operation, extraction and transport.

Commenter s stated EE is not only one of the fastest, cheapest, and safest way to reliably meet the state's growing electricity demand, bu t is a proven, low

- cost investment that will accrue tangible economic benefits for Texas ratepayers and businesses, while also helping the state meet its carbon pollution reduction goals under the CPP.

Commenter s stated more than half of the states have standards or goals for EE, many of which have shown that savings can be achieved faster and more cost

- effectively than EPA assumed, so that less power is used.

Commenter s stated they ha d concerns about the impac ts and precedent setting nature of the CPP proposal for industrial manufacturers and EPA's authority to promulgate these regulations, however, to the extent that EPA is authorized to move forward, BMS strongly recommends an emissions reduction strategy foc used on EE.

However, to the extent that EPA is authorized to move forward, commenter s strongly recommended an emissions reduction strategy focused on EE. Commenter s strongly supported and encouraged EPA's decision to highlight EE as a " building block " op tion to emissions reductions and compliance to the CPP proposal. Commenter s stated EE clearly plays an integral role in mitigating greenhouse gas emissions

- reducing energy demands directly results in less13 demand for fossil fuel consumption. Commenter s st ated as the EPA proposal outlines, there are a number of methods available to achieve carbon emissions reductions through EE. Commenter s stated in crafting the CPP proposal, the EPA has also correctly provided individual states tremendous flexibility in cr eating their State Implementation Plans (SIPs) to demonstrate compliance. Commenter s stated however, that it is absolutely vital that EPA understands that not all EE plans are created equal and some, such as building energy codes, can provide outstanding

e conomic and environmental value with technology and building practices readily available.

Commenter s stated the EPA properly considered the potential for reducing carbon emissions through demand

- side EE improvements as part of BSER. Commenter s stated th e potential for EE to reduce energy demand and avoid CO2 emissions, as well as methane emissions, is now well established. Commenter s stated for example, a 2010 report by the NAS found that a 25 to 30 percent energy savings for the building sector as a who le could be achieved over the next 20 to 25 years through EE measures at a cost of just 2.7 cents per kilowatt hour saved. Commenter s stated whole

- building retrofits and advanced building design could result in even more significant energy savings. Comment er s stated that like the other BSER building blocks proposed by EPA, improved EE would not only drive reductions in carbon pollution, but would also reduce emissions of dangerous co

- pollutants emitted from coal

- fired power plants. Commenter s stated similar ly, EE programs will have the corollary benefits of reducing utility bills and creating jobs.

Commenter s stated EPA should retain EE as one of the Building Blocks included as BSER. Commenter s stated numerous studies show that EE measures are one of the most cost

- effective ways to reduce emissions from the electricity

- producing sector. Commenter s stated those customers who participate in EE programs and measures enjoy lowered electricity bills. Commenter s stated as New Mexico has one of the highest pove rty rates in the country, especially in rural areas, cost to consumers (as well as industry) is an important consideration.

Commenter s stated it is not just human lives, but the very biosphere itself that is endangered by CO2 emissions. Commenter s state d climate change is a major factor influencing Earth's Sixth Great Extinction

- an impact of literal asteroid sized proportion

- including the global warming's evil twin, ocean acidification and " deader " dead zones. In the words of AEC Executive Director Michael Churchman: "I've had conversations with business owners that are trying to be as energy efficient as possible and grow the clean energy economy. Small businesses have shared that they can save homeowners an average of 26 percent on their energy bi lls monthly, and this makes their homes much more comfortable through EE. When people talk about electricity rates, we should remember that EE is the thing that can help all of us to lower bills and should be pursued heavily! I also talk to a lot of people that see that renewable energy, especially solar, is the future. However, the rates paid to distributed producers along with the tariff charged by utilities in Alabama are restrictive and do not incentivize this new technology that is growing across the r est of the Southeast. Alabama is behind many states including Georgia. The Clean Power Plan would spur innovation, accelerate the clean energy economy, and create good American jobs."

Commenter s stated that reducing electricity demand through EE and de mand side energy management, using only available technologies, has been demonstrated to be one of the most
cost

- effective means of reducing GHG emissions from the power sector. Commenter s stated14 demand side EE offers potential to reduce power sector GHG emissions while simultaneously reducing utility bills for American families and businesses, improving grid reliability, reducing

co

- pollutant emissions, improving energy security, and creating jobs in the EE sector.

Commenter s strongly supported EPA's dete rmination that demand

- side reductions in carbon pollution from the power sector through increased EE measures are an integral part of the BSER for existing power plants. Commenter s stated EPA's inclusion of EE as part of the BSER under section 111(d) is a well

- justified part of its system

- wide approach to determining the level of emission reductions that state plans should achieve. Commenter s stated EE is cost

- effective; recent studies and states and utilities with many years of EE experience confirm the re remains vast potential to achieve significant further reductions in electricity demand; EE is economical and effective mechanism to reduce emissions; and several federal and state regulatory programs have already sought to reduce emissions by incentiviz ing EE.

Commenter s stated many states and utilities have already taken action to realize the opportunity for consumer savings and climate protection, providing further support for EPA's conclusion that EE is an "adequately demonstrated" and cost

- effective element of the BSE R. Commenter s stated 26 states have adopted EE standards or targets that require investments matching or exceeding EPA levels in the BSER analysis. Commenter s indicated state investments in consumer

- funded EE increased to nearly $6 billion in 2012, an inc rease of 28 percent in 3 years, reported incremental electricity savings increased by 120 percent and reaching 22 million MWh in 2011 (equivalent to 0.6 percent of retail sales, and 14 states reporting savings of more than 1 percent of retail sales). Comm enter s stated a recent Georgetown Climate Center report provided numerous case studies of states and utilities that successfully implemented EE to reduce GHG and save customers money. Commenter s cited a 2013 LBNL report that indicates utility investment i n EE will increase to $9.5 billion by 2025 with increase of 60 percent in total electricity savings.

Commenter s supported the EPA's determination that end

- use EE constitutes a key component of the best system for reducing carbon pollution from existing power plants. Commenter s stated end

- use EE programs have been adequately demonstrated as cost

- effective mechanisms for achieving substantial reductions in emissions of carbon dioxide (CO2) and other air pollutants from this source category.

Commenter s stat ed thus, the EPA has reasonably concluded that: (i) states may include such programs as part of a proposed system for reducing carbon pollution from existing power plants under section 111(d) of the CAA, and (ii) EPA must account for achievable emission r eductions from such programs when setting the stringency of its emission guidelines for existing power plants.

Commenter s stated end

- use EE programs can deliver low

- cost reductions in carbon pollution from the power sector as well as a variety of economic, social and environmental co

- benefits. Commenter s stated in a recent study, the NRDC found that the deployment of EE programs could significantly reduce the cost of meeting CO2 emissions standards for existing power plants. Commenter s stated that according to NRDC's analysis, states could use a combination of EE programs and other control measures to reduce nationwide CO2 emissions from the power sector by approximately 26 percent over 2005 levels in 2020 and 34 percent in 2025 without1 5 imposing unmanageable costs on regulated power plants. In addition, c ommenter s stated NRDC found that the direct economic savings from widespread efficiency improvements would offset the costs of implementing these measures by 2030, and the value of societal benefits generated from such improvements could reach $60 billion in 2020, as much as 15x the cost of compliance. Commenter s stated NRDC's analysis also indicated that the inclusion of EE measures in a section 111(d) program would reduce wholesale electricity prices by appr oximately 4 percent as compared with a reference case. Commenter s stated meanwhile, EE improvements in households and businesses would reduce electricity consumption, lowering electricity bills and emissions at the same time. Commenter s stated recognizing these and other benefits, clean air agencies, regulatory utility commissions and state energy officials across the nation have expressed support for the inclusion of EE programs among the mechanisms that state regulators can use to reduce carbon pollution from existing power plants under section 111(d).

Commenter s stated end

- use EE programs can deliver low

- cost reductions in carbon pollution from the power sector as well as a variety of economic, social and environmental co

- benefits. Commenter s stated in a recent study, the NRDC found that the deployment of EE programs could significantly reduce the cost of meeting CO2 emissions standards for existing power plants. Commenter s stated that according to NRDC's analysis, states could use a combination of EE pro grams and other control measures to reduce nationwide CO2 emissions from the power sector by approximately 26 percent over 2005 levels in 2020 and 34 percent in 2025 without imposing unmanageable costs on regulated power plants. In addition, c ommenter s sta ted NRDC found that the direct economic savings from widespread efficiency improvements would offset the costs of implementing these measures by 2030, and the value of societal benefits generated from such improvements could reach $60 billion in 2020, as m uch as 15x the cost of compliance. Commenter s stated NRDC's analysis also indicated that the inclusion of EE measures in a section 111(d) program would reduce wholesale electricity prices by approximately 4 percent as compared with a reference case. Commen ter s stated meanwhile, EE improvements in households and businesses would reduce electricity consumption, lowering electricity bills and emissions at the same time. Commenter s stated recognizing these and other benefits, clean air agencies, regulatory util ity commissions and state energy officials across the nation have expressed support for the inclusion of EE programs among the mechanisms that state regulators can use to reduce carbon pollution from existing power plants under section 111(d).

Commenter s stated the EPA has reasonably concluded that EE programs may constitute part of the BSER established by a state to reduce carbon pollution from existing power plants in accordance with section 111(d).

Commenter s stated that Arizona passed an Energy Effi ciency and Resource Standard in 2010 that requires electric utility companies to reduce overall energy usage by 22 percent by the year 2020 through the implementation of EE measures at homes and businesses. Commenter s stated Arizona can be proud that, as t he result of these standards, the state is now 4th best nationally in the amount of EE accomplished by the electric utilities and their customers. Commenter s stated that Kris Mayes, former Chairman of the Arizona Corporation Commission, reports that since the standards were adopted, businesses and consumers saved more than half a billion dollars, and enough electricity has been saved to power 133,000 homes. Commenter s stated EE measures are the most widely available and cheapest options for reducing carbon emissions. Commenter s stated this option reduces electricity systems costs and results in lower bills for utility customers.16 Commenter s strongly supported the proposed EPA Standards for EE. Commenter s stated the strategies to achieve EE are cheaper than the investments that are required to convert power plants to cleaner

- burning fuel. Commenter s stated according to Ms. Mayes, it is five to ten times cheaper to save energy than it is to generate it fro m new power plants. Commenter s stated increased EE also will result in lower demand for electricity, and reduced carbon pollution along with lower utility bills for customers. Commenter s stated EE benefits local economic development by creating new jobs a nd spurring technology innovation. Commenter s stated another economic benefit is that when consumers pay lower electric bills, the money in their pockets will be spent in the local economy. Federal and state incentives should be established to promote rapi d implementation.

Commenter s stated EE is the least cost resource for state compliance with the Clean Power Plan. As such, Commenter s supported the inclusion of end

- use EE as a building block. Commenter s stated DSM efficiency programs in many states have a long history of providing energy savings, lowering utility bills, and reducing emissions through avoided generation. Commenter s stated DSM end

- use EE programs can be a critical tool to assist states in meeting the emission reduction standards set in the proposed rule.

Commenter s stated Building Block 4 consists of reducing demand for generation through policies to improve demand

- side EE, which results in CO2 reductions. Commenter s strongly supported including an EE contribution as an element of the BSER. Commenter s stated that California and its electric utilities have a long history of implementing EE programs and believed, as the EPA acknowledges, that EE is a proven practice for reducing CO2 emissi ons as well as customers' electric bills. Commenter s stated that California's aggressive work to reduce CO2 emissions through EE has resulted in relatively flat per capita electricity consumption in the state over the last 30 years.

Commenter s stated th ey were pleased that EPA included the use of EE measures as one element of the overall emission reduction portfolio or building block approach. Commenter s applauded the agency's encouragement of states to include end

- use EE in their compliance plans.

Comme nter s supported the inclusion of EE resources as an effective way to reduce load and therefore carbon emissions from fossil

- fueled EGUs. Commenter s stated they first implemented its Iowa EE program in 1994, and MidAmerican's plan was reviewed by EPA in the development of the proposed rule. With its two decades of successful EE plan implementation, resulting in significant cost savings to customers, Commenter s stated they carefully examined how EE is utilized in the development of state 111(d) targets. Co mmenter s recommended EPA recognize the importance of EE in reducing greenhouse gas emissions and clarify how states may utilize EE resources for compliance purposes.

Commenter s supported the current proposal to credit a range of efficiency programs includi ng both utility and non

- utility programs, as long as all measures include the same standards for EM&V. Commenter s recommended a wide range of programs including behavioral programs, financing programs, city programs, and other voluntary programs should be credited in state plans. Commenter s further recommended increased compliance with building codes (0.87 percent per year in 2030) should be included in the potential emissions reductions in the BSER17 for Block 4 and both increased compliance and adoption of updated building codes by states and local governments should be credited in state plans.

Commenter s stated the least cost pathway to compliance with the rule will be increased deployment of renewable generation and EE, including demand response (the t erm "demand response" as used in this letter necessarily excludes fossil fuel

- powered demand generation, which is sometimes included in demand response programs). Commenter s stated Building Blocks 3 and 4 are critical to EPA's approach under either alterna te structure, in order to properly incentivize development and use of renewable energy sources and EE resources.

Commenter s stated that in Building Block 4, EPA understates the achievable annual savings from EE. Commenter s stated as EPA acknowledges, EE ha s been shown to be significantly lower in cost than electric generation. Commenter s stated while the proposed rule itself discusses the numerous tools available to states to enhance EE, such as building energy codes, state appliance standards, tax credits, and benchmarking requirements for building energy use as part of the complementary mix of EE efforts, the savings rate target appears to include only traditional EE programs. Commenter s stated moreover, the proposed rule assumes relatively limited and mod erate growth in these programs despite their demonstrable success and their status as the least

- cost option. Commenter s stated the rule also overstates the cost of EE implementation and includes too slow an implementation rate for expansion of EE efforts i n states. Commenter s stated the final rule must take into account achievable savings from complementary efficiency efforts as well as EE programs, must project a faster implementation rate for EE efforts, and must reflect realistic cost data for EE. Commen ter s stated it is also important that the final rule reflect a formula that adequately counts the effects of renewable generation and EE on fossil generation, as proposed in the October 27, 2014 Notice of Data Availability.

Commenter s stated end

- use EE programs are critical for 111(d) success. Commenter s w ere pleased to see that the EPA's fourth building block aims at using electricity more efficiently, or reducing the growth rate of electricity demand via various efficiency measures. Commenter s stated their goal is to become the most efficient energy user among food manufacturers. Commenter s stated they are making steady progress toward our target of reducing energy consumption in every product category, to achieve an overall reduction of 25 percent per metric ton of product by next year, compared with a 2005 baseline. Commenter s stated they have reduced our global energy consumption by 22.6 percent since 2005, per metric ton of product. Commenter s stated their approach includes using energy more efficiently, switching to cleaner fuels, and investing in renewable energy sources.

Commenter s stated they have implemented a substantial number of EE projects across our 29 retail water bottling facilities and our corporate headquarters. In addition to our corporate headquarters certification as a U.S. Green Building Council Leadership in Energy and Environmental Design (LEED) Gold building, c ommenter s stated they operate 10 LEED

certified bottling faciliti es. Across the supply chain, c ommenter s stated their EE projects include establishing an energy and water efficiency tracking system at several of our plants Piloting an energy efficient lighting program in 2012 at one of our Nestle Waters Direct facilitie s in Connecticut. Commenter s stated this lighting project alone avoided more than 70,000 lbs/CO2, saving about 100,000 kilowatt hours (kWh) of electricity each year

-- which is equivalent to18 saving 51,603 pounds of coal and 6,637 gallons of oil, and providin g nearly 13 homes with electricity for a year. Commenter s stated they are rolling out this efficiency program across our d irect facilities saving money, energy and reducing GHG emissions.

While many of our EE projects are simple and low

- cost, commenter s st ated they are achieving significant CO2 benefits. From powering down garage lamps during daylight hours, to installing timers on bottled water refrigerators, to better optimizing existing occupancy sensors, to swapping incandescent exit signs for LEDs, com menter s stated their EE projects are saving over 208,000 kWh and 80 metric tons (MT) of CO2 per year, and approximately $127,000 in electricity costs. Commenter s stated their Purina headquarters has saved enough energy over the past eleven years through it s energy management program to offset one year's use and cost of electricity.

Commenter s supported the establishment of context

- specific goals for each state and for allowing flexible options for states to meet their requirements. Commenter s believed th at EPA's proposed use of the "four building blocks" approach will achieve greater carbon emission reductions at a lower cost than simply reducing emissions from the affected Electric Generating Units (EGUs). Commenter s w ere particularly supportive of EPA a llowing states to use decreased demand resulting from EE work to meet their requirements. We know that in Philadelphia more than 60 percent of carbon emissions from EGUs are generated to provide energy for buildings. Commenters stated t he City's building energy benchmarking program has helped identify the large magnitude of potential carbon emission reductions from EE improvements.

Commenter s stated the Agencies' comments in this section do not seem to be in line with what Nevada has already shown it i s capable of and what other southwestern states are doing when it comes to EE opportunities. Commenter s stated for example, the agencies cite the relative youth of Nevada's housing stock, noting that half of the homes in the state are less than 20 years ol d. Commenter s stated to be clear, there are still many opportunities to upgrade newer housing stock, especially in the Las Vegas valley, where homes were built very quickly in the last two decades, but even if you grant that there are little to no opportun ities in newer housing, half of the housing in the state is ripe for upgrades, and the residential sector is only one part of the market.

Commenter s stated the reality is, Nevada used to be a leader in the region on efficiency measures, but has recently fa llen behind, even though there are still plenty of great opportunities. Commenter s stated the agencies imply a negative impact on consumers and the economy, but EE improvements are known to reduce ongoing consumer costs and support the local economy (based on research related to many programs, for each program dollar spent there is typically a $5

- 10 impact on the local/regional economy). Commenter s stated in fact, a 2012 study, " The $20 Billion Bonanza " report by the Southwest Energy Efficiency Project, ill ustrated that by putting

" best practice " utility energy saving programs in place, using off the shelf technology, Nevada could save a net $3.4 billion on their utility bills as a result of 11 years of investment in best practice EE programs, cut electricity use at the end of this period by 22 percent, cut peak demand by 21 percent, reduce CO2 emissions by nearly 4.4 million metric tons per year, and support 4,680 new jobs.19 Commenter s stated there are many other studies that contradict the view of the agencies that EE is too costly. Commenter s stated one was published in early 2014 by the ACEEE, " New Report Finds Energy Efficiency is America's Cheapest Energy Resource. " Commenter s stated another, recently published by LBNL, found the cost of many ef ficiency measures to be well under two cents/kWh considering only utility costs, and under five cents per kWh considering both utility and program participant costs. Commenter s stated by maximizing investment in both utility and

non

- utility EE programs, Ne vada can meet the proposed targets with net economic benefits for consumers and businesses in the state.

Commenter s appreciated the opportunity to provide these comments to the EPA and hope that they are helpful as you move forward on the Clean Power Plan. Commenter s stated it is unfortunate that the Nevada Agencies have chosen to use this unique opportunity to argue that our state should be required to do as little as possible when development of our clean energy economy would be such a net positive for Ne vada's residents. Commenter s indicated their state was blessed with world

- class renewable energy resources, and there are great opportunities to help consumers save money on their bills by improving EE. Commenter s stated the public policy in Nevada is squa rely in the direction of reducing pollution. Commenter s hoped that the final rule will set ambitious goals that will allow our state to continue to lead the country in pollution reduction.

Commenter s stated EE is a least

- cost resource; in a vast majorit y of situations, it costs less to save a kilowatt

- hour than it does to produce that kilowatt

- hour, a conclusion drawn by the American Council for an Energy

- Efficient Economy and Lawrence Berkeley National Labs, among others

. Commenter s stated this value is even more pronounced when the full accounting for the lifecycle costs of coal and other fossil fuels are taken into account. Commenter s stated encouraging EE could yield millions of jobs, which would be welcome news in Arizona, where the current unemploy ment rate is higher than the national rate. Commenter s stated an updated analysis of the Clean Power Plan shows that increased reliance on EE and renewables will allow for compliance savings rather than compliance costs and allow for more than an additiona l 100 TWh of energy savings with EE. By replacing the conservative estimates of EE costs with real

world data obtained by Lawrence Berkeley National Labs, c ommenter s stated it is possible to implement the Clean Power Plan while simultaneously providing sav ings for ratepayers. Commenter s stated implementing the Clean Power Plan such that savings are realized would be a tremendous boon to low

- income ratepayers, not only in the effort to reduce climate impacts but also in the overall reduction in utility costs

.
Commenter s stated EPA should include all available EE opportunities in its analysis.

Commenter s stated EPA should include EE (building block four) and noted EE has long helped in meeting energy demand in the United States. Commenter s stated the ACEEE estimates that since 1970, about three

- quarters of the new demand for electricity has been met by EE rather than energy generation, and at least 25 states have voluntarily adopted and funded long

- term binding EE resource standards (EERS). Commenter s stated these standards help states reduce power demand, thereby reducing generation, providing economic, environmental, and public health benefits.20 Commenter s fully supported EPA's inclusion of EE in the rule. Commenter s stated a robust BSER should include all cost effective and proven emission reduction approaches, and the utilization of EE is consistent with that goal. Commenter s stated the ACEEE has studied EE programs throughout the nation, and has reaffirmed in a recent report that EE is two to three time more cost effective than other traditional power generation technologies. As reviewed in the TSD, Commenter s stated there is certainly ample evidence that EE, through programs operated throughout the 50 states, has been adequately demons trated to provide cost effective GHG reductions. Commenter s supported the additional recommendations referencing EE by other

c ommenter s

.
Commenter s supported the use of existing state

- and utility

- led EE programs. Commenter s stated these mechanisms help to provide a long

- term signal to the market of the importance of EE. Commenter s encouraged the EPA to build on these existing programs.

Commenter s supported the inclusion of EE and renewable energy in the CPP as cost

- effective and necessary Building Blocks for a BSER. Commenter s provided Figure 1 that shows the levelized costs for each renewable source and that EE is the most cost

- effective form of electricity savings and wind energy is now cheaper than natural gas. Commenters stated EPA should emphasize model components facilitating state deployment of renewable energy and demand

- side EE.

Commenter s stated improving EE reduces demand for power gene ration and emissions. Commenter s stated demand

- side management can reduce demand at key time periods, avoiding peaks in power generation that would otherwise require fossil plants to ramp up and increase emissions.

Commenter s stated EE is a low

- risk, lo w

- cost energy resource that provides direct savings to consumers, encourages investment across other sectors of the economy, displaces the need for costly investments in new energy supply infrastructure, creates new employment opportunities, and reduces em issions of CO2 and other harmful pollutants. Commenter s indicated States are increasingly recognizing the value of EE as an energy resource and adopting policies to facilitate its deployment. In 2013, c ommenter s stated eight of the top 10 states identified in the ACEEE's 2013 State Energy Efficiency Scorecard had adopted binding EE resource standards. Commenter s stated West Virginia does not have an EE resource standard and ranked #46 in the Scorecard.

Commenter s stated West Virginia utilities currently of fer consumers very few EE programs compared to those offered by the same utilities operating in other states. Commenter s stated for instance, in 2009, the West Virginia Public Service Commission (PSC) approved the FirstEnergy subsidiaries' plan to achieve a cumulative EE savings of 0.5 percent over five years, or 0.1 percent per year. Commenter s stated FirstEnergy subsidiaries in neighboring Pennsylvania are achieving much higher levels of savings, at 1 percent per year. Commenter s stated the Clean Power Pl an recognizes the potential for EE to provide significant GHG emission reductions from the power sector. As applied to West Virginia, c ommenter s stated the BSER assumes West Virginia can avoid 10.71 percent of in

- state electricity consumption by 2030 throu gh EE. Commenter s stated under this scenario, EE would contribute 17 percent of the state's emission reduction goal.21 Commenter s stated EE savings above the level projected by EPA would provide additional emission reductions and added benefits to consumers. Commenter s stated the Center supports EPA's inclusion of EE as part of the BSER and urged EPA to use the most up

- to

- date EE projections and costs when estimating the potential for EE as part of the BSER. Based on EE savings that utilities operating in Wes t Virginia are achieving in surrounding states, in conjunction with estimates provided by ACEEE, c ommenter s stated the Center's analysis indicates that West Virginia's could likely achieve cost

- effective EE savings of 18 percent by 2030. Commenter s stated that tapping into West Virginia's vast EE potential will be central to West Virginia's ability to meet the proposed emission reduction targets, provide West Virginia residents and businesses more control over their energy consumption, will lower their elec tric bills, and will make West Virginia a more attractive state for business to locate.

Commenter s stated EE is often called the "fifth fuel" and is a win

- win for emissions reduction and consumer savings. Commenter s stated the inclusion of EE as one of the building blocks for compliance with the proposed rule provides tremendous opportunity for states to reduce emissions at an affordable cost. Commenter s stated in many cases, as noted in a Synapse report titled " Unleashing Energy Efficiency ," EE is a " n o regrets " policy that would save utilities and consumers money regardless of emission reduction targets.

Commenter s stated many of the states that have the highest emission levels of carbon pollution also have the most inefficient electricity utilization and delivery. Commenter s stated in fact, ten of the states in the top 25 highest carbon emissions from electricity rank in the bottom third of ACEEE's state rankings for EE. Commenter s stated this means that states with the most room for improvement have a vast and affordable resource to cut emissions before they even look to the other building blocks.

Commenter s stated investments in EE put downward pressure on rates by avoiding capital and operating costs for decades to come. Commenter s stated that accou nting for these lasting benefits is important for states to make sure they are investing in cost

- effective EE and including all the benefits in allocating program investments. Commenter s stated one way to account for the benefits of EE is to use a rubric such as the Resource Value Framework, which helps any state determine if an efficiency program is cost

- effective by identifying costs and benefits to the utility, participants, and the pu blic over a time frame within which these costs and benefits are likely to occur.

Commenter s strongly supported the use of EE programs as part of states' efforts to achieve compliance with their targets. Commenter s stated EE is widely recognized as the least

- cost electric system resource, rather than imposing new expenses for the state to come into compliance, customers will actually experience lower bills if the state's plan includes a strong EE component. Commenter s stated EPA has stated that to count towards compliance, each part of the emission standard, including EE, must be quantifiable, non

- duplicative, permanent, verifiable, and enforceable. Commenter s stated for EE, these criteria can be interpreted generally as follows:

• Non

- duplicative: Is anot her state also using those same avoided megawatts hours or avoided emissions towards their compliance with the Clean Power Plan?22 • Permanent: Are the savings from an installed measure ongoing during the year in which the state seeks to use them for complianc e?

• Enforceable: is there an entity with federally enforceable commitments to procuring EE savings?

Commenter s stated EPA's proposed rule, technical support documents, and existing guidance do an excellent job of describing how EE meets these criteria.

Com menter s stated EE is " Adequately Demonstrated ." Commenter s stated demand side EE programs have a long record of achieving energy savings. Commenter s stated customer

- funded EE programs provided by electric utilities have existed since the 1970s, and uti lity sector EE has evolved to become a top priority utility system resource." Commenter s stated several states have established policies that mandate EE as first resource in the loading order of electric utility resources, as well as requirements that stat es should capture " all cost

- effective energy efficiency ." Commenter s stated 26 states have adopted EERS that establish specific energy savings targets for utilities or independent statewide program administrators, while several others have established shor t

- term EE goals.

Commenter s stated that since the early 2000s, EE programs have grown at an accelerated rate. Commenter s stated in 2006, total spending was $1.6 billion; by 2010, total budgets for electric customer EE programs grew to $4.6 billion; and in 2013, total budgets for these programs reached $6.3 billion. Commenter s stated these expenditures are yielding significant energy savings. In 2009, the national total annual savings from these programs were 13,147 TWh or almost 0.4 percent of total energy sales, with five states saving 1 percent or more during that year. Commenter s stated funding for customer EE programs is expected to continue rising, particularly in those states that have been minor players in this industry. Commenter s stated a large port ion of these projected increases in spending are expected to come from the Southeast, which historically has had relatively low levels of funding for EE.

Commenter s stated EE is becoming increasingly important because of concerns with fuel price volatility , increased cost of construction of new power plants and doubts about the ability to finance and secure cost

- recovery of these projects; shrinking reserve margins leading to reliability questions; and more stringent environmental regulations, including reg ulations to reduce carbon emissions to address climate change. Commeneters stated e nergy efficiency is now also being used as a competitive resource. Commenter s stated for example, in New England, EE can compete in the forward capacity market, and FERC is analyzing how to incorporate EE in wholesale markets. Commenter s stated EE is also being used specifically as a greenhouse gas reduction strategy. Commenter s stated the RGGI includes explicit provisions for credits for EE that generate funding for EE savin gs. Commenter s stated this track record provides valuable insights on the future potential of EE as a resource and as a carbon reduction option.

Commenter s believed EPA should consider incorporating grid efficiency upgrades in the EE measures permitted under Block 4. Commenter s stated fuel switching and co

- firing can reduce emissions at individual units, and EPA should include those measures in its BSER cal culation for Block 1 if they will be allowed for compliance. Commenter s stated however, EPA should neither23 include new NGCC capacity in computing state targets nor should it allow states to rely on new NGCC units for compliance. Commenter s stated it may be appropriate to exclude certain measures that would reduce emissions from the BSER calculation based on a robust analysis of cost and energy requirements, while still allowing those measures to count for compliance if states or affected sources choose to i nvest in those measures. Commenter s stated that is the exception, however. Commenter s stated as a general matter, the symmetry principle should control: if a measure is available for compliance, it should be included in the BSER calculation.

In order to re duce carbon emissions and the demand for power, c ommenter s stated they needed EPA to support truly safe, clean, and low

- emission means of energy production, such as solar, wind, and geothermal as well as conservation and efficiency efforts as a way to reduce carbon emissions.

Commenter s appreciated the opportu nity to comment, and supported the use of Building Block 4, demand

- side EE for state CPP compliance. Commenter s stated EE is the lowest cost resource available to states to comply with the EPA's CPP, and states should maximize the use of EE in their compli ance plans. Commenter s stated this is particularly true in the Southeast, where SACE focuses its efforts. Commenter s stated the Southeast has the lowest incomes on a national basis, but the highest percentage of income going to utility bills. By investing in EE, c ommenter s indicated states reduce carbon pollution, lower utility bills, create jobs and grow their local
economy.

Commenter s stated that in 2013, the South accounted for 43 percent of U.S. energy consumption and 43 percent of U.S. electricity c onsumption, but only 36 percent of the nation's population and only 35 percent of the U.S. GDP. Commenter s stated thus, the region has high ratios of electricity per capita and per GDP relative to the rest of the U.S.

Commenter s stated the industrial se ctor in the South uses 73 percent more electricity than the national average to generate one unit of GDP. Commenter s stated this is partly due to the region's higher

- than

- average share of electricity

- intensive industries such as metals, textiles,
paper pr oducts, and chemicals. Commenter s stated the commercial and residential sectors in the South are also more energy intensive than the rest of the nation. Commenter s stated this is partly because buildings in the South rely more on electricity and less on n atural gas for space heating than the rest of the nation. Commenter s stated these high levels of energy intensity also reflect the region's inefficient use of electricity. Commenter s stated the ACEEE has ranked most southern states amongst the lowest thir d in the nation based on their EE policies and performance. Commenter s stated the evidence of energy inefficiency in the South is overwhelming. Commenter s stated for instance, sales data suggest a low market penetration of
energy

- efficiency products in the South. Commenters stated that f or each of the ENERGY STAR appliances with sales data that are tracked by EPA

- air conditioners, clothes washers, dishwashers, refrigerators, and water heaters

- the South has the lowest rates of market penetration.

Commen ter s stated evidence of weak EE policies is ample. Commenter s stated twenty U.S. states have EERS and only two of these are in the South. Commenter s stated EERS are one of the strongest EE policies. Commenter s stated 16 states have implemented policies to "decouple" electricity profits from sales, but only two of these are in the South. Commenter s stated24 decoupling or similar rate reforms are needed because current ratemaking procedures encourage utilities to increase electricity sales and discourage them from promoting EE and distributed generation, which reduce sales. Commenter s stated utilities in the South spent $7 per capita on electric efficiency programs on 2012, while the average expenditure across the nation is $19: Louisiana spent less than $1 p er capita and Georgia spent $3, while Arkansas spent $17. Commenter s stated by "energy efficiency" they do not mean cold showers and warm beer. Commenter s stated they mean getting more energy services out of the energy you consume, with high

- efficiency fl uorescent bulbs and solid state lighting, smart thermostats and building control systems that save energy by strategically idling equipment when it is not needed, variable speed motor and drive systems, and energy upgrades to industrial plants including co mbined heat and power systems that minimize energy waste.

Commenter s strongly supported the EE measure. Commenter s stated it only makes sense to make wise use of our limited resources and to conserve them for future generations. Commenter s suggested tha t significant gains could be made by supporting programs that help low

- income citizens weather

- proof and update their homes or to explore alternate sources of heat/energy. Commenter s stated for example, the Band has used grant money to install a number of solar air heating systems on Reservation homes and has found that they perform very well, and they provide a clean, reliable source of heat and reduce problems resulting from propane price spikes and shortages.

Commenter s stated EE has clearly demonstra ted its reliability, efficacy, and cost effectiveness. Commenter s stated in fact, EE is the most readily available and least expensive way to reduce our dependence on fossil fuels and to meet energy capacity needs. Commenter s shared excerpted sections fr om a recent IEA report which described the viability of EE. Commenter s stated another recent report by the ACEEE was based on a study to assess the costs of EE programs and cost effectiveness of those programs from 2009 to 2012. Commenter s stated the study reviewed EE programs in 20 states. Commenter s stated the finding was that each dollar invested by utilities and participants in EE measures yields $1.24 to $4.00 in benefits. In
summary, c ommenter s stated the study concluded "the results of this analysis clearly demonstrate that energy efficiency programs are the least

- cost resource option available to utilities. Electricity efficiency programs, at a range of about 2 to 5 cents per kWh and an average of 2.8 cents per kWh, are about one hal f to one third the levelized cost of alternative new electricity resource options." Commenter s stated RE and EE clearly meet every aspect of the definition of best system of emission reduction. Commenter s stated therefore, the Clean Power Plan should plac e more emphasis on these alternatives. Commenter s stated furthermore, the Clean Power Plan should factor in these alternatives more vigorously in setting the carbon reduction goals for the states.

Commenter s stated EPA should retain EE as one of the Bu ilding Blocks included as BSER. Commenter s stated numerous studies show that EE measures are one of the most cost

- effective ways to reduce emissions from the electricity

- producing sector. Commenter s stated further, those customers who participate in EE pro grams and measures enjoy lowered electricity bills. Commenter s stated as New Mexico has one of the highest poverty rates in the country, especially in rural areas, cost to consumers (as well as industry) is an important consideration.25 Commenter s indicat ed their States have a record of successfully reducing emissions through the use of demand

- side EE measures. Commenter s indicated that State EE programs cost

- effectively reduce carbon pollution emissions or avoid pollution increases by reducing demand for generation, while also lowering energy costs for consumers. Commenter s cited several examples:

• Maryland achieved a 14.6 percent reduction in peak electricity demand from a 2007 baseline, equivalent to avoiding one coal power plant, and has established a goal of reaching a 15 percent reduction in per capita energy consumption by 2015;

• EmPOWER Maryland has offset 1.3 million metric tons of CO2 emissions, has funded measures that will reduce ratepayer electricity use by more than 2 million MWh per year and s ave $250 million annually, savings are projected to continue for years, with currently existing measures saving ratepayers $3.7 billion over their useful life;

• Massachusetts projects that its investment in EE from 2005 through 2015 will reduce electricity demand by 17.1 percent and reduce emissions by 3 million tons of CO2 in 2015;

• Our states have successfully tailored these efficiency programs to reach rural consumers, residents of low

- income housing, and other under

- served constituencies.

Commenter s noted examples of tailored programs that include:

• Massachusetts' statewide EE program covers low

- income residents that live in both single and multi

- family homes, as well as new construction of low

- income housing, in 2013 the low

- income program reported over $3 3 million in electric benefits and over $92 million in benefits from all energy sources, the Efficiency Neighborhoods+ initiative, which began in 2013, will provide significant energy

saving benefits to low

- and moderate

- income residents in designated urba n neighborhoods, often with older housing stock;

• Minnesota's Conservation Improvement Program (CIP), which set EE goals for utilities, includes a requirement that utilities spend a minimum of 1.5 to 2 percent of annual gross operating revenues on efficienc y programs, at least 0.2 percent must be spent on programs to serve low

- income customers;

• Vermont's Manufactured Housing Innovation Project is a pilot project to develop
new, energy

- efficient manufactured homes to respond to the loss of homes during Tropic al Storm Irene and to increase the supply of quality affordable housing, using advanced EE technology, these homes are projected to use only 29 percent as much energy as a typical mobile home, minimizing monthly energy costs and making the homes more affor dable overall.26 Commenter s stated that at least six of their states achieved incremental annual savings of greater than 1.0 percent of retail sales in 2012 (ME, VT, CA, CT, MN, and OR); two achieved savings rates of at least 1.5 percent (ME and VT); and se ven of our states have policies in place that require incremental savings of 1.5 percent of retail sales on or before 2020 (IL, MA, MN, NY, RI, VT, and WA).

Commenter s stated EE is truly the least expensive fuel, and that even without accounting for

avo ided emissions, our efficiency programs deliver lifetime cost savings that far exceed their implementation costs

- currently, for every dollar invested in EE, we see a return of more than three dollars over the life of the projects. Commenter s hoped that t he many states that continue to under

- invest in efficiency will consider greatly expanding those programs.

Commenter s noted that the EPA and others have also documented the even broader range of benefits that energy efficiency offers, such as locally sourced jobs, increased productivity, heightened comfort, higher property values, reduced price volatility, and greater en ergy security. Even without monetization of all those additional benefits, commenter s noted that many analyses have documented the cost

- effectiveness of energy efficiency and shown the potential for efficiency to dramatically reduce the costs of achieving given levels of carbon reductions. Consistent with the EPA's observations in the draft rule, commenter s noted that many analyses have found that high levels of energy efficiency, paired with high levels of renewable energy, can reduce costs or even produce consumer savings, with gains from efficiency offsetting any rate increases from other measures.

According to commenter s , the economics and potential of energy efficiency are such that the data support energy efficiency playing a much larger role in achiev ing the goals of the Clean Power Plan than currently proposed, and more inclusive assessments of efficiency costs and opportunities would allow the EPA to set stronger state targets. As an example, commenter s cited an analysis by the American Council for a n Energy

- Efficient Economy (ACEEE), which showed that energy efficiency alone could achieve CO2 reductions of 26 percent below 2012 levels by 2030

-- at no net cost to the economy.

Commenter s stated the nucleus of the EE industry already exists and can ea sily ramp up. Commenter s stated Georgia has over 4,000 people employed in improving EE, according to the 2013 Southeast Clean Energy Industry Census. Commenter s stated businesses will put people to work locally, not overseas, in meaningful jobs with tran slatable skills. Commenter s stated improving EE in buildings and homes in Georgia can be a major component of the Clean Power Plan. Commenter s stated this is a grand opportunity to reduce carbon emissions while creating jobs, saving citizens money, and g rowing businesses like mine.

Commenter s stated EE should be a mandated building block, not just one available option. Commenter s indicated States should meet the new standards through renewable energy and efficiency because this is the fastest, cleanes t, and most cost

- effective path. Commenter s indicated States can meet the targets without increasing use of dirty and dangerous energy sources like nuclear or natural gas. Commenter s stated this can all be done while decreasing overall costs to customers and the public.27 Commenter s stated the economic, environmental, and health costs of nuclear energy, from cradle to grave, are too costly, EE is the optimal choice for most states. Commenter s stated it is the cheapest and greenest unit of energy, is the unit of energy that is not used. Commenter s stated costs are reduced, reduction targets are met, and jobs are created. Commenter s stated a recent study by the ACEEE finds that the de ployment of existing EE policies can help states meet a large percentage of their emission reduction targets will creating over 600,000 jobs nationwide.

Commenter s w ere pleased to see that EPA's proposal has a role for EE, which is one of the most
cost

- effective ways to achieve emissions reductions. Commenter s stated building codes and standards can play an important role in achieving the in

- use EE targets outlined in EPA's plan.

Commenter s stated that while it's not a silver bullet, broad deployment of EE measures will be important to reduce the impact of rising utility bills. Commenter s strongly supported EE and serves as a resource on this issue for energy consumers, especially in the underserved communities. Commenter s stated they can't do it alone. Commenter s stated EE measures and education must be available to small businesses and low

- and fixed

- income families and individuals, because they are the ones that will benefit the most from energy savings.

Commenter s stated there are untap ped energy

- source energy savings almost everywhere you look. At the World Trade Center, c ommenter s installed more efficient HVAC and high

- voltage power distribution systems. There and at many other Port Authority facilities, c ommenter s changed out old inca ndescent lights, installed modern tunnel vehicle ventilation systems, automated building management systems, automated toll collection systems and a cogeneration plant. Commenter s stated that at Habitat for Humanity, in Forsythe County in North Carolina, every one of the more than 200 affordable homes built in the past few years have met or exceeded green building standards, affordable homes. Commenter s wanted to assure that dramatic energy savings can be achieved by the private sector as well. Commenter s stated this is being done by progressive for

- profit companies across the nation.

Commenter s stated it's really important that we take these renewable standards that are presented in the plan and the fourth building block, which is EE, and make sure that those are protected, and eliminate the waste that we have in our society in regards to electricity production, and still forward and grow our economy to be strong.

Commenter s stated that opponents of the rule will also state the United States is focuse d more on cheap energy. Commenter s could not agree more. Commenter s urged the EPA to ensure that its final rule maximizes the opportunity and incentives for states to comply by investing in EE. Commenter s stated EE is the cheapest investment utilities can make to meet demand and it also happens to be the lowest carbon output alternative available. Commenter s stated first and foremost states should be capturing all cost effective EE before considering any other compliance option.

Additionally, c ommenter s w ere pleased to see demand side EE listed as a compliance mechanism.28 Commenter s urged EPA to call for a greater reliance on EE and renewable energy. Commenter s stated these should be the preferred solutions as states are encouraged to pursue in meeting the carbon reduction targets.

Commenter s particularly supported provisions of section 111(d) that deal with renewable energy and EE. Commenter s however, recom mended that EE targets be strengthened. Commenter s stated if the EPA would like states to reduce energy consumption cheaply and efficiently, then EE is the way to go about it.

Commenter s stated the most effective way to reduce carbon pollution and energy bills simultaneously is through EE. In their role as Chair of RGGI, Commenter s stated saw firsthand the massive potential to reduce emissions through EE, and the economic opportunities,
p articularly in our urban communities through investments in EE. Commenter s stated the EE assumptions in the proposed rule could be strengthened and they should strive to replicate the proven successes of many of the aggressive state programs and policies already in place.

Commenter s stated the potential for EE to reduce energy demand and avoid carbon dioxide emission as well as methane emissions is now well established. Commenter s stated for example a 2010 report by the National Academy of Scientists f ound that at 25 to 30 percent energy savings for the building sector as a whole could be achieved over the next 20 to 25 years through EE measures alone at a cost of just 2.7 cents per kilowatt hours saved. Commenter s stated the whole building retrofits a nd advanced building design could result in even more significant energy savings.

Commenter s stated environmental advocates, including the Clean Air Council, will push to ensure that the implementation plan that Pennsylvania submits to EPA ultimately will allow for and incentivize EE measures and renewable energy sources as a substantial part of the means by which Pennsylvania will meet its carbon reduction requirements. Commenter s stated one of the challenges in such an effort, however, is the difficulty of adequately and accurately quantifying reductions in carbon emissions achieved by EE measures and renewables. Commenter s stated EPA could aid these efforts by including in the final rule, standards and methods that states can use to measure and verify e nergy savings and emission reductions achieved through such means.

Commenter s stated the plan needs to be restructured to make sure that the best compliance options are more attractive. Commenter s stated EE is the building block that needs to be incenti vized. Commenter s stated benefits are many, including reduced energy use with all of its accompanying pollutants, as well as reduced energy cost for users. Commenter s stated less money spent on energy is money available to spend elsewhere, providing a boos t to the economy. Commenter s stated EE programs from demand side reduction to building envelope improvement are inexpensive to implement and create jobs that cannot be outsourced.

Commenter s urged the EPA, as it develops it section 111(d) guidelines, to tap into the existing EE policies and programs and even expand on those. Commenter s stated that doing so would be a win/win/win for the state of Colorado. Commenter s stated it would save consumers millions of dollars, even if rates go up they would still save money because they would significantly reduce their energy consumption. Commenter s stated it would increase business revenue which would create thousands of jobs. And it would also reduce millions of metric tons of carbon emissions.29 Commenter s s tated it would meet EPA's goal and help the state significantly. Commenter s urged EPA to make EE a key component of your guidelines as you move forward and please remember that they are here to assist EPA offered contact information.

Commenter s applauded the administration for this important effort to regulate carbon emissions, and for the recognition in the rule that EE should be part of the answer to carbon reductions.

Commenter s served as the Energy Committee Chair for the Western Chapter of the Sierra C lub. Last year Commenter s put together a report conducted by Optimal Energy which identified as much as five to 6,000 jobs per year created through investments in EE by our utilities. Having reviewed EPA's Clean Power Plan, c ommenter s urged EPA to increase the EE component of those four building blocks. Commenter s stated it is the best way to reduce electric power bills and create jobs, and clean up the environment.

Commenter s supported this Clean Power Plan and encouraged EPA to en able and support state's deployment of demand side EE to meet the plan's pollution reduction goals. Commenter s stated EE is the fastest, cheapest, most economically beneficial way to reduce carbon pollution, and

c ommenter s w ere pleased that EPA ha d put fo rth a plan to reduce carbon pollution and include a demand side EE in that efficiency can do more in Pennsylvania than EPA expects, and

c ommenter s looked forward to helping Pennsylvania achieve the goals set forth by EPA in the Clean Power Plan.

Commenter s supported Pennsylvania and other states taking advantage of this range of solutions. Commenter s stated however, demand side EE, using less energy to perform the same energy services presents a key area that can support our economy and reduce greenhouse gases. Commenter s stated Pennsylvania's residents, businesses and industry spend hundreds of millions of dollars each year on EE investments because they make business sense. Commenter s stated but more can be done. Commenter s for instance, Rich Selveria n, CFO and COO of MaGrann Associates, a national company, recently talked about a project his firm had done. Commenter s stated EE can save people and business a lot of money. Recently c ommenter s did a project at a 321 unit apartment building upgrading equi pment that will save the customer an estimated $39,000 off their electricity bills and $150,000 off their natural gas bills every year, a percent reduction in their electricity bill and percent in their gas bill. Commenter s this is real money and has the p otential to actually positively innovate our economy.

Commenter s stated in particular, EE can have a myriad of other benefits from helping support field diversity, improve reliability, reducing everyone's customer utility bills, and lastly, it can
create a nd has created jobs. Commenter s stated that much can be said about all these points. Commenter s stated submitted written testimony today detailing all of them as well as offering some recommendations to EPA on how the proposed plan could be improved.

Comme nter s supported the Clean Power Plan as a commonsense solution. Commenter s supported the plan's inclusion of demand side EE as one of the four major pollution reducing tools available to the states.

Commenter s indicated that RGGI states have asserted, and the EPA has recognized in its preamble to the regulations, that the RGGI initiative is an example of the magnitude of cuts that30 the EPA should demand from existing sources elsewhere in this country. Commenter s cited the RGGI comments, as follows:

• "The experience in the RGGI states show that the magnitude of emission reductions possible from the power sector have projected 50 percent decline in tons of carbon dioxide emissions and from a fossil fuel generation fleet that is projected to achieve complian ce on par with the recently proposed resource performance standards for electric generating units."

• " Between 2005 and 2012, CO2 emission from the power sector in the nine participating RGGI states dropped more than 40 percent, from 262.5 million tons in 20 05 to 92 million tons in 2012. The RGGI states are locking in this reduction by reducing the regional cap to 91 million tons in 2014, and reducing it an additional 2.5 percent each year thereafter to 78 billion tons in 2020."

• "In 2020, the RGGI emission caps will ensure that the regional emissions are 50 percent lower than the 2005 emission levels."

Commenter s strongly supported the proposed rules to cut carbon pollution from our power plants and urged EPA's national move to the alternatives of EE.

Com menter s supported the Clean Power Plan as a commonsense solution for energy needs, and supported the plan's inclusion of demand side EE as one of the four major tools available to states to achieve pollution reduction.

Commenter s stated that supports the inclusion of demand side energy efficiency as one of the major tools used by states to address pollution reduction and therefore, protect public health.

Commenter s recognized that this plan can and must be stronger if we want to see our communities become healthier and more prosperous. Commenter s therefore, one key to the success of the Clean Power Plan is making sure that we take full advantage of renewable energy and EE to minimize our reliance on polluting fossil fuels of all kinds, including na tural gas. Commenter s stated the renewable energy and EE sectors are essential to achieving climate success and economic prosperity, and we need to fully embrace these pathways to a healthier future rather than holding onto the dirty fossil fuels of our pa st.

Commenter s stated the Clean Power Plan not only encourages states and utilities to use less carbon

- intensive energy supplies, that is, the inside

- the

- fence approach, but it also encourages states and utilities to assist consumers in using less elect ricity by using it more efficiently. Commenter s noted that they call that the " outside

- the

- fence approach ." Commenter s stated the role of this proposed rule, the role this proposed rule may play in creating stronger markets for that EE side of the solution in the South. Commenter s stated in the year 2013, the South was home to 35 percent of the nation's population, but it consumed 43 percent of the nation's electricity, a very high intensity, indeed. Commenter s stated the region has a great deal of demand reduction potential, and the documentation backing up the Clean Power Plan cites the commenter's work in justifying the push for EE, because the commenter s ha ve complete d a lot of work to show how cost effective it is. Commenter s believed that the documen tation and the31 Clean Power Plan does not sufficiently reflect the opportunity for efficiency. Commenter s stated more is actually available than is in the proposed goals for states across the country and particularly in the South. Commenter s noted the U.S. has poor EE policies. Commenter s stated 20 states have EE resource standards, and only two of these 20 are in the South. Commenter s stated 16 states have decoupled utility profits from sales, but only two of those are located in the South. In 2010, c ommen ter s coauthored a study with a team of researchers from Duke and Georgia Tech, and looked at the potential for EE in the South. Commenter s demonstrated, for instance, in the State of Georgia alone, an EE potential that could save Georgians $3.8 billion

ann ually, if implemented.

Commenter s stated the proposed cumulative goals for southeastern states will save approximately 10 percent of retail electric sales by 2029. Commenter s believed that these goals are not only achievable but also fairly conservative compared to the region's full EE potential. Commenter s believed that maximizing EE impacts is essential for our nation and particularly for southeastern states for several rea sons.

Commenter s stated that number one, end use EE should be available as a means of compliance.

Commenter s strongly supported the inclusion of demand side EE as a compliance tool under the proposed Clean Power Plan.

Commenter s strongly encourage d EPA to treat energy efficiency as a resource that can deliver emission reductions in the very near term, with distinct advantages over capital

- intensive supply

side projects that can take years to materialize.

Commenter s stated that in its findings, A CEEE reports annual technical, economic, and achievable potential for electricity and natural gas. The commenter s stated that ACEEE, for electricity, finds a mean value of economic EE potential of 2.2 percent, and a median of 1.9 percent. The commenter s st ated that focusing only on achievable EE potential, ACEEE identifies a range of 0.3 percent to 2.9 percent across all geographies studied.

Commenter s applauded the EPA for developing the proposed CPP in a manner that identifies the least cost methods fo r reducing GHG emissions in the power sector by accounting for non

emitting sources of generation and energy efficiency.

Commenter s noted that Virginia has a large number of federal government infrastructure, giving the pentagon and Naval Station Norfol k as examples. The commenter s stated that although the EPA cannot regulate these buildings under their authority under the CAA, the EPA should

a nalyze the energy savings potential of such facilities and provide a guidepost of the level of energy savings possible for states should there be favorable policy action and resolution of ongoing budget scoring issues. The commenter s believed that the federal government should lead by example in this area as they set aggressive state goals.

Commenter s noted th at EE improvement opportunities are very often identified by plant wide studies, however, many states forbid the expenditure of funds on studies without their first being tied to a funded capital project. Commenters stated t his makes it difficult for plant s to determine their EE needs, as they would need to perform such a study in order to determine how best to spend their money in an efficiency improvement program. The commenter s requested that EPA32 encourage states to remove this "roadblock" to efficiency improvement efforts and any CO2 reduction targets.

Commenters supported Building Block 4. Commenters stated that although a number of industry observers assert that the Plan requires specific actions by utilities, generators and states, and would result in the EPA controlling state and utility operations in an unprecedented manner (cited Sue Kelly, President and CEO of the American Public Power Association and Nick Akins, the Chairman, CEO and President of American Electric Power, SWEPCo's parent company ). Commenters believed EPA's goals are modest, particularly for Arkansas. Commenters asserted that the proposed rules will not change the grid functions of the regional transmission organizations (RTOs), the capacity or energy markets, or state regulation; the RTOs (MISO and SPP) will continue to oversee the transmission system, although they may be somewhat busier reviewing the changes needed to accommodate retirements of older steam plants, additions of renewables, and increased imports. Commenters added that the capacity market in MISO (SPP does not have a capacity market) will not be affected, other than that the cost of new entry may vary, due to changes in market energy prices, and the energy markets will operate as they do now, with lower loads (due t o energy

- efficiency programs), more renewable energy, less coal and more gas, and probably with the fossil plants including a regional carbon price in their energy bids, as generators in California and New England do now. Commenters also noted that state r egulation will not change in any fundamental manner. Commenters stated that the Arkansas PSC will still review the need and economics of new generation and transmission projects in the state, before issuing a Certificate of Public Convenience and Necessity ; determine whether power

- purchase contracts are beneficial before allowing them in rates; determine the ratemaking for energy

- efficiency programs; and reward or penalize utilities for good or poor performance, as it does now; the Arkansas DEQ will still i ssue permits; and it will just have one additional program under which it will issue permits and determine compliance, probably through a regional emissions

- trading approach similar to that in the Regional Greenhouse Gas Initiative.

Commenters supported EE as an emission reduction measure. Commenters stated while the specific question of whether energy efficiency measures may be used to help define the " best system of emissions reduction " has not arisen in the past, EPA has repeatedly, und er administrati ons of both parties, used efficiency measures to facilitate more cost

- effective compliance mechanisms under the Clean Air Act. (See Jeremy M. Tarr, et. al. 2013. Energy Efficiency and Greenhouse Gas Limits for Existing Power Plants) c ommenters cited the EP A under both Presidents George W. Bush and Clinton released a number of guidance documents explaining how states could use energy efficiency measures to satisfy their obligations under the NOx SIP call. Commenters stated, in these guidance documents, EPA h as applied energy efficiency approaches in other titles of the Clean Air Act, as well. Commenters said, for example, the Title IV Acid Rain Trading Program created a set of credits that would allow utilities to earn allowances in the trading program by cre ating qualified energy efficiency programs for consumers. 60 42 U.S.C. section 7651c (f ) ( 2 ) ( A); see David R. Wooley, The Clean Air Act Amendments of 1990: Opportunities for Promoting Renewable Energy (Technical Report NREL/SR

- 620

- 29448, Dec. 11, 2000), a vailable at http://www.nrel.gov/docs/fy01osti/29448.pdf .)33 Commenters stated that Building block 4 sets goals for electricity generation savings measures to reduce demand for electricity. Commenters said demand side energy efficiency has long been recognized as a least

- cost means of reducing demand for generation and thereb y reducing greenhouse gas emissions. (8879 Fed. Reg. 34,871; Tim Woolf et al., Unleashing Energy Efficiency: The Best Way to Comply wit h EPA's Clean Power Plan, 30 Pub. Util. Fortnightly 32 (Oct. 2014), available at http://synapseenergy.com/sites/default/f iles/Unleashing%20Energy%20Efficiency%2014

- 093.pdf )

Commenters noted that demand side energy efficiency programs currently are administered by many states, electric utilities, and third

- party administrators, and energy efficiency resource standards are in p lace in over twenty states.

Commenters continued, stating that for decades, California has enforced an expanding network of efficiency standards, which has helped minimize the energy needed to power appliances and buildings. (Se e generally Cal. Energy Commn, Tracking Progress: Ene rgy Efficiency (2013), available at http://www.energy.ca.gov/renewables/tracking_progress/documents/energy_efficiency.pdf.) Energy savings are projected at nearly 70,000 GWh in 2013 alone . ( Id.) Commenters said the California E nergy Commission estimates that these efficiency standards have generated $74 billion in savings for California consumers over the last several decades. (See Id.) Commenters stated that energy efficiency is the first resource California looks to as it cons iders its energy needs, and is the first resource considered in procurement proceedings under California's loading order. (See generally Cal. Energy Commn, Implementing California's Loading Order for Electricity Resources (2004), available at http://www.energy.ca.gov/2005publications/CEC

- 400

- 2005

- 043/CEC

- 400

- 2005

- 043.PDF )

Commenters said energy efficiency also is widely recog nized as the least cost energy res ource. Commente rs said a study released earlier this year examined the costs of utility

- sector energy efficiency programs in twenty states over a recent four

- year period (2009

- 12). (Am. Council for an Energy Efficient Econ., The Best Value for America's En ergy Dollar : A National Review of the Cost of Utility Energy Efficiency Programs, at 39

- 40 (Mar. 2014).) Commenters said that study found that energy efficiency cost an average of 2.8 cents per kWh, with a range of 1.6 to 4.8 cents per kWh. Commenters stat ed, by comparison, conventional resources cost two to three times as much per kWh. Commenters added that the study further concluded that the data show that energy efficiency has remained the lowest cost resource over the past decade even as the amount of energy efficiency being captured has increases significantly. Commenters concluded that demand side efficiency is, therefore, not only cost

- effective, it can achieve cost savings for end users.

Comment 2: EE for goal

, compliance o nly; EE as option , not mandate

Response 2: The EPA decided to not include DS

- EE in BSER in the final CPP. See section s V.A and V.B of the final rule preamble of the CPP for details. However, DS

- EE remains generally available for compliance, as the EPA recognizes that a wi de variety of EE measures can be cost

-34 effective emissions reductions strategies which create multiple benefits, including lower electric bills, positive investments and job creation. DS

- EE programs are being implemented widely across the sector and investm ents are increasing. Energy efficiency measures also continue to offer future emissions reductions opportunities. See multiple subsections of section VIII of the final rule preamble of the CPP and the Demand

- side Energy Efficiency TSD for CPP Final Rule fo r details on use of DS

- EE for compliance.

The following are summaries of the specific public comments under this comment:

Commenter s recommended that energy efficiency measures should be used for compliance demonstration purposes only, and not used to determine the emission targets. The commenter s questioned whether Building Block 4 or demand

- side energy efficiency projects should be i ncluded in the determination of BSER because these " affected entities " are not affected EGUs, as stated in the proposed rule. The commenter s stated that affected entities, including demand side energy efficiency projects, should only be allowed in the comp liance demonstrations at the discretion of owners and operators of affected EGUs. Commenter s recommended that energy efficiency measures should be used for compliance demonstration purposes only, and not used to determine the emission targets. Commenter s s tated as proposed, Building Block 4 would reduce CO2 emissions from each state by increasing demand

- side energy efficiency to 1.5 percent annually by using energy efficiency improvements. Commenter s did not believe that Building Block 4, or demand

- side ene rgy efficiency projects, should be included in the determination of BSER because these " affected entities " are not affected EGUs as stated in the pr oposed rule. Commenter s state d that " affected entities ," including demand side energy efficiency projects sh ould only be allowed in the compliance demonstrations at the discretion of owners and operators of affected EGUs. Commenter s stated in addition, the evaluation, measurement, and verification of energy efficiency projects must be subject to high quality qua ntification and the same enforceability standards as required for affected EGUs under Building Block 1. Commen ter s stated without requisite criteria for accurate quantification and enforceability of energy efficiency projects, the integrity of the proposed Section 111 (d) program is further compromised.

The commenter s stated that they find it implausible that line losses can be reduced by .09%. If anything, the commenter s stated that because the CPP is likely to drive so many retirements of existing coal plants for which the existing transmission grid was designed as to increase line loss. The commenter s stated that at the same time, the potential for additional renewables bringing remote wind energy from its source to more populated areas in the east, longer transmission equates to greater, not lesser, line loss. The commenter s stated that and, according to the MISO report on the impact of the GHG Rule, MISO cannot confirm the same reduction in demand through increased energy conservation practices and programs as assumed by the USEPA, suggesting that reduced demand cannot replace the fossil

- fuel generati on that will retire due to this rule.

Commenter s stated EPA cannot restrict the energy efficiency measures that a state might use to comply with their state goal to less than what EPA assumed in establishing the state goals using Block 4. Commenter s s tated that while the TCEQ recommends the EPA not include energy efficiency assumptions in the state goal calculation, if the rule is finalized with Building Block 4 then the states' ability to use energy efficiency programs as compliance strategy under the section35 111(d) rule must be on the same basis as the EPA assumed in setting the state goals. Commenter s noted that EPA did not consider any restrictions on energy efficiency programs when evaluating measures in Block 4. Commenter s stated EPA's Block 4 ass umptions would be invalid unless EPA can show that their assumed energy efficiency growth corresponds to the programs that are allowed to be used by the states in the final rule. Commenter s indicated that states' ability to comply with the state goals woul d be adversely impacted by the EPA restricting measures that can be included in the state plan when no such restriction was assumed by the EPA in establishing the state goals.

Commenter s stated EPA's Building Block 4 goals are based on a very aggressive implementation of energy efficiency. Commenter s stated energy efficiency programs tend to drive up rates, even when weighed against avoided generation and fuel savings. Commenter s stated although program participants' bills may decrease, the fixed cost of paying for existing assets is spread over a smaller pool of purchases, and some customers may never have a meaningful opportunity to participate. Commenter s stated these non

- participants then pay more than they would have had traditional resources been pu rchased instead. Commenter s stated this adversely affected group includes some of our poorest citizens who cannot afford energy efficiency investments, and industries and other consumers that may already be doing all they can to save electricity.

Commenter s suggested that the impact of these problems can be decreased by eliminating renewable energy sources and energy efficiency from the emissions reduction goal, but still allow them to be counted towards compliance with the overall goal. Commenter s stated t his will allow states to determine the appropriate level of energy efficiency and renewable energy sources based on the characteristics of each state, and will eliminate the incentive to build renewable infrastructure in sub

- optimal locations.

Commenter s stated that it is critically important to ensure that energy consumer demand

- side management and other carbon savings be voluntary and fully compensated. Commenter s said EPA noted the importance of demand

- side management and renewable energy efforts to m eet the substantial 30 percent carbon reduction under the proposed rule. So that large energy consumers do not face a double burden of increased energy costs and required demand

- side management under the proposed rule, commenter s stated that it is importan t the EPA make clear that all energy consumer demand

- side activities are to be voluntary. Equally important, commenter s said EPA must make clear that energy consumers are to receive the full economic value of any demand

- side management or other carbon

- redu cing activities they pursue. In order to do this,
commenter s said EPA must clarify that energy consumers that implement energy

- efficiency, renewable energy or other carbon

- reducing activities are to be considered the owner of the carbon

- emission reductions associated with those efforts. Commenter s stated that, only if this occurs will energy consumers, who are the ones ultimately burdened by the cost impacts of the proposed rule be able to at least partially mitigate those costs.

Commenter s stated EPA sh ould not use demand

- side energy efficiency to calculate state goals. Commenter s stated the proposal seeks to incentivize the conversion of energy from coal to natural gas, nuclear, renewables such as wind and solar, and energy efficiency. While the plan

o nly lists energy efficiency as an " option " not a mandate, c ommenter s noted the state goals cannot be achieved by relying only on reductions from affected EGUs, or even reductions from affected EGUs and re

- dispatch with natural gas (Building Blocks 1 & 2). Commenter s stated36 EPA admits as much by calculating different, less stringent goals when relying only on Building Blocks 1 and 2 as BSER. (calculating Blocks 1 & 2 only state goals before entering nuclear, renewable, and EE into the denominator).

Commente r s stated the inclusion of Building Block 4 works better as a carrot, that is, a way to reward states for implementing these programs, and not as a stick, that is, by including EE in the goal setting process. Commenter s cited EPA's words,

" M easures that avoid CO2 emissions from affected EGUs, such as quantified and verified end

- use energy savings and renewable energy generation, could be used to adjust the CO2 emission rate of an affected EGU when demonstrating compliance with a rate

- based CO2 emissi on limit. Alternatively, a state could use the effect of such measures as a basis for administratively adjusting the average CO2 emission rate of affected EGUs when demonstrating achievement of the required emission rate performance level in a state plan."

Commenter s stated this logic applies to demonstration of lower carbon intensity, not to setting a goal based on faulty, overstated assumptions.

Commenter s indicated that states may be resistant to allowing EPA to enforce energy efficiency
programs, an d suggested that EPA consider removing energy efficiency from the BSER building blocks, and instead encourage adoption of energy efficiency programs (such as the robust program in Washington State) as alternative, flexible compliance options.

Commenter s stated that in light of the uncertainties associated with Building Block 4, demand

side EE requirements should be included as an optional means of compliance with a performance standard grounded in the statute. Commenter s agreed that EE is an important g oal and supported use of demand

- side EE as a means of reducing demand for electricity. Commenter s stated it is not appropriately incorporated as a requirement into a CAA section 111(d) standard of performance, but rather, EPA should consider EE programs, a long with other measures that reduce emissions of CO2 discussed in the following section, as an optional means of compliance with a CAA section 111(d) standard. Under this scenario, c ommenter s stated they would be able to adjust the emission rate based on avoided MWh across its members by adding the avoided MWh to the denominator of the pounds per CO2/MWh emission rate.

Commenter s stated that Ameren customer primary market research shows that the annual load reduction targets from Build Block 4 are unlik ely to be able to be met in a cost effective manner, absent the ability to count energy savings achieved beginning in 2012 towards meeting the EPA goals and absent creative reporting practices followed by states with Energy Efficiency Resource Standards le gislation. Commenter s stated in addition, the assumptions and methodology underlying EPA's assessment of EE/DR in calculating individual states' goals is flawed. Commenter s stated each state has methods to determine the cost

- effectiveness of energy efficie ncy, as well as methods for verifying the levels of reduction that should be, but are not, respected by the rule. Commenter s stated moreover, companies can offer a full menu of efficiency programs, but if the end user does not implement them, the efficienc y targets will not be reached. Commenter s stated thus, the proposed rule does not give full effect to the intent of and application of existing state efficiency and demand response rules. For the reasons set forth37 below, c ommenter s suggested that the propo sal allow owners and operators of affected sources to use EE/DR measures to demonstrate compliance with rate

- based state goals, but not rely on EE/DR measures to calculate state goals.

Commenters provided comments that may be somewhat outside the scope of this section. According to these commenters EE should be allowed as an option for state plans, but sho uld not be included in EPA's goal setting.

Commenter s remarked that the EPA incorrectly calculated the assumed benefits of future energy efficiency improvements in Block 4 because the EPA applied the energy savings to the entire electrical generation fleet in 2012 without accounting for the fact that some of the future generation would be from new units, which would not be subject to the rule. Energy efficiency programs should be allowed as an option for a state's compliance but not as a component of the EPA's BSER determination. The commenter s added that, ev en at the base level, the calculation is incorrect because it is based on total 2012 net sales of electricity, but excluded generation from existing hydroelectric power and most nuclear power plants. The commenter s added that the EPA compounded this error by assuming that, in the future, the savings from energy efficiency measures can be solely attributable to the fossil fuel

- fired fleet, despite the fact that significant retirements of units is expected. Commenter s explained that, even though the new EGUs brought online will be outside of the fleet of units subject to the state goal requirements, the new units will still provide power to the electrical grid as a whole, and any energy savings from future energy efficiency savings would also affect the genera tion of the new units as well. The
commenter s stated that even further complicating this issue is the fact that some of the savings from energy efficiency measures will be attributable to future renewable energy generation that the EPA assumed for Block 3. The commenter s stated that, by applying all the energy efficiency savings to only the affected fleet of EGUs, the EPA's calculation biases the state goal low because all energy savings are included in the denominator, but only CO2 emissions from the affec ted EGU fleet are included in the numerator. Commenter s added that, if states are required to make adjustments to account for only the energy efficiency attributable to affected units, when the EPA did not account for this issue in setting the state goals, the discrepancy between state goal calculations and compliance demonstrations would further bias the rule against states. For this and other reasons, the commenter s suggested that the EPA abandon its attempt to incorporate energy efficiency measures in th e state goal calculation. Commenter s stated that, instead, energy efficiency measures should be allowed as an option for state plans, but should not be included in the EPA's BSER determination.

Commenter s stat ed that the EPA should discourage the use of state mandates to reduce electricity use and should clearly indicate that voluntary private sector

- run energy efficiency projects, including those conducted by industrial operations within a state, should constitute approvable components of state complian ce plans. C ommenter s expressed appreciation for allowing states broad discretion to design plans that work best for their power supply mix and energy customer base, but explained that the EPA's aggressive assumptions regarding the availability of end

- use

e nergy efficiency, and the Agency's focus on often ineffective state and utility energy efficiency programs, risk sending inappropriate signals to states as they draft their compliance plans. Commenter s were concerned that, in order to secure approval of th eir compliance plans from the EPA with minimal uncertainty, states would feel obligated to impose only restrictive command

and

- control energy efficiency regulations or would rely primarily on state

- or utility

- run38 programs. C ommenter s stated that such prog rams are often less effective and more expensive at generating energy savings from large industrial facilities.

Commenter s believed that EPA's efforts to force demand

- side energy efficiency improvements were counterproductive since it is certain to pre cipitate a waste of valuable resources in lengthy legal battles. Rather than this path, commenter s encouraged resource investment in voluntary energy efficiency improvement programs like EPA's existing ENERGY STAR program. C ommenter s also stated that EPA s hould encourage projects/programs that lead to energy efficiency improvements, such as streamlining permit approval of innovative technologies and applications through various CAA programs. C ommenter s concluded by giving some specific examples of their tec hnology which could be used to reach EE goals.

Commenter s w ere concerned with the proposed guidelines as written because they will eliminate the flexible, voluntary nature of the demand side management (DSM) programs in place and instead force a federal requirement with enforceable mandatory components that will significantly alter the function of most state plans. C ommenter s w ere also concerned with the ramifications this treatment will have on program implementation and participation that could undermine the efficacy of these programs. C ommenter s stated that by design, DSM programs are intended to incentivize and encourage the ad option of new technology, equipment, or practices that result in reductions across factors such as consumer costs, energy consumption, need for additional generation, and EGU emissions levels. By mandating them, DSM's would risk losing their flexibility an d ability to motivate and encourage innovation.

Comment 3: Commenters did not s upport EE and stated the EPA should eliminate BB4 goal.

Response 3: The EPA decided to not include DS

- EE from the proposed BB4 in BSER in the final CPP. See section s V.A and V.B of the final rule preamble of the CPP for details. However, DS

- EE remains generally available for compliance, as the EPA recognizes that a wide variety of DS

- EE measures have been achieving significant energy savings for years with additional opportun ity to achieve energy savings in the future. Further DS

- EE programs are being implemented widely across the sector and investments are increasing. See Demand

- Side Energy Efficiency TSD for more information on energy efficiency potential. See multiple subse ctions of section VIII of the final rule preamble of the CPP for details on using DS

- EE for compliance.

The following are summaries of the specific public comments under this comment:

Multiple c ommenters did not support use of EE.

Multiple c ommenters stated EPA should eliminate the BB4 goal.

Commenter s noted that moving more motor vehicles to electric vehicles (EV) only works if the electrical generation grid is generating clean energy versus high carbon energy. According to
commenter s , the US elect ric generation grid today is not a clean energy solution.

Commenter s noted that building block four wrongly assumes that selective and unsustained demand site energy efficiency results from only three states can be achieved continuously in39 every state i n the nation. According to commenter s , demand site energy efficiency
programs have historically been very difficult to implement, enforce, monitor and verify. According to commenter s , efforts to reach the assumed levels are sure to raise costs for our
cust omers, almost half of which have household incomes of less than 40,000 a year.

Commenter s noted that Building Block 4 assumes state

- level increases in demand

- side energy efficiency to achieve annual incremental savings of 1.5%. From perspective of comme nter s , there were other potential impediments to achieving EPA's assumed avoided electricity sales from energy efficiency. Commenter s noted that while the assumed avoided electricity sales from energy efficiency is technically feasible, market adoption of the technologies necessary to achieve this level of savings are untested. Commenter s noted that the ability to achieve EPA's assumed avoided electricity sales form energy efficiency is a scenario for which Florida, and most other states, has not experience d. Additionally, commenter s noted that achieving this level of saving is not cost free. According to commenter s , the likely result will be to put tremendous pressure on customer bills due to program operating costs, incentives to encourage investment in

en ergy efficient technologies, and unrecovered fixed costs. Commenter s noted that assuming some of the energy efficiency savings would come from stricter building codes and appliance efficiency requirements, the costs of home and business construction is lik ely to increase, affecting housing affordability.

Commenter s stated that the fourth Building Block in the Proposed Rule is energy efficiency/demand side management ("EE/DSM") that is intended to reduce demand for generation by end

- users. Conceptually, a ccording to commenter s , a reduction in demand would result in a reduction in generation, which in turn would result in a reduction in emissions. According to commenter s , EPA estimated energy efficiency in the twelve leading states to achieve annual increme ntal electricity savings of at least 1.5% per year. According to
commenter s , EPA's concept of BSER assumes that many states increase their current annual savings rate by 0.2% starting in 2017 and continuing until reaching a maximum rate of 1.5%, which then continues through 2030, quoting EPA as follows, " States already at or above the 1.5% annual incremental savings rate ... realize a 1.5% rate in 2017 and maintain that rate through 2029. "

Commenter s noted that after explaining that EPA's estimates of potential energy efficiency savings are " potentially overstated " for several reasons, NERC adds that EPA's theory that even these overly optimistic predictions will counteract normal load growth is count er to the predictions of other electric system experts.

Commenter s quoted NERC as stating the following:

"With potentially overstated expectations for energy efficiency savings, the EPA's demand forecast results in a decline in electricity use between 2020 and 2030. While other major power market forecasters' electricity sales compounded annual growth rates (CAGR5) for the period between 2020 and 2030 are strictly positive (AEO 2013: 0.7 percent, EPRI: (achievable potential) 0.4 percent, NERC average of ass essment studies: 1.5 percent), the EPA assumes a CAGR of

- 0.2 percent for the same time period. Between 2020 and 2030, the EPA assumes incremental
year

- over year reductions from energy efficiency to be almost 41 TWh nationally40 on average, outpacing year

- ov er

- year national electricity sales growth of 31.6 TWh, on average. The main reason for this result is the EPA's assumption of states being able to sustain an annual incremental growth rate in energy efficiency savings of 1.5 percent once achieved. As menti oned above, this sustainability is not supported by any peer

- reviewed or technical studies of energy efficiency potential."

Commenter s noted that Entergy's utility companies operate reflecting varying levels of implementation of energy efficiency programs within their respective jurisdictions. According to
commenter s , Entergy Texas began implementation in 2000; Entergy Arkansas in 2007; Entergy New Orleans in 2011; and Entergy Mississippi has begun its implementation in 2014. Commenter s noted that Entergy Louisiana and Entergy Gulf States Louisiana are awaiting an implementation order. Commenter s noted that these programs are specific to and dependent upon the approval of the state utility regulators.

Commenter s stated that EPA estimated potential EE/DSM outcomes by state. Commenter s included a comparison of the estimated potential EE/DSM available as included in the Integrated Resource Plans (" IRP ") for each of the Entergy utility companies. According to commenter s , when one considers th e internal estimates prepared for inclusion in the IRP cases, it is clear that EPA's estimates for EE/DSM are overly optimistic. According to commenter s , this is especially apparent for the Arkansas and Texas utility companies, which have the most experien ce with the EE/DSM efforts. According to commenter s , with the exception of Entergy Mississippi, EPA estimates exceed the reference cases included in the IRPs. According to commenter s , for the two Entergy companies that have the most robust history (Entergy Arkansas and Entergy Texas), EPA's estimates exceed the IRP high cases. Commenter s noted that for the Entergy Louisiana companies (Entergy Gulf States Louisiana, Entergy Louisiana, and Entergy New Orleans), EPA's terminal values are higher than the refere nce case, but lower than the expected high cases.

Commenter s noted that while EPA's estimates may be achievable theoretically, the cost for this level of EE/DSM would be prohibitive. According to commenter s , the experience garnered from Texas and Arkansas indicates that the most cost

- effective " low hanging fruit " of efficiency measures already has been harvested. Commenter s noted that additional EE/DSM "harvests" are expected to come at a much higher cost. For each additional KWh saved, commenter s noted tha t the costs per KWh for these savings are increasing. Included below is a graphic that shows the experience from Entergy Arkansas and Entergy Texas, demonstrating how the cost of EE/DSM has escalated over time. According to commenter s , the Entergy utility companies in Louisiana and Mississippi have had only limited experience with the programs to date and, therefore, do not have sufficient history for comparison.

According to commenter s , the primary concern regarding the Building Block 4 implementation (as opposed to goal

- setting, discussed above) is the ambiguity of regulatory authority. According
to commenter s , the primary responsibility for implementation of and compliance with the 111(d) plan for a state falls to the environmental regulatory bodies, such as, in Entergy's utility states, the Arkansas Department of Environmental Quality, the Louisiana Department of Environmental Quality, the Mississippi Department of Environmental Quality, and the Texas Commission on Environmental Quality. According to comm enter s , each of these environmental regulatory41 agencies has authority only for " inside the fence " environmental operations and lacks the authority for the " outside the fence " obligations of Building Block 4 (EE/DSM).

Commenter s noted that in contrast, the authority for establishing and providing recovery mechanisms for traditional utility costs, as well as the costs associated with Building Block 4 and the other proposed Building Blocks, belongs to the utility regulatory commissions (e.g., the Arkansas Publ ic Service Commission, the Louisiana Public Service Commission, the Mississippi Public Service Commission, the New Orleans City Council Utility Committee, and the Public Utility Commission of Texas).

Commenter s noted that the ambiguity of responsibilities among the various agencies will be difficult to manage. According to commenter s , the " beyond the fence " regulation has the potential to require generators to answer to two (or more) masters. Commenter s noted that the utility regulatory bodies will be respo nsible for the cost recovery and goal setting and administration, while compliance with the statewide emissions rate falls to the environmental regulatory bodies. According to commenter s , this concern applies not only to Building Block 4, but to the entire proposed regulatory scheme.

Commenter s noted, in addition, the impacts to the generators and utilities will be difficult to discern in regions where there is not a match of service boundaries t o political boundaries (i.e., state borders). According to com menter s , the regulators likely will require a common approach with which all participants comply to allow for the summation of the results for the entire state.

Commenter s stated while EE is an important tool for lowering costs to society, it is not a legally valid option for the purposes of setting a state goal. Commenters stated that a s an outside the fence activity, it is not subject to being part of a mandated state goa l process under Section 111(d).

Commenter s stated the EE reductions intended to achieve compliance with EPA emission guidelines must be real and verifiable. Commenter s recognized that EE plays and important role in an " all the above " energy plan and th at many states and utilities have valuable demand side EE programs. Commenter s stated the incorporation of these valuable programs into regulations under the Clean Air Act requires consideration that goes beyond the overall merits of the programs and their goals. Commenter s stated as previously stated, EPA has no legal authority to include EE measures in its calculation of state goals under section 111(d). Commenter s stated however, standard aside, should states elect to include these EE programs in their c ompliance plans, EPA must ensure that claimed EE reductions are real, verifiable, and based on consistent methodology. Commenter s stated these " reductions " are effectively credits for energy not used, and in any circumstance where you are measuring and ass igning credit for something that did not occur, care must be taken to ensure the " non

- occurrence " is in fact real and resulting from a particular action taken or program developed to incent the " non

- occurrence ."

Commenter s stated that Alaskan homes and businesses are already built to withstand the long winters, and the State of Alaska's Home Energy Rebate Program reimburses homeowners for making energy efficiency upgrades that save energy and lower power and heating bills. Commenter s stated new effici ency programs will do little to reduce carbon dioxide emissions.42 Commenter s stated that because they provide our product at cost, every additional cost that incurred must be passed on to the customer. Commenter s stated the nature of this model has incen tivized us to naturally create energy efficiency and conservation programs over our nearly 70 years of existence that make economic sense to our customers, reducing their cost, not adding to it. Commenter s felt that, based on the diversity of electrical p roviders, this should continue to be our role, and not that of the EPA.

Commenter s stated the inclusion of DSM energy efficiency in the EPA's definition of a " best system of emissions reduction " should be removed. Commenter s stated the inclusion of DSM energy efficiency creates a " standard for emissions of air pollutants " that cannot be a measure. Commenter s stated DSM energy efficiency is not a measurable standard because measurement of these types of programs is based on mu ltiple layers of estimates. Commenter s stated this fact is recognized by the EPA when it states " many states with energy efficiency programs use different input values and assumptions " to estimate energy savings from such programs. Commenter s stated DSM e nergy efficiency doesn't yield the emission reduction results EPA estimates. Commenter s stated DSM energy efficiency is infeasible as a compliance option because it is not dispatchable and is not measurable in any meaningful way. Commenter s stated therefo re, DSM energy efficiency should be removed from EPA's building blocks and resulting emission reduction calculations.

Commenter s stated EPA's assumptions regarding demand

- side EE improvements are arbitrary and capricious. Commenter s stated EPA does not justify its assumptions of increased demand

side EE in the administrative record. Commenter s stated EPA's insufficient record makes its assumptions regarding demand

- side EE arbitrary, capricious, and unreasonable. Commenter s stated EPA relies on data fro m the recent recession and slow economic recovery and fails to account for how energy efficiency rates might be impacted during other, more positive economic conditions.

Commenter s stated building block 4 has not been adequately demonstrated and must, therefore, be stricken. Commenter s stated EPA's assumed end

- user energy savings are unachievable. Commenter s stated programs for demand

- side efficiency gains have been in place for decades, and the energy gains achievable through the use of those sorts of programs have been nearly maximized, especially for rural electric cooperatives where there are no meaningful efficiency gains left to capture. Commenter s also stated EPA has left unanswered critical implementation questions, not the least of which is unde r what authority states/utilities will force consumers to use less electricity.

Commenter s concluded that Building Block 4 would pose the following reliability challenges:

• EPA appears to overestimate the reduction in electricity demand from energy efficiency that is achievable over the compliance time frame, which has implications for future electric transmission and generation infrastructure needs;

• Substantial increases in energy efficiency programs exceed recent trends and projections; in fact, se veral sources, including but not limited to NERC, EIA, EPRI, and various utilities, have published reports, analysis, and forecasts for43 energy efficiency that do not align with the EPA's assumed declining demand trend;

• The NOPR's assumption appears to unde restimate costs and may underestimate the capital investments that would be required by utilities to sustain energy efficiency performance through 2030; and

• The offsetting requirements in more coal retirements, along with expansions in natural gas and VERs , in a constrained time period could potentially result in reliability or constraints on the provision of ERSs.

Commenter s stated that given the aggressive nature of the NOPR's proposed emission reduction targets, many States will have no choice but to pur sue demand

- side energy efficiency improvements. Under those circumstances, c ommenter s indicated States may be inclined to focus energy efficiency efforts on energy intensive industry sectors such as those represented by ELCON's members because, from a regu latory perspective, it may appear more efficient to focus on a limit number of large industrial sources. Commenter s stated they have documented that such efforts can be counterproductive. Commenter s stated the higher rates that industrial consumers pay to their utility to comply with the State

- mandated energy efficiency programs (or to subsidize utility investments in renewable resources) reduce the funds available to the customer for investing in hi gher value projects that may be more aligned with EPA's objectives. Commenter s stated thus, industrial consumers would be forced to "borrow" money from the host utility to fund the energy efficiency measures in a SIP at an effective cost of capital that ex ceeds the consumer's own cost of capital.

Commenter s stated Building Block 4 and the utilization of EE measures should not be part of establishing the performance standards for this rule. Commenter s stated it would involve requiring the EGU's to contro l their product downstream of the facility. While energy efficiency measures are a very cost effective way to reduce energy consumption, c ommenter s stated they are not pollution control measures and are outside the intent and precedence of Section 111 of
t he Act. Commenter s stated currently, these measures are under the authority of the Mississippi Public Service Commission and the Mississippi Development Authority. Commenter s stated including energy efficiency measures in the CPP creates intrastate autho rity issues, in addition to creating burdens and increased cost to resources without any benefit to the State since these measures would have been implemented regardless of the CPP. Commenter s stated EE measures should be left to the State Public Service Commissions and Energy Offices and not included as part of a pollution control standard.

Commenters stated that EPA has determined that significant improvements in end

- use energy efficiency (EE) are to be a primary means of achieving greenhouse gas emis sion reductions even though these requirements are based on the conduct of consumers of electricity rather than generators of electricity, and are beyond the control of EPA, most state environmental agencies, and utilities. Commenters stated that Section 1 11 does not authorize EPA to extend its jurisdiction beyond the stationary source by attempting to regulate demand for the good, service, or product that source produces. Commenters continued, stating virtually every business, institution and household in the country requires energy in the form of electricity, and that energy is provided by existing EGUs. Commenters stated, using EPA's logic in Building Block44 4, which requires increases in end

- user energy efficiency and other efforts to reduce demand, this proposal could well apply to every consumer of electricity and is well beyond EPA's authority. Commenters concluded that without the reliance on the outside

- the

- fence

- line consumer end

- use efficiency that EPA assumes States can achieve, EPA's analysis and justification for state emission limits falls apart, undermining the emission reduction targets set forth in the rule.

Commenters stated that inclusion of Building Block 4 is ultra vires, and that EPA has no authority under the CAA to regulate, or requi re investment in, EE, and consequently, EPA has no authority to impose on states under Section 111(d) an obligation to do the same or, as EPA suggests, achieve equivalent emission reductions through other, jurisdictional means. ( Inclusion of Building Block 4 is ultra vires for the same reasons that inclusion of Building Block 3 is ultra vires. See Section 2.IV.B, supra. These arguments are incorporated by reference and will not be repeated here.)

Commenter s stated that the EPA should not include energy e fficiency in its basis for state goals and should not accept state plans which include energy efficiency as CAA enforceable
programs.

Commenter s stated the assumptions behind building block 4, demand

- side energy efficiency improvements, create a number of measurement and verification concerns. Commenter s stated EPA's analysis suggests a perverse dichotomy in which available energy efficiency improvements would not be realized in the absence of this proposal, but would be adopted completely with the prop osal. Commenter s stated this may be a limitation of EPA's analytical capabilities, but it most surely contradicts reality.

Commenter s noted that according to the ACEEE, states spent $6.3 billion on electricity efficiency programs in 2013, even without the influence of EPA's proposal. Efficiency improvements are obviously cost effective without the CPP in place. Commenter s stated in fact, NERA Economic Consulting found that, "rational consumers would adopt the [efficiency] changes without the need for a gove rnment program." Commenter s stated the result of this analytical limitation is that it is now impossible to compare EPA's work to analyses that capture
cost

- effective efficiency in the baseline, and we have a poor understanding of the proposal's costs. Com menter s stated moreover, EPA's analysis considers only the cost of the efficiency investments themselves and not the program costs necessary to overcome barriers to those investments at present. Commenter s stated this undoubtedly hides the true costs of ef ficiency programs that will contribute to compliance.

Commenter s stated that while it is recognized that EPA will respond that the building blocks are presented as way to meet compliance in a portfolio approach, one must wonder and question if this building block approach is viable if the example developed by EPA itsel f turns out to be a formula that for all the reasons above cannot achieve EPA's objective. Commenter s stated EPA's failure to apparently consider these many issues and the inter

- related nature of all these factors make the premise not credible. While it is understood that the underlying issue is the performance targets, Commenter s questioned whether states can be expected to find viable approaches and solutions if EPA cannot?45 Commenter s stated Building block 4 establishes a goal for demand

- side energy e fficiency programs with a cumulative target for Kansas of 9 percent. Commenter s stated the Kansas legislature passed House Bill 2482 in the 2014 session. Commenter s stated the new law provides utilities the opportunity for cost recovery for demand side man agement programs. It establishes a voluntary program that is in the initial stages of implementation. Commenter s stated it has no compliance provisions that could be adapted into a state 111(d) plan. Commenter s stated transitioning from a voluntary progra m in its developmental stages to a regulatory program with hard targets to meet the interim goals contained in the proposal would be a great challenge. Commenter s stated in addition to these general issues KDHE has concerns regarding EPA's legal authority to mandate energy efficiency, EPA's disregard for certain studies developing the goal for this building block, and the source of EPA's data that serves as the basis for the building block 4 goal calculations and verification of energy efficiency savings.

C ommenter s stated EPA notes in the preamble that some stakeholders have argued that CAA section 111(a)(l) does not authorize the EPA to identify re

- dispatch, low

- or zero

- emitting generation, or demand

- side energy efficiency measures (building blocks 2, 3, and 4) as components of the BSER. Commenter s stated EPA has not identified their authority for regulating customer end

- uses of electricity. Commenter s stated energy policies that include EE programs and goals are traditional areas of regulation reserved fo r states, and included in integrated planning processes in states with vertically integrated utilities. Commenter s stated however, not all states have integrated planning or all vertically integrated utilities, including the State of Kansas. Commenter s sta ted thus, the use of building block four in setting the section 111(d) proposed standards for all states is not appropriate.

Commenter s stated reducing emissions from affected EGUs in the amount that results from the use of demand

- side energy efficiency that reduces the amount of generation required. Commenter s stated that while EPA believes reduced demand on power plants is a proven, low

cost way to reduce emissions, which will save consumers and businesses money and mean less carbon pollution, this co ncept is a little naive. Commenter s stated too often in the past, businesses and even consumers have gone to behind the fence generation where these units did not meet the same emission levels or are as well

- controlled as EGUs. Commenter s stated the net

re sult has been increases in NOx emissions, as well as CO2 emissions, as such units are not as efficient or as well controlled as much of the fossil fuel EGU generation. Commenter s stated the net result would be increases in GHG emissions occurring at the sa me time as these Units run and fossil fuel units curtail or do not run.

Commenter s stated the last adjustment made by the EPA in calculating the final state emission rate goal is energy efficiency measures, BSER Building Block Four. Commenter s stated th at EE makes up a considerable portion of the BSER, and many of EPA's assumptions to derive the projected state EE goals such as for ramping up, annual target rates, EE grows faster than electricity demand, annualized costs, are tenuous.

Commenter s firml y believed that EPA should exclude efficiency projects that are not associated with existing sources of power generation. Commenter s stated CO2 emission goals should be achievable with commercially available technology with a demonstrated achievement capab ility in order to facilitate emission reductions, rather than encouraging emission avoidance.46 Commenter s stated standards should be altered in a realistic manner as more advanced technologies are developed.

Commenter s stated EPA's analysis underlying Building Block 4 is flawed, arbitrary, and capricious, and therefore the inclusion of end

- use energy efficiency as an element of BSER for purposes of setting emission rate goals is invalid. Commente rs stated EPA's method of equating end

- use energy efficiency directly to greenhouse gas emission reductions is flawed. Commenter s stated that as the purpose of EPA's rule is to regulate GHG emissions, EPA has conflated the end

- use electrical energy efficiency with greenhouse ga s emissions in a way that breaks with the physical reality of energy production and use and the emission of greenhouse gas associated with electricity generation. Commenter s stated the uncertainty that a specific end

- use energy efficiency measure will lead to any emissions reduction at all depending on the electricity generation source and whether the consumer decides to spend the dividend from the efficiency on conservation or additional output or comfort shows that end

- use energy efficiency is not a
prope r component of BSER.

Commenter s stated the erosion of the viability of EE reductions over time and incremental higher costs for EE after early actions and initial program implementation. Commenter s stated EPA does not adequately address the risks of lack of persistence of the energy savings involved with energy efficiency programs. Commenter s stated that once an energy efficiency measure is installed, there is a significant risk that the energy savi ngs will not persist. Commenter s stated that homes implementing energy efficiency measures can be remodeled and businesses can go under or change out their equipment for any number of reasons; in either scenario, equipment and appliances can be operated at different levels than anticipated, such as if new occupants are added or removed from a home, weather events cause changes in heating or cooling needs, or equipment is not maintained. Commenter s stated all of these scenarios would lead to end

- use efficien cy measures not leading to the greenhouse gas emission reductions anticipated by EPA or utilities and outside of state control, and for that reason analysis based on the assumptions are flawed and the measures themselves are not BSER.

Commenter s stated demand side energy efficiency is not an appropriate standard of performance. Commenter s fully supported demand

- side energy efficiency programs and has invested heavily in these programs over the past 17 years, however, EPA's proposal to require 1.5 percen t in annual energy savings from demand

- side energy efficiency programs is not an appropriate basis for a CAA section 111(d) standard of performance. Commenter s stated first, this requirement is not "adequately demonstrated." Commenter s stated that EPA admi ts this target is highly uncertain and not supported by firm data. Commenter s stated second, Basin Electric does not market at the retail level and is governed by a three

- tier structure that precludes it from imposing energy efficiency programs on its memb ers (who do sell at the retail level). Commenter s stated Basin Electric has spent millions promoting demand

- side savings through its members and has achieved only about 0.5 percent in energy savings. Commenter s stated EPA's demand

- side energy savings assum ption exceeds EPA's authority to impose, has never been adequately demonstrated, and is impossible to achieve in Basin Electric's experience.

Commenter s stated EPA block 4 analysis also assumes that all energy efficiency programs are
cost

- effective; cl early, that is not the case. Commenter s stated Iowa and Minnesota state law require energy efficiency programs to be cost effective as part of the state rate protection for47 consumers. Commenter s stated if the EPA assumes that the 1.5 percent must be achi eved regardless of cost effectiveness, then the assumptions have failed to meet the adequately demonstrated requirement of BSER. 42 U.S.C. 7411(a) (1). Commenter s stated at a minimum, EPA must include an economic safety valve in its proposal to protect c onsumers.

Commenter s stated the technical feasibility of the buildings blocks mandated by the EPA is not proven, in that the EPA is overestimating benefits from demand side EE established by policy

driven top

- down predictions, rather than engineered bo ttom

- up estimates.

Commenter s indicated that EPA acknowledges that there are practical, economic, and market barriers to tracing the effects of EE deployment, but fails to fundamentally address these issues. Commenter s stated that without addressing the se issues, EPA has not shown that the proposed goals are achievable or adequately demonstrated.

Commenter s stated the Market Potential Studies (MPS) that were relied upon to propose future levels of EE do not provide an adequate basis for use in establishi ng a regulatory compliance target. Commenter s stated that much of the data and information was supplied by EE advocacy organizations and others with a similar focus, and was not subject to a peer review process. Commenter s stated EPA notes that nearly all of these studies represent a "top

- down, policy

based approach" and do not account for all of the practical factors that are necessary to build functioning EE programs; the metrics adopted by EPA largely comport with these findings, and differ substantiall y from the "bottom

- up" engineering based analysis that has been conducted on the topic.

Commenter s stated that EPA chose to use 1.5 percent as the " best practice level " but the MPS do not prove empirically that these levels of EE are achievable or sustain able. Commenter s stated the MPS are not precise engineering analysis undertakings, and that substantial differences in the models, assumptions, data sources, interpretations, etc. by various authors often make significant differences in the results. Comme nter s noted that in an ACEEE study that reviewed 45 publicly available market potential studies performed since 2009, ACEEE found that "for electricity, [the] average annual maximum achievable savings range [was] from 0.3 percent to 2.9 percent", and that is nearly a 1000 percent variation, depending on the assumptions and methodologies employed in the study.

Commenter s stated there is a significant lack of transparency on major model inputs such as forecasting participation rates, incentive level estimates , impacts of codes and standards, emerging technologies, utility avoided cost estimates, and policy limitations, and even modest deviations from these point

- in

- time assumptions, estimates and projections, will compound over time and significantly affect th e results, especially with projections made over 15 or more years, as EPA has done. Commenter s noted that due to these factors, it is generally understood that MPS are most applicable to and best suited for short

- term program planning rather than long

ter m policy application. Commenter s pointed out that EPA itself acknowledges the substantial variation in potential estimates, driven by lack of broad empirical evidence and significantly varying assumptions and methodologies. Commenter s stated EPA ignored th ese limitations, and instead proposed to set legally enforceable requirements based upon such studies. Commenter s stated EPA must re

- evaluate the basis for its proposed goals, and examine the full range of48 studies that have been performed, rather than sel ecting the highest projected rates and applying them indiscriminately across the country.

Commenter s stated additional reduction in customer electrical demand is limited. Commenter s stated they have been successfully operating energy efficiency program s since 1992. Because these programs have been in place for over 20 years, c ommenter s believed that the reductions suggested by EPA are not possible for Interior Alaska. Commenter s stated instead, most members have already implemented cost effective energy efficiency measures. In addition,

c ommenter s stated the high cost of energy in the Interior is a major factor in reducing energy consumption. Commenter s stated for example, essential heating of residences is typically accomplished through oil, wood, or coal

- fired heaters instead of electric heat. Commenter s stated the downside of this reduction in electric energy demand, however, is the Fairbanks airshed classification as a PM2.5 non

- attainment area caused primarily by the emissions from residential heaters. Commenter s stated driving electric costs up even further by implementation of the proposed Performance Goals will likely have a negative impact on PM 2.5 attainment.

Commenter s stated they have an active program that has been encouraging customers for many years to reduce the use of electricity by making energy efficient decisions. Commenter s stated to date, over $6 million have been allocated to our e nergy efficiency programs and about 107,878,652 cumulative kilowatt

- hours (kWh) have been saved. While energy efficiency can always be improved as new products are brought to the market and techniques are developed and made available, Commenter s believed s ubstantial reductions in electrical demand are limited. Commenter s intended to continue to work on demand reduction programs.

Commenter s stated EPA's approach to EE conflicts with Section 205 of the Federal Power Act by causing consumers to pay unjust a nd unreasonable rates. Commenter s stated EPA's proposed rule to regulate existing EGUs under Section 111(d) of the Clean Air Act will conflict with Section 205 of the Federal Power Act, 16 U.S.C. section 824d ( a), because it’s required deployment of deman d

- side EE will result in unjust and unreasonable rates for electricity. Commenter s stated the Goal Computation TSD ("State Goal TSD") accompanying the proposed rule sets forth a methodology for calculating state goals for emissions reduction. Commenter s st ated Step 5 of the methodology considers demand

- side EE to be avoided sales that displace generation from more carbon

- intensive EGUs. See State Goal TSD at 16

- 19. Commenter s stated indeed, because of the unreliable and underperforming nature of EE resource s, EPA's proposed rule will force consumers to pay for both the initial investment in EE resources, as well as the backup generation required for when EE fails to perform.

Commenter s stated the proposed rule correctly assumes that significant investments w ill be necessary to achieve EE reductions, and acknowledges that the cost of these investments will be paid by ratepayers. Commenter s stated the proposed rule explains that such investments are justified because the costs will be offset by "reductions in a verage bills across all end

- use sectors." Commenter s stated however, the reality is that the increase in rates attributable to utility energy efficiency spending may offset the bills of customers who participate in the program but customers who do not par ticipate will both receive an increase in electric rates and in electric bills. Commenter s stated furthermore, participation in EE programs generally is shared, requiring customers to spend their own money in order to participate, with customers receiving a rebate or a portion of the costs back in some form such as a tax credit. Commenter s49 stated the customers left receiving no benefit are those who most likely need the benefit of EE, i.e., low and fixed income customers. Commenter s stated finally, there is a specific energy efficiency cost

- effectiveness test called the Ratepayer Impact Measure (RIM) Test, sometimes referred to as the Non

- Participant Test, which attempts to quantify the impact of energy efficiency programs on nonparticipating customer electr ic rates and bills. Commenter s stated this test typically produces results that show that costs exceed benefits by a margin of 2 to 1.

Commenter s indicated that some have suggested demand

- side EE programs, which reward the consumer beyond cost reduction s in their utility bill by allowing them to generate credits that could be traded on the CO2 market. While such a policy may have a lofty and admirable goal, Commenter s stated such a course is not within the regulatory purview of many state environmental a gencies when establishing standards of performance for existing EGUs. Commenter s stated the same level of reduction can be achieved, with much less complexity, through the application of a supply

- side (mass

- based) trading program as outlined above. Comment er s indicated States and sources, by whatever means they determine as cost

- effective, would still be free to encourage consumers to implement energy efficiency programs in their homes or businesses, thereby, reducing emissions though demand reduction.

Comm enter s stated EPA should eliminate EE from the state goals [in context of interstate accounting].

Commenter s stated building block 4 is not feasible or adequately demonstrated. Commenter s stated DSEE cannot be considered in EPA's BSER because: (1) i t unlawfully is based on reductions of electricity from the grid; (2) it is not technically feasible at EPA's expected levels; (3) it is not Adequately Demonstrated; and (4) it is exorbitantly costly. Commenter s stated DSEE is influenced by many factors we ll beyond the scope and control of the local utility. Commenter s cited federal compliance standards and state building codes that have a major impact on DSEE availability are completely beyond the utility's control; DSEE is market

- drive, as customers volun tarily choose whether or not to adopt DSEE and in most cases use their own investment dollars to participate in the program, and while utilities have the ability to influence the market to some degree through awareness and education campaigns, financial in centives to customers, and even training of skill laborers involved in the building industry, adoption of DSEE is ultimately voluntary and cannot be relied upon with the same degree of confidence as " inside

- the

- fence " emissions control technologies. Comme nter s stated it is completely illogical to attempt to predict the market response to DSEE over such a long planning horizon, as there are many factors that can impact customer response to program adoption. Commenter s stated that assuming any states can re peat results year over year, at any cost, is at best pure speculation. Commenter s stated EPA's determinations regarding DSEE are unsupported, and the fundamental problem with EPA's assumptions regarding the availability and cost of DSEE is that they are based on a very small sample of states (three states

- Arizona, Maine, and Vermont) and assume past, short

- term performance is an indicator of future achievability. Commenter s stated the three states used to justify EPA's proposed DSEE targets have recently achieved the annual incremental energy savings levels prescribed in the proposed rule, and sustainability of these levels remains to be seen. Commenter s stated that for Arizona, the Arizona Corporation Commission staff issued a proposal on November 4, 2014, to revoke the state's requirement that electric utilities achieve a 22 percent cumulative reduction in energy use by 2020, and instead,50 the utilities will be able to propose energy efficiency programs that make economic sense in their biannual integrated resource plans.

Commenter s stated EPA's expectation that West Virginia could achieve an equally staggering increase in EE is arbitrary and capricious. Commenter s stated their state is not alone in its concern about the level of EE assumed by EPA; the costs of EE are grossly underestimated by EPA and there are significant reliabili ty concerns regarding the extent of retirement of base

- load coal plants, expansion of natural gas generation, and expansion of variable energy resources. Commenter s stated these concerns were also expressed in the NERC evaluation of the section 111(d) pro posal.

Commenter s stated Block 4 imposes a burdensome, expensive, and unachievable goal for Texas.

Commenter s discussed Building Block 4 cost effectiveness.

Commenter s stated that the approach that EPA takes in setting the EE goal raises questions about the cost

- effectiveness of building block 4. C ommenter s noted that states with ambitious existing energy efficiency programs tend to have a larger obligation than states where energy efficiency policies are less advanced. C ommenter s stated that how these differences will impact cost

effectiveness at the national level is an open question. C ommenter s stated that one might expect there to be more low

- cost opportunities for s aving energy in the inexperienced states where
energy

- using equipment and buildings are presumably less efficient than in the more experienced
states. C ommenter s stated that it could also be the case that more experience with running energy efficiency prog rams results in learning by doing and greater future energy savings at a lower
cost. C ommenter s also noted that both factors could be at play simultaneously with the ultimate answer depending on the balance between the two.

Commenter s stated that EPA's analysis underlying Building Block 4 is flawed, arbitrary, and capricious, and therefore the inclusion of end

- use energy efficiency as an element of BSER for purposes of setting emission rate goals is invalid. C ommenter s stated that EPA ignores the signif icance of the "rebound effect" on achieving emission reductions. C ommenter s stated that the rebound effect is acknowledged and then largely dismissed in EPA's proposal. Generally speaking, c ommenter s stated that EPA characterizes a "direct rebound" as an improvement in energy efficiency that reduces cost and therefore boosts its demand, while an "indirect rebound" reflects energy efficiency savings that are used elsewhere in the economy and may increa se energy consumption. C ommenter s stated that EPA doesn't explain how or if it accounts for the "rebound effect" in the Proposed Rule, but instead simply references several studies that find the rebound effect to be "relatively modest" compared to the impo rtance of energy efficiency as an effective way of reducing energy consumption and CO2 emissions. C ommenter s stated that this arbitrarily dismisses the potential impact of the "rebound effect" when EPA sets the state goals.

Comment 4: Portfolio approac h for state plans

-- states select/adopt/enforce EE policies/programs, rather than the EPA

Response 4: The EPA decided to not include DS

- EE in BSER in the final CPP. See section s V.A and V.B of the final rule preamble of the CPP for details. However, DS

- EE remains generally51 available for compliance, as the EPA recognizes that a wide variety of EE programs and projects have been achieving significant energy savings for years with additional opportunity to achieve energy savings in the future. DS

- EE measures m ust meet the eligibility requirements and provisions related to demand

- side EE programs and projects and the requirements and criteria related to proper quantification and verification of MWhs from demand

- side EE savings as described in Section VIII of the final rule preamble of the CPP.

The following are summaries of the specific public comments under this comment:

C ommenter s noted that calculating the impact of federal standards within each state can be complicated. C ommenter s indicated that factors influencing the impact on each state include considerations such as the market penetration of a particular piece of equipment or appliance and the climactic zones within the state. Rather than allowing states to receive compliance c redit for energy savings resulting from the standards, and attempt to address all the uncertainties that doing so would entail, c ommenter s stated that it would be far simpler and more accurate to leave the standards out of the Building Block 4 assumptions (as the EPA has done in the proposed Clean Power Plan) and likewise not allow states to receive compliance credi t for energy savings resulting from the federal standards.

Commenter s stated that EPA's assumptions about end

- use efficiency growth appear to be based on flawed logic. C ommenter s stated that EPA uses the EIA Form 861 data to determine historical incremental end

- use efficiency reductions, but these are self

- reported numbers for the utilities and there is no uniformity from state to state. C ommen ter s stated that even the term

" incremental " is problematic. C ommenter s stated that it is defined by EIA in the instructions for Form 861 as the annualized effect of any measure initiated or a new participant in an existing program in a given year, and doe s not include the effect of any programs that diminish or are terminated. Therefore, c ommenter s stated that "incremental" changes reported on Form 861 do not equate to the difference in actual energy savings in consecutive years, as clearly explained by EI A in the instructions for Form 861. C ommenter s stated that the difference between reported incremental energy savings and year

- on

- year changes in actual annual reported energy savings can be very large, even for states that have mature Energy Efficiency Re source Standard
programs.

Comment 5: The effect of EE is limited as programs fully penetrate markets, which can initially produce significant efficiency improvements, but that becomes limited later in programs.

Response 5: The commenters state that the EPA has overstated the estimation of energy efficiency represented in BB4. The EPA decided not to include DS

- EE in BSER for the final rule. A response is not provided here on how different EE is reflected in BSER as this comment is now outside the scope of the CPP. See section s V.A and V.B of the final rule preamble of the CPP for details. DS

- EE remains generally available for compliance, including different types of EE programs and projects. The EPA recognizes that a wide variety of DS

- EE measures have bee n achieving significant energy savings for years with additional opportunity to achieve energy savings in the future. Further DS

- EE programs are being implemented widely across the sector and investments are increasing. See Demand

- Side Energy Efficiency TS D for more information52 on energy efficiency potential. See multiple subsections of section VIII of the final rule preamble of the CPP details on using DS

- EE for compliance

. The following are summaries of the specific public comments under this comment:

C om menters stated that the EPA did not properly account for the "pinching" effect of codes and standards on achievable EE savings rates.

Commenters stated barriers to implementation may undermine efforts to expand EE programs. Commenter s stated exi sting EE programs have already penetrated markets for EE measures, and thus there may be few markets in which to expand EE programs. Commenters provided an example, noting that utility

- sponsored EE programs traditionally have relied heavily upon lighti ng programs for the vast majority of their savings, and with the adoption of new lighting standards from the EISA, the potential to achieve electricity savings through lighting retrofit programs will be greatly reduced. Commenters also stated that increas ingly stringent building codes and EE standards for appliances and other technologies are increasing baseline EE performance. Commenters stated that finding participants for EE programs has become more difficult because of the greater investment required to achieve more stringent standards, and because potential participants already have made efficiency upgrades

.
Commenter s stated that as codes and standards progress and energy efficient technologies realize greater market share and reduced costs, the a bility of utilities to realize cost

- effective, incremental benefits from energy efficient technologies is diminished.

Commenter s stated there are temporal challenges in extrapolating past EE achievements into the future, and noted there has been a signi ficant increase in overall baseline efficiency codes and standards, which will inherently reduce energy consumption irrespective of the impacts of utility

- sponsored EE programs. Commenter s stated the most significant changes have occurred in lighting EE ef ficiency standards, which have historically produced the greatest utility

- sponsored EE achievements. Commenter s stated appliance efficiency standards and building codes have become increasingly more stringent, and DOE has issued numerous new EE standards over the last few years, which will affect energy use as new homes are built and equipped with such appliances, and existing homes undertake replacement of appliances in the ordinary course. Commenter s noted that DOE has proposed new efficiency standards for commercial rooftop air conditioners that would reduce energy consumption by 30 percent, achieving the largest national energy savings of any standard ever issued.

Commenter s stated that EPA utilized historic achievements built largely upon low

- cost and readily available EE lighting measures when making its projections for EE savings potential in future years. Commenter s stated there are market potential studies that assert pl entiful and inexpensive EE savings opportunities available from other EE measures in the future, however, there is no empirical evidence that any utility

- sponsored EE programs relying upon these non

lighting measures can achieve EE levels even approaching those levels achieved through lighting
programs. Commenter s noted that in the absence of further evidence of the availability of other programs that can deliver similarly substantial savings, EPA clearly fails in its requirement to demonstrate the technica l achievability of its proposed standard under the EE codes and standards currently in effect.53 Commenter s stated West Virginia's two largest electric utilities, Appalachian Power and FirstEnergy, both offer EE programs to their customers that saved a co mbined 77 GWh of electricity in 2013. Commenter s stated these programs are new to the West Virginia market and thus have the potential to increase savings. Commenter s stated however, reaching the EPA proposed goal of 243 GWh of savings from new programs in 2020 and expanding to an average of 450 GWh saved per year from 2023 to 2030, would be quite challenging due to the lighting

centric nature of savings to date and to low participation rates in appliance rebate
programs. Commenter s stated that a portion o f energy savings for all programs were from lighting projects: for Appalachian Power programs, 85 percent of energy savings (27.9 out of 50.8 million net kWh) came from lighting measures; for the Commercial and Industrial (C&I) Prescriptive program, 72 pe rcent of savings was from lighting retrofits and 309 of 357 projects completed were for lighting, even though average project incentives were larger for HVAC and variable

- frequency drive projects; a portion of energy savings from Residential HomeSMART and Weatherization programs were from compact fluorescent lights; and Non

- Residential High Efficiency Lighting and Residential Low Income also focus on lighting retrofits.

Commenter s stated the ERISA 2007 standards reduce the ability to achieve future savings in the same way that the 2013 lighting savings were achieved; future program savings will have to be achieved largely through entirely new initiatives, and at higher cost portfolio approach for promoting a wider variety of bulbs.

Commenters stated that , while not part of EPA's assessment about the achievable annual incremental EE savings rate, which focused on utility

- sponsored EE, EPA noted appliance and equipment standards and building codes have the potential to reduce electricity consumption in the states. According to commenters, EPA asserted that " if we were to capture the potential for state or local building codes to contribute additional reductions beyond those resulting from energy efficiency programs, we could reasonably increase the targeted annual incremental savings rate beyond 1.5 percent. " Commenters indicated that EPA believes that the savings from building codes and appliance and equipment standards can be added to the savings from EE
programs.

Commenters stated EPA does not understand the relationship between codes and standards and customer EE programs; these reductions are not additive, but can limit future customer EE growth potential as they will decrease EE savings opportunities in the future. Commenter s stated accordingly, EPA can not assert that the target rate is "less stringent than a level would be that accounted for" codes and standards (See Abatement Measures TSD at 5

- 38).

Commenters stated building codes and appliance and equipment standards historically have, and will contin ue to, save electricity for consumers. Commenter s cited a 2012 study by ACEEE and the Appliance Standard Awareness Project (ASAP), which stated that codes and standards in effect in 2010 reduced electricity consumption by about 280 TWh in 2010. According t o commenters, the study also projected that new codes and standards adopted between 2012 and 2016 would save about 212 TWh in 2025 and 306 TWh in 2035.

Commenters stated that while these savings are meaningful and important, a "side effect" of increasing m inimum codes and standards, which set the minimum efficiency levels for newly constructed buildings and a large range of residential, commercial and industrial energy54 consuming appliances, is that this significantly decreases the energy savings opportuniti es that would be available to EE program administrators, while driving up the costs to acquire additional energy savings above the new minimum efficiency levels.

Commenter s stated, for example, EPRI has noted that "Appliance codes and standards coming i nto effect over the next five years increase baseline equipment efficiency, impacting the forecast for energy consumption out to 2035. In addition, with more efficiency baseline requirements there is less room for cost

- effective energy efficiency. Refriger ators and freezers had shown the highest level of savings, with achievable potential in all five major appliance categories. Now there are no savings found for refrigerators and clothes washers as a result of codes and standards. "

Commenters stated tha t standards for refrigerators and freezers have had a " pinching effect " that reduces opportunities for customer EE. Commenter s also indicated that as IEE noted, new codes and standards " shift the starting point and this changes the potential for saving s from rate

- payer funded programs ." Commenters stated it is reasonable to assume that the effect of future codes and standards for other appliances and equipment types will produce similar "pinching effects" on customer EE potential. Commenters stated that instead of increasing the target EE annual incremental savings rate, as EPA argues, future codes and standards should result in EPA lessening this target to reflect diminution of achievable EE. Commenters stated this does not mean, however, that state s should not be able to include codes and standards in compliance plans.

Commenter s stated that using building energy codes for achieving demand

- side energy efficiency is problematic. Commenter s w ere particularly concerned with EPA's inclusion of building energy codes as a strategy for achieving demand

- side energy efficiency under this proposal. Commenter s indicated there are some unique characteristics to the development, adoption, and implementation of building energy codes that go beyond the concerns the
commenter s ha d with Building Block 4 and the inclusion of energy efficiency programs as federally enforceable components of a state plan.

Commenter s stated that the most cost

- effective gains in resi dential energy efficiency have already been made. Commenter s stated that over the years there have been significant advances in energy efficiency technologies such as better insulation, energy efficient appliances, and better heating, ventilation, and air conditioning (HVAC) equipment. Commenter s also noted that the 2012 International Energy Conservation Code (IECC) is 30 percent more efficient that the 2006 IECC. As a result, commenter s stated that new housing is inherently more efficient than existing hou sing. Commenter s cited a recent NAHB economic study, which said "[o]n a per square foot basis, the newer the home is the less energy it uses." According to commenter s , the study went on to note specifically that, while the size of new homes has generally i ncreased over time, average energy consumption per square foot has declined steadily by year built. Commenter s indicated a similar trend was seen in both total energy used in homes as well as energy used specifically for HVAC.

Commenter s said these advance s do not come without a cost, however, as more stringent and prescriptive building codes have raised the cost of housing substantially. According to
commenter s , a comparison of the cost effectiveness of the 2012 IECC relative to the 2009 IECC55 clearly illus trates that consumers are already facing significant incremental construction costs due to more stringent and prescriptive codes. Commenter s referred to Table 1 in their comments (2012 IECC cost effectiveness relative to 2009 IECC), which illustrated that on average nationally the incremental construction costs of building to the 2012 IECC, relative to the 2009 IECC, is $5,668 for a single family home, which led to an annual energy savings of $427 and a simple payback rate of 13.3 years. When accounting for regional differences based on climate

zone (see Figure 1, U.S. DOE Climate Zone Map), commenter s estimated it will take anywhere from 8.9 to 17.3 years for homeowners to break even on the incremental costs of the 2012 IECC which exceeds, and in some cases more than doubles, home buyers' expected rate of return. While EPA assumes a typical payback period of about 10 years on energy efficiency investments, commenter s noted that an NAHB consumer survey shows that while consumers indicate they are willing to p ay two to three percent more for a home with energy

- efficient features, the expectation is that the savings will result in a 7

- year simple payback. Commenter s also referred to a further NAHB analysis, which shows that related rates of return observed in ho using markets, like the rate households with debt are paying on that debt and rent

- to

- value ratios in residential rental properties, are also well in excess of 10 percent, implying a payback period of less than 10 years.

According to commenter s , the impac ts of these incremental energy efficiency changes on construction costs have real world implications for housing affordability and the economy. Commenter s estimated that every $1,000 increase in the price of a home keeps about 206,000 potential buyers from qualifying for a mortgage. As a result, commenter s noted that m ore stringent energy conservation requirements for new homes can have a reverse effect retarding filtering and keeping people in older, less energy

- efficient homes."

Commenter s said the dispr oportionate impacts of these costs need to also be viewed in the context of the fact that new homes only account for a small share of the total housing inventory. According to commenter s , it is not surprising that new housing stock accounts for only a smal l share of the total annual energy consumption and, subsequently, the emissions attributable to housing. Commenter s ’ recent economic report s concluded that while the residential sector accounts for 22 percent of energy consumption in the U.S. combined, all single family and multifamily housing built in the last 10 years accounts for just 3.2 percent of energy consumption.

Commenter s also stated that these distributional costs do not result in insignificant impacts and they clearly illustrate the potential for this rule to directly affect all aspects of the economy. Commenter s noted that multiple Executive Orders, which guide the regulatory planning and review process, call for the analysis of such distributional impacts of various regulatory alternatives (s ee both Executive Order 12866 issued by President Clinton in 1993 and reaffirmed in E.O. 13563 issued by President Obama in 2011). Commenter s also pointed that that even proponents who would recommend policymakers consider adopting or updating building ene rgy codes caution that "States should explicitly evaluate the costs, benefits, and distributional aspects of potential building energy code revisions for various building sectors and stakeholders. . . . it is important for states to understand and account for their cumulative impacts on up

- front costs and design flexibility."56 Commenter s urged EPA to not ignore these clear economic impacts as it determines the reasonableness of its proposal. Should EPA finalize the proposed section 111(d) guidelines in a

ma nner that retains requirements that extend " beyond the fence line ," commenter s recommended that EPA, and subsequently the states in their planning processes, evaluate the cost implications of applying the BSER on housing costs and affordability in determin ing whether adoption of more stringent building codes should be included as an option in Building Block 4. If the cost analysis does not or cannot account for these factors, commenter s recommended that Building Block 4 be removed from BSER, as the statute clearly states that the administrator should establish a BSER considering the cost of such reduction. Absent the elimination of Building Block 4, commenter s recommended that EPA limit the range of efficiency

- related measures to utility operated demand

- side energy efficiency programs.

According to commenter s , the energy efficiency industry is maturing. Commenter s pointed out that many consumers have already taken advantage of energy

- efficient lighting, appliance recycling, and other long

- standing programs to deliver energy efficiency. Commenter s noted that he lower

- cost and easy

- to

- adopt programs have been the mos t widely adopted programs, which is why some states have historically experienced high percentages of avoided energy demand savings. Commenter s referred to data provided on the California Public Utility Commission's Energy Efficiency Data Portal, which sta ted that energy efficiency savings in California were achieved mostly by indoor lighting in the commercial and residential sectors.

According to commenter s , indoor lighting has reached a point of saturation that cannot be sustained unless a new technology can create light more efficiently than LED technology. Commenter s noted that LED technology creates efficiency savings compared to CFL technology; however, the incremental savings are significantly smaller than the historical savings generated from moving from incandescent lights to CFLs and then to LEDs. As an example, the
commenter s noted that usage of 60 watts for an incandescent became 13 watts (78 percent reduction) with the move from incandescent to CFL, but the move from a 13 watt CFL to a 10 watt L ED (which costs significantly more than an equivalent CFL) resulted in only 3 watts of savings (an incremental 23 percent reduction). Commenter s said the savings potential does exist, but it is much smaller.

Assuming a typical residential customer uses 12, 500 kWh per year and converts 15 bulbs from incandescent to CFL, commenter s estimated the resulting annual savings would be roughly 43 kWh/year (60 watts to 13 watts, 2.5 hours per day) per bulb, for a total savings of approximately 643 kWh/year

- roughly f ive percent of the customer's average usage. Commenter s expected that by 2017 the overwhelming majority of residential households will have already achieved these savings. Commenter s estimated that the move from CFL to LED would result in only an additiona l 3 kWh/year per bulb (13

- 10 watts, 2.5 hours per day) for a total annual savings of only an incremental 41 kWh/year, which is roughly 0.3 percent of the customer's average usage, net of the CFL savings already achieved.

According to commenter s , this examp le shows that the move from CFLs, a technology that is already widely adopted, to the next rung on the efficiency ladder, LEDs, will result in only very minor increases in EE savings. Commenter s estimated this same trend applies to many other technologies, including HVAC equipment, which represents a major driver for the higher energy use of residential customers in Florida.57 Despite these mature programs, commenter s indicated that some consumers are still unwilling to adopt energy efficiency measures. When deciding whether to purchase a unit of electricity or to invest in energy efficiency, commenter s said many consumers will respond by purchasing the unit of electri city and spending their dollars on other goods and services that have a higher perceived value.

Commenter s also noted that EPA's proposed rule alludes to adopting and enforcing local building energy codes. According to commenter s , public utilities historic ally have not enforced state or local building energy codes, and have neither the expertise nor the authority to enforce, verify, and/or analyze energy savings associated with code development and enforcement. However, commenter s noted that, as the codes a nd energy savings standards advance, it will become increasingly more difficult for public utilities to create cost effective demand

- side energy efficiency programs to meet EPA's proposed regulations because most states only allow utilities to incentivize and take credit for the energy savings that are over and above the baselines set by the codes. As those baselines increase, commenter s estimated the incremental cost of exceeding those baselines will also increase. Even if EPA regulations allowed the utili ties to count the savings difference between a customer's current state (" as found ") and the more efficient piece of equipment, unless there is a drastic shift in the existing laws and regulations in most states, commenter s stated the program would need to be cost

- effective based on only the difference between the baseline and the more efficient equipment.

Commenter s began their EE programs in earnest in 2008 with the development of their Bright Energy Solutions program. Commenter s has engaged with resid ential, commercial and industrial consumers, as well as trade allies. Commenter s estimated that these efforts have resulted in a savings, from calendar year 2009

- 2013 of 26,330.454 kWh at an average annual cost of approximately $600/kWh. While these effort s represent significant savings over time,
commenter s noted that appliance, motor, compressor and other efficiency elements embodied in various codes eventually reach a " maximum efficiency " level due to technology constraints, thermal limits, size limits, and economic and other conditions, such as diminishing
returns. Commenter s noted that the results are also skewed because state programs

- as well as EPA's proposal

- do not capture the real value of replacement savings rather than the difference between t he current standard and the efficient model incentivized.

Due to the reduced availability of cost

- effective energy efficiency gains as energy standards are approaching "max tech," and increased EE standards that will become effective in the 2015

- 2018 time frame, commenter s said the ability to achieve more efficiency has been significantly limited than was contemplated by EPA in its goal setting process. According to commenter s , the dual effect of these limitations, when taken together with early action to i mplement EE well before the baseline year of 2012 or the effective date of 2020, means that the EE assumptions that lie at the heart of Building Block 4 do not represent the actual conditions in the industry for those utilities that have been proactive. Co mmenter s stated that EPA needs to reconsider its proposed best practices level of EE performance to reflect actual conditions and feasibility of further efforts.

Commenter s also stated that changes in manufacturing codes and building codes means that
custo mers only have certain options available to them. For example, as appliances fail,
commenter s said most residential customers would only find EnergyStarTM certified appliances58 available to them. Commenter s stated that it is nearly impossible for utilities to take EE credit for this customer "choice." Also, as customers choose more efficient appliances, windows or other options, commenter s said the availability of the next increment of savings declines and m akes the incentive for that next increment more expensive. As the low

- hanging fruit gets picked,
commenter s said the next increment of savings becomes more difficult, less cost

- effective, and less likely for customer buy

- in if it involves significant inves tment or consumer behavioral changes.

According to commenter s , California's experience has shown that, as EE measures are implemented, they yield lower amounts of savings as the market is saturated; new measures are needed if the same rate of EE savings is to be maintained. For example, commenter s noted that in recent years, behavioral EE programs have achieved substantial energy savings in California and will be a major factor in the state's ability to meet its goals. If EE is limited to a subset of exi sting and potential measures, commenter s estimated it will not provide the incentives necessary to ensure that states continue to renew their EE portfolios and explore innovative EE programs that could produce sustainable energy savings over the long

- term.

Commenter s noted that more stringent state and federal standards already have captured the largest potential drivers of demand side efficiency. Commenter s said the projected impacts of federal and state energy efficiency codes and standards are both si gnificant and increasing. According to commenter s , this reduces both the physical and financial (i.e., cost effective) potential for utility energy efficiency programs to reduce electricity sales. Commenter s indicated this impact is particularly significan t in Florida because such a high percentage of electrical sales are for air conditioning load and recent changes in energy efficiency codes and standards have largely targeted the efficiency of air conditioning equipment with dramatic results. Commenter s

s tated that this necessarily and substantially lowers the potential of air conditioning

- based utility DSM programs in Florida to reduce electricity sales.

According to commenter s , lower operating costs at Florida Power & Light (FPL) mean less utility

- sponso red conservation is cost effective. Commenter s determined that the cost effectiveness of utility

- sponsored energy efficiency programs is significantly lower than it was previously due to lower fuel prices and more efficient generation on FPL's system. Comm enter s said this is the same shift in their generating portfolio that already has produced a much lower emissions profile, positioning FPL to reach the targeted compliance levels. Thus, commenter s estimated a significant implementation of non

- cost

- effectiv e utility energy efficiency will result in higher electric rates for all FPL customers and significantly higher bills for nonparticipants in those programs. If conservation is to be counted towards lower CO2 emissions, commenter s stated there should be no reason to distinguish between utility

- sponsored energy efficiency and state mandated efficiency. In either case, commenter s said the avoided kWh achieves the policy objective of lower emissions.

Commenter s disagreed with EPA's assumption that EE savings will continue to grow at the same rate (1.5% of retail sales) for years into the future. According to commenter s , only three of the twelve states EPA relies on have reported EE savings of 1.5%, and there is no evidence that these states can maintain that level of EE savings. While nine of the twelve states have legislatively established 1.5% EE goals, commenter s contended that the mere establishment of a59 goal does not mean it can or will be achieved. As an example, commenter s noted that Indiana recently mo dified its EE targets and goals for electricity suppliers due to cost considerations.

Commenter s also noted that the types of EE measures that have been installed to date and those that are likely to be installed in the future will likely be different. Co mmenter s pointed out that North Carolina electric service providers, like others around the country, have relied heavily on lighting measures to generate EE savings. According to commenter s , approximately 70% of the EE savings reported by the IOUs and Gree nCo were realized from lighting measures. Commenter s noted that, while transition away from incandescent bulbs to compact fluorescent bulbs (CFL) has produced significant EE savings, as the lighting programs mature, fewer new opportunities will exist to re place incandescent bulbs because there will be fewer of those bulbs in use. While there can be additional transition to light emitting diode (LED) bulbs, commenter s said the additional amount of savings above CFL bulbs is smaller than the transition from i ncandescent to CFL. Commenter s further noted that the phasing in of the federal prohibition on sale of incandescent bulbs lowers baseline lighting consumption, in effect reducing or eliminating the opportunity for EE savings from lighting in future years w ith respect to utility

based EE lighting programs. Commenter s contended that the diminishing returns for EE savings from lighting measures is just one example of why it is incorrect to assume that the amount of new EE savings can continue to grow at a 1.5% rate for many years into the future.

According to commenter s , EPA's assumption that EE savings will continue to grow at an incremental 1.5% rate for years into the future is also contradicted by the changing baseline for building and appliance energy code s North Carolina updated in 2012 and is affected by equipment and appliance efficiency standards developed by the federal government. With successive changes to the regulatory requirements for energy

- consuming equipment or construction standards, commenter s said the likelihood of EE opportunities through utility EE programs is diminished. Commenter s contended that the changing baselines mean it is increasingly less likely that states can achieve a growing or constant rate of incremental additions to EE savi ngs.

Commenter s stated that energy efficiency goals are inhibited by the fact that federal and state building codes, as well as appliance efficiency standards, are not viable compliance options, as such metrics are already captured elsewhere; these code s and standards are built into the electric sales forecasts. Therefore, commenter s concluded, quantifying these codes and standards into a compliance option would result in states double

- counting savings as energy efficiency programs and as embedded load r eductions to the sales forecasts. Commenter s argued that this approach is confusing because it is not consistent with President Obama's Climate Action Plan (CAP), the blueprint for greenhouse gas reduction under which the CPP is being pursued. Commenter s

n oted that the CAP devotes an entire section to "cutting energy waste in homes, businesses, and factories," including efficiency standards for appliances and federal buildings, new approaches to the delivery of cost

- effective residential energy, and increas ing the energy efficiency of commercial and industrial buildings. Despite the President's emphasis on these modes of energy efficiency, commenter s contended that EPA is dis

- incentivizing companies from earnestly pursuing them by not counting them towards c ompliance under the CPP.

Commenter s stated that energy building codes also impact energy savings. In New Jersey's program, as in most EE programs, commenter s noted the energy savings are calculated as the60 difference between the energy efficiency equipment and the energy building code requirement for that equipment. As the energy building codes improves the energy efficiency that is required to be installed in new and retrofit construction, commenter s said the energy savings an EE program can claim is getting smaller and smaller. Commenter s stated that the cost to acquire these savings is also increasing. According to commenter s , some states calculate the energy savings based on the difference between the energy efficient equipment to be installed and the efficiency of the unit it is replacing. However, commenter s said that it requires a more complex measurement and verification method than the deemed energy savi ngs calculation method currently used by the NJCEP and other state EE programs. Commenter s contended this increases the program administration costs and reduces the dollars available for EE direct incentives.

Commenter s noted that their cooperative enco urages energy efficiency by their members. According to commenter s , most cooperatives have aggressive EE programs targeted specifically for the demographics of the cooperative. Commenter s asked EPA to keep in mind that, given the very diverse load profiles of their membership, not all EE measures have the same benefit. Commenter s believe d EPA ha d overstated the value of EE in the Clean Power Plan. Commenter s stated that many of the low cost EE measures have been adopted in Colorado. Therefore, commenter s de termined there is a diminishing return on investment for expanded measures.

Commenter s stated that EPA should reconsider its assumptions in Building Block 4 to reflect diminishing returns on energy efficiency programs outside the "fence line" of power s ystems.

Commenter s stated that energy efficient lighting can achieve significant energy savings potential. Commenter s said that s olid

- state lighting is five to six times more efficient than incandescent bulbs and up to 1.5 times as efficient as CFLs. De pending on what an LED is replacing,
commenter s estimated that high

- efficiency lighting typically reduces electricity use by 25 percent to 80 percent. According to commenter s , quality LED lights can also last up to 25 times longer than traditional incandes cent bulbs.

Commenter s stated that, in 2013, lighting technologies were responsible for 17 percent of total U.S. electricity, using approximately 609 terawatt

- hours of site electricity, or about 6.9 quads of source energy. While the electricity consumed b y the lighting sector is significant, commenter s indicated that the adoption of LEDs based on anticipated improvements in LED technology efficacy as well as established technology diffusion rates present equally significant energy savings potential and GHG abatement tool.

Commenter s referred to a DOE study published in August 2014 that forecasted the expected path of LED adoption in the U.S. marketplace, and estimated the energy savings offered by LED products out to year 2030. Commenter s noted that, by 203 0, DOE anticipates LEDs will dominate lighting sales, comprising 84 percent of all sales by lumen

- hours, and dramatically lower national energy consumption.

According to commenter s , the market penetration of LEDs is projected to drive a 40 percent reducti on in energy consumption, or a total energy savings of 3.0 quads, in 2030 alone, which is nearly the total energy consumed by 24 million homes today, worth over $26 billion in savings at61 today's energy prices. Without LEDs, commenter s said DOE's model proj ects that the energy consumption of the lighting sector would grow to approximately eight quadrillion Btu (quads).

As further evidence, commenter s noted that the American Council for an Energy Efficiency Economy (ACEEE) concluded a survey in 2014 of existing studies of the technical, economic, and achievable energy efficiency potential of lighting products and found considerable potential savings fr om lighting, even after the effects of federal lighting standards were incorporated, in the range of 8

- 77 percent of total maximum achievable potential savings for the residential sector and 34

- 63 percent for the commercial sector.

Commenter s also stated that states can

-- and should

-- use end

- use EE programs under section 111(d). According to commenter s , e xtensive research and practical results from existing EE programs continue to demonstrate reducing carbon emissions through EE measures cost significantly less than through other means. Commenter s noted that a number of studies have concluded that EE programs deliver economic benefits of $2 to $4 (or more) for each $1 invested, on average.

Commenter s noted that at least 44 states and the District of Columb ia currently operate energy efficiency programs, with budgets totaling over $7.7 billion. According to commenter s , policies and programs to increase end

- use EE adopted by states include adoption of energy efficiency resources standards (EERS), utility and public benefit programs and policies, adopting updated building codes and compliance, and financial incentives for private installation of more efficient appliances like LEDs.

Commenter s stated that the adoption of energy efficient lighting technologies li ke LEDs have

-- and will continue to

-- increasingly contribute to GHG emission reductions through state

- level EE programs. Based on recent analyses by DOE and ACEEE, commenter s estimated that the adoption of LED technologies alone could account for a 30 perce nt reduction in greenhouse gas (GHG) emissions by 2030. A summary of these and other analyses is presented below:

• A DOE study shows the significant, near

- term potential for LEDs to contribute to reducing GHG emissions through increased efficiency of end

- us e lighting technologies. DOE projects that energy savings associated with projected market penetration of LED lighting would reduce GHG emissions by 180 million metric tons of carbon dioxide (MMTCO2).

• A study by the American Council for an Energy Efficien cy Economy (ACEEE) found that rapidly deployable energy efficiency policies can yield an overall 26 percent reduction in greenhouse gas (GHG) emissions relative to 2012 baseline

-- avoiding 600 MMTCO2, obviating the need for 494 power plants, and saving 925 million MWh of electricity.

• An analysis by ICF International concluded that in 2030, if energy efficiency measures were used as a compliance mechanism for section 111(d), electricity system cost savings would be $5.67 billion greater due to EE's ability t o displace other, more expensive compliance options under a national standard scenario. The62 incremental value of additional EE as a compliance option in 2030 is $12.10/additional MWh saved.

• The Rhodium Group and the Center for Strategic and International Studies analysis of the 111(d) regulations concluded that including EE crediting as a compliance option reduces the amount of abatement that needs to occur through changes in sources of power generation

-- a more expensive compliance option. Further, RHG fou nd that crediting EE could likely increase electricity prices, as utilities add the cost of efficiency programs to their customers' electricity bills, but could decrease overall costs as those customers buy less electricity.

Because of the significant ene rgy usage by the lighting sector and the significant opportunity to reduce GHG emissions at the lowest compliance cost compared to other section 111(d) Building Blocks and EE measures, commenter s asserted that EPA should consider DOE's market adoption and technology projection forecasts of LED energy savings and CO2 emissions potential when setting BSER performance standard stringency under section 111(d).

C ommenter s stated that other factors including the enforcement of building codes and customer opt

- outs were not factored into the EPA's analysis. C ommenter s noted that the EPA's Proposed Guidelines allude to adopting and enforcing local building energy codes. Historically,

c ommenter s noted that public utilities have not enforced state or local buildin g energy codes, and have neither the expertise nor the authority to enforce, verify, and/or analyze energy savings associated with code development and enforcement. However, c ommenter s noted as the codes and energy savings standards advance, it will becom e increasingly more difficult for public utilities to create cost

- effective demand

- side energy efficiency programs to meet the EPA's proposed targets, because most states only allow utilities to incentivize and take credit for the energy savings that are over and above the baselines set by state and local building energy codes. As those baselines increase, the commenter s stated that the incremental cost of exceeding them will also increase. C ommenter s stated that even if utilities are allowed to count the savings difference between the customer's current state ("as found") and the more efficient piece of equipment, unless there is a drastic shift in the existing laws and regulations in most states, the program would still need to be cost effective based on only the difference between the baseline and the more efficient equipment before it could be offered.

C ommenter s stated that the Proposed Guidelines do not take into account the fact that some state regulations allow certain industrial and commercial cust omers to opt

- out of public utility offered energy efficiency programs. C ommenter s stated that the process of opt

- out is handled very differently in each jurisdiction. C ommenter s noted that counting the impacts, if any, related to opt

- out is not addressed in the proposal. Further, the commenter s stated that the Proposed Guidelines do not contemplate who is going to account for energy efficiency for opt

- out customers in the future. Historically, c ommenter s noted that public utilities have not counted the imp acts associated with opt

- out and should not be required to track these savings in the future unless the costs can be recovered from the industrial and commercial sectors through state rate

making mechanisms and only if these savings are cou nted toward the statewide goal.

C ommenter s stated that these levels are likely not achievable over the long

- term, and even less likely on a cost effective basis. C ommenter s noted that by 2020, the Energy Independence and63 Security Act 2007 lighting standards will be fully implemented, leaving utilities with little, if any, opportunities to take advantage of residential or commercial lighting measures. C ommenter s stated that advancing building energy codes also will deplete the savings potential of residential and commercial new construction programs as they strive for net

- zero energy consumption by 2030.

C ommenter s stated that achieving 1.50% in later years will likely come with a substantial increase in portfolio costs. By their nature, c ommenter s stated that EE measures typically require a substantial upfront investment in exchange for savings that accrue over the lifetime of the deployed measure. C ommenter s stated that aggressive codes and standards will diminish savings
p otential and limit the number of measures that are cost

- effective for the customer and the utility. C ommenter s stated that the EE assumptions used in the goal setting calculations need to be set at more realistic and reasonable levels since energy savings will be more challenging to deliver over the next 15 years as markets mature and federal equipment standards erode potential creditable savings.

C ommenter s stated that the impact of this phenomenon is most acute for lighting standards resulting from Ene rgy Independence and Security Act (EISA) of 2007. C ommenter s stated that utility

- sponsored EE programs have traditionally heavily relied upon lighting programs (most significantly residential CFL, and commercial T

- 8 fluorescent lighting programs) for a ver y significant portion of their EE achievements. C ommenter s stated that while specific disaggregated data on program administrator reliance on lighting measures is typically not disclosed, indications are that many residential programs may have relied upon lighting measures for over half of their EE achievements in the past. C ommenter s noted that one study conducted on the subject in the northeastern U.S. indicated that the two EE programs reviewed relied upon lighting for 94% of the EE achievements. C omment er s stated that with the adoption of the EISA 2007 lighting standards, standard incandescent bulbs and T

- 12 commercial lighting fixtures are no longer able to be manufactured or imported into the U.S. Therefore, the commenter s stated that this large and in expensive market for utility

- sponsored EE savings is being substantially eroded as the baseline efficiency level increases to the new standard. It is anticipated that by 2020 or soon thereafter, CFL devices will become the standard (or baseline), further l imiting future efficiency improvements from these programs.

C ommenter s listed other options for the invalid extrapolations. C ommenter s stated that non

lighting measures have been aggressively pursued by many utilities; however capturing these savings is m uch more difficult. C ommenter s stated that non

- lighting savings have not been achieved in significant quantities in any state, and most cost substantially more on a per

- MWh basis. These measures are primarily comprised of thermal efficiency measures, such as heating, air conditioning, and other appliance efficiency upgrades, and weatherization measures. C ommenter s noted that they are expensive, requiring a relatively large capital investment by customers for new appliances and equipment. This is problematic, as customers customarily avoid such large expenditures until a precipitating event occurs (appliance or equi pment failure, etc.). Therefore, the commenter s stated that utilities would need to offer a much higher incentive payment to encourage customer participation. C ommenter s stated that these are the types of EE measures that will need to be increasingly relie d upon to achieve ongoing incremental improvements going forward as dependence on abundant an inexpensive lighting measures declines significantly.64 Comment 6: Commenters noted b arriers to implementation of EE.

Response 6: The commenters cite various barri ers to implementing energy efficiency. C ommenter s cite various studies that discuss the wide range of market barriers that exist for adopting energy efficiency practices. For discussion on barriers and potential of energy efficiency, see Demand

- side Energ y Efficiency TSD for CPP Final Rule . The EPA decided not to include DS

- EE in BSER for the final rule. See section s V.A and V.B of the final rule preamble of the CPP for details. EPA recognizes how DS

- EE strategies are being designed and implemented to redu ce the barriers to greater investment in energy efficiency. DS

- EE remains generally available for compliance, as DS

- EE programs are being implemented widely across the sector and investments are increasing. See multiple subsections of section VIII of the f inal rule preamble of the CPP for details on using DS

- EE for compliance.

The following are summaries of the specific public comments under this comment:

Commenter s stated there are barriers to expanding EE programs.

Commenter s stated EPA has ignored technical barriers to achieving DSEE levels. Commenter s stated numerous barriers exist that hinder states from sustainably achieving the DSEE levels prescribed by EPA. Commenter s stated the barriers include: climate differences, bui lding codes,
state

- level regulatory frameworks, customer mix, DSEE evaluation method for cost effectiveness, economy/market factors, and electricity rates and rate structures.

Commenter s stated the Proposed Rule does not reflect the challenges associate d with utilizing the existing state Energy Efficiency Resource Standards, policies and procedures, in the energy efficiency framework in the Proposed Rule.

Commenter s stated that for over 30 years, economists, engineers and policy analysts have described a phenomenon in energy markets that came to be known as the " energy paradox" or the " efficiency gap." Commenter s stated engineering/economic analyses showed that techn ologies exist that could potentially reduce the energy use of consumer durables (from light bulbs to air conditioners, water heaters, furnaces, building shells and automobiles) and producer goods (like motors, HVAC, and heavy duty trucks). Commenter s state d because the reduction in operating costs more than offset the initial costs of the technology, resulting in substantial potential net economic benefits, we confront the paradox: "Why don't consumers purchase more economically efficient durable goods that result in net economic savings? ”

Commenter s provided a figure showing that several major research institutions estimate that there is a large potential to reduce the consumption of each of the forms of energy consumed by most households (electricity, natu ral gas, gasoline, and diesel), all of which are substantial emitters of carbon. Commenter s provided another figure showing that a 20 to 30 percent reduction in consumption for energy sources consumed directly by households is technically feasible and econ omically practicable. Commenter s stated the potential long

- term reduction in consumption of diesel fuel, which is used by heavy duty trucks is considerably larger, primarily because the first fuel economy standards were only recently adopted, almost forty years after the first fuel economy standards for light duty vehicles were adopted.65 Commenter s stated that recently, energy efficiency standards have become a hot topic in energy policy circles. Commenter s stated they had a very prominent place in the rece nt articulation of the Administration's climate policy and several major standards are moving through analytic and regulatory reviews at the federal and state levels. Commenter s stated among the most prominent examples are major appliance efficiency standa rds in Washington D.C. and Sacramento, a sharp increase in energy efficiency building codes, and National Research Council review of the fuel economy of medium and heavy duty trucks tied to the first ever fuel economy standards for these vehicles.

Commente r s stated at the same time, the cost benefit analysis used to support recent performance standards across a broad range of consumer durables has been criticized, with a great deal of attention placed on the recent increase in CAFE standards that governs ca rs and pickup trucks (light duty vehicles). Perplexed by the fact that in the EPA/NHTSA light duty vehicle fuel economy standard analysis "the preponderance of the estimated benefits stems from private benefits to consumers," c ommenter s stated that the Me rcatus Center argued that the market cannot possibly perform his poorly with respect to energy efficiency.

Commenter s questioned how can it be that consumers are leaving billions of potential economic gains on the table by not buying the most energy

- effici ent cars, clothes dryers, air conditioners, and light bulbs? Commenter s stated moreover, how can it also be the case that firms seeking to earn profits are likewise ignoring highly attractive opportunities to save money? Commenter s stated if the savings a re this great, why is it that a very basic labeling approach cannot remedy this seemingly stunning example of completely irrational behavior? It should be quite simple to rectify decisions that are this flawed

.
Commenter s stated the Mercatus view is that s ince "the preponderance of the assessed benefits is derived from an assumption of irrational consumer choice" and such behavior is easily rectified by labeling programs, which already exist, "the main failure of rationality is that of the regulators themse lves." Commenter s stated in Mercatus' view, the fault lies in the agencies, whose analysis must be wrong because it was prepared under legal mandates structured so that "government officials act as if they are guided by a single mission myopia that leads t o the exclusion of all concerns other than their agency's mandate."

Commenter s stated the other and correct answer to the question is well

- known. Commenter s stated energy markets are imperfect, riddled with barriers and obstacles to efficiency, especially the market for electricity. Commenter s stated market imperfections lead to market failures and underinvestment in energy saving technologies. Commenter s stated McKinsey and company offered the following framing in one of a series of analyses addressing various aspects of the ongoing transformation of the electricity sector:

" T he highly compelling nature of energy efficiency raises the question of why the economy has not already captured this potential, since it is so large and attractive. In fact, much progress has been made over the past few decades throughout the U.S., with even greater results in select regions and applications. Since 1980, energy consu mption per unit of floor space has decreased 11 percent in residential and 21 percent in commercial sectors, while industrial energy consumption per real dollar of GDP output has decreased 41 percent. As66 impressive as the gains have been, however, an even greater potential remains due to multiple and persistent barriers present at both the individual opportunity level and overall system level. By their nature, energy efficiency measures typically require a substantial upfront investment in exchange for savi ngs that accrue over the lifetime of the deployed measures. Additionally, efficiency potential is highly fragmented, spread across more than 100 million locations and billions of devices used in residential, commercial, and industrial settings. This disper sion ensures that efficiency is the highest priority for virtually no one. Finally, measuring and verifying energy not consumed is by its nature difficult. Fundamentally, these attributes of energy efficiency give rise to specific barriers that require opp ortunity

- specific solution strategies and suggest components of an overarching strategy ."

Commenter s stated even in the industrial sector, where firms are considered to be motivated primarily by economic profitability incentives, the efficiency gap is evi dent. A recent review of 160 studies of industrial energy efficiency investments conducted for the United Nations Industrial Development Organization (UNIDO) framed the analytic issues by posing and answering the key questions as follows:

• Why do organizati ons impose very stringent investment criteria for projects to improve energy efficiency?

• Why do organizations neglect projects that appear to meet these criteria?

• Why do organizations neglect energy efficient and apparently cost

- effective alternatives when making broader investment, operational, maintenance and purchasing decisions?

Commenter s stated because of barriers to energy efficiency these seemingly profitable measures are not being adopted. Commenter s stated there is a large body of literature on t he nature of barriers to energy efficiency at the micro and the macro level, which draws on partly overlapping concepts from neo

- classical economics, institutional economics (including principal

- agent theory and transaction cost economics), behavioral econ omics, psychology and sociology. Commenter s stated that barriers at the macro level involve price distortions or institutional failures. Commenter s stated in comparison, the literature on barriers at the micro level tries to explain why organizations fail to invest in energy efficiency even though it appears to be profitable under current economic conditions determined at the macro level.

Commenter s stated the Mercatus critique of the efficiency gap concept embodies a second flaw that the efficiency gap ana lysts have overcome in the past decade

- defining the problem as solely a consumer information problem. Commenter s stated in fact, in the last decade the important role that market imperfections play on the supply

- side of the market has been noted. Comment er s stated the market outcome reflects both the supply of and demand for technologies. Commenter s stated as Carl Blumstein has noted:

"But what if the energy

- efficiency gap was regularly framed as a supply

- side problem, such as a concern about whether pro blems in the supply

- chain create a67 gap between the energy

- efficiency potential of goods and services and the adoption of energy

- efficient goods and services? After all, in many instances consumer choices are constrained because it is not practical for manu facturers to produce a continuum of choices; suppliers can only provide a limited set of discrete choices within a range of prices, functionality and energy efficiency. In addition, even when the choice set of energy users is not constrained, limitations

r elated to the behavior of actors in the supply chain may restrict consumer choices."

Commenter s stated when the market barriers and imperfections on the supply and demand sides of the energy market are properly comprehended, it is clear that the performan ce standards are not an example of " overriding consumer preferences with energy regulations ," based on an assumption of consumer irrationality as Mercatus claims, rather, even without significant externalities (like climate change). Commenter s stated ener gy performance standards are a well

justified effort to overcome severe market obstacles constraints and cognitive limitations on human decision making that impose huge, unnecessary energy costs on consumers and the
economy.

Commenter s provided a table tha t summarizes a 1996 paper prepared by analysts at the LBNL (see Table II

- 1, LBL Market Barriers to Energy Efficiency). Commenter s stated the analysis was framed in terms of the role of policy intervention to promote efficiency as states restructured the

e lectricity market. Commenter s stated the paper " focuses on understanding to what extent some form of future intervention may be warranted and how we might judge the success of particular interventions. " Commenter s stated restructuring did not spread throug hout the utility industry and in the past few years, reliance on interventions in the market to increase efficiency and renewables has grown, even in the deregulated states. Commenter s stated t he growth of market interventions is consistent with the concl usions in the LBL paper.

Commenter s concluded that there are compelling justifications for future energy

- efficiency policies. Commenter s stated that nevertheless, in order to succeed, they must be based on a sound understanding of the market problems they seek to correct and a realistic assessment of their likely efficacy.

Commenter s provided a paper, the Golove and Eto paper identified four broad categories of factors that inhibited investments in energy efficiency

- barriers, transactions costs, market fa ilures, and behavioral (noneconomic) factors. Commenter s stated it identifies about two dozen specific factors spread roughly equally across these four categories. Commenter s stated a key aspect of the analysis is to identify each of the categories as comi ng from a different tradition in the economic literature. Commenter s stated the barriers category is made up of market structural factors. Commenter s stated the market failure category is made up of externalities and imperfect competition. Commenter s state d however, the LBL paper bases a substantial part of its argument on a transaction cost perspective as a critique of neo

- classical economics.

Commenter s stated neo

- classical economics generally relies on the assumption of frictionless transactions in which no costs are associated with the transaction itself. In other words,

c ommenter s stated the cost of activities such as collecting and analyzing informat ion; negotiating with potential suppliers, partners and customers; and risk are assumed to be nonexistent or68 insignificant. Commenter s stated this assumption has been increasingly challenged in recent years. Commenter s stated the insights developed through these challenges represent an important way to evaluate aspects of various market failures (especially those associated with imperfect information).

Commenter s stated starting from the observation that " transaction costs are not insignificant but, in fac t, constitute a primary explanation for the particular form taken by many economic institutions and contractual relations ", the LBNL paper identifies such costs and information as a critical issue, pointing out that " the key issue surrounding information i s not its public goods character, but rather its asymmetric distribution combined with the tendency of those who have it to use it opportunistically ."

Commenter s stated a second analytic framework that rests on a technology investment approach was offered more recently by other analysts at LBNL. Commenter s provided F igure II

- 2 (titled:

“ Penetration of Mitigation Technologies: A Conceptual Framework ”) that shows one can use a technology investment framework to assess the factors that cause investment in ener gy efficiency to fall well short of the technical potential

. As shown in in Figure II

- 2, the LBL study identified broad categories of market imperfections, barriers, and obstacles that are important in determining the level of investments

- economic, trans action cost, and social cultural and institutional. As shown in in Figure II

- 2, the analysis emphasizes the important role that policy can play in determining where the market will settle. Commenter s stated thus, there are six broad categories of factors t hat must be incorporated into the analysis of the level of investment in energy saving technologies. Commenter s stated market performance is influenced by: behavioral factors (social, cultural & institutional), economic factors, transaction cost, externali ties (non

energy costs), technological change, public policy.

Commenter s stated a more recent paper from Resources for the Future (RFF), entitled " Energy Efficiency Economics and Policy ," addresses exactly the same issues as the earlier LBNL paper, i.e., t he debate over the efficiency gap observed in energy markets. Commenter s stated the authors of the RFF paper characterize the efficiency gap debate as follows:

" Much of the literature on energy efficiency focuses on elucidating the potential rationales fo r policy intervention and evaluating the effectiveness and cost of such interventions in practice. Within this literature there is a long

- standing debate surrounding the commonly cited " energy efficiency gap..." Within the investment framework, the energy efficiency gap takes the form of under investment in energy efficiency relative to a description of the socially optimal level of energy efficiency. Such under investment is also sometimes described as an observed rate or probability of adoption of energy

- efficient technologies that is " too slow ."

Commenter s noted that Table II

- 2 presented their summary of the RFF framework. Commenter s stated the RFF paper suggests three broad categories of market failures

- the individual, the interaction between economic agents and the fit between economic agents and society. Commenter s referred to these three levels as the behavioral, the market structural, and the societal levels. In the present context, c ommenter s considered behavioral failures to represent consumer beh avior that is inconsistent with utility maximization, or in the current context, energy service cost

- minimization. Commenter s stated in contrast, market failure analysis is distinct in presupposing individual rationality and focusing on the conditions surr ounding69 interactions among economic agents and society. Commenter s stated the societal level market failures are closest to what the traditional sources of the economic literature refers to as market failure. Commenter s stated these are primarily externali ties and public goods. In the market failure category, the Figures show the distinction between the structural and societal levels suggested by the paper. Commenter s stated it also includes a few more specific failures that were discussed in the text, but not included in the original table. Commenter s stated there are about a dozen specific market failures spread across these categories. Commenter s stated these were also considered market failures in the LBL framework. Commenter s stated the LBNL barriers an d transaction costs fit in the category of interactions between economic agents, as would imperfect competition.

Commenter s stated one obvious point is that, as in the case of the LBNL framework, information problems occur in all categories of the RFF anal ysis, with several manifestations in each. Commenter s also noted that RFF ties the investment framework to the innovation adoption framework. Commenter s stated in this analysis they do so through the analysis of market imperfections.

Commenter s stated that a fourth comprehensive approach that adds depth to the analysis is the framework offered in a detailed analysis of efficiency in the building sector prepared by McKinsey and Company, and provided in a table. Commenter s stated the McKinsey

conc eptualization of barriers and obstacles to energy efficiency uses three broad categories

- structural, behavioral and availability. Commenter s stated there are about two dozen specific barriers described. Commenter s stated moreover, McKinsey identifies nin e different clusters of activity in the building sector. Commenter s stated the manifestation of the barriers is different in the clusters, so McKinsey ends up with fifty discrete barriers.

Commenter s provided a table that presents the framework utilized by the California Energy Institute in evaluating policies to increase energy efficiency in businesses. Commenter s stated it is notable in two respects. Commenter s stated first, it is oriented toward bu sinesses, which is a useful antidote to the overemphasis on residential consumers in the efficiency gap debate. Commenter s stated second, it explicitly endeavors to summarize and compile the various approaches to analyzing the " efficiency gap ," used by oth ers. Commenter s stated in doing so, it returns to the traditional distinction that is made between market failures, which are recognized in neoclassical approaches, and other obstacles to investment in energy efficiency in.

Commenter s provided input on ext ernalities. Commenter s stated the large negative externalities associated with the fossil fuel

- based electricity sector are the proximate cause of the need to re

center the sector on alternative resources. Commenter s stated the need for change is great and urgent. Commenter s stated however, the negative externalities are not the only obstacles that the transformation confronts. Commenter s stated other market barriers and imperfections must be overcome to control the cost and speed the transition to a new el ectricity system.

Commenter s stated there is a very large literature on the externalities associated with energy consumption. Commenter s stated importantly, it goes well beyond the negative national security and environmental externalities, which are frequ ently noted in energy policy analysis. Commenter s stated the central observation on the supply

- side is that many of the benefits of alternative generation technology resources or the processes by which their costs would be70 reduced, e.g., public goods quali ties of research and development, learning by doing, network effects, are positive externalities themselves. Commenter s stated this means the private sector will underinvest. Commenter s stated long lead times for technology development, increasing
returns to scale and network effects make entry difficult.

Commenter s stated the macroeconomic effects of energy consumption and energy savings are important externalities of the efficiency gap, as are health and welfare effects. Commenter s stated there are two m acroeconomic effects that have begun to receive a great deal of attention

- multipliers and price effects. Commenter s stated the ability to increase macroeconomic activity or, more importantly in the case of climate change, moderate reductions in macroecon omic activity that flow from the need to shift energy resources is an important policy consideration.

Commenter s stated that choosing least cost approaches to decarbonization is critically important from the macroeconomic perspective. Commenter s stated red ucing energy consumption tends to reduce economic activities that have relatively small multipliers (especially when energy imports are involved as in the transportation sector) and increase economic activities that have large multipliers (including the di rect effects of spending on technology and the indirect effect of increased household disposable income).

Commenter s provided input on the slow responses on the demand

- side. Commenter s stated consumers and producers are poorly informed, influenced by soci al pressures and constrained in their ability to make the calculations necessary to arrive at objectively efficient decisions. Commenter s stated consumers and producers apply heuristics that reflect rationality that is bounded by factors like risk and loss aversion. Commenter s stated inattention to energy efficiency is rational, given the magnitude, variability, and uncertainty of costs, as well as the multi

- attribute nature of energy consuming durables. Commenter s stated the product is a bundle of attribut es in which other traits are important and energy costs are hidden costs. Commenter s stated the resulting energy expenditures are important components of total household spending. Commenter s stated important benefits of energy consuming durables may be "sh rouded" in the broader multi

- attribute product.

Commenter s stated consumers are influenced by social norms and advertising. Commenter s stated consumers respond sluggishly to price increases, so the shifting of the risk of price volatility onto the consume rs does not have the hoped for effect in stimulating demand for alternative resources. Commenter s stated the undifferentiated nature of the product makes it hard for new entrants to secure a foothold (niche) from which to build scale and learn

- by doing. Co mmenter s stated energy consuming durables have long lives, and consumers frequently do not make the purchase decision. Commenter s stated the agents who make the purchase decisions and consumers are first cost sensitive and have difficulty projecting energy prices and quantities to make lifecycle cost calculations. Commenter s stated the demand

- side does not receive the attention commensurate with its importance as a source of market failure or its potential impact on the transition to a decarbonized sector.

Commenter s stated these factors weaken the ability of price to deliver the first best outcome and trigger the search for second best solutions. Commenter s stated moreover, while "picking winners" is fraught with dangers, setting the right level of the tax is equally difficult and the benefits of overcoming inertia and other barriers to cost reducing innovation are large.71 Commenter s stated a portfolio of policies that includes both carbon taxes and targeted intervention to stimulate innovation, is widely se en as the best approach.

Commenter s stated the empirical evidence on consumer rationality in the literature paints a picture that bears little resemblance to the rational maximizer of neoclassical economics. Commenter s found a risk averse, procrastinating consumer, who responds to average, not marginal prices, who is heavily influenced by social pressures, with discount rates that vary depending on a number of factors and has difficulty making calculations, not to mention the fact that the most important de cision, which energy consuming durable is made by someone else.

Commenter s stated firms suffer similar problems. Commenter s found organization structure matters a great deal in routine bound, resource strapped organizations confronted with conflicting incentives and a great deal of uncertainty about market formation for new technologies. Commenter s stated knowledge and skill t o implement new technologies is lacking and firms have little incentive to create it because of the difficulty of capturing the full value. Commenter s stated public policy efforts to address these problems have been weak and inconsistent. Commenter s stated the supply

- side does not escape these factors and it exhibits the added problem of powerful vested interests and institutional structures that are resistant, if not adverse to change.

Commenter s stated given this, it is little wonder that the centerpiece of traditional economic analysis, the discount rate, which is supposed to express the way the utility maximizer maximizes value is a shambles. Commenter s stated it is claimed to represent the value people place on efficiency, which is presumed to be correc t, but for externalities, which do not enter into the private calculation, or information problems, which frustrate the calculation. Commenter s stated the empirical analysis of discount rates shows that this claim suffers from two fundamental flaws. Commen ter s stated we have no solid basis to answer two basic questions.

Commenter s stated the market exhibits a high " implicit " discount rate, which c ommenter s interpret as the result of the many barriers and imperfections that retard investment in efficiency

en hancing technology. Commenter s stated there are several aspects of the high discount rate that deserve separate attention. Commenter s stated there is a low willingness to pay and a low elasticity of demand. Commenter s stated in a sense the discount rate i s the centerpiece of the market fundamentalist objection to performance standards.

• How big is the discount rate?

• How big should it be?

Commenter s stated estimates of the discount rate vary widely, from zero to well over 100 percent and the discount rate a ppears to be influenced by a wide number of personal and situational factors. Commenter s provided several tables, including Table V

- 1, Empirical Evidence Supporting the Efficiency Gap; Table V

- 2, Key Characteristics of and Findings of Empirical Studies on Efficiency Gap; and Table V

- 3, Market Barriers and Imperfection in Climate Change Analysis).72 Commenters stated there could be political impediments to expanding EE programs, for example, state and local governments, as well as homeowner associations, m ay have restrictions in effect to protect historic properties and preserve neighborhood character. Commenters stated these restrictions can limit how residences and buildings can be modified to be more energy efficient.

Commenter s stated EPA has propo sed increasing demand

- side energy efficiency (DSEE) to unreasonable levels based on the short

- term, unsustainable experience of only three states, one of which is not even subject to this proposal. Commenter s stated EPA's assumptions ignore the practical barriers to achieving and maintaining such levels. Commenter s stated BSER for existing sources, moreover, cannot include " reductions of electricity from the grid ."

Comment 7: Engaging Customer Participation is Voluntary ; the EPA should consider unique circumstances of states and COOPs.
Response 7: The EPA decided not to include DS

- EE in BSER for the final rule. See section s V.A and V.B of the final rule preamble of the CPP for details. However, the EPA recognizes that DS

- EE may be considered as a cost

- effective emissions reductions strategy which create multiple benefits, including lower electric bills, positive investments and job creation. DS

- EE remains generally available for compliance, with flexibility to given to consider unique circumstances wit hin states. DS

- EE measures must also meet the eligibility requirements and provisions, if applicable, and the requirements and criteria related to proper quantification and verification of MWhs from demand

- side EE savings as described in Section VII I of t he final rule preamble of the CPP

. See the Demand

- Side EE TSD for information on unique circumstances of states and

co

- ops and their roles in delivering cost

- effective EE.

The following are summaries of the specific public comments under this comment:

Mult iple commenters noted the difficulty in engaging customer participation in EE programs.

Commenter s stated there are customer economic challenges for EE, and that neither EPA nor the

s tates can force customers to achieve higher levels of EE, as it is com pletely outside their control.

Commenter s stated that non

- lighting initiatives had lower participation than expected for 2013; only 252 of 1,727 customers who received the in

- home energy assessment received rebates

. Commenter s stated these low participation rate is a concern about the state's or utility's ability to induce homeowners to invest in EE, particularly for households near the poverty line for appliance replacement. Commenter s stated West Virginia is more rural, has low population density; and has smaller average household size, all making EE deployment more challenging, particularly for rural, low

- income households. Commenter s stated that sustaining an average of 450 GWh in ne w savings from 2023 through 2030 is a very aggressive goal compared to the experience of the existing programs.

Commenter s provided input on customer behavior impacts adoption of demand

- side energy efficiency programs. Commenter s agreed that demand

- side energy efficiency programs have the73 potential to reduce CO2 emissions as well as help to minimize the long

- run cost of supplying electricity, however, utility driven installation of energy efficiency measures requires customer participation for this to oc cur. Commenter s stated customer adoption of measures in utility energy efficiency programs is voluntary. Commenter s stated utilities are limited to offering the programs, promoting the programs and providing incentives. Commenter s stated the ultimate deci sion of whether to adopt an energy efficiency measure rests entirely with the customer. To illustrate this point, c ommenter s provided two examples:

1. CFL Light Bulb Program. Since 2009, Duke Energy has been offering free or highly discounted CFL bulbs to r esidential customers and have provided customers with nearly 39 million compact florescent lights. This program has reached over 63 percent of our active residential customer accounts. Of that 63 percent, over 56 percent have received 15 CFLs, the maximum number of bulbs a single residential account can receive. Over 90 percent of these bulbs have been mailed directly to the customer's home eliminating the need for customers to take any significant action

- such as taking a coupon to a store. This extremel y successful program is designed to eliminate barriers to participation and make it as easy a process as possible by allowing customers to simply enroll on the company's website, respond to a mailed offer, or place an order over the phone. Even though it is free and easy, over one third of customers have not participated in the program.

2. Residential Appliance Recycling Program. In 2012, Duke Energy launched residential appliance recycle programs in several states. Duke Energy offers to pick up old applianc es at the customer's home and pay them a cash incentive. Initial program research indicated that customers are mostly motivated by the free in

- home pick

- up and potential energy savings from removing the inefficient appliance. Even with a robust marketin g plan that included bill inserts, direct mail, electronic offers and mass media TV/radio spots, the program struggled to meet even 50 percent of the targeted participation. Customers did not respond to an offer that provided simple enrollment, free home pick up, $100 annual electric bill savings and a paid cash incentive. A pricing study was then conducted to better understand the elasticity of program enrollment when the incentives were increased. The new research indicated that the cash incentive was more important than previously thought, so by changing the incentive from $30 to $50 per appliance the program participation improved by more than 200 percent but overall saturation is still low. Since launching in 2012, just over 40,000 appliances have b een recycled through this program.

Commenter s stated voluntary customer participation is only one of the reasons why it is not appropriate for the EPA to have proposed that demand

- side energy efficiency be a component of its proposed BSER for coal

- fired EG Us. Commenter s stated its adoption is beyond the control of the regulated source. Commenter s stated even if it were lawful, it is simply not appropriate for the EPA to establish CO2 emission limits for coal

- fired EGUs that are based in part on something which the plants have no control over. Commenter s stated in its Proposed Guidelines, the EPA has failed to take into account that customer behavior is beyond the control of public utilities or states. Commenter s stated instead, customer adoption of ener gy efficiency programs depends on a number of factors including, but not limited to, the cost of electricity, the maturity of the programs, the incremental cost of the technology to the customer, the availability of more energy efficient equipment, the cli mate, the customer mix, and the socioeconomic demographics74 within a jurisdiction. Commenter s stated these factors vary significantly from one state to another, and can even vary across utility service area within a state. Commenter s stated grand

macro as sumptions applied across all states and service areas do not properly reflect the efforts to obtain the maximum benefits of energy efficiency at the least cost, and they invariably result in assumptions that are incorrect and inapplicable for some areas. Commenter s stated nevertheless, the EPA's Proposed Guidelines would require that these macro assumptions be applied in every state.

Commenter s stated the price of electricity is an important factor affecting adoption of energy efficiency measures. Comment er s stated that probably the most important factor affecting adoption of demand

- side energy efficiency measures is the price of electricity. Commenter s stated the higher the price of electricity, the more customers will likely find that the installation

o f energy efficient measures is cost

- effective for their circumstances. Commenter s stated this is analogous to the measure of price elasticity often found in utility econometric

- based load forecasting models. Commenter s stated as the price of electricity ( in real dollars) rises over time, usage per customer is projected to decline. Commenter s stated customers can achieve these price

- driven energy use reductions, in part, by installing more energy efficient equipment. Commenter s stated rising prices reduce the payback period and make the measures more economically attractive. Commenter s indicated that in states where electricity prices have remained relatively low, customer adoption of energy efficiency programs, measured as a percentage of retail electric ity sales, historically has been lower than in states where electricity prices are much higher. Commenter s stated in its Proposed Guidelines, the EPA refers to data reported by utilities to the EIA showing that in 2012, the five states (California, Connec ticut, Minnesota, Rhode Island, and Vermont) with the highest cumulative energy efficiency savings had achieved, on average, a cumulative reduction in load of 13.4 percent. Commenter s stated the EPA refers to this data as evidence of what can be achieved a nd implies that all states can achieve this level of load reduction. Commenter s stated a closer look at the data from the EIA Form 861 shows that the average retail electricity prices for those same five states in 2012 was 12.98 cents per kWh (while the av erage retail price in Minnesota, one of the five states, is near the average for the nation, it does not refute the fact that higher electric prices make it easier for
customers to cost

- justify investments in energy efficiency, which makes implementation o f energy efficiency programs easier in states with higher retail prices. Also, it is important to note that Minnesota's achievement includes codes and standards). Commenter s stated this is over 50 percent higher than the average for 34 states, or two

- third s of the 50 states plus the District of Columbia. Commenter s stated the EIA data strongly suggest that higher electricity prices are linked to a higher rate of customer installation of energy efficiency measures. Commenter s stated also, it is important to note that in 2012, these same five states achieved incremental savings as a percentage of retail sales of 1.28 percent on average, not the 1.5 annual percentage increase the EPA has proposed as the basis for setting state energy efficiency targets for its preferred Building Block 4 approach. Commenter s stated this calls into question the technical basis for EPA's proposed 1.5 percent annual incremental savings rate target because the EPA has not demonstrated that the leading states can sustain the targeted level of projected energy efficiency savings. C ommenter s stated to achieve the annual 1.5 percent incremental savings rate the EPA has proposed, customers in all sectors (residential, commercial, and industrial) must be willing to aggressively adopt programs offered by the utility. Commenter s stated c ustomer behavior is difficult to predict, but when the cost of energy increases, customers have a larger incentive to reduce energy consumption to save money. Commenter s stated the EPA has focused primarily75 on energy efficiency policies and programs that increase the energy efficiency of buildings, appliances, and industrial operations and has paid little or no attention to customer behavior, which will ultimately determine the level of efficiency gains that can be achieved.

Commenter s stated the EPA has n ot accounted for the fact that demand

- side energy efficiency programs are maturing. Commenter s stated the demand

- side energy efficiency industry is maturing. Commenter s stated many customers have already taken advantage of energy

- efficient lighting, appli ance recycling, and other long

- standing programs to deliver greater energy efficiency. Commenter s stated the lower

- cost and easy

- to

- adopt programs have been the most widely adopted programs, which is why some states have historically experienced high
perce ntages of avoided energy demand savings. Commenter s stated according to data provided on the California Public Utility Commission's Energy Efficiency Data Portal, energy efficiency savings in California were achieved mostly by indoor lighting in the comme rcial and residential sectors. Commenter s stated the rate of energy savings due to indoor lighting has reached a point of saturation that cannot be sustained without a new technology that can create light more efficiently than light

- emitting diode (LED) t echnology. Commenter s stated while LED technology creates efficiency savings compared to compact fluorescent (CFL) technology, the incremental energy savings when going from CFL to LED lighting are significantly smaller than the historical savings generat ed from moving from incandescent lights to CFLs; for example, the electricity usage of a 60 watt incandescent bulb became 13 watts (a 78 percent incremental reduction) with the move from incandescent to CFL, but, the move from a 13 watt CFL to a 10 watt LE D (which costs significantly more than an equivalent CFL) results in only 3 watts of savings (only a 23 percent incremental reduction). Commenter s stated while there is a savings opportunity when moving from CFL to LED lighting, the incremental savings wi ll be relatively small, and certainly will not support the rate of year

- to

- year energy efficiency savings that have been achieved historically. Commenter s stated that to illustrate further, assume that a residential customer uses 12,500 kWh per year (avera ge usage for Duke Energy residential customers) and the customer converts 15 bulbs from incandescent to CFL. Commenter s stated based on an annual savings of roughly 43 kWh/year per bulb (60 watts to 13 watts, 2.5 hours per day), the customer realizes a to tal savings of approximately 643 kWh/year or roughly 5 percent of the total annual electricity usage. Commenter s stated by 2017, it is expected that the overwhelming majority of residential households will have already achieved these savings. Commenter s s tated the move from CFL to LED would result in only an additional 3 kwh/year per bulb (13

- 10 watts, 2.5 hours per day) for a total annual savings of only an incremental 41 kWh/year, which is roughly 0.3 percent of the customer's annual electricity usage, n et of the CFL savings already achieved. Commenter s stated this illustration shows that the move from CFLs, a technology that is already widely adopted, to the next rung on the lighting efficiency technology ladder, LEDs, will result in only a marginal incr emental increase in energy savings. Commenter s stated this same technology development and adoption trend applies to many other end

- use technologies, including heating, ventilation and air conditioning (HVAC) equipment which represents a major driver for the higher energy use of residential customers in Duke Energy's service territories. Commenter s stated despite the maturity of energy efficiency programs such as lighting, Duke Energy has found that some customers are still unwilling to adopt even these re latively low

- cost energy efficiency measures. Commenter s stated unlike lighting, HVAC and large appliances represent durable goods that represent a significant cost for most consumers. Commenter s stated when deciding whether to purchase a unit of electri city or to invest in energy efficiency, many76 customers will respond by purchasing the unit of electricity and spending their dollars on other goods and services that they perceive have a higher value for them.

Commenter s stated the potential lack of availa bility and the cost of more energy

- efficient equipment impacts customer adoption. Commenter s stated in its Proposed Guidelines, the EPA did not assume any particular type of demand

- side energy efficiency policy, but the EPA did note that appliance standar ds is a policy that has been used at the federal and state levels to accelerate the deployment of demand

- side energy efficiency technologies. Commenter s stated what the EPA did not appear to take into account is that it may take years for more energy

effic ient appliances such as refrigerators, air conditioners, washing machines, and clothes dryers to come to the market and even longer for customers to embrace them. Commenter s stated the EPA's Proposed Guidelines ignore the length of time it takes for more energy

- efficient equipment to enter the market, and compounds that mistake by ignoring consumer preference and assuming that consumers will readily purchase these types of appliances, particularly in situations where the purchase of a more efficient appli ance would occur prior to the end of the useful life of the existing appliance. Commenter s stated customers do not go out and immediately purchase a new washer and dryer simply because a more energy efficient one has become available. Commenter s stated ad ditionally, as has been the case with new efficiency technologies that have already entered the market, the incremental savings that can be achieved through technological advancement declines over time relative to earlier advancements. Commenter s stated as discussed above, moving from CFLs to LEDs provides little relative improvement in efficacy when compared to moving from incandescent bulbs to CFLs. Commenter s stated similarly, early heat pump technology was relatively inefficient compared to today's stan dards, but the 1980's vintage heat pumps have been largely replaced with drastically more efficient heat pumps. Commenter s stated as a result, replacement of today's more efficient heat pumps will likely result in only a modest improvement in efficiency.

Commenter s stated regional climate impacts the adoption of energy efficiency programs. Commenter s stated the climate in a given jurisdiction has a significant impact on the development of and the adoption of energy efficiency programs and the energy saving s that can be achieved with certain programs. Commenter s stated that in its Proposed Guidelines, however, the EPA does not take into account that climate impacts customer behavior, thus affecting the ability of a jurisdiction to meet the Agency's proposed energy efficiency goals.

Commenter s stated in regions where summers are typically hot, consumers will generally use their air conditioners and/or heat pumps regardless of the efficiency of their equipment. Commenter s stated to be comfortable, consumers may choose not to adjust their thermostat or allow the utility to adjust their usage even if financial incentives are offered. Commenter s stated in jurisdictions with hot and/or humid climates where air conditioners consume a significant portion of the utili ty's load, it is difficult to develop cost

- effective energy efficiency programs that provide enough of an incentive for customers to adopt demand

- side energy efficiency programs because of the large customer out

- of

- pocket cost required to purchase the mor e efficient equipment. Commenter s stated as a result, once the savings from indoor lighting have been achieved, additional energy efficiency savings are difficult to achieve in climates where HVAC equipment is a major driver of the customer's usage.77 Commen ter s stated customer mix impacts the savings each state is able to achieve through demand

- side energy efficiency measures. Commenter s indicated each state has a different customer mix (i.e., residential, commercial, industrial, and agricultural). Commente r s stated the EPA's Proposed Guidelines do not take into account customer segmentation and how this impacts each state's energy efficiency savings potential; for example, Duke Energy's service territories include a large number of industrial customers. Co mmenter s stated in most of Duke Energy's jurisdictions, state regulations allow certain larger energy using industrial and commercial customers to elect not to participate in public utility

- offered energy efficiency programs (commonly referred to as "opt

- o ut") and hence be relieved of the obligation for paying the costs of the utilities' demand

- side energy efficiency programs. Commenter s stated for industrial customers electing to opt

- out, utilities are not involved in either offering or measuring the impa ct of demand

- side energy efficiency programs, if any, they may adopt. Commenter s stated the EPA's Proposed Guidelines do not clearly state how demand

- side energy efficiency will be addressed where entire classes of customers are eligible to opt

- out, howev er, any EPA rule that requires electricity savings from end

- use energy efficiency measures must make it clear that the targeted energy savings only apply to sales net of the loads that have opted

- out of the
program. Commenter s stated in addition, since ut ilities are not required to verify, measure, or report the energy efficiency impacts associated with opt

- out customers as part of their energy efficiency achievements, it is unclear how any energy efficiency savings associated with opt

- out customers would be tracked for the purpose of the EPA's rule. Commenter s stated establishing a requirement for the utility to verify, measure, and report the impacts associated with opt

- out customers is contrary to state statutes, in some cases, and at a minimum, would r equire the establishment of a mechanism to allow a utility to recover the costs for tracking these energy savings from the industrial and commercial sectors.

Commenter s stated however, the energy use reductions achieved as a result of these opt out customers' demand

- side energy efficiency programs need to be factored into the calculation of the overall state goals, as these savings may be a significant contributor to the CO2 reduction achieved through energy efficiency. Commenter s stated therefore, the EPA needs to determine how, and by whom, these savings should be reported.

Commenter s stated socioeconomic demographics impacts customer behavior. Commenter s stated in it s Proposed Guidelines, the EPA failed to recognize that each state has a different socioeconomic demographic which impacts customer behavior. Commenter s stated buying new appliances, retrofitting a home with energy efficient features, and/or buying a new home that meets new building standards may not be affordable depending on the socioeconomic mix of customers in the state. Commenter s stated the greatest opportunity for electricity savings, for example, often comes from older manufactured homes which are typically occupied by lower income individuals or families that are unlikely to be able to afford costly energy efficiency investments. Commenter s stated consequently, certain households are less likely to invest in costly energy efficiency measures or pro grams.

Commenter s stated that consumer behavior determines adoption of demand

- side energy efficiency programs. Commenter s agreed that demand

- side energy efficiency programs have the potential to reduce CO2 emissions as well as help to minimize the long

- run cost of supplying electricity. However, commenter s contended that utility driven installation of energy

- efficiency78 measures requires customer participation. Commenter s pointed out that customer adoption of measures in utility energy efficiency programs is voluntary.

According to commenter s , the EPA's proposal fails to take into account that consumer behavior is beyond the control of public utilities. Commenter s stated that customer adoption of energy efficiency programs depends instead on a number of fa ctors including, but not limited to, the cost of electricity, the maturity of the programs, the incremental cost of the technology to the customer, the availability of more energy

- efficient equipment, the climate, the customer mix, and the socioeconomic de mographics within a jurisdiction. Commenter s said these factors vary significantly from one utility service area to another. According to commenter s , grand macro assumptions applied across all service areas do not properly reflect the efforts to obtain the maximum benefits of energy efficiency at the least cost.

Commenter s stated that the climate in a jurisdiction also has a big impact on the development of and the adoption of energy efficiency programs and the amount of energy savings that can be derived f rom certain programs. According to commenter s , the EPA's proposal does not take into account that climate impacts consumer behavior, thus affecting the ability of a jurisdiction to meet its proposed energy efficiency goals. Commenter s noted that consumers use electricity to be comfortable. In states such as Florida with hot and long summers, commenter s said consumers use their air conditioners regardless of whether the units are energy efficient. Commenter s pointed out that to be comfortable, consumers may choose not to adjust their thermostats or allow the utility to adjust their usage even if incentives are offered. In jurisdictions where air conditioners consume a significant portion of the utility's load due to the hot and/or humid climates, commenter s s aid it is difficult to develop cost

- effective energy efficiency programs that incentivize consumers to adopt demand

- side energy efficiency programs because of the large customer out

- of

- pocket cost to purchase the more efficient equipment. As a result,

once the savings from indoor lighting have been achieved, commenter s concluded that additional energy efficiency savings would be difficult to achieve in climates where HVAC equipment is a major driver of the customer's usage.

Commenter s stated that customer m ix also impacts each state's ability to achieve goals. Commenter s noted that e ach state has a different customer mix (i.e., residential, commercial, industrial, and agricultural). According to commenter s , the EPA's proposal does not take into
account custo mer segmentation and how this impacts each state's goals. For example,
commenter s noted that regulations in many states allow certain industrial and commercial customers to choose not to participate in public utility

- offered energy efficiency programs (com monly referred to as " opt

- out "). For consumers who choose to opt

- out, commenter s said utilities are not involved in demand

- side energy efficiency measures, if any, adopted by the consumer. Commenter s argued that EPA's proposed rules do not clearly state how demand

- side energy efficiency will be addressed for customers who are eligible to opt

- out. Commenter s said that public utilities historically have not measured and included the impacts associated w ith opt

out as part of their energy efficiency achievements and should not be required to track these savings in the future unless the costs for tracking energy savings can be recovered from the industrial and commercial sectors through state rate

- making m echanisms. However, commenter s recommended that the energy use reductions as a result of these consumer driven efficiency programs should be included in the overall state goals as a contributor to the CO2 reduction; therefore, EPA needs to determine how, a nd by whom, these savings should be reported.79 Finally, commenter s stated that socioeconomic demographics impact consumer behavior. According to commenter s , the EPA's proposal fails to recognize that each jurisdiction has a different socioeconomic demograph ic that impacts consumer behavior. Commenter s noted that buying new appliances, retrofitting a home with energy efficient features, and/or buying a new home that meets new building standards may not be affordable for many consumers. In fact,
commenter s poi nted out that the opportunity to save the most electricity often comes from older manufactured homes which are typically occupied by lower income individuals or families that are unlikely to be able to afford costly energy efficiency investments. Commenter s also noted that the cost to comply with EPA's proposed rule will ultimately result in much higher energy prices and higher customer bills, even when customers take advantage of energy efficiency opportunities. Commenter s said higher energy bills will abs orb more of the disposable income that households use to pay essential expenses. Consequently, commenter s concluded that certain households are less likely to invest in costly energy efficiency measures or programs. According
to commenter s , EPA fails to re cognize that consumer spending on energy efficient measures depends on the financial means of the consumer, which varies by jurisdiction and will be adversely impacted by these regulations.

Commenter s stated that EPA's proposed Clean Power "building blo cks" for state emission reductions contain unrealistic assumptions on the potential for large

- scale renewable energy and energy efficiency development within the short timetable of the EPA rule. Commenter s stated that lower

- income seniors are among those l east likely to make major investments in new energy efficiency programs with long investment payback times, as envisioned by EPA's Clean Power Plan. Commenter s stated the suite of new regulations EPA is now pursuing inevitably will lead
to ever

- higher uti lity prices for America's elderly population, exceeding the modest cost

- of living (COLA) adjustments that many 65+ retirees depend upon just to keep up with inflationary
pressures.

Commenter s stated that, while EPA used state

- specific data from EIA Form 861 for establishing starting points for EE levels, it applied "national" estimates of EE potential to this data and applied an EE growth rate historically only experienced in other best

- practice states. Commenter s argued that the applicability of both th ese metrics has some fundamental flaws, based on the variability of state

- specific factors, such as customer economic challenges. Commenter s stated that EE improvements are expensive for customers, often requiring significant capital investment. C ommenter s said this is problematic. According to commenter s , customers usually avoid such large expenditures until a precipitating event occurs (HVAC failure, for example). And with current economic conditions, commenter s said this is even more challenging. Longer

- term, commenter s anticipated continued difficulty in motivating customers to pay premiums for such EE improvements due to significant portions of their service territory being economically disadvantaged. For example, commenter s noted that households served by their subsidiaries in Texas have household incomes 25 percent below the US national average.

Commenter s noted that most utility

- based EE programs rely on an analysis of customer behavior. According to commenter s , predicting the intensity of customer adoption of new EE technology is not precise, and is based on an assessment of the customer's purchasing power, the ability of the available technology to meet customer needs and service expectations. Commenter s pointed out that the technology itself must produce savings through demonstrated reductions in energy usage. Commenter s argued that establishing a firm emissions performance standard, even in part,80 that is based on customer behavior and the willingness of substantial portions of the population
to a dopt new technologies is unreasonable

-- for Georgia and perhaps for any state.

Commenter s stated that the percentage of impoverished residential customers will affect the viability of EE programs. Commenter s noted that Oglethorpe Power Corporation (OPC) pro vides electricity to 38 electric distribution cooperatives that provide electric service to the most rural areas of Georgia. Commenter s pointed out that about 1/2 of Georgia's EMCs provide service to customers whose average annual income is 28% below the n ational average, and 25% below the State (Georgia) average. Commenter s also noted that the poverty rate experienced by such customers is about 27%

-- 7 percentage points higher than the national poverty level and 10 points higher than the state poverty level . Therefore, commenter s concluded, on average EMC members have considerably less purchasing power than other Georgia citizens who purchase their power from other utilities. While participation in energy saving programs could benefit lower income customers, commenter s contended that the investment required by them to upgrade from standard equipment to more energy saving equipment can pose a significant barrier for introduction

-- even with aggressive financial incentives. Commenter s also pointed out that these customers make up a larger proportion of the EMCs' customer base than for other Georgia utilities. Commenter s concluded that this fact leads to lower participation rates and higher costs for EMC sponsored energy efficiency programs.

Commenter s noted that utility sponsored energy efficiency programs typically include financial incentives, education and sometime behavior changing programs. As noted by commenter s , financial incentives are designed to encourage customers to reduce energy use throug h the purchase of energy saving lighting, water heating or heating/cooling equipment. Commenter s stated that this equipment typically costs more than " standard " equipment. According to
commenter s , financial incentives will help some customers to purchase m ore expensive equipment today to achieve energy saving benefits in the future.

Commenter s stated that customer mix between residential and commercial and industrial can also affect the viability of EE programs. The commenter s said that a significant cost of these programs is in the advertising and promotion of the program. According to commenter s , attracting residential customers to participate in such programs can cost 5

- 7 times more than for commercial and industrial custome rs. Commenter s also noted that each commercial and industrial customer, on average, uses 5 times more energy than a single home for cooperatives in Georgia (and 9 times more energy for Georgia's IOUs). Commenter s said this higher usage per customer contrib utes to higher participation rates and cost advantage for those systems that have higher concentrations of commercial and industrial customers. Commenter s noted that typical studies indicate that 75% or more achievable energy savings from utility energy ef ficiency programs is expected to come from commercial/industrial customers. Commenter s said that cooperatives generally have fewer opportunities to implement EE measures, due to their traditional customer base (over 90% of Georgia cooperative customers are residential, providing far fewer opportunities to implement EE measures than commercial and/or industrial customers).

Commenter s also commented on the limitations of demand

- side energy efficiency (EE) programs. To put the availability of EE programs in context, commenter s pointed to one potentially viable example of a program that their cooperative might implement, specifically the replacement of incandescent bulbs with compact fluorescent light (CFL) bulbs in poultry houses.81 Commenter s noted that their member systems are currently serving approximately 4,000 poultry houses. Using data from past studies, commenter s estimated and determined that 52,896 MWh of generation could be avoided in a single year. Commenter s estimated this retrofit would cost $500 per house to the poultry farmers. Commenter s also estimated that the MWh of generation avoided would be equivalent to approximately 1 percent of their cooperative's net generation in a single year, given 100 percent participation by the poultry farmers (al though historic participation in such programs has been significantly less than 100 percent). Optimistically assuming 100 percent participation in the program, which is the single most effective program identified, commenter s indicated their cooperative wo uld still be incapable of achieving the Building Block 4 compliance goal for one year, and the commenter s said it is unclear to them that any other viable programs exist and can be implemented to achieve necessary reductions for compliance in future years. Therefore, commenter s concluded, the few viable Energy Efficiency programs that they have identified may be thought of as "one and done." Commenter s w ere also concerned about maintaining continued participation with Energy Efficiency improvements already made from year to year. Thus, commenter s contended that implementation of such a program is fraught with problems.

Commenter s also argued that, d espite their cooperative's efforts to encourage demand

- side energy efficiency, it is ultimately up to the consu mers whether they want to participate in these programs. While the current measures come nowhere close to achieving the 1.5 percent annual reduction goal in the first year, much less the cumulative total of a 15 percent reduction over ten years as required by EPA, commenter s contended that their cooperative has no authority to ration its consumers' energy or force them to implement certain measures. Even if consumers adopt efficiency strategies, commenter s indicated they may simply consume more energy with the additional disposable income. For example, commenter s noted that their cooperative can help customers install more efficient air conditioners, but questioned what prevents the consumer from taking advantage of those efficiencies by, for example, loweri ng their temperature settings from 75 degree F to 73 degree F, leaving total energy consumption constant. Commenter s noted that the State of Alabama, ADEM, and EPA are similarly lacking such authority. Accordingly,
commenter s indicated it is unclear how EP A expects to hold the states accountable for something over which they have no control: the energy consumers themselves. Commenter s argued that this is a drastic overreach of EPA's authority and, in addition to being unachievable for their cooperative and the states, is illegal. Commenter s stated that EPA cannot seek to regulate the entire electricity sector. According to commenter s , this is clearly not within the powers delineated to the Agency by Congress. As such, commenter s concluded that EPA's proposal is a drastic overreach and cannot lawfully be implemented.

Commenter s stated that energy

- saving programs exist at their City utility, but the goal of 9.98% of avoided electricity sales from energy efficiency appears to be unrealistically high. Commenter s noted that customer adoption of these measures is voluntary. While they encourages energy efficiency, commenter s said individual consumer usage is beyond their control.

Commenter s stated that they will continue to conduct i ntegrated resource planning and expand
cost

- effective efficiency efforts before building new generation. Commenter s argued that the proposal does not appear to take into account economic development goals for growing a municipality's or state's economy nor expected population increases like they experience in82 Florida. If a program requires utility

- specific or even state

- wide energy efficiency goals, the
commenter s said they are very concerned that it would stifle economic development, which means less indus try, fewer jobs, and a lowered standard of living. Commenter s said that they are opposed to any program that would stifle economic development or population growth. Even if economic and population growth is not considered, however, commenter s said neither they nor the state can replace enough of society's energy

- consuming appliances to cut emissions by 6 percent, and certainly not by 38 percent; it's just not feasible.

Commenter s stated that, at the end of the day, it is not them or their municipal utili ty members that will achieve the projected 0.7 % savings

-- but the end

- use customers. Commenter s contended that the utilities can only provide incentives and encouragement to prompt customers to make investments or behavioral changes in electric energy use. According to commenter s , undertaking those actual investments or changes lies solely in the free will of the customer; their studies on energy efficiency potential necessarily take into account the "buy

- in" that customers are willing to make based not onl y on economics but also on other barriers that are customer

- specific, as well as the historical achievements to date. However, commenter s stated, block 4 is based on the unproven assumption that customer buy

- in and action will be consistent in its impact o n energy use and generation needs regardless of cost or other barriers and taking only into account availability of technology. Commenter s said their studies are based on their actual customers, use, and load, and show otherwise. Commenter s argued that EPA reliance on block 4 overestimates the ability of the state or the utilities to change the habits of individuals or to cause the consumer to undertake investment in savings in order to consistently achieve 1.5 % per year savings, and consequently overestim ates the savings available from block 4 in setting target goals. Commenter s contended that EPA failed to undertake any engineering studies on what is actually achievable and instead based the 1.5 % per year savings by cherry

- picking the most optimistic pol icy review.

Commenter s stated that, as a responsible electrical utility, they encourage their customers to save energy, offer incentives to retire old appliances, provide energy audits, participate in the Focus on Energy program, support customers that want to install distributed generation resources, distribute energy efficient bulbs, and cogenerate to provide steam to schools, government buildings and businesses. According to commenter s , the expectation that they can somehow force their customers to us e electricity efficiently per block 4 is not realistic. C ommenter s argued that what is realistic is that these regulations will make electricity so expensive that their low

income ratepayers will be forced to cut electrical consumption to maintain the most basic necessities.

Commenter s argued that utilities should not be put in a position of doing anything more than providing information and programs that will both increase consumer awareness of their energy consumption or encourage the installation of e quipment that is mutually beneficial. Commenter s stated that t here are limits of utility influence on the consumption levels of individual households.

Commenter s stated that EPA should help states achieve energy savings goals through educational programs and products

-- the responsibility associated with the smart grid of the future, use and care, is no different than teaching a society to turn lights off, and lower the thermostat, or buy CFL, LED, etc.83 Commenter s noted that they are a member of the Reenergize Coalition locally, which is working to drive a market demand for energy efficiency. Commenter s participate d in the 2030 Challenge sponsored by the Green Building Alliance locally, which is one of three efforts across the country where, in their region, more than half of the downtown businesses commercial property owners have committed to reducing their carbon footprint by 50 percent by the year 2030, the same year named in the EPA rule.

Commenter s stated that " any efficiency standard aimed at industrial consumers should recognize the extent of improvements already implemented " and industrial sources "are different from residential consumers who may not yet have implemented an array of energy

- saving measures that regulatory programs can target in the future."

Commenter s stated that Block Four assumes that the demand for energy can be reduced by improving demand

- side efficiencies. C ommenter s stated that in other words, EPA assumes that as the energy system as a whole grows more efficient through initiatives like subsidizing energy

efficient appliances and implementing energy efficiency standards for new construction, this will translate into a decreased demand for energy

. C ommenter s stated that the most glaring assumptions in Block Four are that these types of reductions would be within the scope of EPA's power and the states' control. C ommenter s stated that EPA has not identified any authority which woul d allow it to control the consumer

- end uses of electricity

- a regulatory power that has always been reserved for the states. C ommenter s stated that there have also been reliable claims that the numbers used by EPA to generate these energy efficiency rates i n Block Four come from data and methods developed by special interest organizations.

Commenter s discussed how EE goals are unrealistic and should not be enforceable.

Commenter s stated that EE cannot be an enforceable compliance measure. C ommenter s stated that regardless of how much time, effort and money is committed to EE, there is no way to know how effective it will be. C ommenter s noted that even in current EE programs it is difficult to measure energy savings and it is impossible to enforce ene rgy savings targets from EE programs.

C ommenter s stated that for G&Ts it is even more difficult to enforce EE goals because member

co

- ops own and operate the distribution systems. C ommenter s noted that PowerSouth has implemented a number of EE programs, an d the one commonality is that participation is low, regardless of efforts made to notify members. C ommenter s noted that PowerSouth has over 380,000 residential members. C ommenter s stated that in 2013, it processed 888 residential HVAC rebates totaling over $500,000, representing a savings of over 1,847,000 kWhs (1,847 mWhs). C ommenter s stated that PowerSouth is budgeting for 1,180 rebates in 2015. C ommenter s stated that despite PowerSouth's efforts to notify its residential members about this program, in 20 13 the participation rate was 0.2%. C ommenter s stated that this participation rate may overstate the number of homes that participated, because many of the rebates processed came from multiple units within a single home.

C ommenter s stated that in 2007, Pow erSouth implemented a water heater demand

- side program called H2O Plus through which load control devices are added to water heaters to allow PowerSouth to remotely control usage during peak hours to minimize demand. C ommenter s noted that through this prog ram, PowerSouth prevents energy usage during peak times when the84 cost of generation is highest. C ommente rs stated that despite efforts to notify members, only about 3% of Power South's total residential members participate in this program.

C ommenter s state d that most of PowerSouth's programs, and programs that it may consider implementing if necessary are "one and done" meaning continued increase in EE is not likely after all programs are implemented. Also, c ommenter s stated that it may be difficult to sust ain residential consumer participation. C ommenter s noted that Power South's experience demonstrates the difficulties of implementing a widespread EE program, let alone enforcing EE goals.

C ommenter s stated that SMEPA and its member systems have had EE programs in place for over 25 years. C ommenter s stated that SMEPA offers the following programs to its customers: (1) Comfort Advantage Program; (2) Pre Pay Program; (3) Time of Use Rate; (4) Energy Aud its; (5) Automated Metering Infrastructure; (6) Energy Efficiency Education; and (7) Distributed Generation. C ommenter s stated that the Comfort Advantage System offers incentives for EE and energy efficient HVAC systems in new home construction and energy efficient HVAC equipment upgrades in existing homes. C ommenter s noted that through the Pre

- Pay Program, some of SMEPA's member systems allow their members to pay for electricity before they use it, which reduced their bills by 10

- 15% because end

- users beco me more aware of their usage. C ommenter s stated that by employing the Time of Use Rate program, SMEPA allows its members to avoid or reduce load during the on

- peak period and increase load during the off

- peak to save cost which allows current generating facilities to operate more efficiently. C o mmenter s stated that most of SMEPA's member systems conduct free energy audits for their customers. C ommenter s stated that some of SMEPA's member systems have installed automated metering infrastructure that allows members to access their energy use 24 hou rs a day, 7 days a week. C ommenter s stated that all of SMEPA's member systems provide EE education for their customers and encourage them to purchase energy efficient products and build energy efficient homes. In the spring of 2009, c ommenter s stated that SMEPA and its member systems developed common contractual documents addressing distributed generating resources for residential installations up to 10 kilowatts.

C ommenter s stated that together, SMEPA's programs reduce the average residential kWh. C ommente r s stated that the decrease is driven by replacement of older less efficient appliances and equipment with more energy efficient models. C ommenter s noted that by implementing and administering these EE programs, SMEPA has found that EE programs must make e conomic sense for the rate payer for the program to be effective. C ommenter s stated that if an EE program must be heavily subsidized, it will most likely result in higher rates, which will no longer benefit the customers. C ommenter s stated that given the e xtensive EE programs SMEPA already has in place, it is unlikely that SMEPA can implement additional EE projects that will result in the reductions contemplated in the CPP.

C ommenter s stated that East Kentucky Power Cooperative (EKPC) also has some members who have implemented pre

- pay programs. The commenter s stated that EKPC has seen an average reduction of 12% in electricity usage, similar to SMEPA's experience with pre

- pay programs. C ommenter s stated that a pre

- pay program encourages end

- users to be disci plined and frugal with their energy usage.85 Since 2008, c ommenter s stated that Hoosier Energy has also voluntarily implemented an EE and demand side management program. Between 2009 and 2013, the program has saved over 130,000 MWhs, with a program cost of o ver $32 million.

C ommenter s stated that even though substantial investments have already been made, the CPP, as proposed, does not give any members of the commenter s ' group, credit for EE programs already in place and savings that are already being achieve d.

Commenter s stated that the CPP has grossly overestimated the energy efficiency reductions achievable in rural areas due to population densities, income levels and economies of scale for large commercial/office energy users. C ommenter s noted that only three (3) states have achieved a 1.5% energy efficiency goal (AZ,CT,VT) and those states have had programs for over 20
years. C ommenter s stated that California which is often used as an example of model energy efficiency programs has only achieved a 1% re duction with most other states realizing only a 0.5% gain. C ommenter s stated that the 1.5% reduction may be achievable over time but not in the time allowed in the CPP. C ommenter s recommended that the CPP remove or modify building block 4 to a realistic en ergy efficiency target that can be achieved by electric cooperatives.

C ommenter s stated that the CPP requires energy efficiency programs that are impractical and overstated in rural areas with low meter density. C ommenter s stated that the EPA uses in its regional averaging for energy efficiency targets from urban areas with large office and manufacturing buildings that can achieve much higher reduction efficiencies at a lower cost due to economies of scale. C ommenter s reque sted that the EPA evaluate rural areas with meter densities less than 10 per mile and establish realistic energy efficiency targets in those areas as to not over predict the reductions that can be made by rural consumers.

Comment 8: EM&V Guidance

Response 8: DS

- EE remains generally available for compliance, according to the eligibility requirements and criteria related to proper quantification and verification of MWhs from demand

- side EE savings as described in Section VIII of the final rule preamble of t he CPP.

Comment 9 

## : C ommenters had c oncerns with EM&V for EE Programs

Response 9: Commenters are concerned regarding data used to inform BB4 in the proposed rule. The EPA decided not to include DS

- EE in BSER for the final rule. A response is not provide d as this comment is now outside the scope of the CPP. See section s V.A and V.B of the final rule preamble of the CPP for details. DS

- EE remains generally available for compliance, see multiple subsections of section VIII of the final rule preamble of the CPP for details. DS

- EE measures must meet the eligibility requirements and prov isions related to demand

- side EE programs and projects and the requirements and criteria related to proper quantification and verification of86 MWhs from demand

- side EE savings as described in Section VIII of the final rule preamble of the CPP.

The followin g are summaries of the specific public comments under this comment:

Multiple commenters did not support use of EM&V and pointed out issues or concerns.

Commenter s stated that quantifying energy savings from efficiency measures can be difficult. Commen ter s stated the projected value of energy savings can vary significantly based on criteria used to determine eligible programs, technologies and standards. Commenter s stated the value may also vary based on the relative stringency of measurement and verifi cation. Commenter s stated for example, the ACEEE's reported incremental energy efficiency savings in 2012 was 7 percent higher than the EIA's reported incremental savings (22,978 and 21,478.5 GWs respectively). Commenter s stated using a different approach from EIA Form 861 may lead some states to report a higher number of MWh actually reduced versus EPA's projection, leading to higher CO2 emissions than anticipated and a higher quantity of CO2 "offsets" generated compared to the rate setting formula.

Comme nter s provided input on EE avoided generation quantification and verification. Commenter s acknowledged that it is possible to quantify and verify avoided generation due to some EE measures such as hardware upgrade, replacement and repair. Commenter s st ated, however, many types of EE measures being implemented are more "soft"' and do not provide a sufficient level of accuracy required to stand up to legal challenges. Commenter s in addition, the quantification and verification methods that would be requir ed to make an EE measure legally defensible may make certain measures too burdensome and/or costly to implement. Commenter s questioned whether the actual impact on the overall CO2 rate for existing EGUs make these measures worth the effort given the burden some and costly requirements to make legally enforceable BSER demonstrations at affected EGUs. Commenter s stated EE is generally seen as a means to limit the growth of generation (i.e., avoid building new power plants) and not to decrease existing generati on.

Commenter s stated that even if Basin Electric had data demonstrating that it could meet the 1.5 percent reduction in annual energy savings, Basin Electric is not subject to the type of measurement and verification (M&V) requirements on which EPA pro poses to rely for purposes of verifying compliance. Commenter s stated EPA asserts that " most EE programs (including all investor

- owned utilities which account for more than 75 percent of reported savings) are overseen by state utility commissions, which re view and approve program plans, projected impacts, and associated budgets; and establish annual reporting and M&V requirements ," and

" State commissions define and oversee the analysis and reporting requirements for energy efficiency programs . . . . One ty pical requirement is the application of recognized " M&V protocols. Commenter s stated that Basin Electric, however, is a wholesale power producer and is not overseen by a state utility commission. Commenter s stated moreover, its three

- tier cooperative struc ture would make it impossible to impose the type of M&V program on its members that EPA repeatedly references as a means of ensuring compliance with the 1.5 percent requirement. Commenter s stated the difficulty in assessing compliance with such an amorpho us87 standard is yet another indicator that application of EE as part of BSER is practically and legally unsupportable.

Commenter s stated energy EMV is extremely difficult to quantify. Commenter s stated estimating the amount of energy not consumed due to EE measures is an art, not a science. Commenter s stated the process of quantifying EE is uncertain. Commenter s stated EPA claims that in calculating the 1.5 percent savings rate, it used EM&V dat a that reflected savings only from EE programs and that do not account for savings from other policies for which EM&V protocols are less consistently required or applied (for example, building energy codes). However, c ommenter s stated the 26 states with En ergy Efficiency Resource Standards in place have very liberal reporting policies that overstate the amount of EE savings directly attributable to utility EE programs. Commenter s stated nonetheless, EPA also admits that " energy savings data are estimates ." Commenter s stated EPA further concedes that EE values " should be reported as 'expected values'

- that is energy efficiency values are expected to be correct within a certain range of certainty ." Commenter s stated adding to the difficulty, there is no uni form way of estimating energy savings. Commenter s stated 5 different energy EM&V contractors are likely to estimate five different levels of energy savings for the same EE program. Commenter s stated for example, energy savings for an efficient central air conditioner may be estimated using equipment metered data, customer bill analysis data, or building simulation modeling, all yielding different results. Commenter s stated to further complicate the issue, weather has a direct impact on air conditioning us age. Commenter s stated there are a myriad of approaches that can be used to attempt to " normalize " weather to estimate " normal " air conditioning usage in either a hotter or cooler summer season. Commenter s stated finally, the most subjective component in t he evaluation of energy savings from utility EE programs is the estimate of the
net

- to

- gross (" NTG ") ratio which attempts to quantify how many efficient air conditioners were purchased by customers as a direct result of the utility EE program versus what c ustomers would have naturally purchased in the absence of any such utility program. Commenter s stated as with the other evaluation components, there are a myriad of subjective approaches to estimate NTG, none of which are objective or that can be quantifi ed with discrete accuracy and precision. Commenter s stated EPA recognizes the difficulty and requests comment on a variety of approaches to EE programs.

Commenter s stated that EPA should require that a state ensure utilities update form 861 energy effic iency data as part of the state compliance plan. C ommenter s stated that accurate data is critical to effective oversight by regulatory agencies. C ommenter s stated that as part of compliance with Washington's Energy Independence Act, every two years Washing ton utilities subject to the law must verify energy efficiency savings and submit the savings total to the regulatory agencies. C ommenter s noted that the Washington reports are due in June of even numbered years. C ommenter s noted that utilities must file t he Energy Information Administration (EIA) form 861 by April 30, following the end of the calendar year. C ommenter s stated that due to the timing of the Washington Energy Independence Act reporting and verification of savings, the efficiency savings data r eported on form 861 are not necessarily
accurate. C ommenter s noted that for example, in 2012 one state utility reported to the EIA 11,551 MWh of total energy efficiency savings, and 15,703 MWh to the Washington State Department of Commerce. C ommenter s stat ed that another utility did not report any savings to the EIA but 80,836 MWh to the state. C ommenter s stated that discrepancies between the EIA reported savings and actual savings are substantial. C ommenter s stated that in 2012, including88 Bonneville Power Administration (BPA) savings on behalf of its non

- Energy Independence Act utilities, Washington achieved 1,031,621 MWh, or 175,000 MWh more than utilities reported to the EIA on form 861. To minimize discrepancies, c ommenter s stated that streamline reporting requirements and ensure accurate data, EPA should require the use and timely reporting of energy efficiency data on form 861.

Commenter s stated that EPA is using information reported in particular fields of EIA form 861 to set the baseline for state EE programs. C ommenter s asked which particular " Schedule, "

" Part," and "Question Number" on Form 861 are used for EE baselines? C ommenter s not ed that it appears EPA only intends to count strictly EE programs (i.e., Schedule 6, Part A. EE Programs), while other DSM programs like demand response (Schedule 6, Part B. Demand Response Programs) and other customer focused behavioral programs (i.e. Sch edule 6, Part C. Dynamic Pricing Programs and Schedule 6, Part D. Advanced Metering and Customer Communications) may not be included. C ommenter s stated that the reporting form instructions do not clearly distinguish how to separately report these programs, and the EPA proposal does not clearly outline what has been included/excluded from the baseline number used in goal setting. C ommenter s asked if EPA can please explain exactly how they got to the EE baseline number? C ommenter s also asked if information in cluded in Form 861 is self

- reported, is there ever a circumstance where EIA revises or modifies information reported by a respondent ?

Commenter s stated that they are concerned about the baseline EE data relying on EIA Form 861, which collects informati on provided by EE program administrators. C ommenter s noted that for example, in Massachusetts, data from Northeast Utilities (one of the State's two largest utilities) are not included for 2012, significantly under

- counting incremental EE. C ommenter s state d that this not only underestimates the baseline in Massachusetts, but suggests that the 1.5 percent target based on state best practices may not take into account all data and is therefore lower than it should be. C ommenter s stated that the ACEEE's annual state ranking report provides annual incremental EE savings that better reflect the experiences of some NESCAUM states compared to EIA Form 861.

Commenter s stated that the EPA's approach for calculating achievable efficiency savings is problematic. C om menter s stated that the EPA's calculation of achievable efficiency savings are based on EIA

- 861 data, which include values reported by many different entities that may not be using consistent definitions of baselines or efficiency savings. C ommenter s state d that EIA

- 861 historical data provides an unreliable basis for forecasts of future energy efficiency savings potential.

The commenter s stated that they do not know why there is a large discrepancy between the two data sources. C ommenter s noted that it does point out the difficulty of tracking EE savings data in a reliable manner. C ommenter s stated that using EIA Form 861 data to establish state

- specific BSER from EE, when EPA acknowledges that the data is not complete/reliable, is not a l egal determination of BSER for each state.

The commenter s stated that the source of the base data that EPA relied upon for EE achievement data is not reliable. C ommenter s noted that EPA uses EIA Form 861 data as the baseline level of the amount of EE a chievements by utility EE programs. C ommenter s noted that EPA acknowledges the consistency and quality issues with EIA Form 861 data, as utilities rely upon89 differing methodologies in measuring the net impact of their EE programs; however EPA does not fund amentally address this issue.

Comment 10: Commenters note u nique state circumstances

, deference to stat e programs , experience . Commenters also support municipal coop eratives implementing EE

Response 10: Comments received are supportive of energy efficiency, including programs administered by Cooperative and Public Power Utilities and unique aspects of various EE programs across different states. The EPA decided not to include DS

- EE in BSER for the final rule, see section s V.A and V.B of the final rule preamble of the CPP. DS

- EE remains generally available for compliance, with flexibility provided to states to consider a variety of factors and approaches. See multiple subsections of section VIII of the final rule preamble of the CPP for details. DS

- EE measures must meet the eligibility requirements and provisions related to demand

- side EE programs and projects and the requirements and criteria related to proper quantification and verification of MWhs from demand

- side EE savings as described in Sectio n VIII of the final rule preamble of the CPP.
The following are summaries of the specific public comments under this comment:

Multiple commenters noted that there are unique state circumstances related to energy efficiency programs, and the EPA should prov ide deference to existing state programs and consider the level of experience with such programs.

Commenter s stated that electric cooperatives differ in size, load characteristics and growth, wholesale power supply arrangements, and member demographics . Commenter s stated it is typical for electric cooperatives to assess energy efficiency programs in terms of whether they are the most cost

- effective alternatives available (i.e., by utilizing the rate impact measure test) and/or whether their member

- consu mers find the demand

- side alternatives desirable. Commenter s stated these differences are a core consideration when developing energy efficiency programs and how the EPA's 1.5 percent goal does not properly account for them.

Commenter s stated that in the E PA's development of individual state targets for carbon dioxide emissions, the EPA presumes a uniform energy efficiency target of 1.5 percent across all states which inexplicably fails to account for the broad differences that likewise exist from state to state in the consumption of energy. Commenter s stated these differences, not just among states, but also among utilities within the same state, play a key role in determining the appropriate level of
cost

- effective, achievable, and sustainable energy effic iency.

Commenter s stated electric cooperatives are member

- owned, not

- for

- profit organizations that serve primarily rural communities. Commenter s stated electric cooperatives, which number over 900 and span the nation, are committed to providing safe, reliable, and affordable electricity to their members. Commenter s stated any program/project that creates greater cost than benefit leads to upward p ressure on retail electric rates and this burden falls directly upon the electric cooperative's members. Commenter s stated electric cooperatives strive to minimize this burden and therefore routinely rely on the Rate Impact Measure (RIM) test to evaluate t he cost

-90 effectiveness of energy efficiency programs. Commenter s stated the RIM test provides the best indication of how an energy efficiency program will affect retail rates and is closely dependent upon characteristics of individual utilities.

Commenter s stated that just as utilities vary greatly across the nation, so does the cost

effectiveness of energy efficiency programs. Commenter s stated the EPA should be more mindful of this before setting a national energy efficiency goal that does not accurately a ccount for this variability.

Commenter s pointed out some of the differences between cooperatives and IOUs. Commenter s stated the nation's cooperatives have less available opportunity for energy efficiency savings than IOUs, and have a very different consum er base, which is predominately rural. Commenter s stated cooperatives have a larger residential base, whereas IOUs serve larger portions of commercial and industrial customers. Commenter s stated commercial and industrial customers present a much greater op portunity to achieve cost

- effective energy efficiency savings due to their size and energy intensity, and the electric bill represents a huge cost center for commercial and industrial customers, so it makes sense that commercial and industrial customers ac tively seek to implement energy savings opportunities as the benefits can quickly outweigh the costs. Commenter s stated residential customers, especially those in rural communities, pose a greater challenge to deliver cost effective energy efficiency solut ions due their dispersed proximity and lower savings potential. Commenter s stated that since the majority of cooperatives are relatively small and located in rural areas, affordable electric rates are at the forefront of any policy decision. Commenter s als o noted that the majority of electric cooperatives have rates below the national average, with only 9.7 percent of cooperatives having residential retail rates which equal or exceed the national average.

Commenter s noted they are obligated to ensure tha t it can comply with whatever final state plan is adopted to meet the final EPA Interim and Final Goals. Commenter s noted their options are limited by what it can physically build within the proposal's time lines, what it can financially achieve, what its members and their customers and the ACC will accept, and the fact that it is a generation cooperative without direct customers, which eliminates most EE programs from consideration. In this part of their comments, Commenter s h ave :

1. E valuated available optio ns; and

2. P repared high level analyses of the two principal compliance strategies available to it: comply with the program as written; or shut down existing units to exit the program.

Commenter s stated the cost of electricity is an important factor affe cting adoption of EE measures. Commenter s stated the higher the cost of electricity, more consumers will likely find that the installation of energy efficient measures is cost

- effective. Commenter s stated this is analogous to the measure of price elastici ty often found in utility econometric

- based load forecasting models. Commenter s stated as the price of electricity (in real dollars) rises over time, usage per customer is projected to decline. Commenter s stated consumers can achieve these price

- driven ene rgy use reductions, in part, by installing energy efficient equipment. Commenter s stated rising prices reduce the payback period and make energy

- efficient measure installations more economically attractive. Commenter s noted that in states where energy pric es91 have remained relatively low, consumer adoption of EE programs, measured as a percentage of retail electricity sales, historically has been lower than other states where energy prices are much higher. Commenter s stated in its proposed rule, EPA refers t o data reported to the EIA that show in 2012, five states (California, Connecticut, Minnesota, Rhode Island, and Vermont) had, on average, achieved a cumulative reduction in load of 13.4 percent. Commenter s stated EPA refers to this information as evidence of what can be achieved and implies that all states can achieve these savings. A closer look at the data from the EIA shows that the average retail electricity price for those same five states in 2012 is 12.98 cents per kWh. Commenter s stated this is over 50 percent higher than the average for 34 states or two

- thirds of the 50 states plus the District of Columbia. Commenter s stated this implies that higher energy prices are linked to higher consumer installation of EE measures. Commenter s stated also, it i s important to note that in 2012, the aforementioned five states achieved incremental impacts of 1.27 percent on average, not 1.5 percent or above. Commenter s stated this raises the question of whether or not the leading states have gained the " low hanging fruit " ( i.e., indoor lighting ) and are now beginning to struggle to keep up the pace.

To achieve the annual incremental savings in EPA's proposed rule, commenter s stated customers in all sectors (residential, commercial, and industrial) must be willing to adopt programs offered by the utility. Commenter s stated consumer behavior is difficult to predict, but when the cost of energy increases, consumers have a large r incentive to reduce energy consumption to save money. Commenter s stated EPA has focused primarily on EE policies and programs that increase the EE of buildings, appliances, and industrial operations and has paid less attention to consumer behavior, which will ultimately impact how and when the efficiency impacts are

re alized.

Commenter s supported EE/DSM measures, as well as the combined efforts of DOE and EPA to encourage these policies and programs as a means to decrease load and/or abate emissions, however, the commenter s do not endorse EPA's proposal to use EE as a factor to determine state goals as it currently stands in the Proposed Rule. Commenter s stated that there are a number of assumptions in the proposal that ignore situational factors states and utilities may have to face during the actual application of these programs and measures. Commenter s stated e ach utility and/or entity involved in EE for the state has a unique situation that must be assessed before determining the real potential for demand

- side efficiency improvements.

Commenter s stated climate differences could limit potential DSEE, as climate plays a significant role in determining the potential DSEE. Commenter s stated the Southeast has a very different climate compared to many other regions. Commenter s stated at a minimum, this difference
sug gests that EPA needs to evaluate potential DSEE at the state

- level as opposed to a generic nationwide analysis. Commenter s stated for example, in Florida, the FPSC staff recognized the
state

- specific issues associated with climate consideration in the " Flo rida Investor

- Owned Utilities' Demand

- Side Management Achievements Comparative Analysis " study that was published in January 2011. Commenter s stated the study identifies Florida as having a unique weather profile compared to other states. Commenter s stated Florida has the highest cooling degree days and lowest heating degree days of any state in the continental U.S. Commenter s stated the number of cooling degree days and heating degree days affect the potential savings associated with many DSEE measures. C ommenter s stated the study also highlights that Florida's energy usage tends to exhibit higher variation than other states due to state

- specific weather92 patterns and the high reliance on electricity for cooling and heating. Commenter s stated the study

conc ludes that given the greater variation in customer usage patterns, the benefits associated with reducing peak demand are particularly important in Florida. Commenter s stated similar conditions exist among all of the southeastern states. Commenter s stated f or these reasons, it is important to consider state

- specific data when estimating the potential DSEE. Commenter s stated the International Energy Conservation Code ("IECC") and Building America also recognize the significance of climate in developing effici ency standards. Commenter s stated these organizations categorize all regions of the country based on climate differences including temperature and humidity. Commenter s stated these classifications support the fact that much of a state's DSEE potential vari es based on state

- specific weather characteristics.

Commenter s stated customer mix impacts potential DSEE. Commenter s stated a state's customer mix will also greatly affect potential DSEE. Commenter s stated States with a high percentage of industrial cus tomers, for example, may have difficulty reaching arbitrary goals because many industrial customers have already implemented cost

- effective DSEE measures. Commenter s stated Southern Company's operating companies have large portions of retail sales that com e from the industrial sector. For example, the industrial sector represents approximately 50 percent of Mississippi Power's retail sales.

Commenter s stated further, in states served by multiple entities, EE programs may be less effective because they do n ot cover all of the state's customers. Commenter s stated for example, Southern Company's four subsidiaries do not serve all of the customers in the states in which they operate and are not regulated in the same way as other entities in those states. Comme nter s stated Georgia Power, for example, is the only investor

- owned utility in the state of Georgia. Commenter s stated Georgia Power serves approximately half the residential customers of the state and provides roughly two

- thirds of the energy for Georgia. Commenter s stated the other entities that serve customers in the state, EMCs and municipalities, are not regul ated by the PSC and in most cases do not currently have DSEE programs. Commenter s stated under current state law, no one would have authority to force these entities to implement DSEE programs. Commenter s stated Alabama Power is similarly situated, providi ng 63 percent of the energy in the state of Alabama, with a number of municipal providers and cooperatives also providing energy to customers. Commenter s stated Mississippi Power and Gulf Power are also in states that have other investor

- owned utilities th at are regulated by state commissions as well as cooperatives and municipal providers.

Commenter s stated DSEE evaluation method for cost effectiveness varies by state. Commenter s noted States evaluate the cost effectiveness of DSEE programs in very differe nt ways. Commenter s stated while some states evaluate programs on the portfolio level, other states may require measures meet a cost effectiveness test. Commenter s stated "cost effective" is defined differently between states. Commenter s stated while some states may measure the cost effectiveness of DSEE programs using the Total Resource Cost ("TRC") method, Southern Company and its operating companies believe the Rate Impact Measure ("RIM") test is a more appropriate method of evaluating DSEE programs. Com menter s stated EE policies based on the RIM test ensures that both EE program participants and non

- participants benefit through downward pressure on all customers' electricity rates over time, thus the RIM test is called the

" no losers " test. Commenter s in dicated a state's DSEE potential may change depending on the cost effectiveness test employed.93 Commenter s stated economy and market factors vary by state. Commenter s noted that the state of the economy, as a whole, influences the success of DSEE programs. Commenter s stated for example, in the case of the new home market, builders may come in and out of the market as customer demand waxes and wanes. Commenter s stated similarly, commercial activity also fluctuates. Commenter s stated because the economy chang es due to a number of uncontrollable factors, this adds uncertainty to a state's ability to achieve arbitrary DSEE targets. Commenter s stated furthermore, as the energy needs and the number of Southern Company's customers grow, the ability to meet those ne eds cost effectively becomes increasingly important. Commenter s stated that same growth would place additional requirements on potential DSEE targets because, as proposed, the targets are a percentage of retail sales.

Commenter s stated electricity rates an d rate structures vary by state. Commenter s stated electricity rates and rate structures, which vary widely across states, are also significant factors in assessing cost

- effective DSEE potential. Commenter s stated according to the May 2014 EIA report, ave rage electricity rates in the U.S. ranged from $0.0733/kWh in Washington to $0.1757/kWh in Connecticut. Commenter s stated this wide variation in rates creates vastly different economic incentives for customers when it comes to EE decisions and resource pla nning. Commenter s stated States with higher electricity rates present customers with shorter payback periods for DSEE investments which reduces the need for utility

- provided incentives. Commenter s stated given that the participant payback period and incent ives play significant roles in determining the cost

- effectiveness of DSEE measures and targets, electricity rates are clearly a significant factor that is overlooked by EPA's simplistic assessment of DSEE potential and subsequent establishment of one

- size

- fits

- all targets. Commenter s stated for example, in Massachusetts the average residential electricity rate for March 2014 was $0.1733/kWh. Commenter s stated at this rate, an EE expenditure that resulted in 200 kWh/month of reduced usage would result in el ectricity bill savings of almost $416 per year for a customer participant. Commenter s stated in Washington, that same energy savings expenditure would result in annual bill savings of $209, barely half of the Massachusetts savings.

Commenter s stated Southe rn Company's four operating company's electricity rates are below the national average. Commenter s stated EPA did not recognize that the average retail electricity rates for all sectors in Arizona, Maine, and Vermont are 27 percent higher than the average retail electricity rates for all sectors in Alabama, Florida, Georgia, and Mississippi . Commenter s stated moreover, Vermont's residential retail electricity rates are 65 percent higher than Mississippi's, leading to longer payback periods for EE measures and less customer interest. Commenter s stated clearly, similar DSEE measures will have different impacts on customers' rates depending on where they are being implemented.

Commenter s stated EPA's compliance with BB#4 assumes that demand side management can reduce electric usage by about 10 percent by 2030. Commenter s stated however, EPA's CPP does not take into account states with high economic growth or states that are expected to

e xperience high population growth, subjecting these states to comparatively negative treatment. Commenter s stated in addition, many states have had robust EE programs for years. Commenter s stated there is no recognition of this in the rule, leading to the c oncern that this rule is based on

" one size fits all ."94 Commenter s stated additionally, statewide efficiency requirements disproportionately impact some communities more than others. Commenter s shared the case of a group of North Carolina cities that inves ted in nuclear power in the early 1980s. Commenter s stated these cities derive all of their power from non

- GHG emitting resource and, as a result of slow economic growth, actually have more power than they need. Commenter s stated yet EPA proposes a model that presumes GHG benefits from additional investments in demand

- side EE by these all

- nuclear communities. Commenter s stated in reality, the opposite is the case; these communities will have to undertake new programs to lower consumption of product that they already own in excess. Commenter s stated they are not alone; North Carolina cooperatives largely own emissions

- free technologies and in South Carolina a similarly situated group of communities own only nuclear power. Commenter s stated EPA, in its mo del, failed to consider circumstances of this nature and, as such, has failed to "adequately demonstrate" the achievability of the standard.

Commenter s stated although a few of our utilities have implemented EE programs much more can be done in this reg ard. Commenter s stated however, in the past the economics did not exist since we have had several years of surplus power to meet the growing demands of our cities. Commenter s stated when implementing EE, we should apply the same standards from past practic es with best available energy efficient equipment and technology available to date. Commenter s stated in other words, EE programs for cities and urban areas are likely not all applicable to rural areas. Commenter s stated a best practice approach to this sh ould be implemented for rate making and consumer education.

Commenter s provided input regarding relative industrial, commercial, and residential consumption. Commenter s stated some states have higher manufacturing and industrial consumption than others (such as the Northeast) with higher levels of service

- economy industries. Commenter s noted that states with larger commercial and industrial usage increases the base substantially (greater overall consumption levels due to more energy

- intensive loads), wh ich then increases the absolute EE goal levels as well. Commenter s noted also, states that currently allow industrial customers to opt out of utility programs may have to re

- visit these determinations and encounter resistance from these customers. Commente r s stated implementing utility

- sponsored EE at manufacturing and industrial facilities is more challenging and costly. Commenter s stated many such customers have already implemented economically justified EE improvements for cost

- competitiveness reasons be cause they often have better access to capital, at lower rates, and are generally better informed of the options.

Commenter s stated state

- level targets under building block 4 are not differentiated based on the potential for associated carbon reductions. C ommenter s stated indeed, states with some of the highest building block 4 requirements, including Maine, California, and Connecticut, have some of the lowest historic CO2 emissions rates. Commenter s stated in contrast, some high emitting states, including Wyoming and West Virginia, have some of the lowest efficiency potentials. (Commenter s stated this latter observation is not surprising as high emissions rates tend to be correlated with low electricity prices and thus weak economic incentives to encourage energy savings through investments in efficiency, setting aside environmental arguments for such investments.) Commenter s stated across the 50 states, there is a small negative correlation between efficiency potential and average CO2 emissions rates in 201 2. Commenter s stated this95 lack of correlation raises a question of whether a more targeted approach would improve both the effectiveness and cost

- effectiveness of this building block.

Commenter s w ere concerned about demand

- side EE programs mandated by the proposal. Commenter s stated that while most traditional utilities serve a mix of both residential and commercial customers, rural electric cooperatives like Darke Rural Electric Cooperative serve mostly residential customers. Commenter s stated this cus tomer base significantly limits the opportunities for obtaining reductions through demand

- side EE programs that are available to more traditional utilities. Commenter s stated thus, EPA's assumption that a 1.5 percent

- per

annum emission reduction can be obt ained across

- the

- board cannot be squared with the particular circumstances that Darke Rural Electric Cooperative faces.

Commenter s stated EE would be better addressed as part of the state plan processes. Commenter s stated a case

- by

- case evaluation of th e potential for EE for each state should be included in the final guidelines. Commenter s stated EPA should allow states to provide input to this assessment for the final goal computation, based on data and specific circumstances applicable to individual af fected utility companies.

Commenter s stated EPA ignores sectoral composition and its impacts on states' abilities to achieve the EE savings rate. Commenter s indicated that EPA implies that the sectoral composition of a state is not a factor in whether that state can achieve an annual 1.5 percent incremental EE savings rate. Commenter s stated EPA cannot use generalized regional data to demonstrate that any particular state can achieve the target EE savings rate. Many studies find that the potential for EE savings varies across different customer sectors, for example, IEE has detailed the varying potential for codes and standards to improve the efficiency of residential, commercial and industrial projects. Commenter s stated given that different sectors h ave different opportunities for EE, it would be unreasonable to assume that an individual state's sectoral composition had no bearing its ability to achieve and sustain 1.5 percent annual incremental increases in EE. Commenter s indicated that States with little or no manufacturing will not be able to achieve the portion of EE potential estimates attributable to that sector. Commenter s stated at minimum, EPA should allow states to demonstrate that sectoral composition will impede attainment of the target in cremental savings rate.

Commenter s stated the EPA employs EE improvements as its 4th Building Block to achieve the state goal for target emissions of CO2; EPA has assumed a 1.5 percent annual energy savings rate based on a " best practices " level of the 12 states with the highest level of EE; the current mean national average saving rate is 0.58 percent in 2012; South Carolina currently has a 0.35 percent savings rate; and States below the 1.5 percent rate are assumed to be able to reach 1.5 percent with an assumed 0.2 percent " pace of development". Commenter s stated these assumptions on best practices rate and pace of development are not tested and are unsupported as being appropriate on a state by state basis. Commenter s stated the sustainability of a 1 .5 percent savings rate over a long period of time (until 2030 under the proposal) is also unexamined. Commenter s stated it is also a concern that federal and state budgets will not keep pace with assistance necessary to make these EE investments possible in lower income areas such as those areas served by many of our electric cooperative members. Commenter s stated clearly many of these programs to spur EE are not utility driven and depend on federal money to stimulate the home improvements required.96 Comme nter s believed that EE is an essential component of its plans to curb supply side cost commitments. Commenter s stated it has invested with the Electric Cooperatives of South Carolina in a Help My House energy savings program and has instituted an on bill f inancing measure that has become a national model. Commenter s stated they are convinced of the need for EE, however we are concerned that the EPA assumes a rate which works in Colorado or Washington has direct relevance to South Carolina. Commenter s stated one of our primary areas of concern is that we may be pushed to rely on EE more heavily than other states to meet the state goal because of the limitations we have in using the other Building Blocks, particularly Renewable Energy, efficiency improvements in our existing coal fleet, and increased utilization of NGCC units. Commenter s stated as with most programs, EE improvements are most cost effective when low hanging fruit is picked. Commenter s stated the more c entral must rely on EE beyond what would be traditionally considered " prudent and cost effective " programs, the more likely we are to have to adjust our rates upward to a customer base which may not be able to afford those increases.

Commenter s stated it is also important to note that the mix of customer base will significantly impact the percentage of EE improvements that can be expected. Commenter s stated South Carolina has a higher percentage (36.2 percent in 2012) of industry electric use th an the national average (27.7 percent). Commenter s stated industry typically achieves smaller annual reductions in EE because as a practice it addresses this significant cost component where it sees an opportunity. Commenter s stated as a consequence, it w ill be harder for South Carolina to achieve the 1.5 percent saving rate. Commenter s stated EPA should examine the differences in the states and adjust the building block to reflect a reasonably achievable EE savings rate. For the reasons stated, Commente r s believed the EE goals within the Building Blocks for determining the emission performance goal for South Carolina are arbitrarily reached, inadequately documented, and are applied without a demonstration of fairness to South Carolina.

Commenter s stat ed the use of a uniform incremental savings rate for all states is flawed because it ignores the different potential for cost effective EE caused by different avoided cost rates. Commenter s noted States used by EPA to derive the 1.5 percent EE incremental savings rate very likely have avoided cost rates that are greater than those in North Carolina. Commenter s stated EE programs are more cost effective in states with higher avoided costs rates, compared to states with lower avoided cost rates. Commenter s st ated avoided costs are EE benefits; they represent energy dollars saved by not generating electricity. Commenter s noted a state with higher avoided energy costs will therefore have relatively more opportunity for cost effective EE, making higher incrementa l EE savings rates more likely than for a state with lower avoided cost
rates.

Commenter s noted the states used by EPA have retail rates that are higher than those in North Carolina. Commenter s stated higher retail rates would drive utility customers to pa rticipate in EE measures in greater numbers in order to save more on their electricity bills, and greater participation for a given measure results in higher EE savings. Commenter s stated that is, where a given EE installation produces roughly the same kWh savings in all states, those kWh savings equate to more dollar savings in the states with the higher retail rates. Commenter s stated the use of a uniform incremental savings rate for all states is flawed, because it ignores the different potential for the amount of EE savings caused by different retail electric rates.97 Commenter s stated a comparison of retail rates and estimation of avoided cost rates illustrates the previous two points. North Carolina's avoided cost rates are roughly 5.8 cents per kWh. Com menter s stated a review of the retail rates reported to the EIA shows the average North Carolina retail rate to be 9.68 cents per kWh while the average rate for the eleven states with 1 percent or greater incremental EE savings have an average retail rate of 12.10 cents per kWh, or 25 percent greater than North Carolina. Commenter s stated presuming a similar relationship between avoided costs rates and retail rates, the avoided energy rate for those others states would be 7.3 cents per kWh, as the avoided e nergy cost rate is approximately proportional to the retail rate. Commenter s stated these data show the states used by EPA to derive the 1.5 percent incremental EE savings goal would have more EE programs that are cost effective, and more EE participation than North Carolina. Commenter s stated the result is to impose on North Carolina an expected EE savings rate that is too high, as it does not reflect relevant utility costs in North Carolina.

Commenter s stated the eleven states identified by EPA are locat ed in areas other than the southeastern part of the country. Commenter s stated all of the eleven states cited in the GHG TSD have a much lower HVAC load than North Carolina and other southeastern states, as customers in those northern states use less air c onditioning and they are more likely to use natural gas for space and water heating. Commenter s stated this means a higher proportion of their electric bills represents lighting load. Many utilities across the country, including North Carolina have realize d that the greatest EE savings have come from lighting measures. Commenter s noted that States where a higher proportion of electricity use is for lighting will therefore have a better opportunity for a higher EE savings rate. Commenter s stated that to base an EE savings rate on those states, and apply it to a state such as North Carolina where lighting is a much lower proportion of total electricity use, overstates the potential for EE savings in North Carolina.

Commenter s stated EE savings from lighting po int to a further problem in the EPA analysis. Commenter s stated given the significant contribution lighting measures have had to the savings achieved by many states, including the eleven states cited by EPA with 1 percent or more in EE savings, the applica tion of a " one

- size

- fits

- all " approach fails to recognize the variability of lighting end

- uses across the country. Commenter s stated a report by the US DOE concluded that the variability among lighting preferences, size of homes, the concentration of hous ing (multi

family verses single family dwellings) were just some of the criteria impacting lighting end

- uses. Commenter s stated the EPA cannot simply ignore these regional and physical differences when applying its one

- size

- fits

- all approach to future EE s avings potential.

Commenter s stated a similar concern is the omission of EE savings from customers what are allowed by North Carolina statute to opt

- out of IOU EE programs. Commenter s stated large commercial and industrial customers are allowed to opt

- out of paying for the EE programs of electric service providers if they attest to implementing their own EE measures. Commenter s stated this includes approximately 35

- 40 percent of the st ate's electric load requirements. Commenter s stated North Carolina has not quantified the amount of EE savings from these opt

out customers because it was not necessary in the absence of requirements to reduce carbon emissions. Commenter s stated however, m easurable EE savings will be relevant under the Proposed Rule, so omission of EE savings achieved by opt

- out customers in North Carolina would, again, understate North Carolina's EE achievements. Commenter s stated North Carolina98 should be given time to qua ntify the EE savings of "opt

- out" customers so those savings can be credited toward compliance with the Proposed Rule.

Commenter s noted they have substantial experience in delivering conservation programs and an informed understanding of available and a chievable conservation within its markets. Commenter s stated from this, it is apparent that not all states have the same savings opportunities and market conditions conducive to the acquisition of cost

- effective EE resources, particularly at the level EPA suggests is achievable. Commenter s stated with the exception of Oregon, none of PacifiCorp's six states have shown a capability to deliver sustained savings at or near 1.5 percent of retail sales or to increase savings at 0.2 percent annually, as proposed. Commenter s stated this is despite all PacifiCorp states having access to similar program services and incentives and the company capitalizing on the savings opportunities in those states. Commenter s stated to illustrate this, the EE acquisition rates ac hieved and forecasted (2014) for the PacifiCorp's service territories in six states are shown below.

Commenter s provided a table that shows how five western states in the PacifiCorp service area besides OR had annual EE savings for each year in 2009

- 2014 r anging between 0.09 to 1.12 percent. Commenter s stated these results reflect significant differences between states and utility service areas that can affect the ability to acquire EE resources. Commenter s stated for example, more urban markets with subst antially greater amounts of residential and commercial loads or a better balance of residential, commercial and industrial loads tend to perform better than rural states and markets with a greater percent of industrial and/or agricultural loads.

Commenter s stated furthermore, markets and market opportunities vary between states, making an equal metric for their assessment and sustained results over the 111(d) timeframe unrealistic.

Commenter s supported inclusion of EE in the development of the 111(d) target s, but in a more equitable manner to assess that opportunity. Commenter s stated for some states, increasing reported savings from EE by 0.2 percent a year is likely an insurmountable task, requiring a doubling or tripling of current results in a short time frame. Commenter s stated rather than an increase of a fixed percent of retail sales, PacifiCorp recommended an approach of limiting growth rates to 20 to 30 percent of base year results, allowing those states with fewer opportunities and/or more rural serv ice areas with numerous and scattered energy providers an opportunity to pursue longer lead time but more sustainable savings.

Commenter s supported EPA's consideration of EE resources as an effective way to reduce load and therefore reduce carbon emissi ons from EGUs. Commenter s stated NV Energy is a utility that has actively worked with its customers and the PUCN across Nevada to promote energy conservation resources and manage peak loads for the last several decades. Commenter s stated that while result s have varied over the years as a result of market and industry conditions, NV Energy has substantial experience in delivering conservation programs and an informed understanding of what is available and achievable at cost effective levels within our uniqu e residential and industrial markets. Commenter s stated as such, NV Energy has concerns regarding the quantification methodology used in the development of state 111(d) targets.

Commenter s stated in applying Building Block 4, EPA assumes the same level of annual savings may be achieved by states with significantly different generation and load profiles. Commenter s99 stated in reality, the level of achievable and cost effective demand side management resources and EE is highly dependent on the load profile in each state. Commenter s stated therefore the annual savings assumption may not be realistic for all states, and, similar to EPA's renewable energy growth projections, needs to be tied to real load growth projections.

Commenter s noted they periodically com mission independent third

- party demand

- side resource potential assessments used to inform the development of the company's integrated resource plan, where demand

- side resources offset supply

- side alternatives in the development of the company's least

- cost, least

- risk resource plan. Commenter s stated through this work and experience, it has become apparent to the company that not all states or regions have the same savings opportunities and market conditions conducive to the sustained acquisition of cost eff icient EE resources, particularly at the level EPA suggests is achievable across the country. Commenter s stated further, given the number of years that Nevada has promoted these types of programs and the effectiveness of strengthened codes and standards th at have raised efficiency baselines, the cost of any new reductions will likely be higher than what may be experienced historically and in other parts of the country.

Commenter s stated their experience highlights differences within our own service area that can affect the ability to acquire EE resources. Commenter s stated the most cost

- effective opportunities for EE exist in two urban centers in the state of Nevada: Las Vegas and Reno. Commenter s stated the remainder of the state consists of rural communities. Commenter s supported a focused and aggressive pursuit of EE resources as a means for states to achieve their carbon reduction targets, however, absent a more equitable mann er to assess opportunity, NV Energy does not support their inclusion in the development of these targets. Commenter s suggested reducing state targets by the initial calculation of the contribution of the fourth building block from each state's target, but requiring state plans to contain an EE component receiving an enhanced (e.g., 1.5 to 2 times) value for these resources in meeting a state's carbon reduction target. Commenter s stated this type of market based program recognizes the important of EE progra ms as a compliance tool and would accomplish the same effect of encouraging a greater reliance on EE programs in state plans while also providing incentives for new or innovative technology implementation.

Commenter s stated public power utilities and c ooperatives also have significant advantages over investor

- owned utilities that should enable them to at least match, and possibly exceed, national EE gain averages. Commenter s stated cooperatives are well placed to embark on significant EE programs for ma ny of the same reasons they can be leaders in incorporating renewable generation: they have access to federal funding and development support that can be harnessed to make them leaders in the efficiency space. Commenter s stated for instance, in December 20 13 the U.S. Department of Agriculture expanded its RUS, which provides funding, loan guarantees, and administrative support to rural electricity cooperatives, by adding an Energy Efficiency and Conservation Loan Program. Under this program, Commenter s stat ed the Department plans to provide up to $250 million in EE loans specifically to rural cooperatives in 2014 alone, with more expected in future years. Commenter s stated as with renewables, cooperatives can obtain additional funding from the National Rural Utilities Cooperative Finance Corporation, which raises funds from capital markets to supplement the loan programs offered by RUS. In addition to these federal initiatives, Commenter s stated many cooperatives are part of broader self

coordinated EE effort s, most notably including that orchestrated by Touchstone Energy.100 Commenter s stated that Touchstone Energy, founded in 1998, is a massive alliance of almost 750 local cooperatives, and acts both as a unified advocate for cooperative utility interests exte rnally, and as a facilitator of inter

- cooperative cooperation and standards setting. Commenter s stated it has been a leader in developing EE standards for its cooperatives, through its " Together We Save " program. Commenter s stated started in 2009, and the first (and to

- date the only) utility

driven national effort to improve EE, the program offers model efficiency standards, individual consulting, and other support for local cooperatives seeking to increase EE at homes, farms, commercial and industrial faci lities, and public facilities (airports, jails, etc.).

Commenter s stated municipal and public utilities do not always have the same access to rural development assistance that cooperatives have, but they have other key advantages that should enable them to achieve significant efficiency improvements more easily than investor

- owned utilities. Commenter s stated as with renewable energy, a substantial chunk of EE investments have long

- term payback windows, and municipal utilities are well suited to make those investments with low

- interest bond issuances. Commenter s stated but beyond that, unlike generation projects, which are usually centralized (the rise of distributed generation notwithstanding) and easily orchestrated by a single entity, efficiency programs require small improvements by thousands, or even millions, of individual electricity consumers. Commenter s stated private and cooperative utilities can establish incentive programs to achieve these gains, but municipal utilities are often directly connecte d to, or at least affiliated with, their municipal governments. Commenter s stated as a result, they are more likely than other owners of covered facilities to be able to directly implement local regulations and measures that can achieve substantial efficie ncy gains.

Commenter s stated as with cooperatives, public utilities also have access to federal and peer assistance to help implement effective EE measures. Commenter s stated most notably, the DOE and EPA are facilitating the State and Local Energy Efficie ncy Action Network (SEE Action), which is a stakeholder

- driven initiative (with municipal utilities like the Los Angeles Department of Water and Power and Tacoma Power in its executive group along with state utility commissions and other efficiency experts ) that provides state and local governments with tools and resources to assist in implementing EE measures. Commenter s stated SEE Action has established a goal of achieving all available "cost

- effective" EE improvements by 2020.

Commenter s stated as a re sult of all of these programs, many cooperatives lead the nation in EE efforts. Commenter s stated part of this leadership has come, as might be predicted, from federal assistance programs. Commenter s stated just over a month ago, the U.S. Department of Agr iculture announced that it had issued its first two loans under the Energy Efficiency and Conservation Loan Program. Commenter s stated the Department will lend $4.6 million to the North Arkansas Electric Cooperative to fund installation of new geothermal a nd air pumps, efficient lighting, weatherization measures, and other efficiency improvements throughout the region. Commenter s stated it will lend $6 million to North Carolina's Roanoke Electric Membership Corporation to finance improvements to HVAC system s, appliance replacements, and building improvements. Commenter s stated separately, the Alaska Village Electric Cooperative received a $200,000 grant from the Department of Agriculture Rural development unit to conduct energy audits of 42 businesses in nat ive communities and identify key efficiency improvement opportunities.101 Commenter s stated even without federally subsidized programs, however, cooperatives still have achieved significant EE gains in recent years. Commenter s stated as of 2012, over 96 perce nt of cooperatives had EE programs in place, 70 percent offered financial incentives to promote additional efficiency, and 73 percent had made public plans to significantly expand their existing programs over the next several years. Commenter s stated as wi th renewable energy, NRECA has produced an interactive map detailing hundreds of programs run by cooperatives, noting additionally which ones are part of broader programs like the "Together We Save" program. Commenter s stated to give just one example, in M innesota, Great River Energy in 2008 spent $20 million on conservation and demand response programs, including nearly $7 million spent on lighting and pump improvements and distributed solar generation, enabling it to reap 636 million kilowatt

- hours of lif etime savings and to reduce summer peaks by nearly 13 percent. Commenter s supported coops doing EE.

Commenter s stated similarly, there are several municipal agencies who have taken positions of leadership in the field in pushing for significant EE improvements. Austin Energy has been a leader for decades in improving EE; by its own calculations, the utility reduce d demand by 700 MW between 1982 and 2007, and it has set a goal of saving an additional 800 MW of demand by 2020. Commenter s stated to accomplish this, the utility spends upwards of $36 million, composing almost 3 percent of its total budget, capturing ene rgy savings opportunities, including by providing rebates that encourage individual consumers to weatherize their homes, upgrade lighting, and make other such improvements. Commenter s stated in California's Central Valley, the Sacramento Municipal Utility District is another example of a leading municipal utility in this area, obtaining large demand reductions with a similar portion of their budget; this effort notably included a program incentivizing developers to make new buildings up to 30 percent

more e fficient than would be required under local energy codes. Commenter s stated and again, these success stories are not limited to large municipalities: Holyoke Gas & Electric has one of the most generous efficiency programs in the country, offering zero

- inte rest loans to both commercial and residential customers to make various EE improvements.

Commenter s stated EPA should consider how to equally evaluate all electric service providers including investor owned utilities, municipal utilities, and rural elec tric membership cooperatives that supply power to the grid. Commenter s stated these types of utilities are unique and may require special considerations, particularly rural cooperatives and smaller municipal utilities. Commenter s stated these types of faci lities generally service a lower number of members per line than larger utilities. Commenter s stated most of those serviced are rural customers that are in the lower income bracket. Commenter s stated these utilities also service far fewer industrial
custom ers than other utilities. Commenter s stated as a result, the ability to implement Building Block 4 for these utilities is far more difficult and costly than for other utilities. Commenter s stated given the demographic make

- up of the customers for these uti lities, increases in rates will be felt much more deeply than for other utility customers since they not only have less income to pay for higher rates, but also less means to invest in EE measures. Commenter s stated the economy of scale dictates that the c osts for energy efficiencies for these areas will be much higher without the industrial component factored in.

Commenter s stated the final building block of the CPP is that electricity savings from enhanced EE measures are assumed to significantly reduce electricity generation, and thereby lower carbon emissions. Commenter s stated much like what was constructed with the RE targets, the EPA has102 cherry

- picked a small sample of existing state EE programming (AZ, ME and VT) and has declared, without deep analysis, that those states' one

- year EE programming experience of 1.5 percent can be replicated throughout all SO states each year through 2030. Commenter s stated the energy

- savings potential from EE programming are very specific to each state based on customer mix, EE efforts already taken, and levels of subsidies. Commenter s stated it is hard to imagine that the EPA performed no analysis on each state's actual EE market environment. Commenter s stated it is highly unlikely that the targeted goals of EE assumed in the CPP of 108 Twh/year in 2020 (from a base of 22 Twh/year in 2012), 283 Twh/year (2025) and 380 Twh/year (2030) can be met.

Commenter s stated from an implementation prospective, EE programming takes place at the distribution side of the industry. Commenter s stated programs, incentives, energy audits, etc. all take place in the customer interface with retail distributio n. Commenter s stated carbon emission goals/targets and enforcement takes place at the generation side of the industry. Commenter s posed the following questions: unless a utility is vertically integrated, how will broad, aggressive EE goals work; and what incentives are there for distribution

- only utilities like BGMU? Commenter s stated TVA can design and incentivize a local power company like BGMU all they want, but unless a distribution

- only utility and its customers actually want to participate, not much is going to happen.

Commenter s noted that states will need to conduct case by case analyses to evaluate both the potential for what EE savings can be achieved, as well as potential costs associated with developing and implementing such programs, inclu ding quantitative and qualitative justifications.

Commenter s stated when committing to the nationwide 1.5 percent energy savings goal, the EPA failed to accurately account for the extreme variations in demographics, regulatory environments, load growth, an d usage patterns among states and utilities. Commenter s stated this omission on EPA's behalf directly impacts the resulting carbon emissions targets as it places more dependency on the other three carbon

- reducing building blocks. Commenter s stated assuming every state can achieve persistent 1.5 percent annual energy savings potentially overstates the state

- level carbon emissions targets. Commenter s stated given the numerous examples of states' and utilities' inability to achieve and sustain a 1.5 percent energy savings level the EPA would be well served to utilize a more realistic state

- by

- state evaluation when including the EE component in the overall carbon emissions calculation.

Commenter s stated publicly

- owned utilities and rural coope ratives can save energy on par with investor

- owned utilities, and EPA should not modify the best practices scenario for these utilities. Commenter s recommended that assumptions used for publicly

- owned utilities and rural cooperatives for the Block 4 targe ts should not differ from investor

- owned utilities.

Commenter s stated municipal utilities and rural cooperatives, as EPA states, " have multiple options for reducing CO2 emissions ," including the ability to employ EE. Commenter s stated in states where mu nicipal or cooperatively

- owned utilities operate under similar regulatory (by local boards or councils) or customer pressure to implement demand

- side EE programs as their investor

- owned utility counterparts, these utilities have implemented robust EE progr ams. Commenter s stated in California, for example, Senate Bill 1307, signed in 2005, requires103 municipally and cooperatively

- owned utilities, in procuring energy, to first capture all EE resources that are cost

- effective, reliable, and feasible. Commenter s stated Assembly Bill 2021, signed in 2006, requires municipally and cooperatively owned utilities to establish 10

- year EE targets and report progress to the California Energy Commission. Commenter s stated under this framework, California's publicly

- owned utilities, ranging in size from the Los Angeles Department of Water and Power (LADWP), the nation's largest municipal utility, to Truckee

Donner Public Utility District, which provides electric power to 13,200 customers, have implemented robust EE efforts. Commenter s stated over the past three years, LADWP's annual savings have increased 40 percent per year, and last year LADWP's programs saved around one percent of sales. Commenter s stated LADWP's board recently adopted 10

- year energy

- saving targets that will have the utility ramp up annual savings to 1.7 percent of sales. Commenter s stated Truckee

- Donner's EE programs saved three percent of sales in 2008, more than two percent of sales in 2009 to 2011, 1.9 percent of sales in 2012, and 1.7 percent of sal es in 2013. Commenter s stated in 2009, Truckee

- Donner devoted 4.5 percent of gross electric sales to EE programs, and implemented 16 EE programs. California's publicly

- owned utilities as a group invested almost $140 million in EE programs in 2013. Best p ractices in the sector include working with other utilities, including investor

- owned utilities that operate in the same region. Commenter s stated southern California's publicly

- owned utilities, together as the Southern California Public Power Authority, j ointly issue requests for proposals for EE programs, jointly apply for grant monies, jointly train staff, and meet regularly to exchange information. Commenter s stated since 2010, Northwest publicly

- owned utilities (municipals and cooperatives) and the Bo nneville Power Administration (BPA) have saved at least 560 average megawatts of electricity, greatly surpassing the five year goal of 510 average megawatts set by the NWPCC in its Sixth Power Plan. Commenter s stated the NWPCC estimates EE is now one of th e top three electricity resources in this region with some of the lowest electricity rates in the nation, having already avoided more than 10 to 12 large power plants. Commenter s stated according to NWPCC, the average cost of efficiency improvements is $.0 17/kWh, about five times less than the cost of power from a new gas

- fired plant. Commenter s stated and without these savings, it would have to generate enough additional electricity to power 3.6 million Northwest homes. Commenter s stated BPA and Northwest publicly owned utilities administer programs that pursue
cost

- effective energy savings in all sectors of the economy in support of public power's share of the region's EE target, which is roughly 42 percent of the total regional target.

Commenter s stated o ther municipally

- and cooperatively

- owned utilities around the country have had similar successes. Commenter s stated in fiscal year 2012, Austin Energy (TX) invested $17.7 million in EE rebates and its programs saved 0.83 percent of load. Commenter s state d Iowa also provides an example of municipal and cooperative utilities active in promoting EE and achieving meaningful savings. Maquoketa Valley Electric Cooperative achieved savings of 1.45 percent and 1.87 percent of their sales in 2011 and 2012 respecti vely, while staying within budget and close to or above their energy savings targets. Commenter s stated it is also possible for municipal utilities and cooperative utilities in a region to work with a third party to provide EE programs region

- wide, as is t he case with Efficiency Vermont, which serves the entire state of Vermont, including the territories of 22 municipal, coop and investor

- owned utilities. Commenter s stated Efficiency Vermont has achieved significant savings over the last 14 years, and its 2 012 to 2014 plan includes approximately 2.2 percent annual savings. A study by the National Rural Electric Cooperative Association (NRECA) showed that over 90 percent of its member cooperatives offered at least one EE program, and over 70 percent of member s planned104 to expand their EE programs further. Commenter s provided tables that use EIA Form 861 Data for municipal utilities, cooperatives, and political subdivisions (see Table 7.3, 2011 and 2012 Energy Savings for Leading Municipal Utilities; Table 7.4, 2011 and 2012 Energy Savings for Leading Cooperative Utilities; Table 7.5, 2011 and 2012 Energy Savings for Leading Political Subdivision Utilities).

Commenter s recommended that municipal utilities and rural electric cooperatives be subject to the rule in the same manner (no special treatment), consistent with the performance of leading municipal utilities and cooperatives.

Commenter s stated that most smaller utilities do not have the capital to initiate a demand

- side management program, without long

- term budgeting and capital expense planning. Commenter s stated depending on the nature of each individual Power Purchase Agreement, the development of any such de mand

- side management program would have to be weighted, along with a cost benefit analysis completed, as to not overly burden rural ratepayers.

C ommenter s stated that as with EPA's renewable energy discussion, EPA presumes to dictate "best practices" to states for energy conservation programs. C ommenter s stated that as with renewable energy, EPA neither has the expertise nor the authority to dictate to states what "best practices" are for adopting programs that conserve energy. C ommenter s noted that as a Montana public utility commissioner recently testified:

" Each state's utility commission of which I am aware has evaluated the potential energy savings available to the utilities it regulates, and the possibilities depend on many variables, from climate o f the region, to the hours of daylight at the particular latitude, to the mix of consumers (industrial versus residential) served by the utilities. That is why each state has a utility commission, and why it makes sense to house this kind of decision

- makin g at the state or local level, and not in a federal agency. Unfortunately, Building Block 4 is perhaps the banner example of the BSER's supposition of an arbitrary target that lacks meaningful substantiation in the real world. The Public Service Commission in Montana (and the comparable agency in many other states) already obligates the utilities that it regulates to acquire all cost

- effective energy efficiency available to them. The EPA's rule supposes that there is a substantial amount beyond this availab le for the taking. This assumption is only thinly evidenced in the EPA's rule."

C ommenter s stated that indeed, some state public service commissions, such as Florida's, based on their own considerably more informed and in

- depth analyses than EPA has perfor med, are reducing their energy efficiency targets.

Furthermore, c ommenter s stated that currently no study exists to support the 1.5 percent net savings goal between years 2020

- 2030. C ommenter s stated that the EPA does not confirm or support whether EE is cost

- effective at this savings level. C ommenter s stated that Federal building codes and standards will diminish the 1.5 percent net savings opportunity over the years, resulting in making achievement of goals even more challenging if not impossible.105 Com menter s stated that EPA relies on inconsistent and flawed data for evaluating " best practices " around energy efficiency. C ommenter s noted that EPA uses EIA Form 861 data as the baseline level of the amount of energy efficiency achievements by utility de mand

- side management programs. C ommenter s noted that EPA acknowledges the consistency and quality issues with this data resulting from the self

- reported sourcing and differing methodologies in estimating these data. C ommenter s stated that EPA does not fundamentally address this issue.

C ommenter s stated that while EPA did use state

- specific data from Form 861 for establishing starting points for EE levels, it applies "national" estimates of EE potential to this data and applied an EE growth rate historically only experienced in other best

- practice states. C ommenter s stated that the applicability of both these metrics has some fundamental flaws, based on the variability of state

- specific factors, such as the following:

• Lighting st andards: Utility

- sponsored EE programs have traditionally relied heavily upon lighting programs for the vast majority of their savings (generally, compact fluorescent lamp programs for residential customers and T

- 8 lighting retrofit programs for commercial customers). With adoption of new lighting standards from the Energy Independence and Security Act (EISA), this broad, inexpensive EE resource will largely fade quickly. Statements made regarding EE achieved "historically," due largely to lighting programs , ignore the impact of EISA lighting standards and other code changes that limit future EE potential. There is no empirical evidence of any future utility

- sponsored EE programs achieving levels even approaching those achieved through lighting programs of
t he past.

• Other EE options: Other options need to be relied upon to achieve incremental improvements going forward. Utilities will need mostly to default to thermal efficiency measures, such as heating, ventilation and air conditioning (HVAC) upgrades and w eatherization measures, which typically have a higher cost to achieve. As other energy efficiency options and technologies emerge, EPA should allow states to incorporate these into a state's Section 111(d) compliance plan.

• Customer economic challenges: EE improvements are also expensive for customers, often requiring significant capital investment. This is problematic. Customers usually avoid such large expenditures until a precipitating event occurs (HVAC failure, for example). As current economic conditio ns continue to challenge residents and businesses in Michigan, this capital investment barrier may prohibit reaching full energy efficiency potential.

C ommenter s noted that in its Proposed Guidelines, the EPA has proposed a one

- size

- fits

- all demand

- side energy efficiency target based on combining bits and pieces of historical data without performing a detailed analysis of what is achievable in each jurisdiction based on all relevant facts and circumstances that impact the ability to realize demand

- side e nergy savings. C ommenter s stated that neither the EPA's proposed 1.5 percent nor alternative 1.0 percent annual energy efficiency growth rates are suitable for across the board application in every
state. C ommenter s stated that while they believed that th e use of demand

- side energy efficiency in setting BSER for fossil fuel

- fired EGUs under section 111(d) exceeds the EPA's authority,106 c ommenter s recommended that if the EPA continues to include demand

- side energy efficiency as part of its BSER determination , it should finalize neither the 1.5 percent nor 1.0 percent growth rates and instead, allow each state, with input from impacted utilities, to develop its own demand

- side energy efficiency target based on state

- specific market potential studies. C ommente r s noted that market potential studies analyze applicable market conditions within a jurisdiction to develop economically and technologically feasible goals and are an industry accepted practice for determining achievable savings from the adoption of energ y efficiency programs.

C ommenter s also stated that the data reported on EIA Form 861 contain historical data regarding energy efficiency and demand

- side management, but do not provide forward

- looking data. C ommenter s recommended that the EPA instead allow each state, with input from affected utilities, to develop their own demand

- side energy efficiency targets based on state

- specific market potential studies. C ommenter s noted that these studies have been conducted on a regular basis by many states and utilities since the 1980s to quantify the size of the energy efficiency resources in their territories and to identify major opportunities for energy savings. C ommenter s noted that such studies would help states and uti lities set achievable and cost

- effective goals, design efficiency policies and programs, and determine appropriate funding levels for efficiency programs and policies.

Commenter s stated that there is no support for the EE assumptions and EPA's Technical Support Documents are unable to explain how the numbers are derived. C ommenter s noted that EPA determines a state

- specific value reflecting the total MWh sales that could potential ly be avoided through DSM. C ommenter s noted that these values increase each year from 2020 to 2029. C ommenter s stated that once the savings are determined, the numbers are scaled up 7.51 percent to convert retail sales to a total net generation that accoun ts for transmission and distribution losses. C ommenter s stated that the lesser of the

1. avoided net generation value, or

2. the avoided net generation multiplied by the state's generation share of its sales is added to the denominator.

C ommenter s stated that for Kentucky, EPA determines that the percentage of potential avoided MWh sales from EE savings to be 1.91 percent in 2020, increasing to 10.02 percent in 2029. C ommenter s noted that EPA proposes a substantial increase in EE savings. C ommenter s stated that this goal is unrealistic given the unique difficulties that co

- ops have achieving energy reductions.

Commenter s discussed the varying energy efficiency landscape in the United States.

Commenter s stated that the nation's cooperatives supply 58% of the ir energy requirements to residential customers and are often located in rural areas. C ommenter s stated that residential customers typically do not consider household energy efficiency measures with payback periods longer than 2

- 3 years, which is a major limiting factor in the residential sector.

C ommenter s stated that in 2012, Connecticut residents had one of the highest electric residential retail rates at 17.34 cents/kwh, approximately 40% higher than the national average and 70%107 higher than the bottom half of the US, who pay an average of 10.04 cents/kwh. C ommenter s stated that due to the cost prohibitive nature of electricity in Connecticut, less utility

- sponsored incentive is required to encourage the more expensive energy efficiency programs due to t he accelerated payback period of the energy efficiency measures. C ommenter s stated that this is evident by the 8.14% energy savings achieved by Connecticut, compared with Missouri who only achieved 0.55% energy efficiency savings while paying 10.32 cents/k wh for electricity.

C ommenter s stated that the correlation of energy efficiency program participation and high electric retail rates can be seen in the 12 states that the EPA used as a basis for setting the national goal. C ommenter s stated that the average residential retail rate across the 12 states are 30% higher than the average bottom half of the United States' residential retail rates. C ommenter s stated that the majority of these states are on the top 15 list for the highest retail electric rates in t he country and have a very different demographic profile than the rest of the country. C ommenter s stated that the majority of these states are located in the Northeast and Western regions where a significant portion of their energy consumption is met with natural gas instead of electricity. C ommenter s stated that the consumption of natural gas to electricity is almost 2:1 in the Northeast and just the opposite in the South where energy efficiency programs are less favorable.

C ommenter s stated that the bulk of the Northeast's electric end

- use consumption primarily exists in electronics, lighting, and appliances, whereas the South's electric end

- use primarily exists in other areas such as air conditioning, space heating, and water heating

. C ommenter s stated that the energy efficiency has a higher economic and achievable potential in the Northeast because consumers can save a larger portion of their electricity usage through measures that are less capital

- intensive and have a quicker paybac k period. C ommenter s noted that electric consumers in the South would have to spend more to save more energy by investing in more expensive measures like hot water heaters, HVAC systems, etc. because the majority of their end

- use consumption comes from tho se systems.

C ommenter s stated that energy efficiency measures are not one

- size fits all and energy efficiency savings vary across four key characteristics: customer type, appliance and end

- use technology saturations, climate conditions, and regulatory env ironment/mandates. C ommenter s stated that energy efficiency opportunity exists in every state, but each state and the utilities within each state have a different energy use profile which dictates the amount of technical, economical, and achievable energy efficiency potential.

C ommenter s stated that the ideal electric energy efficiency landscape would include a larger portion of industrial and commercial customers, consisting of primary electric consumption in lighting, appliances, and other areas where th e payback period is minimal, and contain a natural gas footprint across the more expensive space and water heating systems such that the energy efficiency savings claimed are from other more economical programs ("low

- hanging fruit") that have a larger savi ngs impact relative to total retail sales.

C ommenter s stated that regions with natural gas space and water heating are at an advantage because those units displace the otherwise electrical systems that exist in other regions of the country. For instance, c ommenter s noted that those states with high penetrations of electric space heating and cooling systems must focus on more expensive energy efficiency measures, such as108 HVAC retrofits and home weatherization and insulation improvements. C ommenter s stated th at according to the EIA's report for Household Site Fuel Consumption in the U.S., residential consumers in the Northeast consume 17% more electricity primarily in lighting and other end

uses than residents in the South. In 2012, c ommenter s noted that light ing accounted for 80% of the total energy efficiency savings in Vermont and 60% of the energy efficiency savings in Maine. C ommenter s stated that lighting remains one of the most inexpensive, popular, and successful measures, which is why Maine and Vermont can attribute the majority of their energy efficiency savings to inexpensive lighting measures.

C ommenter s stated that climate conditions vary across regions and play a significant role in both the total electric footprint and the electricity end

- use cons umption profile in each state. C ommenter s noted for example, the South has a hot, humid, and seasonally cold climate, compared to the Northeast that has a moderate and freezing climate. C ommenter s stated that the South consumes 3.5 times more electricity t han the Northeast (Figure 2), and a large part of this consumption is tied up in space heaters, water heaters, and air conditioning (Figure 3). C ommenter s stated that the South uses 7 times more electricity in space heaters, water heaters, and air conditio ning units than the Northeast.

C ommenter s stated that the replacement of a water heater or HVAC system requires a larger upfront customer investment and has a longer customer payback period than a CFL light bulb. C ommenter s stated that the amount of energy efficiency savings potential from small appliances and light bulbs is much greater in the Northeast (65%) than the South (48%).

C ommenter s stated that the EPA evaluated the cost effectiveness of the industry's "best practices" energy efficiency measures, but did not property account for the penetration levels available to each state based on the end

- use consumption profiles. C ommenter s stated that this oversight favors states with a greater electric footprint in small appliances and light bulbs, because th ey can claim energy efficiency savings achieved from more economical measures such as lighting and appliance replacements. C ommenter s stated that the EPA should utilize a state

by

- state evaluation, specifically considering the number of cost effective ener gy efficiency measures available and the threshold at which the measures put upward pressures on retail rates (RIM test).

C ommenter s noted that the EPA relied on 12 state studies to set its expanded annual program target savings improvement rate at 1.5 percent per year. C ommenter s stated however, that the EPA appears to overestimate most states' energy efficiency savings potential versu s prior energy efficiency projections, resulting in setting performance targets too high for individual states. [Electric Power Research Institute (EPRI) and EIA

. C ommenter s noted that savings potentials are highly state specific in their consumer mix, cre dit for measures already taken, and levels of subsidies provided. C ommenter s stated that the EPA applies one national energy efficiency growth factor to all state situations and does not consider energy efficiency program performance
or cost. C ommenter s st ated that the discrepancies are subsequently compounded by extrapolating these annual energy efficiency performance targets as incremental improvements that can be sustained through 2030

-- beyond the 12 studies evaluated. C ommenter s stated that out of 12 studies, 11 contain multiple scenarios with different sets of assumptions to demonstrate wide ranges of what is achievable under alternative financial, technological, and behavioral environments. C ommenter s stated that there is no documentation on how each study's respective109 average annual improvement rate was calculated, which was used as the foundation to calculate the incremental performance improvement target of 1.5 percent per year.

C ommenter s stated that while the studies on energy efficiency consider different potentials for the three main sectors (residential, commercial, and industrial), the CPP uses one number across all sectors in its emission rate calculation. C ommenter s stated that industrial processes are designed to use as little energy as pos sible in order to maximize profits of daily operations and may have already invested in energy efficiency programs, leaving minimal and costly opportunities remaining for incremental improvement. C ommenter s stated that applying the same energy efficiency p otential percentage for all three sectors indirectly provides incentives for industrial utility customers to reduce their energy load proportional to residential customers, but by a much greater magnitude per capita.

C ommenter s noted that the underlying st ate and regional studies used as the base for calculating the 1.5 percent potential include the full range of financial incentives from 25 to 100 percent, when considering base, low, and high cases. C ommenter s noted that since the EPA uses an averaging met hod in translating from the observed studies, sector and scenario findings to the final average annual projected potential, it is difficult to evaluate the financial incentives that are assumed in both the Building Block calculations and study results.

Com menter s discussed increasing demand side energy efficiency.

Commenter s stated that the EPA assumes that each state could implement additional EE measures each year up to a maximum of 1.5% annual incremental savings, resulting in an 11% decrease in gener ation in 2030. C ommenter s stated that they in conjunction with their Member Systems have invested in rebates, advertising, training and personnel toward the goal of reducing peak demand and providing EE programs to benefit the residents and businesses of M ississippi. C ommenter s stated that i n addition to the EE programs offered by individual Member Systems,

c ommenter s administer certain EE programs that are available to all Member Systems.

C ommenter s stated that each Member System is committed to EE and pursues those EE programs that make sense for its members taking into account the unique characteristics of its system, including but not limited to member characteristics, varied geography, weather pa tterns, local economic conditions, existing and new building construction, system load profiles, and energy use patterns. C ommenter s stated that EE programs currently in effect include:

1. Comfort Advantage Program

C ommenter s stated that they offer the Comfort Advantage Program that is a recognized standard for energy efficient construction and quality products for the home. C ommenter s stated that this EE program, the benefits of which are promoted by c ommenters ’ Member System s, offers incentives for EE and energy efficient HVAC Systems in new home construction and energy efficient HVAC equipment upgrades in existing homes. Since 1988, c ommenters ’ participation in the Comfort Advantage Program (initially known as the Good Cents Program), that is made available to all Member Systems, has added over 25,000 energy efficient homes to the meters that Member Systems already serve. C ommenter s stated that Comfort Advantage programs and services offer consumers knowledge, cash incentives , peace of mind and energy savings.110 C ommenter s estimated that each of these homes saves 3,000kWh per year or cumulatively 77,000,000 kWh per year. C ommenter s stated that the Comfort Advantage program drives the incorporation of energy efficient building te chniques and features such as building shell sealing, window area limitations, window thermal and radiant efficiency requirements, robust insulation, and energy efficient water heaters and heat pumps in non

- Comfort Advantage homes. C ommenter s stated that t his program raises the EE bar for construction of new homes in the region whether they are Comfort Advantage homes or not.

2. Pre

- Pay Programs

C ommenter s stated that some of their Member Systems have Pre

- pay programs that allow their members to pre

- pay for electricity before they use it. The commenter s stated that experience has shown that Pre

- pay customers actually reduce their bills by 10

- 15% simply because they become more aware of their usage.

3. Time of Use Rate

C ommenter s stated that they have a Whol esale Rate Time

- Of

- Use (TOU) Rider which is available for use by their Member Systems. C ommenter s stated that the Member Systems offering a TOU rate allow its members to avoid or reduce load during the On

- Peak period and increase load during the Off

- Peak t o save cost. C ommenter s stated that by shifting electricity use off

- peak, they and the Member Systems prolong the need to build new generation plants and increased off

- peak use allows current generating facilities to operate more efficiently.

4. Energy Aud its

C ommenter s stated that most of the Member Systems also conduct free energy audits available to all members to help them establish an effective energy management plan to reduce monthly electricity use.

5. Automated Metering Infrastructure

C ommenter s sta ted that some of the Member Systems have installed Automated Metering Infrastructure (AMI). C ommenter s stated that the automated metering structure allows members to access their energy use data 24/7 through a portal.

6. Energy Efficiency Education

C ommenter s stated that all Member Systems provide EE education for their members which consists of a variety of programs and services, brochures, resources and communications. C ommenter s stated that Member Systems also produce information educating and enco uraging their members to purchase energy efficient products and build energy efficient homes.

7. Distributed Generation111 C ommenter s stated that in the spring of 2009, they and the Member Systems developed common contractual documents addressing distributed generating (DG) resources for residential installations up to 10 Kilowatts. C ommenter s stated that they and the Member Systems have also developed similar documents for DG resources greater than 10 kW and up to 10 MW. C ommenter s stated that these document s include an application, an interconnection and operating agreement, interconnection requirements for DG resources, a Power Purchase Agreement (PPA) and a rate schedule for purchase by the commenter s of excess electric energy generated by DG resources and delivered into the electric grid.

C ommenter s stated that the current EE programs and the existing government mandated EE standards already in place appear to be working to reduce average residential kWh. For the years 2006 through 2009 average residentia l kWh use decreased even though degree days increased (06

- 07) or were virtually flat (07, 08 and 09). C ommenter s stated that average residential use from 2011 to 2013 decreased even though degree days for the two years (2011 and 2013) were almost flat. C om menter s stated that the trend from 2006 through 2013 has been for average residential kWh use to decrease.

C ommenter s stated that the decrease is driven by replacement of older less efficient appliances/equipment with more energy efficient products

-- lig hting, HVAC, refrigerators, water heaters, TVs, computers and other electric consuming products. C ommenter s stated that improved energy efficient building techniques

-- weatherization, insulation, etc.

-- due to improved building codes and technology impro vements encouraged by the Comfort Advantage program also contributes to the decrease. C ommenter s stated that the loss or extensive damage to homes as a result of Hurricane Katrina accelerated the building of new homes and replacement of appliances all with better EE standards.

C ommenter s stated that they should be given credit for EE work that began in 1988 and for this reduced electric energy use in homes using appliances and electric equipment built to existing government mandated EE standards. C ommenter s stated that much of the benefit from this work has already been achieved as shown by the reduction in residential energy usage. C ommenter s stated that the usage is now less responsive to changes in degree day totals. C ommenter s estimated that the annual s ystem wide reduced energy to be about 249,000 MWh (based on the difference between average residential electric use from 2006 to 2013).

C ommenter s stated that they and the Member Systems agree that EE measures can be beneficial to all members, provided th ey are cost effective and do not result in cross subsidization between members of the Member Systems. C ommenter s stated that benefits may be provided either directly or indirectly through avoidance of expensive on

- peak energy and reduced need for or comple te avoidance of future generating capacity. C ommenter s stated that EE goals must be achieved through programs that make economic sense and can provide lasting impacts for energy and capacity savings. C ommenter s stated that EE Programs that must be heavily subsidized in order to make them attractive enough for rate payer acceptance would most likely result in higher rates for all. C ommenter s stated that under this scenario, few benefit at the expense of
many. C om menter s stated that this would not comply with the cooperative principles, nor would it be effective.112 C ommenter s stated that in 2009 their Board of Directors approved a plan to investigate additional programs to produce more efficient use of electric energ y and help avoid increased capacity requirements. C ommenter s stated that the intent of this new program was to seek ways of reducing the need for new generating facilities, or at least delaying the time before new generation became necessary. C ommenter s st ated that the Coordinated EE and Demand Response (CEEDR) program was launched with the formation of the CEEDR Cabinet consisting of representatives from each Member System and the commenter s

. C ommenter s stated that the CEEDR Cabinet is a guidance committee that works to identify potential EE and demand response programs that can be implemented by the commenter s and/or its Member Systems. C ommenter s stated that the CEEDR Cabinet hired a consultant to perform an Energy Efficiency and Demand Response Potential Study (Potential Study) to determine the potential for electric energy and demand savings from multiple programs. C ommenter s stated that residential, commercial, and industrial customers were surveyed to identify the saturation of energy

- efficient applian ces and building practices in customer homes and businesses. C ommenter s stated that key issues and common characteristics of homes and businesses with high energy usage were identified and used to develop ways to improve EE and lower costs for consumers. C ommenter s stated that the survey results were used to develop a comprehensive portfolio of potential performance and prescriptive based programs. C ommenter s stated that after the Potential Study was completed another consultant developed Pilot Programs to test and affirm the results from the Potential Study. C ommenter s stated that the results of each pilot project will then be used by the commenter s and its Member Systems to determine whether to implement a full scale program utilizing the concepts of the p ilot project.

C ommenter s stated that the following Pilot Programs are currently underway:

1. The Commercial and Industrial (C&I) Lighting Pilot Program. The C&I Direct Installed Lighting Pilot measures have been installed. A consultant is in the process of ev aluating the pilot results and a draft full scale business lighting program would follow the evaluation.

2. The C&I Custom Measures energy efficiency projects Pilot Program. The C&I Custom Pilot measures should be completed and a final report received by the commenter s by the end of 2014. An evaluation of the C&I Custom Pilot Project will follow, and any development of a full scale program would follow the evaluation

.
3. Residential Pilot Program. The Residential Pilot includes installation of EE measures and sho uld be completed by the end of 2014. After meter data is gathered for 12 months following the installation phase an evaluation of the Residential Pilot will follow and any development of a full scale program would follow the evaluation

.
C ommenter s’ Member Systems rural service areas are not densely populated, in many cases, resulting in great distances between meters. C ommenter s stated that this presents an added challenge to the implementation and cost of many EE programs. C ommenter s stated that its Member Systems have a low average member density of 7.3 meters per mile of distribution line (range is 4.8

- 11.6 meters/mile compared to investor owned utility customer densities exceeding 39 customers per mile of distribution line).113 C omme nter s stated that they have learned that the energy savings from the EE programs included in the portfolio of programs suggested by the Potential Study may not be as optimistic as first studied. The commenter s stated that this is based on direct experience from the commenter's Residential, C&I Direct Install Lighting and C&I Custom Pilot Programs. C ommenter s stated that much has been learned, as well, from the EE program experiences of other utilities.

C ommenter s stated that they have learned from another u tility that implemented a HVAC Tune

Up program that it may not be cost effective. C ommenter s stated that the utility found that the program required an inspector to follow

- up behind the HVAC technicians performing the HVAC system tune

- up. C ommenter s stated that the inspector found many instances where the HVAC system was not operating as efficiently as desired because of incorrect tune

- up adjustments/Freon charging made during the HVAC tune

- up. As a result, c ommenter s stated that the energy savings expected for many of the tuned HVAC systems were neutral or negative. C ommenter s stated that the expense of needing the follow

- up inspector and the minimal energy savings would make the program cost ineffective for the commenter s and their Member Systems especiall y given the distance between homes

.
C ommenter s stated that the distance between businesses had an impact on administering the commenter's Commercial and Industrial (C&I) Direct Install Lighting Pilot Program. C ommenter s noted that installing energy effici ent lighting fixtures at commercial and industrial locations separated by many miles added to the cost and logistic challenges of the Direct Install Lighting Pilot Program. As a result, c ommenter s stated that it is most likely that the full scale
commenter 's C&I lighting program will be a prescriptive program as opposed to the direct install program tested in the pilot. C ommenter s stated that in a prescriptive lighting program, incentives are provided for each type of energy efficient lighting fixture insta lled (by the business owner) to replace inefficient lighting fixtures. C ommenter s stated that achievement of energy savings goals from the prescriptive lighting program will most likely vary from the anticipated rate of installations from a direct install lighting program. C ommenter s stated that until experience is gained, it is not known how quickly cumulative energy savings from a prescriptive lighting program will result in energy savings.

C ommenter s stated that its Residential Pilot program is testing t wo energy savings retrofits:

1. Seal air leakage in HVAC ducts in home attics

.
2. Seal the ceiling between the building shell and the attic and add insulation to attain an R38 insulating value between the attic and the building shell.

C ommenter s stated that this concept should work in most cases as HVAC ductwork is leaky, attics are not sufficiently sealed from the building shell and many attics in existing homes have inadequate insulation. However, c ommenter s stated that installing such energy s avings features may create higher humidity in homes with oversized air conditioning systems. C ommenter s stated that the oversized air conditioning systems cool the home quickly, but do not run long enough to adequately remove accumulated moisture from the conditioned air. C ommenter s stated that the increased humidity impacts comfort. C ommenter s stated that as a result the homeowner may adjust his thermostat lower, thus making the unit run longer and reducing energy savings.114 C ommenter s stated that some challenging aspects of a full scale residential program are the relatively high number of members of the Member Systems living in poverty, the high percentage of members living in mobile homes, and the low number of meters per mile (low

m ember density) in the Member Systems' service territories. C ommenter s stated that according to the American Fact Finder; DP04 Selected Housing Characteristics; 2008

- 2012 American Community Survey, mobile homes in Mississippi make up 15.3% of the total hous ing stock and the national average is 6.5%. According to the Census Bureau Quick facts, detached homes in Mississippi make up 69.7% of the housing stock and the national average is 61.7%. C ommenter s stated that of the detached homes located in Member Syste ms' territories identified in the Potential Study 69,500 are mobile homes and 288,855 are single family homes. C ommenter s stated that because 19.3% of the detached homes are mobile homes in Member Systems' service territories and miles separate many of the homes, it makes the residential program harder to administer.

C ommenter s stated that achieving the EE goals dictated for Building Block 4 by the EPA's Clean Power Plan will be particularly daunting for the commenter s and their Member Systems. Challenges i nclude:

• Geographic dispersion and poverty rates/average income

• Willingness to participate

• Impact on rates

• Impact of Member issues on measurement and verification

• Enforcement of mandated EE goals on rate payers

C ommenter s stated that two of the greatest ch allenges to a successful EE program for the
commenter s are geographic dispersion and prevailing poverty throughout the Member Systems' territories. C ommenter s stated that members living at or below the poverty level will have a hard time investing in EE me asures even if incentives are given. C ommenter s stated that members living above the poverty level may be unwilling or unable to spend the money to make efficiency improvements to their homes and businesses because of their below average per capita and med ian household incomes. Also, c ommenter s stated that renters are unlikely to invest even if financially able. C ommenter s stated that low member density presents challenges of distance, logistics and resulting increased cost to administer an EE program.

C omm enter s stated that EE programs require willing participation by the members. C ommenter s stated that willingness to participate in an EE program will not only be influenced by member resources but also will be influenced by the availability and cost of prog rams and incentives offered by the commenter s and the Member Systems. C ommenter s stated that the cost impact of EE programs on retail electric rates will be a roadblock to willing participation for the members and Member Systems. C ommenter s stated that sin ce it is the members who own the Member Systems, the Member Systems realize that these member

- owners are struggling to pay their bills. C ommenter s stated that in order to keep electric rates from increasing, there will be budget constraints as to the numbe r of EE programs that can be implemented. C ommenter s stated that115 the upfront costs of delivering additional programs including administration, marketing, tracking systems, monitoring and evaluation, and more personnel may preclude some programs from being implemented.

C ommenter s stated that there are practical issues with members, measurement and verification challenges, and logistics. C ommenter s stated that even in current EE programs, it is difficult to measure energy savings. C ommenter s noted for example, if savings calculators and SEER levels are used, assumptions are made as to the number of cooling and heating hours for heat pumps and run time for appliances. C ommenter s stated that each member controls their own usage and the assumpti ons may be incorrect. C ommenter s stated that simply monitoring usage before and after EE measures are implemented is not totally accurate. C ommenter s stated that the size of the household may change or the member may lower the thermostat in summer and rais e it in winter to make his house more comfortable and use the same amount of energy he used prior to the EE

measures. C ommenter s stated that the member may convert from gas heat to a heat pump and their electricity usage goes up even though his house is mo re energy efficient.

C ommenter s stated that the challenges in implementing, administering and paying for an EE program when coupled with the geographic dispersion, member willingness to participate, high poverty rate, low median household income, measureme nt and verification realities and potential adverse retail electric rate impacts will render impossible the enforcement of energy savings targets from mandated EE programs.

C ommenter s stated that a mandate under the Clean Power Plan requiring a reduction i n MWh as a result of EE to achieve a reduction in CO2 emissions from the commenter s ' generating resources is not workable for the above reasons. C ommenter s stated that EE cannot, nor should it be, an enforceable compliance measure and therefore it should b e removed from calculation of state goals.

Commenter s stated that there are several flaws in the analysis used by EPA to establish the level of EE measures to be used in the calculation of state goals. C ommenter s noted that the cumulative effect of thes e flaws is that EPA has substantially overstated the amount of EE that could be achieved by states.

C ommenter s stated that the extrapolation of EE achievement levels between states results in invalid comparisons. C ommenter s noted EPA suggests that a certa in level of EE can be achieved by all states based on its evaluation of "best practices" achieved in certain states. C ommenter s stated the assertion that the experience in these states can be easily replicated in others is based on simplistic assumptions, not detailed analyses. C ommenter s stated that there are fundamental flaws in such extrapolations when inherent real

- world differences among the states are properly considered. C ommenter s stated that the relative size of the different classes of customers ( industrial, commercial, and residential) is substantially different between states and across utility service territories; and the relative potential and costs to achieve EE savings across these customer classes varies substantially. C ommenter s noted that many states (such as those in the Midwest) deliver a much higher percentage of their electricity to industrial and manufacturing facilities. C ommenter s noted that other states (such as those in the Northeast) have a much larger percentage of commercial and service

- based entities in their customer mix. C ommenter s noted that States with higher industrial and manufacturing activity tend to have higher overa ll116 electricity consumption levels because the EE target levels are based on total retail sales, this increases the EE target levels as well. In addition, c ommenter s stated that implementing utility

sponsored EE at these industrial and manufacturing facilit ies can be much more challenging and costly, as they tend to be facility specific measures that are based on unique circumstances, such as replacing pumps, motors, and drives in manufacturing equipment with more efficient models.

C ommenter s noted that many states have determined that larger commercial and industrial customers should be not be required to participate in the utility

- sponsored EE programs, because these customers typically have the sophistication and resources available to implement their own EE measures, have better access to capital, and better rates, and are generally better informed as to their EE options. In these instances, c ommenter s stated that EPA should exclude commercial and industrial sales, or allow the requirement for EE implement ation to be placed directly on those customers. C ommenter s stated that in any event, the expected penetration rate for required EE programs should be consistent with the base of sales that can be addressed by those
programs.

C ommenter s stated that the aver age temperatures and relative use patterns for specific electricity consuming devices among many of the states used to define " best practice " for EE are fundamentally different from the average temperatures and use patterns in other states. C ommenter s note d that foremost among these differences is the significant variation in space heating and cooling requirements and their relative contribution to electricity loads. C ommenter s noted that space heating and cooling are by far the largest energy consuming loa ds in most households and many commercial establishments. C ommenter s stated that EPA's failure to account for these differences leads to a flawed assessment of the percent of EE reductions that can be achieved across different states. C ommenter s noted that regarding electricity consumption for space cooling, the differences are stark. For instance, c ommenter s noted that Massachusetts has significantly fewer cooling degree days than Texas. C ommenter s noted that in Massachusetts, electricity used for space co oling accounts for only 1% of average household electricity consumption; over 20% of homes have no air conditioning; the majority of the remainder use smaller window/wall units sparingly; and only 20% having larger central air conditioning units. C ommenter s noted that in contrast, in Texas electricity used for space cooling accounts for 18% of average household electricity consumption; over 80% of homes have central air conditioning; and those units are used much more extensively throughout a longer cooling season. As such, c ommenter s stated that electricity needs for space cooling are significantly higher in Texas than in Massachusetts. Regarding home heating, c ommenter s stated that there are significant differences as well. C ommenter s noted that Massachuse tts experiences significantly more heating degree days than Texas. However, commenter s noted that a significant percent of residential heating is met using natural gas (>50%) and fuel oil (31%), while electricity is used very sparingly (10%). In contrast, c ommenter s noted that in Texas electricity provides a significant portion of the energy to meet residential heating needs (50%), with relatively smaller percentages of natural gas usage (~42%) and virtually no heating oil. Therefore, c ommenter s stated that due to a combination of average temperatures and prevalence and type of space heating and cooling equipment, households in Massachusetts rely on electricity significantly less than those in Texas to meet basic space heating and cooling needs of homes.

C o mmenter s stated that phenomena discussed above are directly relevant to the issue of EE achievement potential. C ommenter s noted that lighting has historically been among the most117 widespread and successful utility

- sponsored EE measures. C ommenter s noted that if the same EE lighting measure (such as a CFL light bulb) is installed in a low electricity

- use household in Massachusetts, it will contribute a far greater percent reduction in electricity usage than that same measure installed in a higher

- el ectricity

- use household in Texas. C ommenter s noted for example, all other things being equal, since household electricity consumption in Massachusetts is only about half that of Texas, the exact same EE measures installed in a typical Massachusetts househo ld that resulted in a 1 percent reduction in electricity consumption would produce only a 0.5 percent reduction in a typical Texas household. C ommenter s noted that if the identical types and levels of EE measures are implemented in a state that has double the energy consumption than another, the impact on a percentage

- basis would be half that experienced in the original
state. C ommenter s stated that these stark differences are particularly relevant because what EPA characterizes as EE is a misnomer. C omment er s stated that when EPA professes that a certain state has achieved a certain percent of energy efficiency, in actuality what is measured is the reduction in electricity consumption relative to the base of all electricity consumption. C ommenter s stated th at other energy sources are completely ignored. C ommenter s stated for example, though the average household consumes only about one

- half the electricity in Massachusetts as it does in Texas, when one compares the total energy consumption (on a British ther mal unit " BTU " basis) the comparison is completely different. Massachusetts uses 22 percent more energy per household than the US national average, while Texas households use 14 percent less than the US average.

Commenter s stated that EPA should base e ach state's renewable and energy efficiency targets on the policies already adopted in each state, and that EPA should not use formulas for state targets that assume less generation and energy efficiency savings in 2030 than what the state has already achi eved today.

Commenter s stated that, because EE targets would be based on the current retail sales of electricity from all utilities in the state, the responsibility for meeting the target should be proportionally shared by those utilities, including in vestor owned utilities, municipalities, rural cooperatives, and competitive retail suppliers. C ommenter s explained that, otherwise, certain customers would be unfairly burdened. C ommenter s added that, in many states, only investor

owned utilities are requi red to implement such programs, while municipal utilities, rural cooperatives, and other suppliers often are not.

Commenter s respond ed to the EPA's request for comment on the issue of whether there are special issues for municipal utilities and rural el ectric cooperatives that merit modifications in Building Block 4. C ommenter s stated that these utilities have the ability to cost

- effectively implement energy efficiency programs, and therefore do not need special consideration. The examples commenters cited were:

• The City of Fort Collins Utilities (FCU) in Colorado which has a comprehensive set of EE programs totaling a savings of 32,700 MWh in 2013, equal to 2.2% of their electricity total consumption, on a gross basis

• The Sacramento Municipal Utility District (SMUD) in California which saved about 174,000 MWh per year or 1.4% of electricity sales in 2013 on a net basis118 • The state of Iowa, in which rural electric cooperatives owned by wholesale power providers are able to provide savings to customers totaling over 1.1%

• The states of Oregon and Minnesota, the latter of which saved 315,000 MWh per year or 1.4% of electricity sales through energy efficiency programs implemented in 2010

C ommenter s concluded by stating that rur al electric cooperatives and municipal utilities throughout the country can replicate what these leading utilities are achieving with respect to energy savings. Thus commenters stated no adjustment in the proposed Building Block 4 targets is warranted to r eflect a difference in energy savings potential between IOUs and municipal utilities or rural electric cooperatives

. Commenters also noted that as many of these entities are not regulated in the same manner as the IOUs, EPA and states should give some cons ideration as to how these utilities will be treated in the state plans and implementation efforts. Due to the varying regulatory practices, commenters stated municipal utilities and rural cooperatives may, in fact, have greater latitude in the types of pro grams they implement. C ommenter s believed that it may be more appropriate to have an authority other than the state public utilities commission (PUC), such as the state energy office, certify that appropriate evaluation, measurement, and verification (EM&V ) procedures were followed and that the energy efficiency credits resulting from efficiency programs implemented by municipal utilities or rural electric cooperatives are legitimate

Comment 11: State Regulatory Framework impact the ability to implement EE programs Response 11: Commenters stated that the regulatory framework varies across states impacting the scope and breadth of ratepayer

- funded EE programs. Since, the EPA decided not to include DS

- EE in BSER for the final rule, this comment is now outsid e the scope of the CPP. DS

- EE remains generally available for compliance. See multiple subsections of section VIII of the final rule preamble of the CPP for details. Further, the EPA recognizes that regulatory options do exist, and are generally available for states to consider in support of greater use of DS

- EE policies and programs. See the Demand

- side Energy Efficiency TSD for CPP Final Rule for more information on state regulat ory frameworks and energy efficiency.

The following are summaries of the specific public comments under this comment:

Commenters stated that a state's regulatory framework impacts its ability to use and implement EE measures and programs.

Commenter s o ppose d EPA's end

- use efficiency assumptions and argue d that EPA's approach does not recognize that there are different rate methodologies, regulatory models, and different rate structures across the states. Commenters stated s ome states have rate and/or re gulatory structures that make the implementation of utility

- based energy conservation programs more cost effective or have different tests and stringency levels for determining ratepayer impacts. In those circumstances, commenters stated, implementation of large

- scale energy conservation programs can be more readily justified to state regulatory commissions as cost effective, resulting in119 greater energy savings potential over time. C ommenter s present ed information on Virginia's energy efficiency approval pr ocess as an example and states that energy efficiency measures are more appealing and cost effective in states where electricity prices are high. C ommenter s also
argue d that a one

- year snapshot of data does not provide any historic context on the time need ed to achieve the rates, nor does it provide justification that such a level of savings can be maintained making it difficult to evaluate whether the achievements of a few states can be reasonably replicated across all other states. C ommenter s further argu e d that achieving the energy efficiency targets envisioned in EPA's proposal may require a state commission to approve programs that are not otherwise cost

- effective to reach the state's target. Commenters stated t his requirement usurps the state commissio n's authority to protect ratepayers and to make

case

- specific judgments as to the cost effectiveness of individual programs within its jurisdiction.

Commenter s stated differing s tate

- level regulatory frameworks skew potential DSEE.

Commenter s stated r egulatory frameworks vary widely across states and are significant factors in energy efficiency goals and achievements. Commenter s stated utility planning processes are directly related to the regulatory framework of each respective state. Commenter s stat ed in some states, the generation, transmission, and distribution portions of the electric system are not controlled by the same entity. Commenter s stated furthermore, in some states, like Vermont, energy efficiency program delivery is provided through a third

- party, further detaching the energy efficiency resource from each utility's planning process. Commenter s stated within Southern Company's region, each state PSC determines the amount of energy efficiency activity each utility should pursue based on the state's regulations and policies. Commenter s stated a state's regulatory framework and associated utility p lanning process may impact the structure of DSEE measures.

Commenter s stated energy efficiency targets vary widely across states from those based on a percentage of retail sales to states that have no defined energy efficiency targets. Commenter s stated i n some cases, like New Jersey, these targets are advisory and utilities have not formulated any plans to achieve the targets. Commenter s stated Maryland's target is based on achieving a
per

- capita reduction calculated against a prior year baseline. Commen ter s stated in North Carolina, energy savings can be counted towards compliance with the state's REPS. Commenter s stated Michigan allows achievements in excess of the state

- required target to be banked for credit in future years. Commenter s stated this va riety in DSEE accounting makes basing a national standard on the snap shot results of three states all the more arbitrary.

Commenter s stated EPA ignored the critical role of supportive state regulatory frameworks in increasing state EE savings rates. Commenters stated EPA's discussion of the potential for increased EE savings focuses only on technical potential and ignores the reality of how EE savings are actually achieved. Commenter s stated electric utilities (including investor

- owned utilitie s, municipal utilities and cooperatives) are by far the largest providers of EE in the country

- they are responsible for 89 percent of the total customer

- funded EE nationwide. Commenter s stated electric utility customer

- funded EE programs

- both EE and DR programs, such as load control and price

- responsive demand

- saved 126 TWh of electricity avoided 89 million mt CO2 in 2012. Commenter s stated electric utility ratepayer

- funded, or customer

- funded, EE programs have been in place for over two decades in s ome states, and the costs of administering the programs are paid for by a utility's ratepayers, usually through a fixed charge added to electric120 bills, and are routinely reviewed by PUCs to ensure that such programs pass a cost

- benefit
test. Commenter s st ated many states, working with their electric utilities, likely will include EE programs in 111(d) compliance plans.

Commenter s stated that no EE savings will be achieved unless current state

- and administrator

run EE programs are both continued and expan ded. Commenter s stated the regulatory environment in each state determines the size of the budget for customer

- funded EE programs; the budget determines the scope and breadth of EE programs. Commenter s indicated that regulatory frameworks that support ut ility investments in EE programs (through cost recovery mechanisms or performance incentives), therefore, are the key to achieving actual EE savings. Commenter s pointed out that despite this clear relationship between supportive regulatory policies and EE savings, EPA's analysis does not make any mention of this. Commenter s stated that as a practical matter, annual incremental state EE savings rates cannot be increased without supportive regulatory frameworks and the EE program budgets they create.

Comme nters stated EPA has not addressed how a failure to align regulatory policy and EE goals in some states will inhibit states' abilities to achieve the target annual EE savings rate. Commenter s noted that 33 states allow for some type of fixed cost re covery (either decoupling or a lost revenue adjustment mechanism), and 28 states have EE performance incentives. Commenter s stated that in order for states to achieve and maintain the target savings rates, regulatory environments in all states must allow for some type of fixed cost recovery.

Commenter s stated furthermore, municipally

- owned utilities and electric cooperatives are not currently subject to state jurisdiction for energy efficiency. Commenter s stated this could require new state legislation in many states to extend this jurisdiction (which MRES does not support), which will amount to a major change and increased compliance costs for these non

- jurisdictional entities. Commenter s stated EPA must resolve this issue by stating that the building blocks can only be used as optional compliance tools, and that the use of the blocks cannot be mandated in state plans. Commenter s stated without that definitive clarity, states will be without a way to dem onstrate the enforceability of EE measures, for example.

Commenter s stated EPA's discussion of the potential for increased savings from demand

- side energy efficiency focuses only on technical potential and ignores the reality of how energy savings are actually achieved. Commenter s stated EPA has not addressed how a failur e to align regulatory policy and EE goals in some states, especially those in the TVA service territory, will inhibit states' abilities to achieve the target annual EE savings. Commenter s indicated States should be allowed to adopt current measurement and verification mechanisms already in place by electric utilities.

Commenter s w ere concerned with the application of BSER under Building Block 4 of the proposed rule. Commenter s stated in 2012, the year that U.S. EPA chose to garner data from, Indiana had a state

- mandated energy efficiency program in place called Energizing Indiana. Commenter s stated, however, the Indiana General Assembly passed legislation which brings the program to an end as of December 31, 2014, meaning Indiana will no longer have a st ate mandated energy efficiency program. Commenter s stated because of this, Indiana no longer has any regulatory authority to mandate any type of demand

- side energy efficiency measures, therefore, even though many utilities have decided to continue the prog ram voluntarily, Indiana121 is uncertain how the state would receive credit in the state plan for reduced energy use for voluntary measures that the state has no control over. Commenter s stated even if the state legislature were to approve a new state

- mandate d energy efficiency program in the 2015 legislative session, Indiana would not have sufficient time to implement the program before state plan submissions would be due. Commenter s stated due to the proposed timeline and uncertainty of enforceability under Building Block 4, the state goal calculation may be unrealistic, and Indiana may not be able to rely on this building block at all in the state plan.

Commenter s indicated that Delaware could be very helpful in providing ideas on what works. Commenter s s tated Delaware has been a national leader on energy efficiency, for example, Delaware Electric Cooperative has over 49,000 members participating in its "Beat the Peak" voluntary energy efficiency program to help reduce energy demand during peak times. Comm enter s encouraged you and your EPA staff to meet with Delaware Electric Cooperative and our state officials to understand how Delaware's efficiency programs work and what regulatory framework is best to replicate our programs nationwide. Commenter s stated they would be pleased to help in facilitating that meeting this fall if that would be helpful.

Commenter s stated the proposed requirement for expansion of end

- use energy efficiency programs interferes with state authority to determine the nature and ext ent (if any) of these programs. Commenter s indicated State legislatures are the appropriate venues for making determinations about the design and goals of energy efficiency programs beyond those already required by state and federal legislation.

Commenter s stated that as the Analysis Group also demonstrates through in

- depth case studies, these periods of high energy savings growth often followed changes in state

- level policies that were specifically intended to spur investment in energy efficiency. Comm enter s stated thus, the experience of these states suggests that state

- level decisions, such as programs and regulatory policies that will be adopted as part of state plans under section 111(d), can have a decisive impact on the pace and performance of ene rgy efficiency investments. As an example, Commenter s noted that the state of Arizona has rapidly become a national leader in energy efficiency over the last seven years, increasing its state

- wide energy savings by 1.57 percent of retail sales between 2006 and 2013 (reflecting an annual average rate of increase of over 0.2 percent per year). Commenter s stated as the Analysis Group report demonstrates, this increase in energy savings directly followed the adoption of an expanded system benefits charge in 20 06 that significantly expanded the resources available for utility

- sponsored energy efficiency programs. Commenter s stated that in 2010, Arizona took the further step of enacting a rigorous energy efficiency resource standard (EERS) that requires cumulati ve energy savings to reach 22 percent of sales by 2020. Commenter s stated these two policies combined have helped Arizona sustain a rapid upward trajectory of energy savings growth, helping Arizona exceed EPA's 1.5 percent target in both 2012 and 2013.

Com menter s stated under existing Texas law, EPA's proposed incremental and cumulative savings targets for energy efficiency are not achievable. Commenter s stated extensive amendments to both the statute and the PUCT's rule would be required to revise the e lectric utilities' energy efficiency savings goal, allow direct marketing by the utilities, and either require adoption of the EM&V framework yet to be established by EPA or revisions to the EM&V framework enacted by the Texas Legislature in 2011. Commente r s stated additional amendments122 to the PUCT's rule would be required to adjust the cost caps for residential and commercial customers, as well as to adjust the administrative cost cap to promote increased outreach and marketing by the utilities. Commenter s stated due to the time required for the Texas Legislature to pass legislation to amend current statute and for the PUCT to adopt conforming rules and approve programs, as well as the extraordinarily high cost required to implement this block, which would undoubtedly result in significant rate shock to electric consumers, the demands of Rule 111(d)'s Block 4 are simply not realistic.

Commenter s noted that New Jersey's Clean Energy Program for EE and RE is a statewide program administered by the NJBPU. Ac cording to commenter s , it is not just one or two utility areas or one managed by one or two electric or gas utilities in various franchise areas, but a statewide electric and natural gas EE and RE program. Commenter s noted that the EE incentive and rebates offers are the same for Cape May Point (the southernmost point of New Jersey) to High Point (the northern most point of New Jersey). Commenter s stated that this has an impact on an EE savings that can be achieved in New Jersey versus a state with a new EE program in just one utility franchise area that has a more specific focused approach to address one electric generation plant.

Commenter s’ utility companies operate reflecting varying levels of implementation of energy efficiency programs within their respective jurisdictions. Commenter s’ Texas company began implementation in 2000; its Arkansas company in 2007; its New Orleans company in 2011; and its Mississippi company in 2014. Commenter s’ Louisiana and Gulf States Louisiana companies are awaiting an implementation order. Commenter s stated that these programs are specific to and dependent upon the approval of the state utility regulators.

Commenter s requested that EPA carefully review the alignment of incentives between utilities and EE program ope rators. They stated that in many states, regulatory rate designs do not provide utilities with the proper incentives to aggressively deploy EE. C ommenter s asked that at the very least, utility disincentives, such as having volume rates with no ability to b e made whole for the fixed costs of the system, should be removed in order for utilities to maintain their financial viability. C ommenter s stated that the preferred condition is one in which the utility incentives are aligned with the deployment of EE so t hat all stakeholders can gain a benefit from EE deployment.

Commenters stated, because California has decoupled utility profits from energy sales, its investor

- owned utilities have strong incentives to pursue these savings. (See Am. Council for an Energy

- E fficient Econ., State Energy Efficiency Database: California (2013), available at http://aceee.org/sector/state

- policy/california )

Comment 12: Commenters stated that the EPA doesn't have the authority to include BB4 in BSER for Non

- Utility Measures

Response 12: The EPA decided to not include DS

- EE in BSER in the final CPP

. See section s V.A and V.B of the final rule preamble of the CPP for further discussion of the decision. We123 note, h owe ver, DS

- EE remains generally available for compliance, see multiple subsections of section VIII of the final rule preamble of the CPP for details.

The following are summaries of the specific public comments under this comment:

Multiple commenters stated th at EPA does not have legal authority over non

- utility energy efficiency programs.

Commenter s asked a series of questions regarding BB4, including: Why is it appropriate for EPA to use these EE programs in setting state

- specific EE savings goals, given t hat responsible officials and affected EGUs do not necessarily have control over these programs? EPA's GHG Abatement TSD indicates that: "EE programs are administered by a variety of entities" including utilities, nonprofit and for

- profit third parties, an d state and local government agencies as well as that "Most EE programs...are overseen by state utility commissions..." Which EE programs are not overseen by PUCs?

Commenter s stated in establishing energy efficiency as the final building block for the purposes of setting the state goal, EPA proposes to utilize activities completely outside the power generation sector, an action of dubious legal authority. Commenter s stated EPA proposed alternatives to fill Building Block 4 could include actions such as enhanced building codes, energy efficiency programs, demand response programs and other actions that have the general impact of lowering power consumption.

Commenter s argued that EPA has exceeded the scope of any authority it has under section 111(d) in its regulatory approach regarding demand

- side energy efficiency. Commenter s noted that demand

- side energy efficiency programs would reduce generation from existing fossil fuel

fired EGUs by reducing the demand for that generation and reducing CO2 emissions. According
to commenter s , EPA estimates that the costs of CO2 emission reductions from building Block 4 would range from $16 to $24 per metric ton. Commenter s stated that this approach relies on electricity customers lessening their power demands. To make Building Block 4 work,
commenter s said states would have to establish demand

- side energy efficiency polices. Commenter s contended that, here again, EPA is bui lding its proposed rule around entities that are not the targeted existing source.

Commenter s argued that EPA does not have authority over energy efficiency programs as mentioned in Building Block 4. According to commenter s , energy efficiency programs i n Indiana, at least, were under the governor's authority, although his office had recently announced that this program would be eliminated in 2015.

Even if these building blocks could be managed under the authority of IURC or Indiana Utility Regulatory Com mission instead of IDEM, commenter s stated that cooperatives such as Wabash Valley Power and its 26 member cooperatives are not under IURC purview. Commenter s asked whether EPA or IDEM could see the difficulty here. Commenter s stated that other states may be in the same predicament.

Commenter s ’ primary concern regarding the Building Block 4 implementation is the ambiguity of regulatory authority. According to commenter s , the primary responsibility for implementation of and compliance with the section 111 (d) plan for a state falls to the environmental regulatory124 bodies, such as, in the commenters ’ utility states, the Arkansas Department of Environmental Quality, the Louisiana Department of Environmental Quality, the Mississippi Department of Environmental Quality, and the Texas Commission on Environmental Quality. Commenter s noted that each of these environmental regulatory agencies has authority only for "inside the fence" environmental operations and lacks the authority for the "outside the fence" obligat ions of Building Block 4 (EE/DSM).

In contrast, commenter s noted that the authority for establishing and providing recovery mechanisms for traditional utility costs, as well as the costs associated with Building Block 4 and the other proposed Building Bloc ks, belongs to the utility regulatory commissions (e.g., the Arkansas Public Service Commission, the Louisiana Public Service Commission, the Mississippi Public Service Commission, the New Orleans City Council Utility Committee, and the Public Utility Comm ission of Texas).

Commenter s stated that the ambiguity of responsibilities among the various agencies will be difficult to manage. According to commenter s , the "beyond the fence" regulation has the potential to require generators to answer to two (or more) masters. Commenter s noted that the utility regulatory bodies will be responsible for the cost recovery and goal setting and administration, while compliance with the statewide emissions rate falls to the environmental regulatory bodies. Commenter s said th at this concern applies not only to Building Block 4, but to the entire proposed regulatory scheme.

Comment 13: Commenters Support ed EE Guidelines for Inside the Fence
Response 13: Commenters stated that EPA doesn’t have the authority to include outside the fenceline EE as a building block in the BSER. The EPA decided to not include DS

- EE in BSER in the final CPP

. See section s V.A and V.B of the final rule preamble of the CPP for a detail ed discussion of our decision

. Sources will have flexibilit y to utilize EE measures inside the fenceline that they deem suitable and that are approved for implementation in the state plan. DS

EE remains generally available for compliance in state plans. See multiple subsections of section VIII of the final rule p reamble of the CPP for details on use of DS

- EE for compliance and see the Demand

- side Energy Efficiency TSD for CPP Final Rule for details on DS

- EE potential, opportunity, history, and energy savings.

The following are summaries of the specific public comm ents under this comment:

Commenters stated that EE programs should be utility based.

C ommenters stated that the energy efficiency guidelines should be based "inside the fence." Commenter s further stated that the guidelines should allow for flexibilit y in implementation.

Commenter s noted that EPA, in establishing energy efficiency as the final building block for the purposes of setting the state goal, proposed to utilize activities completely outside the power generation sector, an action of dubious legal authority. According to commenter s , EPA proposed alternatives to fill Building Block 4 could include actions such as enhanced building codes,125 energy efficiency programs, demand response programs and other actions that have the general impact of lowe ring power consumption.

Commenter s noted that EPA's compliance Building Block 4 assumes that demand side management can reduce electric demand by 10% by 2030. However, commenter s said EPA's CPP does not take into account states with high economic growth or states that are expected to experience high population growth, subjecting these states to comparatively negative treatment. Commenter s also noted that many states have had robust energy efficiency programs for years. According to commenter s , there is no r ecognition of this in the rule, leading to the concern that this rule is based on "one size fits all ."

While energy efficiency is an important tool for lowering costs to society, commenter s argued it is not a legally valid option for the purposes of setting a state goal. Even if it were, as proposed,
commenter s contended that the building block is an inappropriate tool for lowering GHG emissions. Commenter s argued that energy efficient inves tments, in keeping with an appropriate reading of the law, should be undertaken at the source, not at the point of customer demand.

Commenter s also noted that statewide efficiency requirements disproportionately impact some communities more than others, ci ting the case of a group of North Carolina cities that invested in nuclear power in the early 1980s. According to commenter s , these cities derive all of their power from non

- GHG emitting resource and, as a result of slow economic growth, actually have more power than they need. Commenter s pointed out that these communities will have to undertake new programs to lower consumption of product that they already own in excess. Commenter s said they are not alone; North Carolina cooperatives largely own emissions

- free technologies and in South Carolina, a similarly situated group of communities own only nuclear power. Commenter s contended that EPA, in its model, failed to consider circumstances of this nature and, as such, has failed to " adequately demonstrate " the achievability of the standard.

Commenters were concerned that the EPA has taken a position to set emissions guidelines that are not achievable at the affected source

- the electric generation unit (EGU) and seeks to hold utilities accountable for the act ions of their consumers as part of energy efficiency or conservation programs. C ommenters said the proposal raises numerous legal and practical issues with regard to enforcement, and argued that EPA fails to address these issues in a meaningful
way.

Commen ter s argued that EPA must base the emission guidelines on CO2 control measures that can be applied within the fence

- line of existing plants, taking into consideration costs of control, physical limitations, geographical location, or similar factors and remaining useful life. Commenter s stated that the basis of the emission guidelines should be inside the fence

- line efficiency improvements over which companies have primary control. Commenter s further stated that demand

- side reductions from outside the fen ce

- line, over which companies have little or no control, should not be used to set the emission guidelines. According to commenter s , establishing emission guidelines based on demand

- side reductions does not allow sources certainty in their compliance optio ns, nor does it allow states certainty in establishing standards of performance. Further complicating the issue, according to commenter s , is the problem of quantifying demand

- side reductions occurring in other states where the electricity generated would h ave been used.126 Commenter s argued that, with the exception of Building Block 1, each of the measures that EPA has proposed to adopt as part of the BSER for existing affected EGUs reaches beyond the individual regulated sources themselves, and therefore is not a " system of emission reduction " under section 111 of the Act. According to commenter s , Building Block 4 (demand side energy efficiency programs) especially presents enforcement difficulties, particularly to G & T electric cooperatives, such as the commenter s

.
Commenter s noted that G & T electric cooperatives serve at wholesale, and the development and implementation of policies regarding end

- use energy efficiency are the responsibility of the local cooperative and PPDs that ultimately provide customer service at the retail leve l. Although
commenter s’ cooperative has implemented demand side energy efficiency programs,
commenter s said there are no mechanisms to ensure that the member

- owner (customer) will implement the measures. Commenter s assumed that the member

- owner does implem ent the measure in question, but indicated there is no guarantee and no way in which they can know for certain. For these reasons, commenter s indicated it would be impossible for a G & T cooperative such as theirs to meet any sort of requirement that requi res reductions from demand side energy efficiency programs. According to commenter s , Building Block 4 represents an unfair burden on their cooperative and other entities.

According to commenter s , another category of EE activities not accounted for in EPA's Building Block 4 is privately

- delivered energy efficiency, such as energy savings performance contracts, industrial energy efficiency and privately contracted

- for efficiency that has traditionally not been accounted for in ratepayer

- funded energy eff iciency programs. Commenter s cited a white paper released in May 2014 by the National Association of Clean Air Agencies (NACAA), National Association of Regulatory Utility Commissioners (NARUC), and the National Association of State Energy Officials (NASEO ), which urges EPA to "encourage states to develop a clear path for inclusion, crediting, and administrative review" of these activities. Although EPA's Building Block 4 target is based on ratepayer

- funded EE programs, commenter s noted that EPA does acknow ledge that it considered EE activities outside of ratepayer

- funded programs as further assurance that a 1.5 percent annual target is achievable. In contrast to building codes and state appliance standards, commenter s indicated this category of EE activitie s is something that the owners and operators of EGUs can implement, by offering the upfront capital needed to weatherize, retrofit, and upgrade buildings for efficiency purposes. Commenter s also noted that there is a large market of unmet demand for weathe rization of low

- income homes and small businesses, which affected EGU operators could serve by offering financing or outright grants. Because similar measures are offered through ratepayer

- funded EE programs, commenter s noted there are already well

- establi shed EM&V protocols for retrofits, weatherization, and replacement of inefficient appliances.

Comment 14: Commenters recommended a dd ing EE m easures, i nclude n on

- u tility EE, p rovide f lexibility
Response 14: Comments suggested DS

- EE measures in addition to ratepayer

- funded energy efficiency programs to include in BSER. The EPA decided not to include DS

- EE in BSER for the final rule, so comments are now outside the scope of the CPP. See section s V.A and V.B of127 the final rule preamble of the CPP for details. DS

- EE remains generally available for compliance, including different types of EE programs, projects, and technologies. Such measures must meet the eligibility requirements and provisions related to demand

- side EE and the requirements and criteria related to proper quantification and verification of MWhs from demand

- side EE savings as described in Section VIII of the final rule preamble of the CPP.

The following are summaries of the specific public comments under this comment:

Multiple commenters supported use of expanded EE measures, non

- utility EE programs, and EE flexibility. Commenter s supported measures not typically included in ratepayer

- funded
programs.

Commenter s stated No. 4 of the building blocks identified by the EPA reads " Reduce electricity demand by using electricity more efficiently ." Commenter s stated the need for the U.S. to reduce emissions is obvious and many solutions are undiscovered at this point. Commenter s stated there are alternative ways to create a solution for the amount of energy needed to run each individual states' transportation; one example comes from railroads. Commenter s stated it would be easy to lighten the load of each rail car by using magnetics to lift the rails carts slightly. Commenter s stated the ef fects of using opposing magnets under the carriage of the train cars could lift the car itself just enough to create less resistance, and keep the cars on track, in order to lessen the inertia needed to pull the modified cars. Commenter s stated the modifi cations could actually reduce the noise of train travel by a great amount if the magnetic solution worked. Commenter s stated this could have the effect of straining the existing railways steel but it might be a cheaper solution to reinforce existing rails to hold the additional strain magnetics would inflict on it. Commenter s stated if changes like these were imposed while still maintaining the proposals to become 30% more efficient by the year 2030, the goal could be achieved by an even greater percentage

.
Commenter s noted that not including EE occurring outside of traditional utility energy efficiency programs fails to account for significant additional sources of energy efficiency, which are already large contributors to overall energy savings in the economy and which could grow substantially with appropriate policy signals. Commenter s urged EPA to address the exclusion of major energy efficiency industry segments, and that adjusting these assumptions will ensure that the emission targets in the final rule more accurately capture the full potential of energy efficiency as a cost

- effective emissions reduction mechanism.

Commenter s stated if utilities are going to move from an energy efficiency program with a purported goal of reducing the need for new generation and system investments to one that is focused on reducing carbon intensity, it merits a more comprehensive look at the tools that are available to utilities to influence their daily load curves. Commenter s stated comprehensive demand

- side manag ement necessitates an " all of the above " approach to utility load curve modification, which includes not only targeted energy efficiency incentive programs, but also robust demand response initiatives and appropriate economic signals coupled with a broad b ase of consumer education. Commenter s stated these approaches should encourage end

- use electrification of fossil fueled combustion technologies to efficient technologies that are integrated with an increasingly renewable electric grid. Commenter s stated su ch an approach does not fit well with the established methods of quantifying energy savings. In conjunction with128 the development of implementation plans, Commenter s stated new methodologies should be developed that quantify the carbon reductions associated with technologies that move consumers from fossil fuel combustion to electricity consumption.

Commenter s stated EPA should develop mechanisms that take account of and provide incentives for advance appliance efficiency standards, build energy codes, an d combined heat and power applications implemented by the states.

Commenter s stated it is critical for the Proposed Rule to recognize and account all of a state's EE savings, which results in part from the evolution of the utility customers from "energy customer" to " energy partner ." Commenter s stated the combination of clean energy policies and technological innovations has created new opportunities for electricity customers to directly manage their energy usage. Commenter s stated advanced energy manag ement systems empower customers across classes to reduce their overall usage and/or reduce their peak demand thereby avoiding peak demand charges, for the most part utilizing technologies that have been subsidized and encouraged to meet broader energy

- poli cy objectives. Commenter s stated the continued growth of distributed generation

- in particular, rooftop solar photovoltaic systems

- represents another option for customers to reduce their reliance of utility

- generated energy and the associated monthly bill. Commenter s stated sim ilarly, energy storage systems can provide a myriad of services to customers, including shifting peak demand and stabilizing rooftop solar generation, which can result in significant GHG emission reductions. Commenter s stated the same, the nascent deployme nt of plug

- in electric vehicles (PEVs) is poised for dramatic growth over the next decade as federal and state incentives and more affordable models level the playing field for PEVs; in addition, the steady addition of public and workplace fast

- charging in frastructure will expand the serviceable range of PEVs. Commenter s stated collectively, these trends are driving transformative changes is customer energy usage patterns. Commenter s stated that many of these changes also shift emissions from the transport ation sector to the electricity sector, and while this shift should result in statewide and nationwide efficiencies and reductions in overall GHG emissions, it also results in higher emissions for the electricity sector.

Whether it is energy efficiency and conservation, demand reduction, low/zero carbon distributed generation, customer

- sited energy storage, or electric vehicles, c ommenter s stated there are current and emerging opportunities for customer energy investments to reduce greenhouse gas emissions. Commenter s stated the federal, state, and local governments, together with utilities and a broad network of stakeholders can, and should, support these customer investments. Commenter s stated in failing to recognize this fundamental shift, the Proposed Ru le does not fully capture those opportunities for GHG emission reductions. Accordingly, c ommenter s stated the Clean Power Plan should be modified to either broadening the scope of building block 4 to include additional demand

- side management and customer r esources beyond energy efficiency, or further clarify how other demand

- side management resources that reduce greenhouse gas emissions will be counted towards a states' compliance with the Clean Power Plan.

Commenter s w ere encouraged to see that operati onal savings (also known as " retro

commissioning" ) are included in the TSD (p. 49) in a list of time

- tested ECMs. Commenter s stated including operational / retro

- commissioning savings is a critically important and laudable choice and one that FirstFuel sup ports because it furthers the objectives of the Clean Power Plan in the most cost

- effective manner. Commenter s stated by their own estimates, as much as one

-129 half of the savings potential in buildings is operational, and requires no or low up

- front investme nt. Commenter s stated capturing this savings is essential to achieving high savings rates in a cost

- effective manner and we encourage EPA to provide guidance to states to include operational savings programs in Building Block 4. Commenter s stated finally, with a longer list of ECMs, energy efficiency programs also benefit from a "portfolio diversification" effect. Commenter s stated blending deep retrofit and operational energy efficiency measures increases the likelihood of achieving savings at all hours o f the day, including both peak and off

- peak periods.

Commenter s recommended that EPA provide greater explanation and detail in regards to the types of EE projects that EPA anticipates will be undertaken in response to the final guidelines, including the costs, potential and scale of these projects. Commenter s also stated EPA should provide a mechanism for allowing and accounting for compliance purposes EE measures that are undertaken without the direct supervision of the state, and/or are not run through utilities. Commenter s stated there are many EE programs undertaken by third parties that provide substantial energy savings, and states should be able to take credit for those efforts, provided there are adequate safeguards to ensure the accuracy of their accounting.

Commenter s stated other energy efficiency improvements that EPA has not considered include demand management, voltage optimization, combined heat and power ("CHP"), and the emerging potential of energy efficiency technologies such as smart meters.

Commenter s stated the EPA determined that energy efficiency programs could eliminate 1.5% of retail electricity use. Commenter s stated as with renewable energy, the Council believes that this estimate is too conservative. Commenter s stated in reaching its determination, EPA failed to take into account several important avenues for energy efficiency measures including building codes, potential for increased efficiencies in transmission and distribution, voltage optimization, and combi ned heat and power. When it issues the final rule, Commenter s strongly urged EPA to include all possible energy efficiency opportunities in its analysis of the energy efficiency building block. If it does, Commenter s believed EPA will find that the potenti al emissions reductions achievable through these measures are substantially greater than currently projected.

Commenter s supported the inclusion of end

- use energy efficiency as a building block and the beyond

- the

- fence

- line approach taken by EPA in the proposed rule.

While the proposed 1.5 percent savings scenario is based on historic utility EE program results and targets, commenter s stated the EPA should recognize that state and national C&S are critical to achieving electricity savings across a state. Commenter s stated this is particularly true in California, where C&S account for the majority of in

- state annual energy savings, and where California's future efforts regarding C&S are expected to be aggressive. Commenter s stated for example, California policymakers have established a policy requiring the construction of zero

net

- energy new homes and buildings in the timef rame of the Proposed Rule, and are increasing efforts to target energy savings in existing buildings with appliance standards for building retrofits. Commenter s stated these goals will lead to an increase in savings from C&S in California, and a correspond ing decrease in savings from utility programs. Commenter s stated therefore, it will be essential that the savings attributable to C&S are equitably counted towards130 California's EE savings during compliance; otherwise, a 1.5 percent goal for Building Block 4 is not realistic.

Commenter s stated that offering energy efficiency as a compliance tool is critical to least

- cost implementation. Commenter s applauded EPA's vision to go outside the fence line and capitalize on economic emissions

- reduction opportunit ies from power

- sector players such as energy efficiency and renewable resources. Commenter s stated energy efficiency is the cheapest and fastest resource available to reduce emissions. That said, c ommenter s w ere concerned that the current draft rule underv alues energy efficiency; the agency must change the rule to more effectively capture the full value of energy efficiency.

Commenter s believed that for meaningful emission reductions to occur, EPA's proposed "outside the fence line" approach to identifyi ng possible reductions must remain intact. Commenter s stated failure to do so would render Building Blocks 3 and 4 meaningless, and in our view those Building Blocks are where true reductions will be achieved. Were the Clean Power Plan to be restricted to activities inside the fence line at the plant level, c ommenter s stated the GHG reductions would likely be limited to 4 percent or less

- far below the goals identified in the Clean Power Plan.

Commenter s stated that MEEIA also provides opportunity for c ustomers to " opt

- out " of IOU demand

- side programs when certain criteria are met. Commenter s suggested the final rules provide flexibility for states to receive credit for non

- utility efforts toward reducing CO2 emissions.

Commenter s stated all reduction s in end

- use electricity consumption should be recognized. As they reduce demand for fossil generation, Commenter s recognized that all energy efficiency and demand reduction measures are implicitly recognized in the Proposal. Due to the importance of

ener gy efficiency in reducing emissions from the power sector and putting downward pressure on electricity bills, c ommenter s appreciated that in many cases energy efficiency measures are also explicitly credited in the Proposal as essentially a form of zero

- ca rbon electricity generation.

Commenter s stated EPA should explore methods to encourage more aggressive efficiency programs. Commenter s stated they are not suggesting that EPA change its proposed determination of building block four, but that EPA enable st ates to build flexibility, or " adaptive management, " into their efficiency strategies as part of their plans, especially if they choose to be aggressive in driving demand reduction programs beyond assumptions made in the BSER determination.

Commenter s s tated one of the building blocks referenced in this rule is the expansion of energy efficiency programs. Commenter s believed this building block will be the key provision that will allow states to obtain long term GHG reductions. Commenter s stated the envi ronmental benefits of an energy efficiency program go well beyond just GHG reduction, and at minimum will lead to the overall improvement in our air quality. Commenter s stated one of the best ways to maximize these potential benefits is to broaden the scop e of what an allowable energy efficiency program can utilize. Commenter s stated by allowing states to fully account for the emission reduction from switching to cleaner burning fuel, the EPA would further promote technologies such as natural gas appliances , small scale CHP, and micro

- grids. Commenter s stated by moving131 the fuel source closer to the end user, the emissions profile will drop. Commenter s advocated for expanding the energy efficiency program provisions to cover all energy types. Commenter s stated by expanding the energy efficiency program scope, the EPA could make an immediate impact on how consumers shop for appliances, as well as influence how states utilize high efficiency and clean energy programs to help curb air pollution.

Commenter s believed that the BSER building block 4 creates some confusion regarding "non

traditional" energy efficiency programs. Commenter s encouraged EPA to stress in the final rule that states are not limited to energy efficiency resource standards (EERS) with respect to using energy efficiency for compliance with the proposed rule, even if these policies are the basis for how building block 4 contributes to setting emissions targets. Commenter s noted that while EPA based building block 4 on state EERS typically overseen by state public utility commissions or other designated entities, states are not limited to programs that fall under EERS policies for energy efficiency compliance options. Commenter s indicated State Energy Offices typically oversee and implement other energy efficiency and renewable energy program options, (e.g., energy savings performance contracting, building energy codes, residential retrofits, financing programs) and are in a position to work with their partner state air agencies on approache s for how to include these programs in state 111(d) compliance plans. Commenter s encouraged EPA to expand its treatment of "Incentives and Finance Mechanisms for Energy Efficiency" that was included in the State Plans Considerations TSD to provide more det ail on programs delivered outside of EERS policies and to provide additional guidance on how states can leverage these types of programs for 111(d) compliance. Commenter s pointed out that more energy efficiency is implemented outside of the utility program s in the United States than through these programs.

Commenter s stated the new technologies, such as smart meters and home energy management devices are emerging every day in the market place, are providing crucial communications between utilities and ho meowners, and can assist with program design and carbon measurement. Commenter s strongly recommended that the EPA recognize this nascent revolution and ensure that the proposed rule does not close the door to new technologies and program designs that have encouraged this kind of innovation.

Commenter s provided examples of several existing or emerging technologies that have significant potential for additional energy savings, including Volt/VAR optimization, whole

building energy retrofits, intelligent en ergy management, high

- performance rooftop HVAC, and dynamic windows. Commenter s explained that Volt/Var optimization (VVO) involves the management of various electric distribution system assets and advanced control technologies to

" right

- size " the voltage delivered to end

- use electric customers, resulting in reduced energy consumption without having to changes in customer consumption behavior. Regarding whole

building retrofits, commenter s commented that there is widespread recognition that building
energy efficiency can be dramatically improved by carefully integrating improvements to multiple building systems at once. Commenter s noted that these types of deep retrofits, yielding energy savings as high as 30 to 50% of baseline energy consumption, have been demonstrated in many buildings over the last two decades. Commenter s explained that intelligent energy management, using advanced sensors and control systems, are now enabling building owners and operators to optimize their energy use in real

- time, achievi ng reductions in building electricity use of as much as 30 percent. Regarding high

- performance rooftop HVAC systems, commenter s stated that, as a result of an initiative by DOE, two manufacturers are now producing rooftop132 HVAC systems that can help reduce energy consumption for cooling by as much as 50% relative to current industry standards. Finally, commenter s explained that dynamic windows, which change opacity automatically in response to electronic controls or thermal conditions can significantly limit heat gain and improve comfort in buildings with significant light exposure, and a recent study found that this technology could reduce heating and cooling electricity consumption by about 10 percent compared to modern high

- efficiency windows.

Commenter s s tated that building codes and appliance standards can make significant contributions to total energy savings. Commenter s cited a 2011 Edison Foundation's Institute study that indicated 8.6 to 13.6 percent of total electricity demand in 2025 (351 to 556 TWh ) could be achieved by adopting new energy building codes and appliances at the state level; these savings are comparable to total savings EPA projects from ratepayer

- funded programs alone in 2030 (500 TWh). Commenter s stated another demonstrated technolo gy is Voltage/VAR optimization; the commenter s provided a table showing VVO is cost

- effective (see Table 7 of the comment letter), and noted Xcel Energy projects energy savings of 1.8 percent of its retail load by 2020 for a proposed voltage optimization p roject.

Commenter s stated EPA should implement the full suite of demand

- side energy

- efficiency programs. Commenter s stated some states have been leaders in adopting strong energy

efficiency programs, while others have lagged behind. Commenter s stated e ach state should review and, if appropriate, quickly adopt the suite of demand

- side energy

- efficiency policies that others have successfully employed. Commenter s stated since buildings account for more than 40 percent of the total energy consumed in the U nited States, states also should adopt the most stringent building

- efficiency codes available today and enforce compliance. Commenter s stated that even more opportunities are available to states that wish to maximize the benefits of energy efficiency. Comm enter s stated in its most recent scorecard of state energy

- efficiency programs, the ACEEE details numerous policies that states could implement to achieve meaningful energy savings and cut pollution.

Commenter s asked that EPA describe its treatment of E E options within Building Block 4 and state targets such as: solar thermal programs; waste heat recovery; and participation in energy imbalance markets like the one operated by CA ISO.

Commenter s recommended that EPA indicate that it will consider, evaluate and give full weight to state implementation approaches that incorporate the beneficial transformation of the electricity infrastructure.

Commenter s recommended that EPA include all availabl e energy efficiency opportunities in its analysis. Commenter s noted that EPA, based on its analysis, determined that energy efficiency can supplant 1.5 percent of retail sales. According to commenter s , this level of energy efficiency underestimates the amo unt of energy efficiency that can be achieved because EPA excluded a number of important additional opportunities for energy efficiency such as building codes, transmission and distribution, voltage optimization, and combined heat and power. Commenter s bel ieve d that energy efficiency can achieve savings equal to 2 percent of retail sales per year.

By including all energy efficiency as compliance tools, commenter s estimated states should easily be able to achieve 0.25% annual energy savings, ramping up to 2%. Commenter s referred133 to a recent analysis by ACEEE, which found that four energy policies could save over 700 million GWh of electricity by 2030. Of these policies, commenter s said building codes were projected to save 17% of the impacts, and CHP was p rojected to save 7% of the impacts.

Commenter s stated that EPA should know that other opportunities exist to save energy from activities other than from utility programs and match the assumed pace of the implementation to what has been demonstrated in graphics.

Commenter s urged EPA to consider that there are new technologies emerging every day in the marketplace that can assist with program design and carbon measurement. According to
commenter s , smart meter proliferation is providing crucial new data sources on home
energy consumption. Commenter s noted that home energy management devices from technology that measure plug load and energy current signature are further disaggregating that data. Commenter s further noted that advanced thermostats and smart phone applications are providing crucial communications between utilities and homeowners.

Commenter s stated that we are at a turning point for new home energy technology and data and analytics; standards, protocols and platforms are just being developed. Commenter s strongly recommended that EPA recognize needs and revolution and ensure that their regulations do not close the door on new technologies and program design that encourage innovation.

Commenter s stated that it would do a lot more for the poor in Georgia to weatherize houses and push energy efficiency than spending billions of dollars on nuclear power plants, like Georgia Power and other utilities are doing at the Vogtle 3 and 4 plants. Commenter s referred to an analysis from an energy efficienc y expert who looked at what you could do with that kind of money, such as weatherize every house in Georgia. Instead, commenter s referred to a statement from Georgia Power that they were only going to be spending $5 million over 10 years for demand

- side ma nagement.

Commenter s urged EPA to consider energy savings achievable from building codes, combined heat and power, state appliance standards, etc., when setting Iowa's targets; the commenter s further urged EPA to include them in the overall energy effic iency target setting for Building Block 4. Commenter s referred to a recent report by the American Council for an Energy

Efficient Economy (ACEEE), which stated that, if every state incorporated " four of the most common and effective energy efficiency policy options available to a state ," including ( 1) implementing an energy efficiency savings target; (2) enacting national model building codes; (3) constructing combined heat and power systems; and (4) adopting efficiency standards for products/equipment , these end

- use energy efficiency measures alone could achieve close to the EPA's proposed 30% carbon pollution reductions by 2030 (from 2005 levels). Commenter s noted that ACEEE also found that these energy efficiency measures could achieve significant ca rbon reductions at no net cost to the economy.

According to commenter s , if every state adopted the four policies in their scenario, in 2030, carbon dioxide emissions from the power sector would be reduced by 26% relative to 2012 emissions, and power deman d would be reduced by 25% relative to 2012. Commenter s also said the nation would avoid 600 million tons of carbon dioxide emissions, save over 925 million MWh of electricity, and obviate the need for 494 power plants in 2030.134 Commenter s stated that th e final rule should strengthen the targets set for advanced
energy technologies, allowing periodic review of targets to reflect technological progress and rewarding early use of these technologies. Commenter s also asked that EPA specifically recognize the compliance options identified in their recent report, called " Advanced Energy Technologies for Greenhouse Gas Reduction ." Commenter s believe d that EPA's Clean Power Plan provides a historic opportunity to modernize our electric power system for the 21st

ce ntury. Commenter s indicated this rule will drive investment in electric power system that is sorely in need of it. According to commenter s , many of the technologies that are already changing the U.S. power system also help reduce carbon emissions. The rece nt report from
commenter s details 40 separate technologies including energy efficiency, demand response, natural gas electricity generation, solar, wind, hydro power, nuclear, smart grid, and energy storage that should be considered. Commenter s applauded E PA for referencing by name many of these technologies in its proposal. Commenter s urged EPA to further clarify the value of these technologies by recognizing all 40 of the options identified in their report.

Commenter s noted that the proposed Clean Powe r Rule does not currently include savings potential from effective energy efficiency strategies including local building code updates, local appliance standards, transmission and distribution system efficiency improvements, and Energy Service Company savin gs. Commenter s pointed out that local adoption of model building codes has led to approximately 32% energy savings in residential buildings, which equates to $500 in annual homeowner utility cost savings. Commenter s further noted that in commercial buildin gs, adoption of building codes has saved approximately 23% of energy used at an average energy cost savings of $0.40 per square foot.

Commenter s noted that the 2012 Focus on Energy Annual Report registered 649,848 MWh of energy savings, which was approx imately 1.0 percent of total energy sales in Wisconsin. According to commenter s , as of 2012, Wisconsin was at 0.97 percent incremental savings as a percentage of retail sales. Commenter s noted that the proposed Clean Power Plan projects that beginning in 2 017, Wisconsin's incremental savings percentage will need to start at 1.05 percent and increase every year by 0.2 percent until Wisconsin reaches 1.5 percent incremental savings, anticipated in 2020, which EPA proposes, and then Wisconsin will maintain tha t level of savings. Commenter s said Focus on Energy could be a component of the approach. However,
commenter s indicated additional components would likely be needed to support the proposed aggressive expectations of EPA's proposed plan, such as credit for energy building codes and state appliance standards and the addition of supplementary utility

- administered programs. Commenter s further stated that an additional amount needs to be accounted for as what is normally factored into utility load forecasting.

C ommenter s recommended that EPA include a broader suite of existing energy efficiency policies, measures, and technologies, including building codes, state appliance efficiency standards, and combined heat and power. Commenter s felt that this is appropri ate given the demonstrated effectiveness of such approaches in achieving cost

- effective energy reductions

.

Comment 1 5 : Include Advanced Energy Technologies135 Response 1 5 : Comments suggested DS

- EE measures in addition to ratepayer

- funded energy efficiency programs to include in BSER. The EPA decided not to include DS

- EE in BSER for the final rule, so comments are now outside the scope of the CPP. See section s V.A and V.B of the final rule preamble of the CPP for details. DS

- EE remains generally available f or compliance, including different types of EE programs, projects, and technologies. Such measures must meet the eligibility requirements and provisions related to demand

- side EE and the requirements and criteria related to proper quantification and verifi cation of MWhs from demand

- side EE savings as described in Section VIII of the final rule preamble of the CPP.

The following are summaries of the specific public comments under this comment:

Commenters recommended EPA include advanced technologies as part of EE programs.

Commenters stated EPA should explicitly recognize more advanced energy technologies as compliance options and provide guidance on incorporating them into State plans.

Commenter s stated that with proper state policy, additional forms of energy efficiency can be accounted for and directly supported by affected states, utilities, and EGUs. Commenter s indicated States and utilities directly procure PCs (and CHP projects, see section 3.4.5). Commenter s stated an energy savings crediting system can serve as a mechanism by which individual EGUs or utilities indirectly support energy efficiency actions. Commenter s stated such mechanisms would be appropriate ways for states to include a lternate energy efficiency programs, such as PCs, CHP projects, or building code policies.

While EPA has indicated that states can propose options outside of the list, commenter s pointed out there is a great deal of uncertainty as to what options EPA might allow, and given the finite timeline for the development of state plans, such uncertainty is likely to limit the compliance options States incorporate into their plans to those listed in the rule. Commenter s noted their recent report, Advanced Energy Tec hnologies for Greenhouse Gas Reduction, outlined 40 separate technologies that can provide the power sector with emission reductions while also providing other system and economic benefits, including many not named in the Proposed Rule, such as demand resp onse and voltage

- VAR optimization. Commenter s asked that EPA explicitly recognize the technologies in this report as compliance options and provide guidance to states on the use of these technologies in compliance plans.

Commenter s stated the history o f energy efficiency deployment shows that savings potential has remained steady or increased over time due to the introduction of new technologies. Commenter s cited Northwest Power and Conservation Council's 2010 regional energy plan that reported a 136 percent increase in energy efficiency potential relative to 2005, primarily because of " changing technology that has created new efficiency opportunities and re duced costs ". Commenter s cited World Resources Institute that noted, "Major household appliances

- including refrigerators, dishwashers, and clothes washers

- have become 50 to 80 percent more energy efficient over the last two decades;" for example, new refrigerators, clothes washers, dishwashers, and air conditioners use 75, 70, 40, and 50 percent less energy, respectively, than they did in 1990. Commenter s stated LED lighting has fallen in cost by approximately 75 percent over the last several years an d achieves significant energy savings even relative to compact fluorescent bulbs. Commenter s indicated that a recent report notes that Southwestern136 utilities have increasingly begun incentivizing customers to switch to LED bulbs in order to meet more stri ngent energy savings targets, as the cost and performance of this technology has improved. Commenter s provided Table 7, highlighting other emerging technologies, such as high

- efficiency HVAC units and intelligent energy monitoring instruments, that demons trate the potential to maintain or increase technical and economic potential for energy efficiency over time.

Comment 1 6 : Commenters recommended EPA include behavioral programs as part of EE approaches.

Response 1 6 : The EPA decided not to include DS

- EE in BSER for the final rule. See section s V.A and V.B of the final rule preamble of the CPP for details. DS

- EE remains generally available for compliance, including different types of EE programs, projects, and technologies. Such measures must meet the eli gibility requirements and provisions related to demand

- side EE and the requirements and criteria related to proper quantification and verification of MWhs from demand

- side EE savings as described in Section VIII of the final rule preamble of the CPP.

The f ollowing are summaries of the specific public comments under this comment:

Commenter s stated behavioral programs provide personalized tips to change consumer behavior to conserve energy and participate in other energy efficiency programs. Commenter s sta ted since 2008, Home Energy Reports (HER) behavioral programs have been implemented by all the investor

- owned, and multiple consumer

- owned utilities in Washington. Commenter s stated most utilities hire a contractor to administer the program, which provides customers with feedback by comparing a household's energy use with that of its peer neighbors. Commenter s stated to demonstrate actual savings, the contractor measures the reduction between the participating customers and a control group of customers that do not receive a report. Commenter s stated the contractor must then net out potential double

- counted savi ngs from participation in other efficiency programs. Commenter s stated that to support the contractor's measurement and verification of savings, Washington also requires its investor

- owned utilities to have third

- party verification of HER savings. Comment er s stated the EPA should accept programs like this that are supported by rigorous EM&V.

Commenter s stated that behavioral efficiency alone has helped save over 5 TWh of electricity, avoiding the emission of roughly 39 million tons of CO2 Over the past seven years.

Commenter s stated that Chicago passed an ordinance requiring energy benchmarking and disclosure for commercial, municipal and residential buildings over 50,000 square feet in size. Commenter s stated the ordinance seeks to unlock energy and cost savings opportunities by creating the data necessary to assess and improve building energy performance. Commenter s stated although these buildings comprise under 1% of the city's building stock, they use approximately 20% of the energy used by buildin gs in the city. Commenter s stated additionally, Chicago was the first city to make energy use information available to real estate agents through Multiple Listing service (MLS) listings.137 Commenter s stated that behavioral

- based programs that show persist ent, measureable savings should be credited to state plans. Commenter s stated that energy usage bill information programs in the residential sector show savings on the order of 2 percent annually and a range of operations

- based and occupant behavior

- drive n savings opportunities are available in the commercial and industrial sectors.

Commenter s stated that EPA's final rule to reduce carbon dioxide emissions under section 111(d) of the Clean Air Act must allow for states to include low

- cost programs that lead to measurable and verifiable emissions reductions in their compliance plans. Commenter s stated that their behavioral energy efficiency (BEE) programs

-- which are an approved efficiency resource in 31 states and are currently reaching over 13 million ho mes in the United States

-- are an example of such a program. According to commenter s , leading BEE programs are measured with a randomized control trial approach, which is the gold standard in scientific research and is the M&V methodology recommended by the Department of Energy's State and Local Energy Efficiency Action Network. Commenter s recommended that EPA's final rule give states a reasonable level of certainty that behavioral energy efficiency programs measured with a randomized control trial will be a pproved as part of a state's compliance plan.

Commenter s stated that energy consuming behavior is by its nature highly variable; behaviors are also subject to change as new energy consuming technologies are adopted. Commenter s stated that energy efficie ncy evaluation should be cognizant of this variability. While some level of EM&V is warranted, commenter s argued that states should not be required to realize an unattainable level of accuracy. Commenter s contended that such an approach has the potential t o reduce total program impacts and benefits to end

- use consumers.

Comment 1 7 : ESCOs

- Multiple commenters supported including energy performance contracting as part of EE programs.

Response 1 7 : The EPA decided not to include DS

- EE in BSER for the final rule. See section s V.A and V.B of the final rule preamble of the CPP for details. DS

- EE remains generally available for compliance, including different types of EE programs, projects, and technologies. Such measures must meet the eligibility requirements and provisions related to demand

- side EE and the requirements and criteria related to proper quantification and verification of MWhs from demand

- side EE savings as described in Section VIII of the final rule preamble of the CPP.

The following are summarie s of the specific public comments under this comment:

Commenter s stated it is difficult to determine exactly how costs might differ between EE programs operated by a public utility commission and electric distribution utility, relative to EE delivered by private energy efficiency services companies for EGUs but noted t hat for the most part, the costs should be the same, particularly given the substantial role of EE service companies already play in designing and implementing energy efficiency programs. Commenter s reviewed two ways that EGUs and the private market might face higher costs: (1) some EGUs (other than those that are part of vertically integrated companies) likely have fewer direct customer relationships than the electricity distribution utilities, which could lead to the need to do more market

- research and advertising, and (2) EGUs are not able to recoup the costs of energy138 efficiency programs concurrently with energy efficiency program spending, as an electric distribution utility (EDU) can, by collecting costs of energy efficiency programs on the utility b ill. Commenter s further noted that even assuming that EGUs and private EE service providers cannot achieve offsetting program efficiencies, these additional costs are reasonable and the
commenter s estimate the extra costs would increase the total cost of energy efficiency programs (the incremental cost of energy efficiency measures plus the costs of program administration) by only 12.5 percent. Commenter s indicated that even if EGUs faced this additional level of cost, EE programs would still be a cost

- ef fective way to achieve energy efficiency programs.

Commenter s recommended savings from ESCOs that correct for any duplication with other programs should be included in the BSER and credited in state plans. Commenter s stated EPA should take into account t he opportunity of ESCO projects to be part of a state plan or generate savings credits that could be distributed to or purchased by EGUs. Commenter s recommended EPA raise the best practices level by 0.025 percent per year to account for this opportunity. Commenter s indicated that LBNL projects the industry will gross $10 to 15 billion in annual sales by 2020. Commenter s noted that the ESCO industry is dominant especially in the municipal, university, schools, and hospitals markets, and a 2013 LBNL study e stimated current and potential market penetration in these sectors (see Figure 7.12 in the comment letter). From a recent LBNL release, commenter s estimated the incremental electricity savings of public sector ESCO projects undertaken in 2012 without util ity incentives to be 1.15 TWh or around 0.027 percent of sales.

Commenter s stated there is a significant opportunity for private sector investment in cost

effective energy efficiency projects. Commenter s stated that because many studies are designe d to take into account the limitations of ratepayer

- funded programs, it is unclear whether or how these studies take into account the potential for private actors to deliver energy savings additional to those that would be captured through programs adminis tered by utilities or states. Commenter s stated the private energy services performance contracting industry, for example, has been growing at a rapid pace in recent years, and achieved average annual savings of approximately 26

- 40 TWh (including both ele ctricity and gas savings) over the period 2003 to 2012, and it is reasonable to expect that this industry and others like it will see significant new growth if energy efficiency investments are incentivized through section 111(d).

Comment 1 8 : Commenter s recommended the EPA include EE programs for large energy users.

Response 18: The EPA decided not to include DS

- EE in BSER for the final rule. See section s V.A and V.B of the final rule preamble of the CPP for details. DS

- EE remains generally available for compliance, including different types of EE programs, projects, and technologies. Such measures must meet the eligibility requirements and provisions related to deman d

- side EE and the requirements and criteria related to proper quantification and verification of MWhs from demand

- side EE savings as described in Section VIII of the final rule preamble of the CPP.

The following are summaries of the specific public comment s under this comment:

Commenter s stated that large energy users have voluntarily implemented EE measures as part DOE's Better Buildings Challenge, including 190 organizations that collectively own or operate139 approximately 3.3 billion square feet of buil ding space and over 600 manufacturing facilities. Commenter s stated that achievements by large energy users corroborate the results of other energy efficiency potential studies, and suggest that even deeper savings can be achieved through well

- coordinated investments in efficiency. Commenter s stated since 2011, Better Buildings Challenge partners have reduced the energy intensity of their buildings by an average of 2.5 percent each year; more than 2,100 of the 9,000 participating facilities have improved t heir performance by 20 percent or more; and more than 4,500 have improved their performance by at least 10 percent. Commenter s stated many participating large companies and municipal entities have reported reductions in building energy use as great as 40 percent through the adoption of leading energy efficiency technologies as well as careful energy management practices.

Comment 19 : Building Codes

Response 19: The EPA decided not to include DS

- EE in BSER for the final rule. See section s V.A and V.B of the final rule preamble of the CPP for details. DS

- EE remains generally available for compliance, including different types of EE programs, projects, and technologies. Such measures must meet the eligibility requirements and provisions related to demand

- side EE and the requirements and criteria related to proper quantification and verification of MWhs from demand

- side EE savings as described in Section VIII of the final rule preamble of the CPP.

The following are summaries of the specific public comments under this comment:

Multiple commenters supported including building codes as EE measures.

Multiple commenters stated adoption and enforcement of building codes would be burdensome.

Commenter s stated efficiency, conservation and renewables use in resid ences can drastically reduce power use and the need for burning fossil fuels. Commenter s stated over the last decade energy use for operation of their home has decreased fifty percent or more without significant lifestyle changes. Commenter s stated 15 year s ago our electricity use for a month as hot as the month we just had would have been close to 2000 kwh. Commenter s stated this past month our electricity use was under 800 kwh. Commenter s stated the changes made in their household did not take place overn ight and they are things that have or will pay for themselves. Commenter s stated the first thing was to switch gradually to compact fluorescent bulbs. Commenter s stated when the 15 year old heat pump died they replaced it with the most efficient unit we co uld obtain without going to a ground based system. Commenter s stated systems available now are even more efficient. Commenter s stated utilities could participate and make money by being in the business of encouraging installation of more efficient systems and making loans for those systems. Commenter s stated they operate the heating and cooling system conservatively keeping the temperature at 78 F or higher in summer and use ceiling fans and 65 F or lower in winter and use an electric oil

- filled space heate r some in winter. Commenter s stated they open and close blinds to keep sunlight in or out depending upon the season. Commenter s stated they did a lot of things to seal leaks and drafts some before and some after a home energy audit. Commenter s stated that included the installation of lifetime windows when it was time to replace windows.140 Commenter s stated when it was time to replace roofing, they put an Energy Star reflective metal roof on the house.

Commenter s stated utility companies can do energy audits and these sorts of things and make a profit doing so. Commenter s stated when they had done most of the EE and conservation things that make sense they moved on to consider clean renewable energy. Commenter s stated that about 4 years ago they had a solar w ater heater installed that provides all of our hot water for all but about 6 weeks of the year and some of the hot water even then. Commenter s stated a couple of years ago they had their heating and cooling system ducts checked for leaks and sealed reducin g air loss from leaks by more than half to around eight percent or less from around 18 percent. Commenter s stated there is still more that they can do and have done. Commenter s stated last fall they put a clothesline up in the backyard after not using a c lothesline for more than a decade, and began to use a retractable clothes line in our great room more. Commenter s stated there are other efficiency things that they will do as appliance and equipment need to be replaced like the refrigerator, freezer, comp uters, and even the heat pump when or if it needs replacement. Commenter s planned to reduce energy used for treatment and delivery of water by harvesting and using rain water. Commenter s stated not only can utilities be involved in and make money by makin g loans for these efficiency and clean energy measures, these efforts create more jobs than power generation.

Commenter s stated they would have installed PV panels to generate part or all of our electricity use, if our public service commission had not in stituted repressive fees for connecting and selling excess power on the grid. Commenter s stated the utilities can make money by financing and servicing solar PV installations and these installations will create as many or more jobs than burning coal.

Comme nter s stated the District of Columbia (District) is taking action to improve the EE of homes as well as commercial and public buildings. Commenter s stated the DC Sustainable Energy Utility (DCSEU), funded by District of Columbia utility customers, provi des EE and renewable energy incentive programs to help District residents and businesses save money and reduce their carbon footprint. Commenter s stated last year, DCSEU provided $80 million in lifetime economic benefits and directly invested more than $4 million in local businesses while serving 45,000 District households. Commenter s stated in addition, the District adopted in March one of the most progressive energy conservation and green construction codes in the country to cut energy use in new building s by as much as 30 percent. Commenter s stated EPA should consider this proven strategy when setting emission reduction goals and laying out compliance options.

Commenter s believed Home Performance meets the BSER test and is a crucial part of building block number four in the proposed rule. Commenter s stated in fact, with more than 113 million residences consuming 22 percent of all U.S. energy, this sector is critical for any program that targets emission reductions.

Commenter s stated they are working on a program to improve the energy efficiency of our homes.141 Commenter s noted that the new Carbon Emission Guidelines do not include updating building codes for commercial and residential buildings. Commenter s strongly suggested that building codes be mandated, and noted that power plants may last for a few decades, but well

- built buildings will last for a century. Commenter s stated further, there are financial incentives fo r builders to ignore EE and carbon emissions. Commenter s asked EPA to write regulations that protect users of these buildings after they have been constructed.

Commenter s stated the BSER calculations in the Proposed Rule exclude the use of building codes to drive improved EE and noted that commercial and residential buildings were responsible for approximately 40 percent of all 2013 energy consumption in the United States, and a recent analysis showed that expanded building code policy could drive an additional 1.1 trillion MWh of cumulative energy savings by 2030.

Commenter s recommended EPA clarify that building energy codes may be included in the best system of emissi on reduction (BSER). Commenter s stated buildings account for approximately 41 percent of total primary energy consumption in the U.S., more than 70 percent of electricity use, and 40 percent of CO2 emissions. Commenter s stated existing buildings make up t he vast majority of the building stock, and the average age of commercial buildings is 41.7 years old, with many built more than 75 years ago. Commenter s stated consequently, the buildings sector possesses many opportunities for large reductions in energy use and emissions. Commenter s stated indeed, the IPCC found that the buildings sector has the greatest potential for economical mitigation of GHG emissions between now and 2030. Commenter s stated likewise, a 2014 evaluation conducted by the PNNL of the U.S . DOE funded Building Energy Codes Program (BECP) found the cumulative GHG emissions reductions from the Programs' activities have been significant, totaling nearly 3.9 billion metric tons, or approximately three

- fourths of all
energy

- related emissions in the U.S. in 2012. Commenter s stated advances in demand

- side EE are often driven by model building energy codes and standards, the International Energy Conservation Code (IECC) (residential buildings), and ANSI/ASHRAE/IES 90.1 Energy Standard for Buildings Except Low

- Rise Residential Buildings (commercial buildings). Commenter s stated these model building energy codes are developed by the private sector through open, consensus

- based procedures, and then adopted and put into force by federal, state, and loca l governments. Commenter s stated model codes, such as Standard 90.1, have seen consistent gains in EE, with significant increases over the past several years.

Commenter s stated the energy

- savings and emissions reductions of building energy codes translates into cost

- savings for consumers. Commenter s stated the PNNL evaluation of BECP found that since the Program's creation 20 years ago, " cumulative FFC [full

- fuel

- cycle] energy savings from 1992 to 2012 are estimated to be approximately 4.2 quads and cost sa vings to consumers have been more than $44 billion. These savings have resulted primarily from the Program's activities which upgrade the model energy codes, accelerate their adoption by states and localities, and improve code compliance".

Commenter s state d while many gains have been realized, tremendous potential continues to exist for additional energy and cost

- savings. Commenter s stated the analysis estimates that with immediate code adoption and 100 percent compliance, cumulative FFC energy savings betw een 2013 and 2040 is approximately 80 quads, with aggregate energy cost

- savings of nearly $330142 billion. Commenter s stated unfortunately, 100 percent code compliance seldom exists, placing these projected savings to the nation, consumers, and businesses in jeopardy.

Commenter s stated the transition of utility EE programs from a focus on mitigating resource additions to a focus on reduced emissions is faced with a number of challenges. Commenter s stated these challenges are related to the long term benefi ts and viability of these programs to deliver the same results that have been associated with these programs in the past. Commenter s stated the impacts of codes and standards should be counted towards a state's EE goal. Commenter s stated the progressive n ature of codes and standards reduce the baseline for energy consuming end uses and thereby reduce the cost effectiveness of incrementally higher efficiency technologies.

Commenter s stated Building Block 4 allows for reducing CO2 emissions from affected EGUs in the amount that results from the use of demand

- side EE that reduces the amount of generation required. In order to properly credit and capture the full range of EE savings, c ommenter s stated the Clean Power Plan must recognize not only utility

- spec ific EE savings, but statewide programs that also result in reduced electricity consumption. Commenter s stated the current iteration of EE programs in California is a combination of state efforts

- primarily through the adoption of Title 20 Appliance Energ y Efficiency Standards and Title 24 Building Energy Efficiency Standards (local government adopted building codes, and utility programs to incentivize customer investments in energy saving measures). Commenter s stated California has adopted a zero

- net ener gy goal for all new homes by 2020. To this end, c ommenter s indicated the state adopted much more stringent building EE standards in 2013, and is scheduled to do so again in the 2016 and 2019 updates to the Title 24 Building Energy Efficiency Standards. Commenter s stated California's aggressive schedule to capture energy savings through updates to state codes and standards

- for both buildings and appliances

- will necessarily result in reduced opportunities for energy savings from utility programs. Commenter s stated as proposed, the Clean Power Plan would exclude state codes and standards from the calculation of annual incremental savings rates of at least 1.5 percent of the electricity demand that would otherwise have occurred. Commenter s stated that excluding state codes and standards from the calculation of net EE savings ignores the single greatest source and opportunity to achieve energy savings, and disadvantages California and any other state that has demonstrated a commitment to increased EE savings through the development of comprehensive EE codes and stand ards. Commenter s stated the Proposed Rule should be revised to allow states to account for energy savings derived from the adoption and enforcement of state or local building energy codes in the calculation of annual incremental savings.

Commenter s stat ed some of the easiest ways states can encourage increases in EE in new buildings are through the adoption of policies that require new construction to hit certain EE goals. The three most commonly adopted policies that establish these goals are codes, sta ndards, and rating systems.

• A building code is an enforceable body of rules that governs the design, construction, alteration, and repair of buildings by establishing minimum requirements to ensure the health, safety, and welfare of occupants and neighbors

. The 2015 International Energy Conservation Code (IECC) is the latest national model code developed by the International Code Council CICC).143 • A building standard defines a specific path

- or a variety of alternatives

- to achieve a desired outcome in a bui lding. ASHRAE Standard 90.1

- 2013 is the most recent national model EE standard developed for nonresidential buildings.

• Building rating systems establish terms of measurement for the performance of building components to encourage levels of performance beyo nd the minimum requirements set by codes. In the past two decades, green building rating systems like the U.S. Green Building Council (USGBC) Leadership in Energy and Environmental Design (LEED) suite and the Green Building Initiative (GBD Green Globes pro gram have emerged for the purpose of rating the overall performance of buildings with respect to energy consumption and other environmental considerations.

Commenter s stated numerous research reports from the U.S. DOE, regional EE organizations, and other advocates indicate that smart building energy code policies are one of the most fundamental, affordable, and effective mechanisms for decreasing energy waste, increasing comfort, creating jobs, and reducing negative health and air quality impacts.

Commente r s stated that in separate studies, DOE concluded that compliance with the 2012 IECC yielded substantial life

- cycle energy cost savings, more than 30 percent compared to the 2006 IECC, in both residential and commercial buildings across all building types and configurations in states in every climate zone. Commenter s stated a 2010 Institute for Market Transformation CIMD report estimated that for each dollar spent to improve energy code compliance yielded more than six dollars in energy savings for America n consumers.

Commenter s stated that based on national GDP and energy consumption data, the Energy Efficient Code Coalition (EECC) concluded in 2014 that the traditional link between U.S. electricity demand and economic growth from the previous century has been broken as the nation has achieved improvements in EE for buildings and appliances through codes and standards. Commenter s stated the adoption of updated energy codes and standards paired with implementation policies to encourage compliance yield signi ficant energy cost savings at a national, state, and individual building level. Commenter s stated policies that encourage building owners to invest in these systems are key to market uptake. Commenter s stated tax incentives like the federal Energy Effici ent Commercial Building Deduction (Internal Revenue Code Section 1790) help building owners finance the cost of energy efficient building systems.

Commenter s stated that architect

- led deep energy retrofits can help unlock the potential of the existing buil ding market. Commenter s stated recent market analyses have confirmed the scale and scope of the building EE market. Commenter s stated in their March 20l2 joint report, the Rockefeller Foundation and Deutsche Bank Climate Change Advisors found that improvi ng efficiency by 30 percent in the nation's pre

- 1980 building stock would result in $1 trillion dollars of energy savings over l0 years, requiring an upfront investment of just $279 billion dollars, a simple return on investment of 358 percent over a decad e. Commenter s stated an important regulatory factor that is elevating EE as a priority is the wider adoption of energy disclosure policies, which require building owners to publicly report their building's energy use.144 Commenter s recommended the BSER sh ould include EE that could occur due to the adoption of, updating, and increased compliance with building energy codes. Commenter s indicated State

specific estimates of the cost

- effective savings available should be added to Building Block Four. Commenter s recommended BB 4 be adjusted to reflect the potential carbon reductions that can be achieve through building energy codes.

Commenter s stated there is a tremendous potential for additional CO2 reductions to be achieved by the implementation of national mo del building energy codes. Commenter s cited their (ACEEE) recent report that found the potential for energy savings from both residential and commercial building codes to be dispersed across all states, with cumulative energy savings between the years 2016 to 2030 ranging from 953,000 MWh to 133,768,000 MWh. Commente rs noted the calculations of potential savings from building codes adoption are being modified to conform to the Clean Power Plan, and the updated numbers will be available in early January 2015 and will be submitted to EPA directly in a separate filing.

Commenter s cited a 2009 econometric study that examined residential energy code adoption across 48 states from 1970 to 2006 and found that the establishment of residential building energy codes a lone reduced state per capita residential energy consumption by 0.3 to 5 percent in 2006. Commenter s further noted at the national level, the study found residential energy consumption savings of 2.09 to 4.98 percent in 2006 from the adoption of building e nergy codes. Commenter s stated the study asserts that the energy savings experienced over the examined period may only represent a lower bound of the potential energy savings from residential codes.

Commenter s cited a second econometric study published in 2011 by the Climate Policy Initiative that used a regression analysis to examine the residential energy consumption of states with building energy codes as compared to those without. Commenter s indicated this study found residential energy codes reduced p rimary energy consumption in the sector by 1.3 percent and reduced energy

- related emissions by 1.8 percent in 2008.

Commenter s stated the adoption of building energy codes, as well as code

- compliance improvement activities, have already accounted for a gre at deal of quantifiable energy savings and emission reductions across many states and jurisdictions. Commenter s noted the DOE Building Energy Codes Program (BECP) has worked since 1992 to aid states in improving building EE through the adoption and impleme ntation of building energy codes and standards. Commenter s noted a 2013 assessment of the BECP found program activities to have contributed 2 quads of cumulative site energy savings and resulted in 344 trillion tons of avoided CO2 emissions over the 1992 to 2012 time period.

Commente rs cited a 2009 Northwest Energy Coalition study that examined historic and future projections of energy savings due to EE in Washington, Oregon, and California and found that state building energy codes accounted for an averag e of roughly 900 MW of energy savings in 2006.

Commenter s indicated advances in the EE achieved by new versions of both residential and commercial energy codes have led to significant continued reductions in the energy consumption of newly constructed buil dings subsequent to these studies. Commenter s provided Figure 1 showing the trend of residential and commercial energy code efficiency improvements.145 Commenter s noted that with each iteration of the IECC for residential buildings and the ASHRAE Standard 90 .1 for commercial and high

- rise multifamily buildings, the energy consumption of newly constructed buildings and those undergoing major retrofits or renovations further decreases, citing DOE

- calculated national average source

- energy

- use intensity reduction for new commercial construction of 3.9 percent from ASHRAE 90.1

- 2004 to ASHRAE 90.1

- 2007, 18.2 percent from ASHRAE 90.1

- 2007 to ASHRAE 90.1

- 2010, and 7.2 percent from ASHRAE 90.1

- 2010 to ASHRAE 90.1

- 2013.

Commenter s also cited a 2012 DOE study that found average site energy savings of 32.1 percent when comparing buildings that meet the 2012 IECC with buildings that meet the 2006 IECC, for single

- family and low

- rise multifamily new residential construction.

Commenter s stated building energy codes are already in place and common across the majority of the United States, and as of September 2014, 40 states have in place mandatory statewide residential energy codes, 42 states have in place mandatory statewide commercial c odes, 9 states and the District of Columbia have adopted the 2012 IECC for residential buildings, and 13 states and the District of Columbia already have the ASHRAE 90.1 2010 in place for commercial buildings. Commenter s provided Figures 2 and 3 illustrati ng the residential and commercial energy code adoption status of the states through November 2014.

Commenter s recommended that affordable multifamily housing energy efficiency be included in the potential emissions reductions used to set the targets in Block 4 and should be credited as state plans. Commenter s indicated that that the savings potential from multifamily upgrades are large and can contribute significantly to overall program savings and help meet aggressive energy savings targets. Commenter s stated that on average, multifamily housing is older than single

- family housing and has less efficient heating, cooling, plumbing, and lighting systems, and therefore more room for improvement. Additionally, c ommenter s stated a single intervention such as an HVAC replacement can improve efficiency in every unit in the building.

Commenter s stated that despite the potential for improvements, multifamily rental housing has been underserved by EE programs, despite representing about 25 percent of the housing u nits in the U.S. and 20 percent of energy consumed by all housing units. Commenter s recognized that Affordable multifamily owners face barriers to energy efficiency, such as imperfect information of opportunities and available solutions; reactive rather th an strategic decision making; perceived risk of making efficiency investments; split incentives; and constrained access to capital. Commenter s noted that energy efficiency programs for the affordable multifamily housing sector tend to require more specific ity and customization than programs typically offered for residential and commercial sectors. Commenter s stated that special financing products are often needed to overcome the limited cash flow available in affordable housing.

Commenter s concluded by givi ng suggestions as to how multifamily housing could become a part of EE programs. Commenters ’ suggestions included:

• Utilities and governments fund multifamily energy efficiency programs to fill the capital gap.146 • Utilities improve processes and systems for ut ility delivery of energy usage information to building owners and provide incentives for continuous commissioning

.

• Utilities and governments support a "one stop shop"

-- a place for building owners to access integrated program services

.

• Governments support c ommunity development financial institutions (CDFIs) and other types of lenders to make loans available for energy efficiency improvements in multifamily affordable housing

.

• State housing finance agencies require affordable housing developers to incorporate energy saving improvements in their housing developments as a condition of receiving funding.

Commenter s believed that the CPP should lower barriers for building energy efficiency and onsite generation strategies. Commenter s stated that the CPP should foster collaboration between building owners, tenants, and utilities on energy and GHG reduction goals. Commenter s noted that building owners often cannot control end use efficiency of their tenants, but asked that the EPA use the CPP to motivate positive tenant behaviors to reduce energy use and minimize their buildings' carbon footprint. Commenter s concluded by agreeing with commenter s that EPA should support energy improvements in older homes, and gives some examples of how that could be achieved.

Comm enter s stated the EPA plan should take building code and appliance standards into consideration. Commenter s indicated States should receive credits for implementing the latest codes and standards, because they have resulted in significant EE and, as a r esult, carbon reduction. Commenter s stated carbon savings from code

- compliant residential and commercial construction amounted to 682,701 MWh/year or 343,000 MTY. If Texas were to adopt the 2012 and later building energy codes, Commenter s indicated the sta te could reduce its carbon emissions by an additional 400,000 MMT per year. Commenter s provided a chart that shows CO2 generation by building sector, commercial, single

- family, etc.

Commenter s stated other EE options need to be relied upon to achieve incremental improvements going forward. Commenter s stated utilities will need to mostly default to thermal efficiency measures, such as heating, ventilation and air conditioning (HVAC) upgrades an d weatherization measures, which typically have a higher cost to achieve.

Commenter s stated both industry and stakeholders have concluded that the adoption and enforcement of model building energy codes, which provide for the deployment of energy effici ent lighting and lighting controls, are one of the most cost

- effective ways to save energy. Commenter s noted the following:

• At a cost of slightly more than 1 cent per KWh, building codes and standards achieve energy savings at 1/3 the cost of conventional residential EE programs and are roughly 1/10 the cost of retail residential electricity

.147 • ACEEE concluded that if states adopted building energy codes policy achieves would avoid 41 GW of capacity, reduce electricity consumption by 4.2 percent relative to 2012, and generate a cumulative electricity savings of over 1.1 billion MWh in 2030. This amount is conservative, given that it represents electricity benefits to new buildings only. In fact building codes will create additional savings due to (1) reduced natural gas consumption and (2) improvements to existing buildings.

• A 2011 Report by the Edison Foundation concluded by 2025, significant energy savings could be achieved through the adoption of building codes, up to 129 TWh, and a large majority of the sa vings would come from LED lighting already available in the marketplace.

• A recent LBNL study concluded the incremental cost of enforcing residential and commercial energy codes using a traditional plan review and inspection process ranged from $50 or less per home to nearly Dollar 200, and from less than $150 per commercial building to over $1,000, exclusive of overhead and travel.

• A recent study by a task force of more than 30 organizations led by the Institute for Market Transformation (IMT) found that ev ery $1 spent on enforcement of energy codes yields $6 in energy savings.

Commenter s recommended EPA strengthen state emission goals by including energy savings that are possible through state and utility

- administered codes and standards programs.

Commen ter s believed incorporating building energy code programs into the state emission goals is feasible. Commenter s recommended adoption of at least the 2012 IECC or equivalent code: A majority of states have already adopted either the 2009 IECC (about 24 sta tes) of the 2012 IECC (about 14 states) and at least five states are at various stages of adopting the recently released 2015 IECC. Commenter s believed that by 2017 most states should be able to adopt either the 2012 or 2015 IECC.

Commenter s cited a 201 3 Cadmus Group report that found 17 states are already working toward increasing utility involvement and reliably quantifying the energy savings from building energy codes. Commenter s stated that DOE's Building Technologies Program has awarded millions of dollars to states to implement training and education programs and provide technical assistance on building codes through state and federal partnerships. Commenter s stated four states (Arizona, California, Massachusetts, and Rhode Island) have already mad e significant progress in implementing robust utility

- run energy code programs for which utilities may take some form of energy savings credit, and these state efforts have established reliable mechanisms for ensuring compliance with building codes and for evaluating, measuring, and verifying the energy savings that code adoptions produce.

Commenter s stated greater investment in EE in commercial buildings has huge potential to cut and manage demand. Commenter s stated that one leading innovative approach for HVAC systems enables recirculation of indoor air in commercial buildings by use of low cost re

generable sorbents (largely developed by DOE), reduces the HVAC load, and results in148 significant energy savings. Commenter s stated the innovative concept has been developed and demonstrated to reduce the energy consumption in HVAC systems in commercial and public buildings by up to 50 percent at peak loads. Commenter s stated air handling modules can be retrofitted onto virtually any building. Commenter s cited 3 commercial building installations where 30 to 40 percent reduction in average daily cooling energy has been demonstrated, and noted that several other sites in the U.S. and abroad are in the works. Comment er s stated the impact of such an approach can be massive on a regional and national scale, and initial targets will be office buildings, large retail stores, schools and healthcare facilities. Commenter s noted that the U.S. has approximately 40 billion sf of commercial space; each system can save 25,000 kWh/year, and reduce CO2 generation by 17 metric tonnes/year. Commenter s provided a table for CO2 reduction that results from the HVAC technology, including the commercial square footage, energy saved per y ear, and estimated CO2 reduction ; for example, 800,000 sf results in 2,000,000 kWh saved, and CO2 reduction of 1.4 metric tonnes/year and 4,000,000 sf results in 10,000,000 kWh saved with a CO2 reduction of 6.9 metric tonnes/. Commenter s stated meaningful and substantial reductions in GHG's are possible from the adoption of such technologies, and there is a financial incentive and attractiveness from the viewpoint of building owners (energy cost savings) and utilities.

Commenter s cited a new Stanford Re port on EE as a key part of state clean energy programs that analyzes and makes specific recommendations on policies that states are using today to encourage EE and quotes: "Energy Efficient Building Codes. States should adopt or update energy efficient building codes following an independent analysis of cost

- effectiveness, distributional impacts, and other factors. Building energy codes are a relatively straightforward and transparent EE strategy. Updating codes is likely to be most worthwhile in states with the oldest existing codes." Commenter s recommended the 2012 IECC, which is a model code adopted by many states and municipal governments and which establishes minimum design and construction requirements for EE.

Commenter s noted three facets of build ing energy codes that would bolster EPA's goals. Commenter s indicated that States have the authority to adopt building codes, which are generally based on model codes developed by organizations such as International Code Council (ICC). Commenter s stated EPA should give credit in the final Clean Power Plan where states and municipalities adopt the 2012 IECC or some other code of similar rigor and integrity. Because most states have existing building energy codes but they are frequently outdated or in ne ed of improvement, commenter s suggested EPA also give credit where states upgrade or improve and enforce code requirements to reflect the most recent model code.

Commenter s stated building codes are important because modeling from various sources shows

ene rgy savings for residential, commercial, and industrial buildings. Commenter s stated that the most effective and comprehensive tool for promoting energy savings is building energy codes. Commenter s stated building codes are immediately available technolo gy.

Commenter s noted that EPA is eager to have EM&V data for such savings, and building code adoption can deliver that crucial data.

Commenter s cited Institute for Electric Innovation ("IEI") and ACEEE studies that indicate electricity savings achieved from improved adoption and enforcement of building energy codes149 is validated. Commenter s stated the estimated electricity savings is significant, and the electricity saved under all utility

- administered EE programs in 2012 was 126 TWh. [Institute for Electric Innovation, "Summary of Electric Utility Customer

- Funded Energy Efficiency Savings, Expenditures, and Budgets," Issue Brief, March 2014.]

Com menter s stated Pennsylvania also has a significant opportunity to improve EE through adoption of current building codes and improving code compliance. Commenter s stated as a result of procedural changes to the code adoption process made in 201123, Penns ylvania has not adopted the 2012 International Energy Conservation Code (IECC) and is still operating under the 2009 code. Commenter s stated this results in a 15 percent improvement in building energy performance that is achievable but not considered in EP A's target setting. Commenter s stated as buildings represent approximately 41 percent of statewide energy consumption this could be a very large source of reductions. Commenter s encouraged EPA and state regulators to develop appropriate quantification and verification protocols that will allow credit for such improvements.

Commenter s stated building codes could erode potential DSEE. Commenter s stated building codes also vary significantly across states and territories. Commenter s stated DOE reports that : 10 states have residential building codes equivalent to or more energy efficient than the 2012 IECC; 28 states/territories are equivalent to or greater than the 2009 IECC; 6 states are equivalent to or greater than the 2006 IECC; 3 states/territories ar e equivalent to or greater than the 2003 IECC; and 9 states/territories do not maintain state

- wide residential building codes. Commenter s stated these differences affect the baselines from which utility

- sponsored DSEE potential should be assessed. Comment er s stated different baselines make comparisons of achievements among different states difficult. Commenter s stated in addition, according to the American Council for an Energy

- Efficient Economy (" ACEEE "), Arizona allows a portion of savings from new buil ding codes to be counted towards the state's RPS. Commenter s stated this practice further blurs ability to compare DSEE achievements across states and limits the application of Arizona's DSEE achievements to other states. Commenter s stated additionally, a s building codes become more stringent, the amount of DSEE gained from new customers or significant retrofits may be reduced.

Commenter s stated it is important to note, as other EE stakeholders likely will, that the broad flexibility offered in the CPP proposal and supporting documents published by the EPA are largely focused on utility ratepayer EE programs rather than non

- rate payer programs such as building energy codes. Commenter s stated the utility ratepayer programs that focus on demand response st rategies certainly play an enormous role in reducing emissions, however, demand reductions through the use of energy efficient building materials and design should receive equal attention.

Commenter s stated EE represents the best available option to achiev e significant carbon reductions through eliminating wasted energy in new and existing residential and commercial buildings. Commenter s stated according to the U.S. Energy Information Administration, in 2013, 40 percent of total U.S. energy consumption was consumed in residential and commercial buildings, and this statistic clearly underscores the impact the building sector can have on achieving the intended goals of the CPP proposal. Commenter s stated by reinforcing the150 importance of building energy codes i n the CPP, the EPA has appropriately recognized a key opportunity for eliminating wasted energy.

Commenter s stated in determining strategies to demonstrate compliance to CPP goals for target emission reductions, SIPs should aggressively pursue building ene rgy code initiatives that target the full spectrum of buildings, including new and existing residential and commercial structures. Commenter s stated specific energy code related areas that will have meaningful effects on CPP target reductions can include a doption of the most advanced energy codes published and increased compliance and enforcement of energy codes.

Commenter s stated because buildings have a lifecycle that last many decades or more, it is essential to maximize energy savings through energy cod es that emphasize long

- lasting solutions, especially in the building envelope. Commenter s stated energy code compliant envelopes for newly constructed and retrofitted existing buildings provide cost

- effective, quantifiable, and permanent energy savings fro m readily available technology; for example, as demonstrated by " A Cost Curve for Greenhouse Gas Reduction ," insulation is the most cost

effective tool available; it is a measure that carries no net life cycle cost

-- in effect the reductions come at negat ive cost, i.e., end

- use EE enhancements both reduce utility greenhouse gas emissions and save money.

Commenter s stated this building block was constructed in a reasonable way, although some refinements and improvements could be made, such as explicitly adding efficiency opportunities from updated state building codes and from expanded use of combined heat and power systems to each state's target. Commenter s stated ACEEE estimated state

- specific savings available from these two measures in an April 2014 report.

Commenter s stated insulation provides a unique and singular contribution as the most effective EE option for reduction of greenhouse gas emissions. Commenter s stated insulation products save more energy than is used to manufacture them. Comment er s stated in fact, insulation saves 12 times as much energy per pound in its first year of use as the energy used to produce it, which means that for every Btu consumed in its production, 12 Btus are saved each year by the use of the insulation. Of all th e EE options that EPA can and will consider, c ommenter s stated there is no other like insulation. Commenter s stated first, it is the simplest and the most effective way to save energy and reduce greenhouse gases. Commenter s stated in an economy that has been sluggish for 8 years, that characteristic should not be dismissed. Commenter s stated second, insulation truly saves energy. Commenter s stated unlike energy efficient light bulbs and appliances, insulation, after its ini tial production, requires no energy to save energy. Commenter s stated third, insulation is immediately available for installation. It is indeed an existing technology ready to use. Commenter s stated fourth, insulation can deliver energy savings in resident ial, commercial, and industrial buildings

-- even in the power plants themselves; there is a wide array of applications for insulation. Commenter s stated fifth, insulation begins to save energy from the time it is installed, lasts for the life of the buildin g, and unless damaged, requires no further maintenance. Commenter s stated sixth, insulation saves over 600 times more energy each year than all the compact fluorescent light bulbs, Energy Star appliances, and Energy Star windows combined. Commenter s stated that selecting insulation as an option brings significant economic benefits. Commenter s stated Boston University's update of Harvard studies reconfirm151 earlier findings that insulation saves energy, reduces pollutants, including greenhouse gas emissions, and improves public health.

Commenter s stated insulation and insulation

- related reductions are permanent. Therefore, Commenter s requested that EPA recognize in the Final Rule that installation of insulation, upgrades to insulation, or improvements to insu lation within the building envelope result in savings that are permanent and last the life of the building. Commenter s stated these savings from insulation are unique and distinct from other EE projects which EPA limits to only a ten

year savings.

Commente r s stated insulation is the ideal product to reduce energy use in buildings and the corresponding greenhouse gas reductions. Commenter s stated according to the U.S. EIA, residential and commercial buildings combined accounted for 40 percent of energy co nsumed in 2013. Commenter s stated insulation is uniquely advantaged over other EE technologies because it is: a) cost effective, b) easily obtainable, c) produced domestically d) does not require any additional energy once installed, and e) permanent. Co mmenter s stated according to " A Cost Curve for Greenhouse Gas Reduction ", increasing insulation in buildings is the single most cost effective step that can be taken to reduce energy consumption and corresponding greenhouse gas emissions. Commenter s stated insulation saves energy and money while simultaneously making homes quieter and more comfortable. Of all building insulation materials, c ommenter s stated cellulose insulation is unique in that it is a readily available "off the shelf" technology that can be installed by either a professional contractor or homeowner, and is produced from recycled newspaper collected by local recycling centers, saving millions of tons of paper from ending up in landfills. Commenter s stated further, Cellulose insulation also contains the lowest amount of embodied energy (the energy that goes into producing the product) of any insulation technology. Commenter s stated for the reasons stated above, insulation and programs that encourage, incentivize, or mandate its usage are eas y and cost effective ways to reduce our greenhouse gas emissions by lowering the amount of fossil fuel used at existing power plants.

Commenter s stated EPA should recognize and provide an achievable pathway for these forms of EE: building labeling progr ams and policies targeting efficiency improvements in existing building stock. Commenter s stated EE measures should be both bolder and broader, to include an aggressive building codes program, where insulation is a key feature. Commenter s stated energy

sa vings from insulation offers the best solution for reducing greenhouse gas emissions under a system

- wide approach. Commenter s stated from their perspective, EE is the most important element of the Proposed Rule. Commenter s stated EPA Administrator Gina Mc Carthy agrees with the importance of EE, stating at the June 12, 2014 EE Forum that " energy efficiency will continue to play a huge role in our path to cut pollution and propel our clean energy revolution. . . Energy efficiency is the poster child for turn ing our risks into opportunities. So my answer to the title of the session is that energy efficiency is at a tipping point. And our proposal counts on it."

Commenter s stated insulation offers cost

- effective reductions and is immediately available to yield expeditious results. Commenter s stated unlike other EE equipment, once installed, insulation requires no further energy use, is permanent, and does not need regular upkeep, so reductions can continue for decades, a key factor for a program intended to achi eve emissions reductions far into the future. Commenter s stated most important, insulation upgrade/incentive152 programs provide states with maximum flexibility to meet their targets as they can be employed broadly across the power, housing, commercial, and i ndustrial sectors.

Commenter s stated insulation provides cost

- effective reduction of energy consumption. Commenter s stated insulation and insulation

- related reductions are immediately available. Commenter s stated the tremendous benefits from the reductio n of energy demand and greenhouse gas emissions do not have to wait for further technological development. Commenter s stated insulation requires no further energy use. Commenter s stated insulation programs provide maximum flexibility to states.

Commenter s stated EPA has stated publicly in the Proposed Rule that its major goal in the CAA Section 111(d) process is to work with states and ensure they have maximum flexibility to meet any targets set forth in the federal guidelines. Commenter s stated given the facts above related to
cost

- effectiveness, availability, no further energy use, and permanency, insulation already presents a powerful tool for demand management energy reductions. Commenter s stated beyond these factors, insulation upgrade/incen tive programs can be employed broadly across all economic sectors that significantly contribute to a state's energy use and greenhouse gas emissions. Commenter s stated thus, insulation programs can apply broadly across the power, housing, and industrial se ctors. While such programs can be employed in any one sector, Commenter s stated there is no reason they should be so limited, especially if they become a key part of a state's program to reduce energy demand and greenhouse gas emissions from the EGU.

Based on all these factors detailed above, commenter s urged EPA to recognize the vast savings yet to be achieved through improvement in insulation levels. Commenter s recognized that EPA in the Proposed Rule was fairly generic in its discussions of EE programs. However, given the vital role that insulation can play under CPP, commenter s recommended that EPA expressly identify insulation as a key tool in the EE toolbox to give states maximum flexibility in adopting programs that incentivize, provide, or mandate im provement in the building envelope. Commenter s stated these programs should be endowed with sufficient flexibility as to allow the application across power, housing, commercial, and industrial sectors.

Commenter s asserted that with proper emphasis on build ing codes, EPA could gain significantly greater greenhouse gas reductions. Commenter s stated the ACEEE has made a similar statement:

" Building block [#4] was constructed in a reasonable way. Although [ACEEE] will be suggesting some refinements and improvem ents . . . With these refinements, [we estimate] that nationwide energy efficiency savings and emissions reduction would about double relative to what EPA estimates in its Clean Power Plan proposal ." Commenter s stated EE actions as envisioned by NAIMA go far beyond incentive programs where utilities give a rebate on insulation. Commenter s stated EE measures should be both bolder and broader, to include an aggressive building codes program.

Commenters urged EPA to recognize the unique and singular contribut ion insulation brings to the effort to reduce greenhouse gas emissions by elevating insulation as a preferred option for promoting EE in the Final Rule and any guidance on EE that may be provided to states in the future.153 Commenter s stated EPA should suppor t incentives and other measures that encourage increased EE through insulation. Commenter s stated the building sector is a significant source of greenhouse gas emissions due to its use and waste of electricity. Commenter s stated insulation can provide the most cost

- effective and immediately available means to reduce this energy use. As demonstrated by " A Cost Curve for Greenhouse Gas Reduction, " insulation is the most cost

effective tool available; it is a measure that carries no net life cycle cost, in ef fect the reductions come at negative cost, i.e., end

- use EE enhancements both reduce utility greenhouse gas emissions and save money.

Commenter s recommended EPA consider different types of programs for which credit should be given under emission guidelines that include system

- wide demand management EE programs:

1. programs to encourage or provide improved insulation in residential, commercial, and industrial sectors;

2. policies and regulatory programs to encourage, provide, or require upgrades to insulation;

3. loan and grant programs;

4. programs to improve EE of power plants;

a. tax holidays on insulation products; and

b. tax credits or deductions.

Commenter s stated existing tools and data can be utilized by states to ensure such programs meet the EM&V requirements of the Proposed Rule and are effectively enforced.

Commenter s stated EPA should recognize and give credit to home or building labeling programs. Commenter s stated home or building labeling is similar to a motor vehicle's mile

- per

- gallon rating, for examp le, the DOE's Office of Energy Efficiency and Renewable Energy (EERE) has developed " The Home Energy Score " to allow homeowners to compare the energy performance of their homes to other homes nationwide. Commenter s noted that Canada also has a home labeli ng program. Commenter s stated it also provides homeowners with guidance on how to improve their home EE.

Commenter s stated EPA should acknowledge and credit EE gains through retrofits. Commenter s stated EE retrofits offer a cost

- effective means to address greenhouse gas reductions and energy independence. Commenter s stated retrofitting existing buildings provide savings of 10 percent to 20 percent with an average payback slightly over one year. Commenter s stated these projects are low

- risk investment oppor tunities.

Commenter s urged EPA to recognize and give credit for the significant energy savings derived from retrofitting buildings as an EE measure in the final CPP. Commenter s stated programs crediting use of insulation can and should be simply designed a nd easily implemented. Commenter s stated another key aspect of insulation incentive programs is that they are fairly simple to design and implement so that crediting energy and emission reductions resulting from those programs can also be readily established. Commenter s stated EPA should avoid creating154 systems that are both unnecessarily complicated and time

- consuming and that might undermine the utility of these programs. Commenter s stated rather, EPA can look to similar programs in the stationary source and transportation sectors as exam ples of straightforward credit programs that rely on state oversight and reporting to ensure their integrity.

In addition to federal and state programs, c ommenter s urged EPA to recognize that utility and private sector programs also achieve significant ene rgy savings and emission reductions in residential, commercial, and industrial buildings. Commenter s stated such programs should also be given credit in the CPP. Commenter s provided brief descriptions of some example programs that give incentives for insul ation installation. Commenter s stated EPA should allow states maximum flexibility in identifying guidelines and compliance demonstrations. Commenter s stated considering the significant differences among the states relative to fuel diversity and market dif ferences, flexibility is imperative.

Commenter s stated EE, specifically insulation, should be promoted as the first option for compliance. Commenter s stated energy conservation should be preferred over creation of new, untested and uncertain renewable ener gy generation. Commenter s stated EPA should give credit for adoption, enforcement, or upgrades to building energy codes. Commenter s stated EPA specifically invited comments on the role building energy codes might play in achieving an increased annual incr emental savings rate. Commenter s stated a new Stanford Report on EE as a key part of state clean energy programs analyzes and makes specific recommendations on policies that states are using today to encourage EE. Commenters stated t he Report's second of thirteen recommendations is for the adoption and update of EE building codes: "Energy Efficient Building Codes. States should adopt or update energy efficient building codes following an independent analysis of cost

- effectiveness, distributional impacts, a nd other factors. Building energy codes are a relatively straightforward and transparent energy efficiency strategy. Updating codes is likely to be most worthwhile in states with the oldest existing codes."

Commenter s stated they did not take a position on whether the annual incremental savings rate in the Proposed Rule should be increased. Commenter s stated rather that their comments focus on the efficacy of building code adoption, upgrades, and enforcement in delivering the greenhouse gas reductions sough t by EPA in the Proposed Rule. Commenter s stated such savings can be significant. Commenter s stated a building code is a set of rules that specify standards for buildings and non

- building structures. Commenter s stated there are many different types of bui lding codes, but the ones relevant to this discussion address EE. Commenter s recommended the 2012 IECC, which is a model code adopted by many states and municipal governments. Commenter s stated the IECC establishes minimum design and construction requireme nts for EE.

Commenter s stated EPA should give credit in the final CPP where states and municipalities adopt the 2012 IECC or some other code of similar rigor and integrity. Commenter s stated most states have existing building energy codes, but they are fre quently outdated or in need of improvement. Commenter s stated therefore, EPA should also give credit where states upgrade or improve and enforce code requirements to reflect the most recent model code. Commenter s stated of course, building codes are really only effective when they are consistently and routinely enforced, so credits may be contingent on proof of rigorous state enforcement. Commenter s stated similar to adoption and upgrades, enforcement of the strongest building codes should be recognized by EPA as deserving of credit in the CPP. Commenter s stated building codes are155 important because modeling from various sources shows energy savings for residential, commercial, and industrial buildings. Commenter s stated in fact, they are the most effective and comprehensive tool for promoting energy savings. In that EPA is eager to have EM&V data for such savings, Commenter s stated building code adoption can deliver that crucial data and it is
cost

- effective and immediately available technology.

Commenter s stated Chicago has launched residential and building retrofit programs that have led to proven energy use reduction and cost savings. Commenter s stated for residential buildings, Chicago has facilitated partnerships between residents, non

- profits, and ut ility

- run EE upgrades, retrofit contractors, and equipment rebates. Commenter s stated using data obtained from the utilities, Chicago targeted its outreach to areas of the city with relatively high

- energy use and low

- to

- moderate income levels. Commenter s s tated over 120,000 homes have received free upgrades and 15,100 homes have been fully retrofitted, connecting Chicagoans to $8.5 million in energy bill savings due, in part, to a 15 percent reduction in energy use in retrofitted homes. Commenter s stated Ch icago has leveraged data from this program to launch an Energy Map project to help residents more easily understand their energy use and how it compares to other residents.

Commenter s stated Chicago implemented a Commercial Buildings Initiative (CBI), a v oluntary leadership program for large buildings that commit to increase EE by 20 percent over five years. Commenter s stated to date, 48 buildings (representing 37 million square feet of space) have joined the CBI including offices, hotels, multi

- family res idential buildings, universities, and cultural institutions, and to date, the CBI has connected Chicago's commercial buildings with $2.5 million in energy bill savings due to a 7 percent reduction in energy usage. Commenter s stated Chicago has helped CBI b uildings by offering faster permit timeframes for upgrade work and the program was featured in a best practice report issued recently by the Natural Resources Defense Council.

Commenter s stated that for municipal buildings, Retrofit 1 is a self

- funding pr ogram that reduces utility and operating costs for buildings owned by the city. Commenter s stated over 60 municipal buildings are being retrofit, including libraries, police stations, community centers, and unique facilities such as City Hall and the 911 C enter. Commenter s stated The Chicago Infrastructure Trust, on behalf of the city's Department of Fleet and Facility Managements, has secured $12.8 million in off

- book, off

- credit financing for the 60 buildings that are part of Retrofit 1. Commenter s stated that upon completion, Retrofit 1 is projected to result in $1.4 million in energy bill savings due to an 18 percent reduction in energy use.

Commenter s urged EPA to recognize that state and national Codes and Standards (C& S) are critical to achieving electricity savings across a state. Commenter s stated that in California, C&S account for the majority of in

- state annual energy savings. Commenter s stated California's ongoing efforts are aimed at achieving net zero

- energy at all new buildings in the timeframe of the proposed rule as well as targeting existing buildings. Commenter s stated thus, it is essential that the savings attributable to C&S are equitably accounted for towards California's EE savings for compliance; other wise, a 1.5 percent goal as proposed in the Best System of Emission Reduction would not be realistic.156 Commenter s commended EPA for looking at the experience of leading states, in particular California, which has a long history of adopting and enforcing building energy codes that have led the nation, and have contributed significantly to the development of recent ver sions of the IECC, as well as to parts of the I G CC. Commenter s that as EPA points out, the application and implementation of best practices takes time, and states like California have been engaged in requiring buildings to meet strict building energy codes for many years. While the discussion in the preamble suggests a distinction between state "energy efficiency programs" and implementation of building energy codes, Commenter s stated it is quite clear that the reduction in energy use in California is to a very large extent the result of adoption and enforcement of building energy codes. Commenter s stated they would say that a key, and very crucial element of the California EE program has been the advanced, and highly efficient energy codes, that have been c onsistently adopted, enforced, and upgraded on a regular basis in that state.

While some EE programs are higher profile, and attract more attention than building energy codes, c ommenter s stated the fact remains that to achieve a really significant reductio n in electricity end use, it is necessary to reduce usage across the board, in all homes, offices and other commercial structures. Commenter s stated the huge use of energy for heating, cooling and lighting buildings means that reducing energy for those purposes in ALL new buildings by a significant percentage, such as the 30 percent reduction in average energy use estimated by DOE in buildings constructed to meet the 2012 IECC, over buildings built to meet the 2006 IECC, will result in a significant decreas e in energy end

- use.

Commenter s stated they see several reasons to allow states to count end

- use energy savings achieved through adoption of statewide building energy codes to be used to achieve part of the state plan for end

- use energy reduction. Commente r s stated these reasons go to the heart of the EPA rationale for the Clean Power Regulation, and strongly support the inclusion of building energy codes in state plans:

• Reductions in energy use attributed to building codes are measurable. New tools
to accu rately measure the difference between existing buildings and new buildings meeting current energy codes continue to be developed and implemented in the field.

• Reductions in energy use attributed to building energy code adoption and enforcement are scalable and predictable, based on known demographic and construction trend data.

• Reductions in energy use attributed to energy codes are permanent, and continue to result in lower end

- use for the life of the building, often 100 years or more.

• Reductions in energy use for new buildings regulated by building codes have an indirect market impact on existing buildings, influencing owners of both residential and commercial to retrofit those building to be competitive in the market place in competition with newly constr ucted, energy

- efficient buildings.

• Once adopted, and integrated into construction practices, building energy codes

are non

- reversible. They are almost never modified to result in less efficient157 buildings. At ICC, we know of no jurisdiction that having adop ted the IECC has later adopted a less stringent version of the code. The fact that building energy codes are adopted by, and supported by, policymakers of all political backgrounds and philosophies means they are unlikely to be subject to swings in public sentiment or political changes.

Finally, commenters stated, there is already a strong and sustainable infrastructure in place to support the adoption, implementation and enforcement of building energy codes across the nation in every state, and especially in areas where over 90 percent of new construction occurs. Commenters stated t he infrastructure comprises systems for publishing and distributing the model IECC. Commenters stated t he system provides interpretations and guidance on code provisions, and tra ining and certification testing on current and each new version of the IECC. Commenters stated a ll of these are provided nationwide by ICC, and there are various training and guidance programs provided by other public and private sector organizations.

For all the above reasons, c ommenter s suggested that EPA include building energy codes as an acceptable element of state Clean Energy plans, and specifically include the 2012 or 2105 IECC as an acceptable element of Building Block 4.

Commenter s stated adopt ion of improved building codes and increased compliance with codes could add between an additional 0.87 to 2.5 percent per year in 2030. Commenter s stated buildings account for 40 percent of US primary energy use, 70 percent of electricity use, and 39
per cent of carbon dioxide emissions. Commenter s stated increasing EE in buildings represents a significant opportunity to reduce emissions from the electricity sector, and building codes have proven to be one of the most effective policy tools for increasing EE in new construction and major renovations, thereby reducing emissions and resulting in cost

- effective energy savings for consumers. Commenter s stated that utilities, program administrators, and EGUs can affect the energy savings achieved from buildings codes, including affecting the stringency of codes during code development, influencing the code adoption process, and ensuring that adopted codes are complied with. Commenter s stated including updated code adoption and future code improvements by state o r local governments will lead to significant additional savings and should also be credited in state plans.

Commenter s stated the EE in affordable multi

- family housing can provide significant savings and recommended savings from affordable multi

- family hou sing programs should be credited in State plans. Commenter s stated 18 percent of American households live in multi

- family buildings and affordable multi

- family sector is a critical untapped resource for achieving widespread energy demand reductions, emiss ions reductions, and improving quality of life for residents. Commenter s cited a report that multi

- family house could become 28.6 percent more energy efficient by 2020, saving 51,000 GW of electricity, 2,800 million therms of natural gas, which equates to $9.2 billion in energy costs. Commenter s cited a study that estimated capital costs for EE opportunities in low

- income residential buildings is approximately $46 billion and would saving $80 billion (with $16 billion of this savings for multi

- family buil dings). Commenter s noted that multi

- family housing is older (85 percent built before 1990) with less efficient heating, cooling, plumbing, and lighting systems that could save 30 to 75 percent from EE improvements. Commenter s stated that multi

- family housing makes it amenable to energy retrofits because it is inherently more energy efficient than single

- family housing due to size per158 unit, exterior exposure, and other structural differences. Commenter s stated that 85 percent of multi

- family households are renters with average annual income ($31,000) that is half of homeowners ($61,000), and renters typically pay a higher percentage of their income for energy (energy costs for renters rose 22.7 percent from 2001 to 2009 while r ent rose 7.6 percent). Commenter s stated efficiency gains from multifamily retrofits have the concurrent benefit of relieving low

- and middle

- income families of some of their financial strain and uncertainty. Commenter s noted that only a fraction of the p otential energy savings in the multifamily sector has been realized, despite the economies of scale not available in single

- family homes. Commenter s stated multi

- family retrofits are easier to coordinate for multiple units that are contiguous, and a singl e intervention (for example, HVAC replacement) can improve efficiency in every unit in the building. Commenter s indicated that EPA underestimates the potential for EE by assuming that states will only be able to ramp up EE programs extremely slowly. Comm enter s stated that by investing more resources into the multi

- family sector, States can scale up EE programs much more rapidly than previously imagined.

Commenter s stated newer housing stock limits efficiency. Commenter s stated Nevada needs peaking powe r during the summer months, particularly in the Las Vegas metropolitan area. Commenter s stated the Agencies contend that the capacity to add more EE is limited because Nevada's housing stock is relatively new and therefore already efficient. On the contrar y,

c ommenter s stated there is enormous opportunity to improve both residential and commercial building stock, much of which is very inefficient and in need of retrofitting. Commenter s stated the real problem is that current programs are too weak. In places where temperatures hit the 100s for weeks on end, c ommenter s stated great improvements can be made with new HVAC systems, ceiling insulation, vapor barriers, cool roofs and other relatively inexpensive changes. Commenter s stated such programs, particularl y if they were more available and affordable for small businesses and multi

- family dwellings, could make major improvements in Nevada's efficiency and in people's lives. Commenter s stated Nevada needs to commit to such programs. Commenter s stated the avoid ed cost of investing in new gas plants or renewables makes EE one of the most powerful tools for complying with the Clean Power Plan.

Commenter s believed EE building codes should be considered as a compliance option for States. Commenter s indicated mos t States have long recognized the importance of updated energy codes, and the tremendous economic savings for businesses and homeowners in States that have automatic code updates to keep pace with new technologies. Commenter s stated the energy savings achi eved by homeowners and businesses far outweigh the cost of moving to updated requirements, which is generally assumed by the buyer. Commenter s stated the U.S. Department of Energy estimates that "building energy codes will produce a financial benefit to ow ners of nearly $2 billion annually by 2015, rising to over $15 billion annually by 2030." Commenter s stated these savings reduce the energy demand of public buildings, which is the largest energy consumption sector in the United States. Commenter s stated m odern homes and public buildings are more energy efficient than ever before largely due to the effectiveness of and consistent upgrades to energy codes.

Commenter s stated EPA should expressly include above

- code building certification and other third par ty provided efficiency projects as allowable measures for state plans, with appropriate conditions. Commenter s stated as whole

- building efficiency approaches, above

- code certification such as LEED and EPA's own ENERGY STAR have an important role in reduci ng159 the 70 percent of retail electricity that is used by buildings. Commenter s stated another important type of third party efficiency is energy performance service contracts. Commenter s stated these above

- code certifications and performance contracts have the advantage of leveraging private capital investment, as well as reaching a broader spectrum of buildings. Commenter s stated utilities in a number of states are already using LEED and ENERGY STAR as approaches to meet their efficiency obligations.

Commen ter s stated EPA appropriately proposes to allow credit for energy savings resulting from adoption of state and local building codes and non

- preempted appliance standards. Commenter s stated the Northwest has a long history of aggressive building energy c odes and appliance standards starting with mandates for Model Conservation Standards that are called for in the Northwest Power Act. Commenter s stated for the last 18 years, they have worked directly with the four states to advance these codes and standard s and to track and evaluate savings from improvements in these codes and standards compared to national baselines. Commenter s stated they ha ve worked to establish measurements of compliance in all four states to ensure that these advances in codes and stan dards actually deliver the promised savings. Commenter s stated as these codes and standards are adopted, they are incorporated into base load forecasts for utility integrated resource planning across the four

- state area, directly reducing the planning
requ irements for new generating sources. Commenter s urged EPA to allow states to claim full energy savings credit for energy savings resulting from efforts to advance state

- adopted codes and standards.

Commenter s stated EPA should recognize building codes and EE retrofits as compliance options. Commenter s stated that according to the EIA, the U.S. building sector consumes approximately 40 percent of total U.S. energy resources and 70 percent of the electricity pr oduced in the country, just for building operation. Commenter s stated it does not include the energy used to manufacture and transport building materials or for construction work. Commenter s stated the energy we use for lighting, heating and cooling our b uildings, as well as powering residential appliances, commercial building equipment and a growing array of electronic devices accounts for nearly 40 percent of U.S. greenhouse gas emissions. Commenter s stated EPA knows this and has developed programs and t ools for building owners and developers to reduce the negative impact of buildings on public health and the environment. Commenter s stated unfortunately, the energy utilities that would be regulated by the proposed Clean Power Plan are not as knowledgeable about the vast energy

- saving potential of buildings as they could be. Reducing demand has not been their primary mission. Commenter s believed this proposed rule is a historic opportunity to educate state agencies, utilities and consumers about the potenti al role of low/zero energy, high performance buildings in meeting the requirements of the proposed rule, while fostering local economic development and improving building comfort.

Commenter s stated much of the energy consumed by buildings is wasted. Poor d esign and construction as well as deterioration over time can create gaps in the building envelope (literally, holes in the wall or insulation), which causes heating/cooling equipment to work overtime without even providing the desired level of comfort. Co mmenter s stated older appliances also use too much energy. Commenter s stated the good news is that the buildings industry has solutions. Commenter s stated they just need to be deployed much more widely. Commenter s grouped these solutions into two basic cat egories:160 • Utility and non

- utility EE improvement programs. These include:

− Industry

- developed model building energy codes and federal appliance efficiency standards. The easiest, fastest, and least expensive strategy states and local jurisdictions can take t o reduce building energy use is adopting and enforcing model building codes. Codes represent a broad industry consensus for a minimum level of efficiency and reference both industry and government efficiency standards. By adopting and enforcing building co des, states can ensure a competitive market for efficient buildings and products. A spokesman for the We Mean Business Coalition noted on the group's website, "We're fine with well

- designed regulation, the sort of thing that the EPA is now proposing in the U.S. Well

- designed regulation creates a level of certainty. You can plan against it and invest against it." EESI urges EPA to include building codes as a compliance option. EESI believes this will provide the incentive states need to adopt the most curren t model codes and for communities to enforce these codes. It is a minimal, cost

- effective option that has the potential to achieve significant reductions in energy demand, because codes apply to all new construction.

− Retrofit programs. Of course, new cons truction is only one or two percent of the entire U.S. building stock. To make a dent in carbon pollution, we must make existing buildings more energy efficient. States and cities have numerous programs underway to do this, often using tools and resources from EPA, DOE and national organizations with expertise in EE. Some utilities have programs as well, such as rebates to residential, commercial and industrial building owners who retrofit their properties for improved EE. In addition, utilities, rural elec tric co

- ops and communities are offering innovative ways for consumers to pay for efficiency upgrades, such as "on

bill" financing and property

- assessed clean energy bonds known as PACE bonds. Absent regulations or other mechanisms to limit carbon emission s, utility efficiency programs and state policies such as Energy Efficiency Resource Standards (EERS) have served an important role. But more can be done. For instance, states and utilities could fill a gap that EESI considers a serious hindrance to the us e of some of these private

- sector programs: that of consumer advocate or liaison. EESI urges EPA to promote and facilitate greater use of existing state/utility and private

- sector efficiency programs as a compliance option.

• Ultra energy efficient buildings. EESI is encouraged and excited to see that industry professionals are gaining expertise and experience in best practices for achieving high quality, highly energy

- efficient construction. Even more encouraging, the market i s starting to learn about and adopt methods for ultra

energy efficient new construction and "deep

- energy" retrofits of existing buildings. This has the potential to dramatically reduce building

- energy demand (load) and save owners hundreds or thousands (or hundreds of thousands for large buildings) per year. Indeed, the building sector is a vast, mostly untapped source of energy savings. Investments in very energy

- efficient construction and "deep161 energy" retrofits can achieve buildings that use 50 to 90 per cent less energy than comparable buildings. The Passivhaus building performance standard, for instance, is being used to design a K

- 12 school building in Franklin County, Virginia

-- the first public school designed to the Passivhaus standard. The school wil l eventually add solar panels and deliver more energy than it uses. A German standard that is being adapted to U.S. climates, Passivhaus is performance

- based and results in an extremely airtight, super low energy structure that also provides high levels of comfort and indoor air quality. The builder, Adam Cohen of Structures Design/Build, LLC, told an interviewer that passive design is a "huge opportunity to improve our nation's energy efficiency. Also an opportunity for U.S. manufacturers to develop new pr oducts to serve the emerging Passivhaus market." EESI urges EPA to promote and facilitate greater use of the PassivHaus standard and other similar ultra

- energy efficient standards.

Commenter s stated EPA should take resilience into account. Commenter s indi cated 48 states and the District of Columbia were designated Presidentially

- Declared Disaster Areas between 2011 and 2013, and things will likely only get worse as extreme weather events and flooding become more frequent because of climate change. Commente r s stated resiliency should, therefore, be a goal near and dear to policymakers and citizens throughout the United States. Commenter s stated fortunately, resiliency goes hand

- in

- hand with reducing carbon pollution. Commenter s stated indeed, resilient build ings are, almost by definition, more durable and long

lasting than conventional buildings, which reduces the need for new construction. Commenter s stated an architect at the 2014 Passive House U.S. conference said his firm aims to "future

- proof"
structures : "Buildings should last 100 years, be low

- maintenance, resilient, independent of energy costs, and be nice and healthy inside." Commenter s stated constructing new buildings is very energy and material

- intensive, resulting in substantial carbon emissions. Commenter s stated by reducing the need for new construction, one reduces carbon emissions.

Commenter s stated we can greatly improve the sustainability and resiliency of the built environment with existing technologies; a focused effort on training building professionals, educating consumers and ensuring that standards and policies facilitate, or at least do not hinder, these goals. Commenter s stated there are best practices and standards for more resilient construction such as the Fortified Home standard (w hich the Department of Homeland Security is using for a residential pilot program). Commenter s stated the U.S. Department of Housing and Urban Development (HUD) is also focused on resilience in a national competition for cities it announced recently with i ts partner, Rockefeller Foundation. Commenter s urged EPA to include language in the Clean Power Plan that encourages communities to become more resilient when such actions help lower greenhouse gas emissions.

Commenter s stated the EPA should include EE from adoption and enforcement of building codes and combined heat and power (CHP) as compliance options. Commenter s stated building codes adopted between 1992 and 2012 have resulted in approximately 2 quads in cumulative total energy savings and are expe cted to save more than $40 billion over the lifetime of buildings constructed during this time period. Commenter s stated however, only about one

- quarter of states have adopted the most up

- to

- date codes for residential and commercial buildings, which reduc e building energy use by 20 and 25 percent, respectively, compared with the 2007

- 09 standards, leaving the door open for greater savings by other states.162 Commenter s appreciated the EPA's invitation for comments related to enhanced building energy codes as a way to increase the annual incremental savings as part of the fourth building block. Commenter s believed building energy codes are an essential tool for builders, consumers, and regulators to ensure their homes and buildings are comfortable, affordable, and consume an acceptable level of energy. Commenter s believed the best building energy codes are generated through granting all stakeholders an opportunity to propose provisions and changes in an open, national or international f orum, as is done through the International Code Council (ICC) code development process. Commenter s stated the International Energy Conservation Code (IECC) is a prime example of stakeholders and officials working together to achieve a code that is at the

s ame time achievable, reasonable, effective, and flexible enough to allow for various pathways towards compliance. Commenter s stated these criteria also fit within the EPA's Best System of Emissions Reduction (BSER), which takes into account the cost of ach ieving reductions.

Commenter s stated unlike the ICC code development process, state and local governmental adoption of building energy codes can be unduly influenced by special interests. Commenter s stated further, not all stakeholders may have the resourc es to have their voices heard at each state and local level. Commenter s stated even the ICC code process can be vulnerable to undue influence from specific stakeholders. (Commenter s stated in the past, certain proprietary interests have tried to use build ing codes to manipulate the market and effectively disqualify all insulation technologies save for one specific product. Commenter s stated for example, in 2003 the DOE proposed reforms to make it easier to comply with the IECC. Commenter s stated during the process a particular proprietary interest proposed modifications from the floor to increase R

values from R

- 13 to R

- 15 in several central and southern states and from R

- 19 to R

- 21 in the majority of northern states. Commenter s stated as a result, only a s ingle, narrowly defined type of insulation product would have qualified. Commenter s stated the DOE's own analysis showed that while this change would cost the average homeowner an additional 5600 to the cost of the home, the annual savings on energy costs would be a mere $15 annually. Commenter s stated fortunately, the scheme was ultimately defeated but the precedent had been set.) Commenter s stated however, special interests acting at the state and local level have a greater chance of exacting undue influ ence than at the TCC level. Commenter s stated accordingly, CTMA requests that the EPA not encourage states, through credits or otherwise, to adopt building energy codes with higher EE than in the most recent version of the IECC.

Commenter s believed that bu ilding energy codes must be sensitive to cost concerns and based on good science. Commenter s opposed the use of building energy codes to create competitive advantages for any proprietary interest. Setting aside the issue of building energy codes, Commenter s strongly supported EPA granting deference to state EE programs and policies that allow states to credit EE policies. Commenter s stated it should be noted, however, that CIMA would not support federal mandates for building energy codes for the reasons sta ted above supporting the ICC code adoption process.

Commenter s stated that repeated studies have demonstrated that many opportunities remain for deploying energy efficient housing and equipment that combine environmental benefits with
cost

- savings over time offsetting or exceeding higher up

- front costs. Commenter s stated positive experience with government regulation in the transportation sector requiring an average 54.4 miles per gallon by 2025 provides guidance on how similar action in the building sec tor might work. Commenter s stated these aggressive standards for vehicle efficiency are producing163 substantial benefits for the environment, the economy, and national security. Commenter s stated yet, they have produced no litigation, will effectively pay fo r themselves in lower fuel costs, and allow a wide variety of options in the marketplace. Commenter s stated an emphasis on efficiency in buildings and equipment can produce similar results under the proposed rule under discussion today.

Commenter s stated b ecause of appliance and lighting efficiency standards at the federal level, states should focus their efficiency efforts on building codes and enforcement. Commenter s stated buildings constitute an area where the states, such as Georgia, have expertise and are able to take into the account local climates. Commenter s stated better enforcement of building codes will likely produce substantial benefits, although research on this issue has been sparse. Commenter s stated utility programs in Georgia for the therm al efficiency of buildings are among their more effective offerings.

In addition to programmatic implementation and efficacy concerns associated with Building Block 4, c ommenter s had concerns with regards to building energy code adoption, that EPA highl ights as an option to address demand side management. Commenter s stated EPA indicates that the calculations it uses in determining the contribution to the BSER from Building Block 4 "represents a feasible policy scenario showing the reductions in fossil f uel fired electricity generation resulting from accelerated use of EE policies in all states consistent with a level of performance that has already been achieved or required by policies," without assuming any particular type of demand

- side EE policy. Comm enter s stated however, in enumerating state policies which have demonstrated the potential impact of demand

- side EE on reducing GHG emissions and in providing examples of measures states may consider including as a component of their state plan, EPA provid es detailed description of five specific strategies including building energy codes. Commenter s was particularly concerned with EPA's inclusion of building energy codes as a strategy for achieving demand

- side EE under this proposal. Commenter s stated there are some unique characteristics to the development, adoption, and implementation of building energy codes that go beyond the previously discussed concerns NAHB has with Building Block 4 and the inclusion of EE programs as federally enforceable components of a state plan.

Commenter s stated Federal government has no authority to mandate the adoption or enforcement of a national building code. Commenter s stated the model building energy codes development process is a product of the International Code Council (ICC) and the American Society of Heating, Refrigerating and Air

- Conditioning Engineers (ASHRAE). Commenter s stated these private organizations devel op, publish and maintain the codes (ASHRAE Standard 90.1 (for commercial and multi

- family high

- rise residential buildings) or the latest version of the International Energy Conservation Code (IECC) (for low

- rise residential buildings)), updating them every three years. Commenter s stated following revisions to the code, the U.S. DOE issues a determination as to whether such revisions included in the latest version of the code will improve EE in relation to the previous edition of the code. Commenter s stated DOE then issues a final determination that each State is required to certify that they have reviewed relevant building code provisions and made a determination as to whether it is appropriate for such state to revise its code to meet or exceed the updated edition of the code. Commenter s stated the ultimate adoption and enforcement of the code is undertaken under the authority of state and local governments.164 Commenter s stated further, the federal government, specifically the DOE, has a very precise role in relation to building energy codes. Commenter s stated actions taken by DOE to evaluate and issue determinations concerning the model building energy codes as well as other actions taken during the development process are done so under its authorized role as a technical advisor. Commenter s stated the limited authority given to DOE in the realm of building codes does not allow for the federal government to impose, adopt or enforce a national building code. Commenter s stated the fact that the federal government lacks such authority is a fundamental reason why building codes should not be an allowable component of state programs or incorporated by EPA as an approvable means of meeting the goals of Building Block 4.

Commenter s stated that built into the guidelines provided by EPA for state plans in the rule are requirements that measures included by the state as a means of achieving the required emissions reduction be quantifiable, verifiable, non

- duplicative, permanent, and enforceable with respect to each affecte d entity. Commenter s stated additionally, as drafted, EPA is requiring that a state include as a component of the state plan any measure they are relying on to meet the state emissions reduction performance goals. Taken collectively, if building energy cod es were incorporated into a state's section 111(d) plan as a means of obtaining emission reductions in the state, Commenter s stated these codes would by definition become federally enforceable

measures.

Commenter s opposed the use of building energy codes a s a measure to achieve end use EE in the context of this proposal to reduce CO2 emissions from the power sector. Commenter s urged EPA to ensure that final regulations, should they be issued, treat end use EE as complementary programs and that building code s are not included as an approvable measure. Commenter s stated any action by EPA to do otherwise would not only exceed federal authority, but would co

- opt the traditional control of state and local governments in this policy area by inappropriately applyin g a policy measure that results in increased housing costs but that has a negligible impact on emissions reductions.

Commenter s stated that adoption and enforcement of state or local building energy codes, to contribute additional reductions in electric ity demand beyond those resulting from EE programs, while increasing the incremental savings rate beyond the proposed 1.5 percent, would be burdensome on the state and utility to enforce, track and meet such goals. Commenter s pointed out that Tennessee is a "home rule" state and energy building codes are not enforced unless a city or county opts into compliance with those standards. Commenter s stated that requiring the state(s) to perform M&V on those standards and provide compliance would burden the rate

- and
tax

- payer for that state.

Commenter s stated emission reductions resulting from enforcement of energy efficient building codes that are demonstrated with rigorous EM&V measures should be an acceptable component of a state compliance plan. Commente r s noted that the NWPCC has been studying the impacts of EE policies, including utility and third party EE programs, state building energy codes, and federal appliance standards across their member states, Idaho, Montana, Washington, and Oregon, for more t han three decades. Commenter s stated that for the past decade, EE programs have accounted for more than 75 percent of the cumulative energy savings with building energy codes accounting for the remaining savings.165 Commenter s stated building codes and ap pliance standards are a significant source of long

- term energy savings, and over the last twenty years accounted for over one

- third of all savings in the Northwest. Commenter s stated codes and standards are a more efficient way of ensuring savings

across a whole state, covering areas that may be outside the patchwork of robust utility efficiency programs. Commenter s stated if a state can demonstrate appropriate EM&V, and enforcement of those standards, the savings should be included. Commenter s stated as an example, in 2013 NEEA found that Washington State building code compliance was 96 percent.

Commenter s stated addressing specifically the topic of building energy codes being included as part of state compliance plans, NEEP acknowledges EPA's identifica tion of the challenges of evaluating, measuring and verifying savings from building energy codes. But commenters also point ed out that significant analysis has been done on this topic in recent years, and they firmly believe that energy codes should and mu st be allowed as part of state compliance because of their ability to comprehensively and fairly affect energy savings in states.

Commenter s asked that the EPA consider its rule establishing a system that employs something similar to the US Green Buildi ng Council's LEED of having prerequisites. Commenter s stated EE is, of all of the options set forth in the rule, the easiest, most achievable, and significantly proven method to reduce energy, which directly correlates to carbon reduction. Commenter s sha red that in their region in particular the energy consumption per capita is higher than the national average, per the EIA data that in their region most of the housing stock was built before 1956. Commenter s stated EE standards for homes didn't come onlin e until the mid

- 70s, and, therefore, they see (four utility companies, through the Pennsylvania Utility Commission and the required work for low income usage reduction programs that utilities provide) by published data that is sent out by Pennsylvania Stat e University each year, on average for electric companies, a 14 percent reduction of electric bills in these homes and approximately a 20 percent reduction in gas usage, which obviously helps. Commenter s stated it has a relationship indirectly to electricity usage. Commenter s thought there could be significant reduction on grade pressure simply by focusing on EE.

Commenter s strongly urged the EPA to adopt insulation incentives that are simple and easy to validate, and to quantify the energy savings and pollution reductions achieved through insulation. Commenter s stated these incentives should apply to installation of insula tion on both new and existing structures. Commenter s stated energy savings achieved through insulation is the most cost effective deep reduction strategy available.

Commenter s encouraged the EPA in establishing the best system of emission reduction, BSER, under Section 111(d) to go beyond just recognizing EE, but indeed promote end use EE enhancements, specifically insulation as the most important and cost effective method for states to achieve greenhouse gas emissions at existing power plants.

Commenter s believed that a comprehensive insulation strategy could reduce energy and associated greenhouse gas emissions by 20 to 30 percent. Commenter s stated insulation products save more energy than it takes to manufacture them. Commenter s stated insulation that goes in a home, the amount of energy it took to manufacture that insulation is recovered in about 30 days in the home. Commenter s noted on the 31st day, it's paying back the environment. Commenter s166 stated insulation saves over 600 times more energy than compact fluorescent bulbs, Energy Star appliances, and windows combined on an annual basis.

Commenter s stated this also applies to industry. Commenter s stated EE opportunities in steam systems, for instance, can deliver significant energy savings without incurring substantial implementation costs using publicly available software like the NAIMA 3E software that is available in a public domain on the internet. Commenter s stated thickness computer programs can actually calculate carbon reduction as a resul t of applying insulation.

Commenter s urged the EPA to give credit for adoption, enforcement or upgrades to building energy codes as well. Commenter s stated studies conducted by Harvard, as well as Boston University which is underway to update the Harvard study, demonstrates significant energy savings and pollution reduction through the improvement of energy codes, and buildings account for approximately 40 percent of the greenhouse gas emissions in this country.

Commenter s stated that improving EE performa nce in building is truly low

- hanging fruit. Commenter s stated it i s fundamental. Commenter s stated based on calculations from an authoritative resources, insulation currently in place in US buildings reduces the amount of carbon dioxide emissions by 780 million tons per year. Commenter s stated t hat's equivalent of about 150 coal

- fired power plants, and the electricity use of about 90 million homes a year is saved through insulation.

Commenter s stated that Pennsylvania does not positively view saving e nergy. Commenter s stated in Pennsylvania, energy equals jobs. Commenter s stated Pennsylvanians have good options to lower their carbon footprint, options that would slow climate change, create good jobs, and not negatively impact nearby communities. Com menter s stated Pennsylvania refuses to consider such options. Commenter s stated for example the Uniform Construction Code Review and Advisory Council is tasked with enforcing standards for the protection of life, health, property, and environment for the safety and welfare of the consumer, general public, and owners and occupants of buildings and structures, but has refused to update building codes since 2009. By simply generating and consuming less energy with modern construction codes,

c ommenter s stated Pennsylvania could easily comply with 32 percent CO2 reduction from a 2005 baseline. Commenter s stated from 2005 to 2011, Pennsylvania reduced CO2 emissions by 12 percent without the EPA mandate. Commenter s stated a comprehensive construction code that lo wers EPA's energy requirement would spur innovation and construction and provide good jobs that value energy consumers.

Commenter s stated EPA should include advanced energy codes in the EE building block as an important way to achieve energy savings. Commenter s noted that especially out in California under Title 24 that it's a very important part of the EE program and is mentioned f requently in the AD

- 32 Scoping Report.

Commenter s noted it would be appropriate, if possible, to specifically refer to insulation as a method to achieve EE, especially in buildings because that's where some of the hugest opportunities are.167 Commenter s sugge sted removing any ambiguity and specifically referring to insulation as a method to achieve EE, especially in buildings. Commenter s estimated that all insulation currently in place in homes and building in the U.S. reduces the amount of CO2 emissions by 78 0 million tons per year. Commenter s stated this is the equivalent to over 150 coal fired power plants or the electricity used by over 90 million homes in 1 year.

Commenter s stated the IECC and the ASHRAE 90.1 are updated every three years, and reviewed and adopted by states. Commenter s stated these energy codes have an unparalleled track record in achieving cost effective energy savings and carbon emission reductions. Commenter s stated therefore, while the IECC does not take a position on the regulation of carbon emissions by EPA, if EPA is going to implement the regulations, IECC Commenter s urged EPA to specifically include the adoption of and compliance with energy and resource saving building codes as an allowable component of the state implementation plans.

Commenter s stated energy codes are able to reduce energy use by buildings at a critical moment in their life cycle when they are being designed and built. Commenter s stated most of the EE programs that the states have implemented through their util ity programs and so forth are directed at retrofits of buildings, but energy codes gets at this sector of our buildings, and their EE at that critical moment. Commenter s stated the EE of buildings, which can last from 30 or to 50 years and beyond is set wh en those buildings are built.

Commenter s stated in addition to the energy codes, the Codes now include the International Green Construction Code (IGCC), which is a model codification of green building practices that jurisdictions can adopt and enforce just like their more traditional building codes. Commenter s stated the IGCC can achieve even greater energy and carbon emission savings at the time of construction through, for example, energy and carbon targets for that particular building, siting, land views , on site renewables. Commenter s stated building codes have a track record of more than two decades of effectively reducing energy use and carbon emissions.

Commenter s stated currently, the IECC is used or adopted in 47 states. Commenter s stated in 2013 th e Pacific Northwest National Laboratory, on behalf of your sister agency at DOE, assessed the energy carbon and cost savings from energy codes, retrospectively back to 1992, and forward through 2040. Commenter s stated PNNL predicts that by 2040, energy cod es can yield as much as 48 quads of fuel cycle energy savings and reduce carbon emissions by 3.7 billion metric tons , and added that's a lot. Commenter s stated in addition to saving energy in carbon emissions, the energy codes help Americans save money. C ommenter s stated the DOE estimates that homes built through the 2012 IECC here in Pennsylvania will save an average of $515 per year on their energy costs, $8,630 over the course of a 30 year mortgage. Commenter s stated on a national scale, DOE predicts an additional 185.7 billion dollars in energy cost savings through 2040. Commenter s stated finally, unlike developing new programs, the states and jurisdictions already have the necessary legal, educational and enforcement mechanisms in place to regulate bu ildings through energy codes. Commenter s stated no additional regulatory mechanisms are required in the vast majority of states to realize the energy savings and carbon reduction benefits of up to date codes.

C ommenter s stated that equipment code change s, at either the federal or state levels, which require more efficient appliances within a state, should be counted in Block 4. The commenter s168 stated that building code changes, at either the federal or state levels, which require improved building envelop es within a state, should be counted in Block 4.

Comment 2 0 : Building Codes are Cost

- Effective
Response 2 0 : The EPA agrees that a wide variety of energy efficiency measures can be cost

effective emissions reductions strategies which create multiple benefits, including lower electric bills, positive investments and job creation. Energy efficiency measures also contin ues to offer future emissions reductions opportunities. However the EPA is excluding BB4 from BSER. See section s V.A and V.B of the final rule preamble of the CPP for EPA’s response to this comment. Even though DS

- EE is not used in calculating emission pe rformance rates, the final rule gives states the flexibility to use DS

- EE measures to achieve their emissions performance rates during compliance. See multiple subsections of section VIII of the final rule preamble of the CPP for details on the use of DS

- E E for compliance and see the Demand

- side Energy Efficiency TSD for CPP Final Rule for details on experience with and potential for savings from building codes.

The following are summaries of the specific public comments under this comment:

Commenter s in dicated building energy codes are a cost

- effective and well

- demonstrated policy mechanism. Commenter s stated building energy codes provide cost

- effective energy savings and emission reductions that last for decades in both the residential and commercial s ectors. Commenter s stated the added up

- front investment for new construction building energy codes is repaid in the form of energy savings and reduced energy bills over the life cycle of a building.

Commenter s cited multiple studies that have demonstrate d the cost effectiveness of building energy codes for residential and commercial new construction. Commenter s indicated that PNNL completed studies on 21 states and the District of Columbia and found ASHRAE standard 90.1

- 2010 for commercial buildings to y ield cost

- effective energy savings in each state examined with the average simple payback for added construction costs ranging from 1.2 to 8.1 years. Commenter s cited a set of state

- specific studies completed by the DOE for single

- family and low

- rise mult ifamily buildings that analyzed the cost effectiveness of the 2012 IECC in 43 states and the District of Columbia, and these studies found cost

- effective energy savings in each state as well, with the average simple payback period for added construction co sts ranging from 2.6 to 8.4 years.

Commenter s stated building codes are cost

- effective.

Commenter s stated building energy codes have a long history of cost

- effective energy savings. Commenter s stated energy efficient building codes have been a successful policy tool for reducing energy use in new buildings and major renovations since the 1970s. Commenter s stated building energy codes ensure that minimum levels of energy efficiency are achieved at the time when they are easiest and cheapest to implement: during construction. In addition to reducing national energy use and consequently emissions, building energy codes result in cost

- effective energy bill savings for consumers, increased comfort in buildings, reductions in peak electricity load, and job creation, as energy bill savings are spent on other goods throughout the economy. Commenter s cited a PNNL estimates for the DOE Building Energy Codes Program: (1)169 cumulative savings from 1992 to 201 2 are 4 quadrillion BTU primary energy savings, $44.6 net present value (NPV) energy cost savings, and 300 million metric tons carbon dioxide; and (2) annual Savings in 2012 are 0.5 quads of primary energy savings, $4 billion NPV energy cost savings, and 3 6 MMT CO2. Commenter s cited a 2009 report that found building codes had a detectable effect on per capita electricity consumption, ranging from a reduction of 0.3 to 5 percent, depending on the state, and estimated aggregate national savings of 2.09 to 4. 98 percent for the year 2006. Commenter s stated that while building codes can result in incremental construction costs, the energy savings from codes have been shown to be cost

- effective. Commenter s indicated the BCAP analysis found that the 2009 IECC had an average simple payback to the homeowner of 3.45 years; PNNL study found that ASHRAE Standard 90.1

- 2010
was cost

- effective compared to ASHRAE 90.1

- 2007 for representative building prototypes and climate zones; and DOE found that both the 2009 IECC and th e 2012 IECC were cost

- effective in all climate zones compared the 2006 IECC.

Commenter s stated that in responding to requirements under the American Recovery and Reinvestment Act (ARRA) of 2009, all states have committed to adopting the IECC (and/or ASH RAE 90.1 Standard for Commercial buildings) and have agreed to implement a plan to reach 90% compliance by 2017.

Commenter s stated an analysis of 45 statewide compliance evaluation studies by the Institute for Market Transformation (IMT) found that whil e data on energy code compliance is often limited, those studies that have been conducted indicate compliance rates well

- below 100%, with many states between 25 and 80%, and some as low as 3%. Commenter s stated the analysis indicated that increased complia nce rates have significant returns on investment, with every $1 used to improve compliance yielding $6 in energy savings.

Commenter s stated as indicated both by IMT's analysis and EPA's Technical Support Document (TSD) on State Plan Considerations, the lac k of data and low compliance rates occur for a variety of reasons, including a lack of education, human and financial resources, and health and safety codes often taking precedence over energy code enforcement. Commenter s stated despite these impediments, EPA should not exclude or discourage states from including building energy codes in their emissions reduction plans.

Commenter s stated that demonstrated savings from improved compliance with codes should be included in the BSER along with savings from i mproved codes. Commenter s stated that many states' energy code compliance rates are below 100 percent, leaving additional energy savings from current codes yet to be realized. Commenter s noted States, DOE, and utilities are increasingly focused on impro ving compliance with building energy codes (historically the province of local governments) and on accurately measuring compliance rates.

Commenter s recommended at a minimum, savings achievable through increased compliance be included in the potential emissions reductions used in the BSER for Block 4 and should be credited in state plans. Commenter s stated programs for increased compliance can be implemented by the state, local governments or the utilities, or a wide variety of third party providers or energy service companies without the involvement of government, and credits developed for compliance by EGUs directly.170 Commenter s indicated that most states have adopted recent energy codes, while other states have not adopted energy codes or have energy codes that predate the 2006 IECC or ASHRAE 90.1:2004; some states such as California and Washington develop and adopt their own codes rather than relying on the IECC and ASHRAE 90.1 codes; and the commenter s provided maps showing state adoption.

Commenter s provided potential electricity emissions reduction from increased compliance and adoption of 2012 IECC and ASHRAE 90.1:2010. Commenter s provided two figures that show the history of improvements in ASHRAE 90.1 between 1975 and 2010 and in the IECC betwee n 1975 and 2012; these figures show there has been continual improvement in building energy codes and also recent significant improvements. Commenter s stated that ASHRAE 90.1:2013 and IECC 2015 make further improvements and this indicates a significant pot ential for energy savings. Commenter s cited an IEE study that found adoption of improved building costs could save 123 to 129 TWh annually by 2025; PNNL found projects future savings from BECP of 40.1 quads cumulatively, 2.2 quads annually in 2040, $185.7 billion cumulatively, $5.2 billion annually, 3,178 MMT CO2 cumulatively by 2040, and 185 MMT CO2 annually in 2040; and 2014 ACEEE report found that state adoption of updated building codes could yield annual electricity savings of 155 TWh in 2030, equal t o 4.2 percent of electricity consumption in 2012 (assumed two rounds of code adoption: adoption of ASHRAE 90.1:2010 and 2012 IECC in 2016, and adoption of updated ASHRAE and IECC codes in 2020, which achieve 50 percent savings relative to the 2004 and 200 6 versions of those codes, respectively). Commenter s also cited an IMT analysis for increased code compliance and adoption of ASHRAE 90.1:2010 and 2012 IECC, that included a scenario for improved compliance with the state's existing code to 100 percent, a nd a scenario for improving compliance to 100 percent plus adoption of 2012 IECC and 2010 ASHRAE. Commenter s noted the conservative assumptions in the analysis included a 50 percent baseline compliance rate, no future building code efficiency improvements, and only estimated savings from new construction. Commenter s provided two figures with state by state potential savings from the two scenarios. Commenter s indicated the nationwide annual energy savings for the scenario with improved compliance with existi ng building energy codes alone are predicted to be 19 million MWh in 2010 with cost saving over $1 billion; over 21 million MWh with cost savings over $2.4 billion in 2025; and 33.8 million MWh with cost savings over $3.9 billion. For the scenario with bo th improved compliance and with adoption of ASHRAE 90.1:2020 and 2010 IECC, c ommenter s indicated annual energy savings of 26 million MWh and cost savings over $2.7 billion in 2020; 60.7 million MWh and costs savings over $6.6 billion in 2025; and 97.8 mill ion MWh and cost savings over $10.8 billion. Commenter s provided two figures with state by state potential savings from the two scenarios.

Commenter s indicated that most states have recently adopted more modern building energy codes with the potential to delivery billions in energy savings and accompanying emissions reductions. Commenter s stated that ensuring builders comply with these codes offers the opportunity to realize these savings, and the commenter s are working with the states, U.S. DOE, and a consortium of private sector organizations to increase compliance rates. Commenter s stated that States should receive credit for these savings and emiss ions reductions.171 Comment 2 1 : Building Codes

- Green Buildings

Response 2 1 : EPA is excluding BB4 from BSER. See section s V.A and V.B of the final rule preamble of the CPP for EPA’s response to this comment. EPA agrees that a wide variety of energy effici ency measures can be cost

- effective emissions reductions strategies which create multiple benefits, including broader environmental benefits, lower electric bills, positive investments and job creation. Energy efficiency measures also be cost

- effectively c oupled with measures which deliver additional environmental benefits, such as water savings, improved indoor air quality, and use of sustainable materials. Even though DS

- EE is not used in calculating emission performance rates, the final rule gives states the flexibility to use DS

- EE measures to achieve their emissions performance rates during compliance. See multiple subsections of section VIII of the final rule preamble of the CPP for details on the use of DS

- EE for compliance and see the Demand

- side Ene rgy Efficiency TSD for CPP Final Rule for details on potential of savings from building codes . Such measures must meet the eligibility requirements and provisions related to demand

- side EE and the requirements and criteria related to proper quantification and verification of MWhs from demand

- side EE savings as described in Section VIII of the fina l rule preamble of the CPP.

The following are summaries of the specific public comments under this comment:

Commenter s recommended EPA clarify that green building codes and standards may be included in state emission

- reduction plans. Commenter s stated although a relatively new development, green building codes and standards are poised to be effective tools for reducing emissions. Commenter s stated model green building codes and standards, such as the International Green Construction Code (IgCC), ANSI/AS HRAE/USGBC/IES 189.1 Standard for the Design of High

- Performance, Green Buildings Except Low

- Rise Residential Buildings, and ICC 700 National Green Building Standard expand upon the model building energy codes and standards to address a wider set of issues , including: site sustainability, water use efficiency, energy efficiency, indoor environmental quality, and the building's impact on the atmosphere, materials, and resources. Commenter s stated as a result, green building codes and standards have the poten tial to not only decrease emissions through energy demand reductions, but to also protect and improve the environment and community surrounding green buildings.

Commenter s stated green buildings are cost

- effective and have been shown to have the same

avera ge life

- cycle costs as non

- green buildings, while providing greater benefits. Commenter s stated for instance, in addition to increased demand

- side energy efficiency, green buildings help spur job creation and economic growth. Commenter s stated specifically , a report by Booz Allen Hamilton found that green construction has generated $173 billion in GDP and supported over 2.4 million jobs. Commenter s stated the report estimates that green construction will generate an additional $554 billion and support over 7.9 million jobs.

Comment 2 2 : Federal and State Appliance and Equipment Standards

R esponse 2 2 : The EPA decided not to include DS

- EE in BSER for the final rule. A response is not provided here on how different EE policies and programs relate to BSER as th is comment is172 now outside the scope of the CPP. See section s V.A and V.B of the final rule preamble of the CPP for details. DS

- EE remains generally available for compliance, including different types of EE policies, programs, and projects. See multiple subsections of section VIII of the final rule preamble of the CPP for deta ils on the use of DS

- EE for compliance and the Demand

- side Energy Efficiency TSD for CPP Final Rule for details on savings achieved and potential savings from appliance and equipment standards . Such measures must also meet the eligibility requirements and provisions related to demand

- side EE programs and projects, if applicable, and the requirements and criteria related to proper quantification and verification of MWhs from demand

- side EE savings as described in Section VIII of the final rule preamble of th e CPP.

The following are summaries of the specific public comments under this comment:

C ommenters opposed including Federal appliance and equipment standards.

Commenter s estimated that the savings from existing and pending Federal appliance and equipment standards average about 0.82 percent of electricity sales for each year over the 2020 to 2030 period. Commenter s stated there is some ambiguity regarding how federal app liance and equipment standards will be treated and how states should account for them in their compliance plans and made several recommendations for addressing these standards. Commenter s stated that current federal appliance and equipment standards have a lready been accounted for in the EIA's Annual Energy Outlook Reference Case (AEO), and, therefore, recommended that states using AEO as a method to forecast emissions rates in their compliance plans should not be allowed to claim credit for federal applian ce and equipment standards to avoid double counting of those emissions reductions. Commenter s also recommended that for cases where this does not apply, if states seek credit for emissions reductions that occur due to the adoption, updating, and increased compliance with federal appliance standards, then EPA should provide guidance for states to take credit for carbon reductions for federal appliance and equipment standards and those states should work with EPA regional offices to determine an adjusted BS ER and state goal reflecting this expanded scope of potential reductions. Alternatively, commenter s stated EPA could set the BSER and state goals for all states to reflect the emissions reductions that will occur as a result of federal appliance and equipm ent standards that have already been finalized or that are pending and will take effect before 2030.

Commenter s stated that an important energy efficiency issue is whether or not states that choose the emissions rate approach receive energy savings cred its for savings resulting from federal appliance and equipment efficiency standards. Commenter s recommended that the EPA not allow states to receive such credits. Commenter s noted that ACEEE and the Appliance Standards Awareness Project estimate that the f ederal energy efficiency standards adopted through 2011 saved about 278 TWh per year in 2010, 7.2% of national electricity use that year, and that the savings from these existing standards will increase to 682 TWh per year by 2025, 15.6% of projected natio nal electricity use that year according to the EIA's most recent Annual Energy Outlook. Commenter s also stated that standards enacted since 2011, as well as those that will be set in the coming years, will add to the electricity savings that will be realiz ed in the future.

Commenter s indicated that allowing states to receive credit for these savings will result in very large credits that would help states reach their CO2 emissions rates targets without any action on the part of utilities or states. If state s were allowed to receive such credits, commenter s said the173 savings from federal appliance and equipment standards must be added to the Building Block 4 energy savings assumptions and thus to the CO2 emissions rate targets. However, commenter s noted there is significant uncertainty about the level of energy savings from federal standards state by state; some standards yield differing amounts of unit savings in different states

- for example, due to climatic differences. Commenter s also noted that the market penetration of some products varies considerably across states and indicated these issues are not well studied. Commenter s also pointed out that states have little or no experience estimating the energy savings occurring within their borders due to federal appliance and equipment efficiency standards. Rather than modifying the Building Block 4 assumptions significantly and allowing states to receive credits for energy savings resulting from the standards, and attempt to address

a ll the uncertainties that doing this entails, commenter s stated it is far simpler and more accurate to leave the federal standards out of the Building Block 4 assumptions (as the EPA has done in the proposed rules) and likewise not allow states to receive energy savings credits for energy savings resulting from the federal standards.

C ommenters supported including State appliance and equipment standards that go beyond Federal standards

.
Commenter s recommended State appliance and efficiency standards s hould be credited in state compliance plans and noted this option will further increase the flexibility states have in reaching their targets. Commenter s stated State appliance and efficiency standards provide substantial
cost

- effective savings, have a hi story of success in many states, and new state appliance and efficiency standards should be considered in setting the BSER. Commenter s shared that States can choose to adopt efficiency standard for those products not yet covered under the federal applian ce and efficiency standards, and the Appliance Standards Awareness Project (ASAP) reports that 16 states have adopted state standards since 2001, on products such as battery chargers, TVs, pool pumps, DVD players and vending machines. Commenter s note d tha t California has been a leader in state standards, and just this year the California Energy Commission announced that it will establish new energy efficiency standards for 15 product categories, ranging from water faucets to the light bulbs that go into sm all recessed cans, and consumer electronics like computers, monitors, modems and Wi

- Fi routers; once in full effect, these standards will save an estimated $2 billion in avoided annual electricity bills and avoid the need to build three new large power pla nts.

Commenter s recommended that state

- based appliance efficiency standards

-- standards that are not preempted by the National Appliance Energy Conservation Act (NAECA) of 1987

-- be allowed as part of state compliance plans. Since 2002, commenter s ha ve w orked with states in the region to help them adopt 31 appliance efficiency standards for specific commercial and residential product categories. Commenter s stated that looking forward, the appliance Standards Awareness Project (ASAP) projects energy saving s from a package of eligible state

- based appliance efficiency standards could save substantial; for just the state of Rhode Island, for example, the region's smallest state, enacting this group of new state

- based appliance standards could result in annual CO2 savings by 2025 of some 138,000 metric tons per year; for New York, the region's largest state, annual CO2 savings of 2,798 metric tons per year by 2025 could be realized. Commenter s stated that given this potential, states should be encouraged to adop t new appliance efficiency standards as a strategy for reducing CO2 emissions, and the EPA should include standards as a qualify CPP compliance strategy.174 C ommenters supported including Federal appliance and equipment standards and opposed state standard s.

Commenter s noted that they and their members have a long history of working with policymakers and regulators in establishing mandatory national energy efficiency product standards that are economically justified and technically feasible. Given that the rule allows flexibility to states to find emission savings across all sectors, commenter s ha ve concern s that states could consider new energy conservation standards on products. While commenter s support state programs to incentivize the purchase or energy efficient products, the commenter s believe d mandatory energy conservation standards should remain within the province of federal jurisdiction to avoid a patchwork of conflicting state product requirements, since products are manufactured and sold on a nati onal basis. Commenter s asserted that state

- by

- state product energy conservation standards should not be eligible for compliance with the Clean Power Plan.

Commenter s noted that EPA's proposed rule suggests that states might adopt efficiency regulations for appliances not covered by the federal programs. However, commenter s indicated that very few states have the technical capability to do so. Commenter s pointed out th at the State of Georgia has had great difficulty creating effective efficiency incentives for replacement lighting and equipment under its Integrated Resource Plan, except when the goal is to switch customers off natural gas. Commenter s noted that, even in July of 2014, the utility's web site urges people to switch from incandescent lighting, even though most such lights have been removed from the market under federal law. Commenter s noted that florescent lighting continues to receive more attention that mo re advanced LEDs. According to commenter s , incentives for appliances are generally small and based on EPA's Energy Star program, which has difficulty keeping current with a dynamic appliance industry. Since many states will want to base their appliance eff iciency programs on Energy Star, commenter s said it is important that EPA devote more resources to it more current. Commenter s indicated this might involve greater resources for the program and more creative uses of self

- certification (with appropriate pen alties for misreporting). Commenter s suggested that states looking for low

- cost alternatives could support that federal effort with their representatives in Washington since it will make their jobs easier.

C ommenter s discussed the impact of new applianc e and equipment standards and rebate programs on energy savings.

Commenter s noted DOE has established many new efficiency standards in recent years that will continue to save energy over the 2020 to 2030 compliance period and is now working on more than a dozen new standards that will add substantially to the energy savings during the compliance period. Commenter s and the Appliance Standards Awareness Project (ASAP) have estimated the savings achieved by both final and pending standards. Commenter s prov ided tables documenting savings from finalized federal standards and many of the pending standards that will be achieved over the 2020 to 2030 (only the savings from equipment installed in 2015 and later years are included, e.g., after publication of the draft EPA rule, and additional savings will be realized from products not included in Table A2 such as air compressors, dishwashers, ceiling fans, portable air conditioners, and wine chillers).

Commenter s noted that utility

- sponsored EE programs have tr aditionally relied heavily upon lighting programs for the vast majority of their savings (generally, compact fluorescent lamp175 programs for residential customers and T

- 8 lighting retrofit programs for commercial customers). With adoption of new lighting sta ndards from the Energy Independence and Security Act (EISA), commenter s asserted that this broad, inexpensive EE resource will largely fade quickly. Commenter s said that statements made regarding EE achieved "historically," due largely to lighting programs , ignore the impact of EISA lighting standards and other code changes that limit future EE potential. According to commenter s , there is, in fact, no empirical evidence of any future utility

- sponsored EE programs achieving levels even approaching those achi eved through lighting programs of the past.

Commenter s discussed the limited availability, cost, and declining energy savings associated with new, more energy

- efficient appliances and equipment. Commenter s noted that EPA, in its proposed rule, expects m anufacturers to develop more energy

- efficient appliances for consumers including refrigerators, air conditioners, heat pumps, washing machines, and clothes dryers. Commenter s asserted that EPA's proposed guidelines do not take into account that it may take years for more energy

- efficient equipment to come to the market and assumes consumers will readily purchase these types of appliances, particularly in situations where the purchase of more efficient appliances is occurring prior to the end of the useful l ife of the existing appliance. Commenter s also pointed out that, as we have seen with new efficiency technologies that have entered the market, the incremental savings achieved through the technological advancement declines over time from earlier advanceme nts.

C ommenters remarked that the adoption of energy efficient standards for appliances and more stringent building codes will limit the potential savings of energy efficiency measures. Commenter s explained that this statement is true whether a progr am determines savings from replacing older, existing appliances with new ones, or calculating the incremental savings from purchasing a high

- efficiency product, as compared to a baseline standard product that meets the most recent Federal efficiency standa rds or state/local building codes. As an example,
commenter s explained that standards for rooftop air conditioners recently proposed by DOE will reduce energy consumption by 30 percent. Commenter s explained that this standard will significantly reduce baseline energy consumption, making utility

- administered energy efficiency achievements in this segment more difficult and costly. Commenter s provided several similar examples, including: replacing an old refrigerator with an Energy Star model, improvements in lighting standards that resulted from the Energy Policy Act of 1992, energy efficiency standards for centrifugal chillers, efficiency standards for refrigerators and freezers, standards for di shwashers and clothes washing machines, and more stringent commercial building codes. Commenter s also provided a list of 18 residential electric appliance efficiency standards that have increased or will increase by 2016. Commenter s added that customers who benefit from the more stringent codes and standards would be less receptive to investing in more efficient equipment, as this equipment would come at a premium, but provide only marginally higher energy efficiency savings.

Commenter s noted that the ir cooperative has over 380,000 residential consumers and processed 888 residential HVAC rebates in 2013 totaling over $500,000, representing a savings of over 1,847,000 kWhs (1,847 MWhs). Despite their cooperative's efforts on this matter, commenter s stat ed these savings came from a participation rate of only 0.2 percent of its total number of residential consumers and produced energy usage reductions of only 0.02 percent. Commenter s further noted that, because many of the rebates processed came from multi ple units within a176 single home, 0.2 percent participation may even be overstated. Based on projections from their member systems, the commenter s ' cooperative is budgeting over $780,000 in 2015 for approximately 1,180 rebates. According to commenter s , EPA's assumption that single

- year DSEE rates in two or three states shows such programs have been "adequately demonstrated" is directly contradicted by this experience.

Commenter s noted that their cooperative implemented a water heater demand

- side program, H20 Plus, in 2007; though not technically an energy efficiency program, this program allows them to remotely control usage during peak hours to minimize demand by adding load control devices to water heaters. Although this does not result in any overall energy reduction, commenter s indicated it allows their cooperative to prevent as much energy usage during peak times when energy is the most expensive to generate, and it is illustrative of the effectiveness and penetration of energy efficiency programs in gener al. Despite its implementation on approximately 13,000 water heaters, commenter s indicated this constitutes only about 3 percent of their cooperative's total residential consumers in the seven years of the program's existence.

Commenter s noted that the growing market share of ENERGY STAR appliances limits a utility's ability to pursue utility energy efficiency incentives for those appliances. Commenter s stated that d emonstration of increased market share of energy efficient technologies should be counted towards a state's energy efficiency goal.

Commenter s discussed the use of appliance rebate programs to incentivize the early replacement of appliances. Commenter s stated that expanded appliance ER programs offer a significant opportunity for meeting se ction 111(d) emission reduction goals by removing hundreds of thousands of comparatively inefficient refrigerators and other appliances from the grid before they would otherwise be taken out of service. According to commenter s , progressive strengthening of DOE standards and EPA ENERGY STAR specifications, which the industry has addressed with major product improvements, has resulted in a dramatic step

- by

- step improvement in appliance energy efficiency since 1990. Commenter s illustrated this improvement in a graph that they provided in their comments.

Summarizing the information in the graph, commenter s noted that refrigerators dating from the 1990s use twice as much energy as 2013 products, and products meeting 2014 DOE standards, which recently took effect, will provide even more energy savings (an estimated 25 percent) compared to units produced in 2013. Because refrigerators have a long useful life and retain value for consumers, commenter s said many less efficient units remain in use that do not meet the latest standards and consume significantly more energy than the newest models. Commenter s also noted that less efficient units that are replaced often remain on the grid because they are kept as backup (or "basement") refrigerators, given away or refurbish ed and frequently resold through the secondary market.

With 147 million refrigerators expected to be on the grid in 2016, commenter s asserted that replacing a significant number of units with the latest models and removing these old units from the grid wil l yield immediate large

- scale energy savings and GHG reductions.

Commenter s noted that EPA's section 111(d) proposal and support documents highlight the benefits of " targeted rebates for high

- efficiency appliances " and underscore that " subsidies for177 the pu rchase of energy

- efficient appliances " can drive demand reduction by " incentivizing investment in cost

- effective efficiency improvements . . .”

Commenter s said there is strong evidence that well

- publicized rebate programs are an effective tool for motivat ing consumers to replace older refrigerators that would otherwise remain on the grid. According to commenter s , a noteworthy success at the federal level was implementation of the 2009 American Recovery and Reinvestment Act (ARRA), which provided $300 milli on for rebates to replace older appliances. Commenter s noted that this program, which was managed by DOE and implemented through the states, resulted in 1.7 million rebates, 90 percent of which were for major appliances, including 565,000 rebates for refri gerators. Noting that DOE has lauded the program as a " huge success ," commenter s agreed.

Commenter s said there is also an extensive track record of appliance rebate programs implemented by utilities in response to demand reduction mandates imposed by publ ic service commissions, often pursuant to state EE legislation. According to commenter s , these programs, too, have achieved positive results in removing inefficient refrigerators from the grid and reducing energy consumption. However, commenter s indicated that a careful review of state programs shows that they have not tapped the full potential of rebates to drive energy savings and GHG reductions through the early retirement and recycling of inefficient appliances. Commenter s said the effectiveness of exis ting state programs has been limited by a number of factors:

• Methodologies for calculating and measuring benefits are not consistent across programs and jurisdictions.

• While many programs exist, there are states and regions where appliance rebates

are unav ailable. (By the commenter s ' count, only 50% of U.S. households have access to a refrigerator rebate).

• Most programs have limited consumer recognition because they are not strongly promoted by retailers and manufacturers, likely because of the difficulty i n promoting these programs on a regional basis.

• Some programs impose unnecessary and burdensome EM&V requirements that increase administrative costs and reduce the rebate amounts paid to consumers

.
Commenter s stated that a coherent and coordinated framewor k for rebate programs at the national level could go far to address these limitations.

According to commenter s , a more fundamental problem is the failure of virtually all existing programs to link purchase and disposal rebates. C ommenters ’ survey of state programs found that, with only a handful of exceptions, they are designed to remove older appliances from the grid or incentivize the purchase of a new product but not to do both at the same time. 6 Commenter s indicated this lack of integration has reduced the benefits that existing programs are delivering. As an example, commenter s noted that in the case of purchase

- only rebates, the utility will lack proof that the old refrigerator has been removed from the grid and thus will be unable to take credit for t he energy savings of taking the old refrigerator out of service.178 Commenter s said that such programs often condition availability of a rebate on purchase of an ENERGY STAR product, in which event the energy savings are measured as the difference in
energy c onsumption between the new ENERGY STAR and new regular model

-- a small increment in actual energy use given the stringent requirements of new DOE standards.

Commenter s stated that linking purchase and disposal rebates (i.e., requiring proof both that a

new appliance has been purchased and the old unit has been removed from grid) will enable the utility to take credit for the greater efficiency increment between the new and old unit, significantly raising the energy savings and GHG reductions attributable to the rebate. By simplifying program administration, commenter s indicated it will reduce paperwork and other barriers to PUC approval of rebate programs, lowering overhead and maximizing utility dollars that flow to consumers. Commenter s estimated that this will result in a more favorable benefit/cost ratio, making linked rebate programs significantly more cost

- effective and enhancing their attractiveness to states and utilities compared to other energy efficiency options.

Commenter s said that a 2001 paper by the Natural Resources Defense Council supports this point, noting that, as federal efficiency standards become more stringent,

" it is now difficult to save significant amounts of energy by simply persuading consumers to buy new appliances that are more e fficient than the standards require. " Instead, " taking inefficient older units out of service, recycling them in an environmentally sound manner, and replacing them with efficient new models . . . greatly increases energy savings and cost

- effectiveness, while providing a wide range of environmental benefits. "

Commenter s said this comment by NRDC was true in 2001; now having finished the next round of DOE energy efficiency standards, the commenter s said it is even more true.

Comment 2 3 : Commenters recomm ended that the EPA include EE measures for the industrial
sector.
Response 2 3 : The EPA decided not to include DS

- EE in BSER for the final rule. A response is not provided here on how different EE programs relate to BSER as this comment is now outside the scope of the CPP. See section s V.A and V.B of the final rule preamble of the CPP for details. DS

- EE remains generally available for compliance, including different types of EE programs and projects across end

- use sectors , including industrial facilities

. T he EPA recognizes that a wide variety of EE programs and projects, including many in the industrial sector, have been achieving significant energy savings for years with additional opportunity to achieve energy savings in the future. Such measures must als o meet the eligibility requirements and provisions related to demand

- side EE programs and projects, if applicable, and the requirements and criteria related to proper quantification and verification of MWhs from demand

- side EE savings as described in Secti on VIII of the final rule preamble of the CPP. The Demand

- Side EE TSD provides further information about the potential for cost

- effective savings from all sectors, including industrial facilities.

The following are summaries of the specific public comments under this comment:179 Commenter s stated industrial energy efficiency will increase total energy efficiency delivered under the Clean Power Plan. Commenter s stated industrial EE can be the cornerstone of an effective carbon mitigation strategy and is con sistent with the requirements of Clean Air Act (CAA) section 111(d). Commenter s stated savings associated with IEE can significantly reduce emissions of greenhouse gases and criteria pollutants, and provide states with low

- cost compliance options that can contribute in a meaningful way to compliance with section 111(d) goals. Comment er s stated an effective Clean Power Plan (CPP) should capture the benefits of
cost

- effective, private

- sector delivered IEE.

Commenter s stated the opportunities to achieve significant EE savings are strong given the large energy consumption by America's i ndustry and the estimates of potential energy efficiency gains in this sector. Commenter s stated IEE has been achieved through ratepayer

- funded EE programs (e.g. prescriptive Incentives or custom programs), state technical assistance programs, federal
prog rams such as the Superior Energy Performance program (SEP), and individual corporate energy saving programs. Despite the myriad benefits of reducing energy consumption and energy costs, Commenter s stated there are challenges to capitalizing on these opport unities, which energy management systems (EnMS) such as International Organization for Standardization (ISO) 50001 and programs such as SEP can overcome. Recognition of greenhouse gas (GHG) reductions associated with IEE savings in the CPP will increase th e likelihood that states will be willing and able to utilize IEE as part of their CPP compliance.

Commenter s stated by supporting the inclusion of IEE projects delivered by the private sector to satisfy state compliance requirements under the CPP, EPA coul d significantly accelerate growth in the demand for IEE. Commenter s stated in turn, that would result in more rapid reductions of GHG emissions than would have otherwise occurred without inclusion of IEE in state plans. Commenter s stated greater reliance on the GHG savings delivered through IEE would often delay, or entirely displace, the need for some of the most expensive 111(d) compliance actions by utility generators and reduce the overall costs of implementation. Commenter s stated as an example, utili zing reductions from IEE could enable a utility to avoid expensive upgrades on a coal

- fired power plant that is slated for closure but still meet its GHG reduction targets.

Commenter s stated by taking the actions discussed in this paper, EPA would facilita te an increase in the adoption of both IEE measures and energy management strategies, the benefits of which would be realized under the CPP. Commenter s stated companies having one or more plants that have conformed to ISO 50001 and have been certified to the U.S. DOE SEP program will see the benefit of expanding the program across the enterprise. Commenter s stated this is consistent with the goal of DOE's SEP Enterprise Accelerator initiative, which seeks to increase the uptake of SEP at more than one faci lity per company. Commenter s stated SEP also has a Utility Accelerator initiative that is designed to integrate strategic energy management through SEP as an effective ratepayer program oriented toward industrial customers. Commenter s stated in addition, a s increased benefits accrue to those SEP participants, competitors may seek to level the playing field by participating in the same programs. Commenter s stated as a result, facilities that have not begun to utilize IEE programs or protocols will be motivat ed by the CPP to seek greater energy savings and GHG reductions.

Commenter s provided input on the role of energy management systems in industrial energy efficiency. (The term " energy management systems " or "EnMS" in this paper refers to human,180 programmati c, technical and administrative infrastructure and procedures that enable an organization to manage energy.) Commenter s stated that traditionally, utility or state

- based EE programs have generally promoted discrete EE technologies and supported the instal lation of new, more efficient equipment or processes. Commenter s stated in contrast, EnMS seek to promote operational, organizational, and behavioral changes that result in greater efficiency gains on a continuing basis. Commenter s stated although technolo gy

- based programs typically involve energy assessments to identify specific efficiency opportunities, many barriers prevent
cost

- effective measures from being implemented. Commenter s stated programs implementing energy management systems focus on establish ing the framework and internal management processes for managing energy use, as well as for implementing capital projects.

Commenter s stated that encouraging the use of an EnMS will contribute to sustained and continual improvements in energy performance i n the industrial sector. Commenter s stated energy savings generated by establishing an EnMS, whether it is ISO 50001 energy management standard or similar energy management approaches, are increasingly recognized as an effective means to overcome key mark et barriers to IEE. Commenter s stated energy management can most readily help overcome information barriers, which are more significant for organizations with little energy efficiency experience or capacity.

Commenter s stated good energy management system s integrate energy efficiency into the management structures of organizations. Commenter s stated this facilitates development of an organizational culture that values energy efficiency by helping an organization develop the policies, procedures, and tools necessary to systematically track, analyze, and improve EE. Commenter s stated such energy management systems address senior management commitment, energy team selection, data collection and communication protocols, EE implementation practices, operational controls, and the design and procurement of renovated, modified, and new equipment, systems, processes and facilities. Commenter s stated an EnMS approach based on ISO 50001 seeks to apply to energy use the same culture of continual improvement that has be en successfully used by industrial firms to improve quality and safety practices. Commenter s stated these systems enable companies to better manage energy use, thus creating immediate and lasting energy use reduction through changes in operational practice s, as well creating a favorable environment for adoption of more capital

- intensive EE measures and technologies.

Commenter s believed the negative impacts of the Proposed Rule can be mitigated in part if appropriate steps are taken to ensure that the Pro posed Rule allows energy consumers that create demand

- side and other carbon savings to receive the full benefits of their actions. As high

- energy

user s in a very competitive industry, commenter s shared many of the same concerns that are being raised by the larger business community. However, in an effort to mitigate the rules impacts, commenter s respectfully suggested modifications to allow large energy users with significant demand

- side and other carbon savings efforts to mitigate some of the costs associa ted with the Proposed Rule.

Commenter s stated that, due to the high energy use by industrial customers, many of the end

- use upgrades in efficiency occur without market intervention or utility incentives.

Commenter s stated that efficiency opportunitie s in the industrial sector will help achieve strong efficiency performance in states. Commenter s recommended industrial energy efficiency should181 be credited in state plans. Commenter s stated the industrial sector in the United States likely has potential for energy efficiency in the vicinity of 15 to 20 percent of current electricity usage, primarily from equipment upgrades, and nearly all of this potential is cost

- effective, with attractive payback for investments (by one estimate 4:1 return on investmen t). Commenter s indicated the technical potential in the industrial sector is much larger (35 to 70 percent by some estimates), and while some of that is not cost

- effective now, it will become cost

- effective over time, especially with a management focus on energy efficiency. Savings can be found in a wide range of industrial sectors.

Commenter s stated that industrial EE can be realized with equipment

- based improvements, energy management, and process and operation based initiatives. Commenter s noted that 20 to 70 percent of the energy used is associated with the industrial processes themselves. Commenter s stated that strategic energy management enables the right decision makers to be at the right place at the right time, making industrial proc esses more efficient, improving operations and behaviors, and magnifying equipment

- based energy efficiency improvements on a continual and ongoing basis. Commenter s stated process

- and operations

- based efficiency initiatives, despite recent evidence that t hey save even more than equipment based initiatives, only constitute a minority in the potential studies cited above (suggesting that the actual efficiency potential may indeed be larger).

Commenter s stated that both large and smaller companies face simila r barriers to energy efficiency, including imperfect information about opportunities and available solutions, lack of well

- trained and technically capable staff, reactive rather than strategic decision making, perceived risk of making efficiency investment s, split incentives, constrained access to capital, and lack of corporate or executive support. Commenter s stated smaller companies tend to be more adversely affected by these barriers than larger companies, however, the most energy

efficient companies do take effective steps to overcome these barriers and capture efficiency potential, by establishing corporate buy

- in for and visibility to energy issues, hiring energy managers, providing appropriate incentives including for identifying efficiency opportuni ties, tracking energy use in real

- time, aligning facility equipment replacement schedules with utility incentives, and, in aggregate, institutionalizing principles of strategic energy management (sometimes known as continuous energy improvement). Commente r s provided specific efficiency improvement examples, including installing variable frequency drives, retro

commissioning HVAC systems, improving recycling or air, and implementing waste heat recovery. Commenter s cited multiple companies that use industri al sector EE best practices.

In the context of overcoming barriers, commenter s stated that government agencies, NGOs, and utility

- sponsored programs can provide considerable assistance in helping companies achieve energy savings.

Based on a recent analysis of industrial sectors across the globe, commenter s stated that there appears to be an energy efficiency gap. Commenter s cited a recent comprehensive review of the causes of the efficiency gap, based on a conceptualization and analysis prepared for the United Nations Industrial Development Organization by analysts at universities in the United Kingdom (hereafter UNIDO). Commenter s indicated it is based on a review of over 160 studies of barriers to energy efficiency in industrial enterprises.182 According t o commenter s , it can be argued that the analysis of industrial sectors provides the most compelling evidence that an energy efficiency gap exists, since these are contexts in which the incentive to adopt economically rational technologies should be strong, if not pure, and the knowledge and ability to evaluate alternatives should be greater than society at large. Commenter s also stated that, since energy is a cost of doing business, records and data should be superior to the residential sector, so evaluatio n and calculation should be better. In spite of these factors pointing toward economic rationality, and notwithstanding assumptions of motivation and capability, the commenter s indicated they have found solid empirical evidence that the efficiency gap exis ts.
According to commenter s , the UNIDO analysis identified a school of economic thought that can be closely associated with each of the categories of market barriers and imperfections. Commenter s said the broad categories in the UNIDO analysis match up wel l with the perspectives offered by LBL and RFF with the addition of the category of externalities. Commenter s noted that the UNIDO document offers six broad types of barriers, with two dozen subtypes.

Commenter s noted that utility

- sponsored programs for t he industrial sector tend to require more specificity and customization based on sub

- sectors as compared to programs for residential and commercial sectors. Commenter s stated that well

- designed industrial efficiency programs consistently contribute about o ne

- sixth to one

- third of the overall annual energy savings (dependent on the region's industrial base), and efficiency programs that include effective industrial sector offerings would constitute one of the "best practices" for demand

- side energy efficienc y.

Commenter s cited multiple industrial section EE programs, including:

1. Bonneville Power Administration (BPA), Energy Smart Industrial program offers a variety of options for different industry types and sizes, such as providing an energy expert and sing le point

- of

- contact, encouraging strategic energy management including funding for energy managers, training and support, and support for specific efficiency measures; the industrial sector contributed about 17 percent of BPA's efficiency savings in 2010;

2. Efficiency Vermont handles the energy efficiency efforts of almost all of Vermont's utilities, including prescriptive and custom incentives, technical assistance, energy management training and building energy efficiency awareness; large industrial
compan ies contributed about 16 percent of Efficiency Vermont's total energy savings in 2013;

3. The Energy Trust of Oregon (ETO) provides technical services and cash incentives to help industrial and agricultural businesses of all types and sizes identify and impl ement electric and natural gas energy efficiency projects and practices, including technical expertise, training, funding, and promoting behavioral changes and strategic energy management; the industrial sector contributed 27 to 35 percent of ETO's efficie ncy savings between 2010 and 2013, and the cost for industrial sector energy savings was 2.1183 cents per kilowatt hour in 2013, cheaper than for savings from the residential and commercial sectors; and

4. Wisconsin Focus on Energy (WFE) consolidates all of the state's utility

- related energy efficiency programs into a statewide program and the industrial programs offer assistance to all eligible customers and include prescriptive and custom incentives, feasibility studies, staffing grants, and (for larger custome rs) customized assistance for systematic energy management approaches; the nonresidential programs (servicing commercial, industrial, schools, government, and agricultural customers) contributed just over half of all electricity savings in 2013.

Commenter s stated the opportunity to achieve industrial energy efficiency (IEE) savings is enormous given the large consumption of energy by America's industrial sector, roughly one

third of America's total energy consumption, and the inherent benefit to reduce c osts. Commenter s stated that IEE can be delivered through ratepayer

- funded energy efficiency programs, custom programs, and private

- sector delivered IEE projects. Commenter s stated that despite the myriad benefits of reducing energy consumption and energy costs, there are challenges to capitalizing on these opportunities, which energy management systems such as the International Organization for Standardization's ISO 50001 En ergy Management Systems standard and the Superior Energy Performance Program can overcome.

Commenter s commended EPA for accommodating industrial efficiency in the draft Clean Power Plan. Commenter s noted that EPA provided states a lot of flexibility to define their own carbon reduction pathways. Commenter s w ere glad to see both renewable energy and industrial efficiency components accommodated under the draft plan.

Comment 2 4 : Support Demand Response
Response 2 4 : Multiple commenters requested the EPA to explicitly include demand response in building block 4 of BSER due to the energy savings and reliability benefits of demand response. The EPA decided not to include DS

- EE (building block 4) in BSER for the final rule. A response is not provided here on h ow different forms of demand response relate to BSER as this comment is now outside the scope of the CPP. See section s V.A and V.B of the final rule preamble of the CPP for details. However, DS

- EE does remains generally available for compliance, inclusive of demand response programs. All DS

- EE measures must also meet the requirements and criteria related to proper quantification and verification of MWhs from demand

- side EE savings as described in Section VIII of the final rule preamble of the CPP.

The fol lowing are summaries of the specific public comments under this comment:

Some c ommenters supported use of demand response , while other c ommenter s did not support use of demand response.

Some c ommenter s strongly encouraged the adoption of demand response options that have the potential to provide least

- cost, least

- emission solutions to the growing challenge of providing184 flexible generation necessary for reliability in an electric system with increasing a mounts of variable energy renewable resources.

Commenter s stated that, for the purposes of the proposed rule, energy efficiency measure should include cost

- effective demand response programs. The commenter s explained that demand

response programs are be havioral response programs conducted in tandem with intelligent efficiency approaches, such as smart metering, incentive rate

- making, and provision of early warning of high emissions, high prices, or both. According to the commenter s , a recent study by LB NL found that these types of programs were delivering results at a very respectable and cost

effective $0.025/kWh, which is at the low end for all demand

- side programs and much lower than the cost of meeting peak demand through peaking power plants.

Commen ter s noted that the rule should allow the use of demand response programs as a strategy for meeting emission reduction targets. According to commenter s , demand response programs such as dynamic pricing align with Building Block 4 of the rule and should be allowed as a means of compliance. Commenter s noted that through market mechanisms that reduce electricity consumption and shift load away from peak demand times, demand response programs can reduce the need for new power plants, while eliminating carbon emissions.

According to commenter s , demand response programs, which provide financial incentives for reducing electricity consumption during peak electric demand hours, have been shown to increase energy efficient behavior, reduce overall household energy use, and shift load away from peak demand times.

According to commenter s , many types of demand response programs are currently implemented by electric utilities. For example, commenter s noted that " dynamic pricing " programs set customers' electricity pric e based on actual market prices at the time electricity is consumed. Commenter s noted that unlike the traditional " flatrate pricing " approach, customers are informed of changes in the electricity prices and may choose to reduce electricity consumption at t imes when higher demand results in a higher price.

According to commenter s , a 2014 study found substantial environmental benefits from Illinois' residential dynamic pricing programs: During summer peak load hours, participants shifted or reduced their peak load by 0.5 kW per participant

. Commenter s noted that participants reduced electricity use by 500 kWh per participant per year

.
Commenter s noted that electricity reductions were equivalent to preventing 1,006 pounds of Carbon equivalent greenhouse gases per participant per year

. According to commenter s , successful dynamic pricing programs provide energy efficiency education and individualize d energy use data. Commenter s noted that participants in Illinois' dynamic pricing programs receive a customized analysis comparing their utility bills to the flat rate, informational workshops, program newsletters, and webinars. According to commenter s , t hese tools have the potential to encourage participants to consider enrolling in other energy efficiency and demand response programs. For example, commenter s noted that 33 percent of participants in one dynamic pricing program also enrolled in the air con ditioning cycling demand185 response program, as compared to just 1.8 percent of the utility's customers who were not participating in a demand response program.

Commenter s noted that there is also tremendous potential for demand

- response to address

renewa ble energy's intermittency and more. While probably not quite ready for prime

- time as a building block of its own, commenter s noted that Advanced Two Way Metering (aka Advanced Metering Infrastructure

- AMI, or Smart Meters) provides the opportunity for ut ilities to send real time pricing signals, and develop voluntary tariffs which, when sending the appropriate rate signal, can help couple demand with intermittent resource availability to a much greater degree than today. Commenter s noted the potential to achieve another 10

- 20% reduction in emissions from these mechanisms by better coupling intermittent renewable resources with loads.

Commenters urged EPA to recognize demand response, and commenter s noted especially when it is evaluating opportunities for compliance options such as energy storage.

Commenter s stated demand response can be a key facilitator of emissions reductions, for example, demand response can help integrate renewable energy resources and facilitate with load

- shifting, which can increase cleaner generation. Commenter s stated that in a more limited set of circumstances, demand response can reduce emissions through curtailment, similar to energy efficiency activities. Commente r s indicated that States should be made aware of demand response in which EPA discusses energy storage.

Commenter s stated demand response is demonstrably " technical feasible " based on its use today; FERC's recent data show there were over 28,000 MW of d emand response participating in wholesale markets that cover the majority of the country in 2012, equaling 6 percent of total peak demand, and it reliably delivers over 90 percent of expected capacity. Commenter s stated demand response's role as an ancill ary resource will become increasingly valuable as more renewable generation comes online, and demand response becomes a means of balancing variable supply. Commenter s provided an example where an Alcoa aluminum smelter in Indiana consistently provides nea rly 10 percent of the spinning reserves used by the Mid

- Continent Independent System Operator (MISO). Commenter s stated that while demand response has become a relied

- upon and widely

- integrated resource, its potential remains largely untapped; the 2009 FER C National Assessment of Demand Response Potential reported that under an

" Expanded Business as Usual " Scenario, there will be 82 GW of peak demand reduction potential by 2019, and under the " Achievable " Scenario, there would be 138 GW of reduction.

Commen ter s stated demand response reduces emissions the following ways: (1) directly through load reductions during peak periods (0.05 to 0.35 percent); (2) directly by providing ancillary services otherwise supplied by fossil

- fueled generation (0.3 to 0.8 perce nt); and (3) indirectly, by facilitating increased penetration of renewable resources and the displacement of generation from older, inefficient sources (approximately 1 percent). Commenter s stated that under
emergency

- based programs, instead of dispatchin g inefficiency units to balance supply with demand, grid operators and utilities can dispatch demand response and reduce demand by hundreds or thousands of MWs at a time. Commenter s noted an example during a September 2013 dispatch, where demand response reduced reliance on fossil

- fueled units by nearly 6,000 MW across PJM, which " represents over 1.1 million electricity customers reducing load as a wholesale market resource ". Commenter s also noted that when electricity demand is high,186 transmission and distribution equipment tends to be less efficient, resulting in greater overall system losses. Commenter s indicated that Navigant estimated that direct emissions savings from load curtailm ents during demand response dispatches range from 0.05 to 0.35 percent of overall emissions even after accounting for onsite backup generation. Commenter s stated demand response can directly reduce system CO2 emissions by 0.3 to 0.8 percent from existing EGUs by providing " spinning reserves ," i.e., when generators are generating electricity in an amount that is less than their full capability so they can ramp up quickly as grid operators call on them, and when generators are running at these lower capacity factors, they are also less efficient and have higher emission rates. Commenter s stated demand response can serve the same function by quickly ramping down demand instead of ramping up generation, given that demand response is in many cases capable of re ducing load in 30 minutes or less. Commenter s indicated that Navigant noted that plants run less efficiently when turned down and thus emit more CO2. Commenter s stated DR

- provided ancillary services can reduce CO2 emissions due to more efficient dispatch of generation units. Commenter s stated demand response can have a large indirect impact on emissions in the following ways: (1) facilitating the use of renewable resources to maximize their emissions impact, and (2) contributing to the retirement of old er, inefficient generating units and replacing them with demand resources. Commenter s stated that during periods of low electric load and high renewable output, demand response can reduce emissions by as much as 10 percent, noted that Navigant indicated th ere may be situations where renewables need to be curtailed such that sufficient fossil fuel generation is available to provide ancillary services, and in these circumstances, DR can instead provide the ancillary services, thereby preventing the curtailmen t of renewable resource. Commenter s noted an example for the Bonneville Power Administration (BPA) that has demonstrated that fast

- acting demand response can also offset fluctuations both up and down in wind power output, where BPA controls were connected to half a dozen frozen food warehouses and the chillers were able to increase operation when wind power suddenly increased, and the chillers could be shut off in response to a sudden decrease in wind generation. Commenter s stated that as the penetration o f renewable generation increases, reserve requirements will likely increase; demand response can be deployed far more cost

- effectively than other resources to provide reserves, rendering the economics of renewables more attractive.

Commenter s stated demand response is contributing to the retirement of older, inefficient generating capacity and replacing it with demand resources. Commenter s stated PJM estimated that demand response and energy efficiency reduced capacity costs in PJM by $11.8 billion. Comme nter s noted that while the retirement of older generating units in PJM can be attributed to a host of factors, the steep reduction in capacity market revenue is a key contributor, i.e., the reduced capacity market revenues make it less economic for older g enerating units that rely heavily on capacity market revenue to stay in operation. Commenter s cited the Navigant study: DR is one of the factors that can lead to lower capacity factors for inefficient fossil fuel units and thus lead to their retirement. C ommenter s noted that PJM noted this trend in a recent transmission expansion plan. Commenter s stated the CO2 emission reductions from one inefficient fossil fuel retirement can be significant, and noted that PJM calculates that the removal of CO2 emissions from coal units that have announced their retirement reduced overall emissions from units covered by the CPP by 12 percent, or from 442 million short tons to 392 million short tons, using 2012 emissions, and these emission reductions in PJM play a major r ole in helping states meet their proposed interim (2020

- 2029) goals under the CPP.187 Commenter s stated demand response can be deployed in an extremely cost

- effective manner and has proven to reduce overall energy prices for consumers as it reduces emissions. Commenter s referred to an analysis that found that a demand response resource could be "built" for less than $14,000/MW

- year, a very low cost relative to other technologies. Commenter s stated demand response also moderates capacity and energy prices for the entire grid. Commenter s stated that instead of incurring the cost of billions of dollars for new capacity construction, demand response saved PJM customers $11.8 billion, and noted that during just one record

- breaking week of electricity usage in 2006 , demand response saved PJM customers $650 million in energy costs in exchange for only $5 million in payments. Commenter s stated that if integrated into state compliance plans, demand response will help reduce compliance costs.

Commenter s stated Build ing Block 4 should explicitly incorporate all proven and useful demand

side emissions reduction strategies. Commenter s stated demand response and load management are proven, low cost tools that reduce the need for dispatch of inefficient EGUs and facilitat e the effective use of renewable generation. Commenter s stated demand response and load management should be explicitly included in Building Block 4's definition.

Commenter s stated EPA should clarify in the final rule that demand response is included in the building blocks for reduction of carbon emissions. Commenter s stated EPA has proposed a suite of four strategies (the "Building Blocks") for states to use in meeting the requirements for carbon emissions reductions for each state set forth in EPA's P roposed Rule. In the event that EPA's regulation of carbon emissions from fossil

- fueled EGUs proceeds, c ommenter s fully supported EPA's approach of a variety of methods to reduce carbon emissions from these power plants.

Commenter s stated the first three Building Blocks proposed by EPA are generation

- centric approaches, including heat rate improvements, re

- dispatch and low

- carbon and no

- carbon alternative generation. Commenter s stated Building Block 4 is focused on demand

- side chang es to achieve carbon emissions reductions and is defined in the Proposed Rule as: "Reducing emissions from affected EGUs in the amount that results from the use of demand

- side energy efficiency that reduces the amount of generation required."

Commenter s st ated in the Proposed Rule's discussion of Building Block 4 implementation, EPA highlights California's demand

- side energy efficiency programs as a paragon for reduction of carbon emissions. Commenter s stated that EPA points out that California's utility ru n demand

side energy efficiency programs, which require utilities to meet electricity load through all available energy efficiency and demand reduction resources that are cost

- effective, reliable and feasible, " are the bedrock upon which climate policies a re built ." Commenter s stated in other words, EPA's most prominent example of demand

- side energy efficiency programs includes demand response as part of its carbon emissions reductions strategy. Commenter s stated EPA also mentions in its discussion of Build ing Block 4 implementation that Arizona utilities can meet the state's energy savings requirements " through a variety of means, including cost

- effective energy efficiency programs, as well as load management and demand response programs. "

Commenter s stated in light of the fact that the Proposed Rule's examples of Building Block 4 implementation include demand response, the Proposed Rule clearly could be construed to include demand response in Building Block 4. However, in order to eliminate any ambiguity, C ommenter s urged EPA to modify the last phrase of the Building Block 4 definition to188 specifically include demand response, as follows: " energy efficiency, demand response and load management that reduce the amount of generation required. "

Commenter s stated demand response can/should play a strategic role in every state's carbon emission reduction strategy. Commenter s stated demand response is a significant resource that has a long tradition of providing reliable load drop, thereby reducing generation from f ossil

fueled peaking plants. Commenter s stated demand response resources have a long tradition of providing reliable reduction of electricity load (" peak load reduction " or " load drop ") when needed to help maintain system reliability. Commenter s stated in wholesale markets alone, there were over 28,000 MW of demand response in 2012. Commenter s stated the practice of demand response has been present in the utility industry for decades. Commenter s stated that traditionally, demand response has been viewed as simple load drop, relieving stress on the electricity network during potential electricity system emergencies. Commenter s stated demand response has proven to be a reliable resource, providing service when called upon and thereby allowing the grid to stay in balance.

Commenter s stated the alternative to maintaining system reliability in an electricity emergency with demand response is to rely on fossil

- fueled peaking generation. Commenter s stated increased utilization of fossil

- fueled peaking generation re sults in additional carbon and other emissions. Commenter s stated therefore, at its most elementary level, demand response results in carbon emissions reductions at times of peak electricity usage when used as an alternative to fossil

- fueled peaking plants

.
Commenter s stated in recent years, as demand response technologies have improved and the services provided by demand response resources have expanded significantly. Commenter s stated demand response resources now provide not only load drop but also so phisticated and flexible ancillary services such as spinning reserve and frequency regulation. Commenter s stated these demand response ancillary services are used to balance the electricity grid all of the time rather than merely during potential emergenci es.

Commenter s stated that when demand response provides these ancillary services, it directly and permanently offsets carbon emissions from fossil

- fueled peaking plants; for example, if a demand response resource is providing spinning reserve by curtailin g load within a few minutes when called upon, demand response is serving as a real

- time service to the grid operator that can displace a spinning generation resource on a megawatt

- to

- megawatt basis. Commenter s stated generation spinning reserves are required for system stability in all hours of the year. Commenter s stated demand response spinning services can now be available at any time. Commenter s stated therefore, these demand response resources reduce carbo n emissions by reducing use of generation spinning reserves in all hours of the year and not just summer peak times. Commenter s stated moreover, these resources have proven to be cost

effective. Commenter s stated that in the PJM RTO during the 9.5 percent of the hours in 2013 when only demand response was utilized for spinning reserve the weighted average SRMCP of synchronized reserve was only $1.21/MW; in contrast, the weighted average cost of spinning reserve in PJM for all hours in 2013 was $6.98/MW.

Co mmenter s stated as a result of the development of demand response as a more robust system tool, the resource has become even more reliable in providing electricity load reduction.189 Commenter s stated the more refined ancillary services of spinning reserve an d frequency regulation are rapid response tools. Commenter s stated frequency regulation is a service where utility system operators expect a response within seconds. Commenter s stated spinning reserve is a service that is typically responsive within minute s. Commenter s stated these parameters hold whether the service is provided by demand response resources or by traditional generation resources. Commenter s stated since the required response times are so rapid, those resources have become more automated. Co mmenter s stated the net result of the improved technologies is that demand response resources are now extremely reliable in providing electricity load reductions during all hours of the year.

Commenter s stated demand response directly offsets a substantial amount of carbon emissions from fossil

- fueled EGUs. Commenter s stated the utilization of demand response resources to provide electricity market products and services in place of traditional generation provides benefit to society, including significant r eduction in carbon emissions. For additional detail and analysis regarding these carbon emissions reductions to EPA, c ommenter s commissioned the utility consulting firm Navigant Consulting (" Navigant ") to study the carbon emissions reduction impacts of dem and response. Commenter s stated Navigant looked at the direct and indirect effect on carbon emissions reductions from both demand response ancillary services (i.e., spinning reserve and frequency regulation) and peak load reduction (i.e., simple load drop)

.
Commenter s provided the Navigant Study , and stated most notably, the Navigant Study concluded the following:

"Navigant estimates that demand response could directly reduce CO2 emissions by more than 1 percent and that its overall role in economics of f uel mix and plan operations will result in CO2 emissions by a larger amount, i.e. potentially an additional 1 percent.... This emission reduction potential is significant when compared to the EPA's targets which propose to reduce CO2 emissions from fossil

- fuel power plants by 20 percent from 2012 to levels by 2030. This analysis demonstrates that demand response provides valuable CO2 emissions reductions and thus should be a strategic part of implementation of the Clean Power Plan."

Commenter s stated the N avigant Study found that utilization of demand response to provide ancillary services 50 percent of the time would directly reduce carbon emissions from fossil

fueled EGUs by 0.6 to 0.8 percent. Commenter s stated the Navigant Study noted: " Demand
response provided ancillary services can reduce CO2 emissions due to more efficient dispatch of generation units ."

Commenter s stated the Navigant Study provided the following illustration of the problems caused by inefficient dispatch of fossil

- fueled generating units that can be alleviated by demand

response: "As an illustration, if a 500 MW coal plant bids 200 MW into the reserves market then it takes heat rate penalty for operating at 300 MW.... The EPA demonstrated in their calculations for building block 1 in the Clean Power Plan that small changes in the heat rates of coal plants can have a significant effect on CO2 emissions.190 Commenter s stated moreover, if grid operators utilize demand response rather than dispatch a fossil

- fueled peaking plant at all, addit ional carbon emissions will be avoided. Commenter s stated the ancillary services of spinning reserve and frequency regulation are used in all hours of the year. Commenter s stated significantly, spinning reserve and frequency regulation are not provided by zero emissions renewable generating plants because these plants are intermittent electricity resources by nature. Commenter s stated nor are spinning reserve and frequency regulation typically provided by nuclear plants because these plants are usually runn ing at full capacity generating electricity for sale. Commenter s stated spinning reserves and frequency regulation are in most cases provided by marginal fossil

- fueled plants running far below their full capability. Commenter s stated when grid operators di spatch these fossil

- fueled resources to provide ancillary services, there is an increase in carbon emissions that can be avoided if demand response is used instead. In addition to the substantial carbon emissions reductions from demand response ancillary s ervices, Commenter s stated the Navigant Study showed that peak load reduction (i.e., simple load drop) can directly reduce carbon emissions from fossil

- fueled EGUs by an additional 0.05 to 0.35 percent. Commenter s stated these emissions reductions occur wh en simple load drop provided by demand response reduces dependence on natural gas fueled combustion turbine plants that are in service to provide peaking capacity on high peak load days.

Commenter s stated the Navigant Study also considered the indirect impact of demand response that results in reductions of carbon emissions that are not as precisely quantifiable. Commenter s stated these indirect effects include the retirement of fossil

- fueled peakin g plants and facilitation of the integration of renewable generation into the electricity grid. Commenter s stated as the Navigant Study indicates and as we discuss further below, these two indirect effects also reduce a meaningful amount of carbon emission s

.
Commenter s stated demand response contributes to retirements of fossil

- fueled EGUs and delays investment in new fossil

- fueled peaking plants. Commenter s stated demand response has a positive economic impact on the electricity market as a more cost

- effe ctive way to manage system peaks than traditional generation. Commenter s stated as a result, deployment of demand response contributes to the retirement of uneconomic fossil

- fueled peaking plants that rely on operating during a few annual price peaks to ma intain economic viability. Commenter s stated that generator interests have been very outspoken about the economic disruption that demand response has caused by forcing early retirements of power plants. Commenter s cited the Navigant Study, these retiremen ts can have a material impact on states in meeting their emissions targets:

"Demand response is one of the factors that can lead to lower coal use and thus lead to retirements of coal units. PJM has noted this in a recent transmission expansion plan. The CO2 emissions reductions from one coal plant retirement can be significant.... PJM calculated that the removal of CO2 emissions from those units that have announced their retirement reduced overall emissions from units covered by the Clean Power Plan by 12 percent, or from 442 million short tons to 392 million short tons, using 2012 emissions. These emission reductions in PJM play a major role in helping states meet their proposed interim (2020

- 2029) goals under the Clean Power Plan ."191 Commenter s stated dem and response's peak

- shaving capabilities also push out in time the development of new fossil

- fueled power plants and energy infrastructure that would otherwise be required to meet constantly growing system peaks. Commenter s stated just as significantly, si nce additional demand response resources can be deployed with short lead times, these resources can reduce carbon emissions more quickly than no

- carbon and low

- carbon generation resources that have much longer lead times and often require extensive transmi ssion build out. Commenter s stated this is particularly important given President Obama's commitment to accelerate reduction in carbon emissions 28 percent (from 2005 levels) by 2025 in his joint announcement with Chinese President Xi Jinping on November 1 2, 2014.

Commenter s stated demand response is a tool to facilitate effective integration of substantial amounts of renewable generation into the grid, increasing reliability and offsetting emissions from fossil

- fueled EGUs. Commenter s stated the Navigant Study highlights the benefit of demand response as a tool to assist in the integration of renewable generating plants into the grid. Commenter s stated unless demand response is used to maintain system balance to offset the intermittent output of wind and s olar generating plants, system operators are forced to rely on fossil

- fueled peaking plants to provide the balancing. Commenter s stated if more renewable resources are placed on the grid, as EPA calls for in its Proposed Rule, these balancing demands will increase significantly. Commenter s stated therefore, it is critical to utilize demand response resources to the maximum extent possible and avoid the increased use of fossil

- fueled peaking plants to balance the grid.

Commenter s stated emission reduction s resulting from demand response measures deserve separate treatment and analysis because they are not a type of demand

- side energy efficiency measure, but rather they are a separate category of measures that can shift load to a different time of day.

Comm enter s stated EPA should assure that energy efficiency includes demand reduction
too. Commenter s stated defining energy efficiency, as including both permanent lowering of energy demand for utility services AND including cost

- effective demand response programs, is a method of meeting the "overarching principle" in the Task Force (The White House State, Local and Tribal Leaders Task Force on Climate Preparedness) report to "maximize opportunities to take actions that have dual benefits of increasing comm unity resilience and reducing greenhouse gas emissions." Commenter s stated demand

- response programs are behavioral response programs conducted in tandem with " intelligent efficiency " approaches such as introduction of smart metering, incentive rate

- making, and provision of early warning of high emissions, high prices, or both. Commenter s stated an evaluation of all utility

- supported demand

- side programs released November 17, 2014 by LBNL and presented to the NARUC found that these programs were delivering r esults at a very respectable and cost

- effective 2.5 cents per kilowatt

- hour avoided, at the low end for all demand

- side programs and much lower than the cost of meeting peak demand through peaking power plants.

Commenter s stated while a main purpose of dynamic pricing is to reduce peak demand, these programs typically result in a reduction in total electricity consumption as well. Commenter s stated there are three reasons energy reductions can be expected from dynamic pricing. Commenter s stated first, higher peak or critical peak prices induce load reductions during peak hours, some of which is shifted to other times, and some of which is not. Commenter s stated192 reducing lighting during peak periods does not lead to the use of more lightin g during off

- peak periods, for example. Commenter s stated higher thermostat settings during the peak period may be offset in part by precooling or payback cooling (increased cooling after the end of the peak period), but empirical evidence indicates that p eak

- period reductions are typically larger than the increased usage outside the peak period. Commenter s stated second, dynamic pricing programs cause participants to have a higher awareness of how they use energy, which may in turn result in lower consumpt ion. Commenter s stated third, these programs often increase the amount of usage information, or feedback, received by the customer, which can also lead to reductions in energy use. Commenter s stated total consumption reductions from dynamic pricing program s have been measured from 0 percent to as high as 8.7 percent, with a typical number of perhaps 2 percent.

Commenter s stated i ntelligent efficiency is a systems

- based approach to efficiency. Commenter s stated enabled by information and communication techn ology (ICT) and user access to more detailed and sometimes real

- time consumption information, intelligent efficiency differs from traditional energy efficiency in that it is adaptive, anticipatory, and networked. Commenter s stated opportunities exist along a continuum of technology and human behavior and include both people

- centered efficiency and technology

- centered efficiency (e.g. smart thermostats).

Commenter s stated the literature suggests that customers are most fully empowered to manage their consum ption and maximize their benefits with a triad of approaches:

1. I nformation to enhance understanding,

2. P ricing options to provide financial incentives to avoid high cost peak hours, and

3. A utomation to allow " set and forget " response. Commenter s stated each of these provides benefits individually as a program type, but can provide even more energy reductions when provided as a holistic menu of options.

Commenter s stated the concept of people

- centered efficiency is that customers reduce their energy consumptio n as a result of having better understanding of their consumption. Commenter s stated this better understanding comes from access to more detailed information (e.g. hourly and daily consumption) on utility websites, or even real

- time information from in

hom e displays connected directly to meters. Commenter s stated utility websites or energy reports to customers can also include comparisons to similar customers and specific energy savings tips.

Commenter s stated one mechanism of information

- based energy savin gs is behavior change

- switching the lights off or adjusting thermostats. Commenter s stated the second mechanism occurs over time, with customers using energy data to make purchases of new appliances or devices that are more energy efficient. Commenter s s tated based on dozens of pilot and large

scale studies globally, utilities have found short

- term consumption reductions averaging between 5 percent and 9 percent for

- customers who report viewing energy usage information. Commenter s stated these savings h ave been found to persist. Commenter s stated over time, more customers become engaged with their information, and total average savings increase.

Commenter s stated regarding technology

- centered intelligent efficiency, one important example is smart thermos tats that can be remotely controlled over the Internet. Commenter s stated service193 providers monitor the operation of these systems and, through analytics algorithms, control the thermostats so that HVAC systems use less energy. Commenter s stated in additio n to such algorithms, smart thermostats may be controlled by occupancy sensors, operating HVAC systems only when homes are occupied. Commenter s stated these capabilities have been shown in pilot programs to reduce HVAC consumption by 6.8 to 11.3 percent. C ommenter s stated residential HVAC consumption in 2009 was 47.7 percent. Commenter s stated another important example of technology

- centered intelligent efficiency is a building energy management system. Commenter s stated research studies performed over the past decade have shown a range of energy savings for such systems

-- from none at all to annual savings of more than 30 percent. Commenter s stated average energy savings from these systems have been estimated at between 5 and 15 percent of overall building e nergy consumption.

Commenter s stated each of these, efficiency is a building energy management system. Commenter s stated research studies performed over the past decade have shown a range of energy savings for such systems, from none at all to annual savings of more than 30 percent. Commenter s stated average energy savings from these systems have been estimated at be tween 5 and 15 percent of overall building energy consumption. Commenter s stated given that homes and buildings together consume 40 percent of total U.S. energy, the reduction in consumption from smart thermostats and building energy management systems cou ld yield total electricity savings of 2 to 4 percent.

Commenter s noted other reasons that demand response and smart grid deserve consideration for their emissions

- reducing characteristics:

1. DR will often reduce kWh consumption during the hours in which the plants with the greatest emissions are used to generate electricity; thus, the emissions reduction achieved from reducing a particular number of kWh will typically be higher for demand response than for the same number of kWh avoided during non

- peak hours ; this means that a higher value could be placed on kWh that are reduced during the peak period; and

2. while the Clean Power Plan is focused on carbon emissions, and not localized impacts, DR and smart grid offer dynamic emissions control that can ensure th at steps that are taken based on a goal of reducing CO2 emissions also avoid adverse local and community

- based impacts.

Commenter s stated the rule should allow the use of demand response programs as a strategy for meeting emission reduction targets. Co mmenter s stated although EPA's proposal allows for the inclusion of EE as a compliance option, it fails to allow for the inclusion of demand response (DR), another end

- use compliance strategy that carries great potential for CO2 reductions at relatively lo w cost. Commenter s stated DR refers to end

- use customers reducing or shifting their normal electricity consumption patterns to respond to emergency reliability concerns or price changes in the energy market with the goal of reducing peak demand and ensuri ng system stability. Commenter s stated when the price of energy is high

- evidence of high demand and/or a constrained electric grid, DR programs call on end

- use customers to curtail or shift energy consumption, alleviating congestion on the grid and reducin g the need to rely on costly and high

polluting peaking generation units.194 Commenter s stated because DR displaces the need to rely on high

- polluting peaking generation units which are inefficient to run and are sometimes only used for a few hours per year t o meet peak demand, it can deliver substantial environmental benefits. Commenter s stated furthermore, DR has demonstrated for decades that it can effectively curb electricity consumption and carbon emissions with more than 28,000 MW of DR having participat ed in wholesale electricity markets in 2012 alone. Commenter s stated the environmental benefits of DR are quantifiable and well

known:

"The environmental benefits of DR Utility programs have shown that shifting load from peak load generating power plants to more efficient off

- peak

- load power plants provides such reductions: the California 'Shift & Save' [DR program] quantifies the reduced CO2 emissions at between 10 and 20 percent."

"Energy efficiency and demand response provide substantial opportunities to displace future capacity additions and lower overall electricity costs. In total, this represents a 40 to 50 percent reduction in pro jected peak demand growth (depending on the carbon policy scenario)... The combined effects of higher gas prices, lower load growth, enhanced DR and CHP [combined heat and power] installations lower CO2 emissions about 4 percent by 2032 versus the Phase II Reference Case, or 143 million metric tons. This is the equivalent of closing one 600 MW coal plant for 30 years."

Commenter s stated a recent study conducted by utility consulting firm Navigant Consulting, Inc. examined the environmental impacts of DR in three of the country's largest regional transmission organizations: the PJM Interconnection ("PJM"), the Midcontinent Independent System Operator (" MISO "), and the Electric Reliability Council of Texas ("ERCOT"). Commenter s noted that Navigant found that using DR to displace generation from high

- pollution peaking plants had substantial environmental benefits:

" Overall Navigant estimates that DR can directly reduce CO2 emissions by more than 1 percent through peak load reductions and provision of ancillary services, and that it can indirectly reduce CO2 emissions by more than 1 percent through accelerating changes in the fuel mix and increasing renewable penetration. For context, 1 percent of 2012 CO2 emissions from affected sources under the CPP [Clean Pow er Plan] is 19.5 million metric tons."

Commenter s stated the cost and environmental benefits of dynamic pricing have been shown in Illinois. Commenter s stated a 2014 study found:

• During summer peak load hours, participants shifted or reduced their peak lo ad by 0.5 kW per participant.

• Participants reduced electricity use by 500 kWh per participant per year.

Electricity reductions were equivalent to preventing 1,006 lbs. of carbon

- equivalent greenhouse gases per participant per year.

Commenter s stated in addition to providing substantial environmental benefits to the electric grid, DR is extremely cost

- effective. Commenter s stated like EE, DR can actually save195 customers money by reducing the amount of energy they use during the most expensive ti mes of the year; for example, a recent Brattle Group report looking at the effects of DR in five Mid

Atlantic states found that using DR to cut peak demand by 3 percent leads to a price reduction of 5 to 8 percent and potential savings to customers of $73 million per year in the region.

Commenter s stated given the proven reliability, cost effectiveness, and environmental benefits of DR, EPA should include it as a compliance option in its proposal. Commenter s stated a variety of DR programs exist throughout the country including what is known as "dynamic pricing"
programs. Commenter s stated dynamic pricing programs encourage customers to reduce their electricity usage during times of peak load by allowing them to pay the market rate for their electricity wh ich fluctuates throughout the day according to supply and demand.

Commenter s stated electric, gas and water utilities face increasing pressure to deliver more successful DR and EE programs to help address utility demand

- side objectives. Commenter s state d for over 30 years, Honeywell's Smart Grid Solutions team has worked with more than 100 utilities worldwide to help meet their DR and EE goals. Commenter s asked that EPA, in the final CPP, recognize and encourage DR programs at the state level. Commente r s stated DR can assist with emissions reduction through helping to integrate renewable energy sources of power, and supports load

- shifting which can boost cleaner power generation. Commenter s stated DR technologies can also reduce peak demand and can help avoid the need for investment in peaking capacity freeing up capital for other investments. Commenter s stated these are technologies that are widely in use now and support the goals set forth in the proposed CPP.

Commenter s noted additionally that both cooperatives and municipal utilities have been industry leaders in implementing demand response programs, both to further reduce electricity demand and to contribute to overall system reliability, cooperatives provide about 10 percent of electricity sales , but are responsible for almost 25 percent of peak load management capacity, and 21 percent of customers with demand response capabilities. Commenter s stated some of this response has been achieved through innovative market structures that may help guide efforts elsewhere: in North Dakota, Minnkota Power reduced peak power demand using a power price

" traffic light " alerting members when prices change and inviting them to reduce power usage in response. Commenter s stated that municipalities have also had si gnificant success simply by providing meaningful funding to these programs, Fort Collins Utilities, a Colorado municipal utility, has had huge success developing demand response services, reducing total use by 1.5 percent at a cost of $0.02/kwh saved (maki ng it the utility's lowest

- cost electricity resource), simply by increasing annual demand response funding to $5 million a year.

Commenter s noted that U.S. EPA acknowledges demand response, or peak shaving, within the proposed rule as an element of some states' energy efficiency resource standards (EERS), but also characterizes Building Block 4 as largely 'enduse' energy efficiency. Commenter s believed that credit for reductions under Building Block 4 should be given for measures such as demand
response, which reduces or shifts electricity usage during peak periods and is typically utilized by electric system operators in order to produce energy at a more efficient rate. Commenter s stated this not only saves consumers money, but it also results in overall reduction of CO2 emissions. Commenter s stated FERC 2009 National Assessment of Demand Response Potential developed four potential scenarios to reflect various levels of demand response within the nation over a ten year period from 2009 to 2019. Commenter s stated they found that demand response196 has the potential to reduce peak electricity demand by as much as 20 percent by 2019 if fully utilized under the Full Participation scenario. Commenter s stated even under the Expanded Business

- As

- Usual scenario, wh ich expands current demand response programs to all states, utilizes a partial deployment of advanced metering infrastructure, and ensures that a small percentage of ratepayers would make use of dynamic pricing, peak electricity demand is reduced by 9 perc ent over the ten year period (2009

- 2019). Commenter s stated if demand response programs are largely expanded and encouraged across the country, a large amount of peak electricity demand could be saved, resulting in a large amount of avoided CO2 emissions. Commenter s stated U.S. EPA should encourage the use of demand response by incorporating it in the energy efficiency calculations of Building Block 4 since it has the potential to cut CO2 emissions, in addition to saving money for ratepayers.

Commenter s stated EPA's Proposed Rule proposes that state implementation plans be allowed to include :
"a wide (or unlimited) set of energy efficiency programs and measure types in state plans, as long as the energy savings are adequately documented according to rigo rous evaluation, measurement & verification (EM&V) methods and appropriate state regulatory oversight."

Commenter s urged EPA to clarify that the same approach applies to demand response programs and measures in the Final Rule in this docket. Commenter s stated as with energy efficiency, this approach will work for demand response because energy savings calculated by rigorous demand response EM&V methodologies subject to regulatory oversight can be used to calculate carbon emissions reductions.

Commenter s stated tested and proven demand response EM&V protocols in use today adequately document energy savings, as well as peak load reduction impacts, and are subject to state regulatory oversight; for example, the California Public Utility Commission (CPUC) de veloped its own demand response EM&V protocols to facilitate integration of demand response into the California electricity system. Commenter s stated CPUC requires that California utilities submit annual and monthly reports in compliance with the EM&V prot ocols which evaluate demand response energy savings and load reduction impacts. Commenter s stated significantly, CPUC's EM&V protocols insure accurate measurement of energy savings from demand response events by addressing any issues of pre

- cooling and sna p back cooling as well as gaming of load impacts. On the other hand, c ommenter s stated the State of Maryland has had success utilizing a third

- party, independent evaluator model to measure and verify the energy impacts of demand response

. Commenter s stated the independent evaluator in Maryland verifies each utility's report on demand response energy impacts in a two

- step process.

Commenter s stated accurate evaluation of the energy impacts of demand response is critical to maintaining system reliability and grid stability. Commenter s stated as a result, the FERC tasked the North American Energy Standards Board (NAESB) to promulgate demand response EM&V model standards for use in wholesale and retail electricity markets. Commenter s stated in FERC Order 676

- G, FERC required RTOs and ISOs to incorporate the NAESB developed standards into their demand response evaluation, measurement and verification tariffs. Commenter s stated as a result, RTOs and ISOs have developed sophisticated demand response EM&V protocols197 i ncorporating NAESB standards that are used to pay demand response providers for load reductions and other purposes.

Commenter s stated in short, demand response has established EM&V protocols that are even more robust than the EM&V protocols that have been used for energy efficiency. Therefore,

c ommenter s urged EPA to use the approach used for energy efficiency of allowing states (and multi

- states) to include an unlimited set of demand response measures in their implementation plans subject to the energy sav ings being documented by rigorous EM&V methods and appropriate state regulatory oversight.

Commenters stated EPA's proposed rule erroneously measures demand

- side energy efficiency in the state goals as a " sale " of energy that offsets energy generated by more carbon

- intensive

resources. Commenters stated the D.C. Circuit Court of Appeals recently held that demand

- side energy efficiency is not appropriately characterized as a sale of energy. Commenters stated in EPSA, the court vacated FERC Order No. 745. Commenters stated Order No. 745 established uniform compensation levels for suppliers of demand response resources who participate in day

ahead and real

- time energy markets, specifically by directing ISOs and RTOs to pay demand response providers the full locational marginal price that is also paid to generators that participate in the market. Order No. 745, at 2. Commenters stated the D.C. Circuit vacated the order, finding that Sections 201, 205 and 206 of the FPA do not provide the Commission with the a uthority to establish such compensation levels. EPSA at 221

- 223. Commenters stated the court rejected FERC's attempt to assert jurisdiction on the basis of its authority over wholesale sales of electricity under Section 201 of the FPA, finding that "[d]ema nd response does not involve a sale, and the resources 'participate' only by declining to act." EPSA at 221.

Commenters stated the " demand response " at issue in Order No. 745 and EPSA is analogous to the demand

- side energy efficiency measures considered in the proposed rule. Commenters stated FERC regulations define "demand response" as a "reduction in the consumption of electric energy by customers from their expected consumption in response to an increase in the price of electric energy or to incentive pa yments designed to induce lower consumption of electric energy." 18 C.F.R. Section 35.28(b ) ( 4). Commenters stated similarly, Building Block 4 of the proposed rule's BSER is " reducing emissions from affected EGUs in the amount that results from the use of demand

- side energy efficiency that reduces the amount of generation required. " 79 Fed. Reg. at 34,877. Commenter s stated the GHG Abatement Measures TSD accompanying the proposed rule explains that energy efficiency "refers to an extensive array of technol ogies, practices and measures that are applied throughout all sectors of the economy to reduce energy demand" including, in the residential sector, "more efficient products and equipment...upgrading of insulation...[and] customized whole home retrofits[,]" and in the industrial sector, "motor upgrades and maintenance programs, recovery of waste heat streams, and optimization of processes through modern instrumentation and controls systems." GHG Abatement Measures TSD at p. 5

- 2 and 5

- 3. Commenters stated th e Order No. 745 demand response and the CPP's demand

- side energy efficiency, therefore, are analogous because both concern actions taken at the retail level to reduce electricity consumption in response to incentives put in place to do

so. Commenters stat ed most importantly, like Order No. 745's definition of demand response, the CPP's definition of energy efficiency clearly does not involve the sale of electric
energy. Commenters stated like the demand response program at issue in EPSA, energy efficiency actually reduces the demand for electric energy through consumers' " declining to act ."198 Commenters stated the Goal Computation Technical Support Document (June 2014) (" State Goal TSD ") sets forth a methodology for calculating state goals for emissions redu ction. Commenters stated Step 5 of the methodology considers demand

- side energy efficiency to be avoided sales that displace generation from more carbon

- intensive EGUs. See State Goal TSD at pp. 16

- 19. Commenters stated under the EPSA analysis, classificat ion of demand

- side energy efficiency as an avoided " sale " is erroneous; therefore, EPA must revisit this element of the proposed rule. Commenter s stated more specifically, due to the uncertainty of demand response programs, particularly in those states with restructured electricity markets, EPA should not rely on demand response as an energy efficiency tool.

Commenters stated EPA's reliance on d emand response as part of the source of BB4 reductions is especially untimely since the D.C. Court of Appeals has recently found that the Federal Power Act does not grant the FERC authorities over demand response. Commenter s stated for EPA to establish an enforceable goal, based on the expected exercise of authority that Congress has reserved exclusively for states, is highly legally vulnerable.

Comment 2 5 : Energy Storage Should be Included in EE Programs

Response 2 5 : Multiple commenters highlighted th e multiple environmental, economic, and reliability benefits that energy storage provides to the electricity grid. The EPA recognizes that energy storage has applications across the electricity grid and may be part of DS

- EE programs and projects. However, the EPA decided not to include DS

- EE in BSER for the final rule. See section s V.A and V.B of the final rule preamble of the CPP for details. However, DS

- EE does remain generally available for compliance. All DS

- EE measures must also meet the requirements

a nd criteria related to proper quantification and verification of MWhs from demand

- side EE savings a s described in Section VIII of the final rule preamble of the CPP. Section VIII of the Preamble addresses the concerns the commenters raised regarding the use of energy storage in state plans.

The following are summaries of the specific public comments under this comment:

Commenters recommended EPA include energy storage as part o f EE programs.

Commenter s stated energy storage can enhance the capacity factor and efficiency of existing power plants by enabling higher productivity, more efficient ramping, and even providing black start capability, allowing these plants to operate more efficiently and mitigating the increases in O&M and downtime from having to supply ancillary services. Commenter s stated the PJM Independent Market Monitor submits that " coal units on average provided only 15.5 percent of regulation in 2013. This is a significant decline from the 30.1 percent of regulation provided by coal units in 2012 ." Commenter s stated coal and other traditional generators simply cannot be used most effectively to manage variability and provide regulation services to the grid; ene rgy storage is particularly adept at responding quickly and with high degree of accuracy in ways that other generators are unable.

Commenter s stated energy storage has near

- instantaneous response time and is able to follow grid signals more accurately than traditional resources. Commenter s stated the California Energy199 Storage Alliance released a white paper, " Energy Storage

- a Cheaper, Faster, & Cleaner Alternative to Conventional Frequency Regulation ", that analyzes several case studies that demonstrate t hat even with frequency regulation services, energy storage can reduce CO2 emissions by displacing fossil fuel plants and enhancing integration of renewable energy

resources.

Commenter s provided Figure 2 (titled: “ Fast Responding Storage Reducing Ancillary Demand ”) that illustrates how valuing speed and accuracy in the market with a fast

- responding grid signal leads to an almost immediate reduction in regulation requirement. Commenter s stated that traditionally this role would be filled by fossil generatio n with limited flexibility, systems that can take minutes rather than fractions of seconds to respond. Commenter s stated that with energy storage, current power plants can run at peak efficiency, and variability between supply and demand can be efficiently and accurately managed.

By creating a more competitive marketplace that rewards performance, c ommenter s stated commercial energy storage systems are already demonstrating cost

- savings and emissions reductions in PJM. Commenter s noted Beacon Power's Stephe ntown, NY project is a 20

- megawatt flywheel energy storage plant that has been providing frequency regulation services to Independent System Operator New England since June 2011 along with an estimated 82% reduction in CO2 emissions over its lifetime compa red with a traditional power plant. Commenter s stated using fast

- responding energy storage to manage variations in load and demand across the grid in milliseconds rather than minutes makes best use of electricity from all types of generation, regardless of where the storage system is deployed. Commenter s stated this allows for more efficient operation of the grid's existing coal

- fired assets, and when combined with solutions like demand response and broader energy efficiency programs, we would expect
compou nded results.

Commenter s stated energy storage allows for more efficient operation of existing plants providing actual emissions reductions as Alevo has found in analyzing battery performance in conjunction with coal plants. Commenter s noted that in their statement launching a manufacturing plant in North Carolina, Alevo states, " coal plants like to run within a narrow operating band. If you ramp the plant up and down to meet changes in demand, it operates less efficiently, costs more and emits more greenho use gas. By using batteries to meet those variations in demand, a utility can keep its coal plants running only at optimal speeds and thus reduce costs and emissions. " Commenter s stated that in a presentation in May 2014 to the White House Office of Manage ment and Budget, Alevo described a simulation with Western Electricity Coordination Council (WECC) that featured energy storage co

- located with coal plants. In this study, coal plants with capacity factors of 70% increased to an average of 85% with the add ition of energy storage to offset ramping, peak capacity, and reserve requirements. Commenter s stated energy storage companies like Alevo continue to develop and deploy cost

- effective technologies that can reduce greenhouse gases from fossil fuel resources while ensuring the grid remains stable with increased penetration from renewables.

Commenter s stated energy storage enables distributed energy resources to operate more effectively and efficiently, allowing for more efficient energy use and lowering the r esulting net carbon emissions. Commenter s stated distributed energy storage can support higher penetrations of distributed renewable generation by transforming as

- available renewable resources into fully200 dispatchable assets, maximizing their value on the g rid by delivering energy when its most valuable to the system (e.g. during peak periods). Commenter s stated this can reduce demand on power plants and spinning reserves, but also reduces line losses from transmission. While producing electricity at the poi nt of demand is potentially the most efficient solution for the grid, Commenter s stated energy storage can play an important role in facilitating higher penetrations of distributed resources. Commenter s stated energy storage technologies on the demand side include substation and community level resources as well as behind

- the

- meter applications (thermal as well as battery storage). Commenter s noted that Solar City and Solar Grid Storage are two companies that are making investments in and currently offering demand side energy storage solutions. Commenter s stated a report by Rocky Mountain Institute analyzed the point at which solar plus storage becomes cost effective for consumers to even opt out of being connected to the grid altogether. Commenter s stated ESA is not suggesting grid defection, but the report is instructional in citing the continued downward trajectory of pricing for energy storage demand side applications.

Commenter s stated an additional v alue for energy storage on the demand side is its ability to facilitate consumer participation in demand response programs, key tools for addressing peak demand and reducing reliance on carbon emitting peaker plants. Commenter s stated energy storage can se rve to eliminate the opportunity cost associated with participating in demand response events, potentially greatly increasing consumer ability to participate in these programs.

Commenter s noted further considerations of using energy storage on the demand s ide include: energy storage allows for alignment of load with optimal fleet dispatch and reduction in the need to build additional conventional peaking capacity; adding energy storage to distributed generation can mitigate the impact of high penetration of solar rooftop PV, making distributed generation more cost effective and reducing the costs for network upgrades; demand side energy storage is able to serve a similar role as supply side resources in ancillary services markets and demand response programs ; energy storage can reduce the need for diesel generation backup power for grid reliability. Commenter s stated most importantly, the combination of these characteristics should be considered when assessing the potential value of including energy storage i n the grid.

Commenter s stated EPA should explicitly state in the final rule that energy storage technologies can be granted credits for avoided emissions that they create. Commenter s stated EPA should credit energy storage technologies for the emissions reductions benefits generated both directly by increasing the efficiency of certain coal

- fired units by reducing ramping and allowing the units to run at their most

- efficient capacities, but also indirectly through improving system efficiencies, such as t hrough reducing the need for spinning reserves.

Commenter s provided an article discussing energy storage. Commenter s stated flexibility is also a crucial attribute for efficient operation of the electricity system. Commenter s stated a major technologic al development that promises to expand the flexibility of the electricity system is the introduction of energy storage technology, including electric vehicles. Commenter s urged the agency to consider carefully the incentives for the development of energy s torage that are implicit in the Clean Power Plan.201 Commenter s stated energy storage is expected to play a growing role in the future evolution of the electricity grid. Commenter s stated the nation's economy requires a robust and resilient electricity delive ry system. Commenter s stated energy storage can play a significant role in meeting this goal by improving the operating capabilities of the grid, lowering cost, and ensuring reliability while deferring and reducing infrastructure investments overall. Comme nter s stated it can be instrumental for emergency preparedness by providing backup as well as grid stabilization services.

Commenter s stated EPA's Clean Power Plan is designed to encourage a transformation of the electricity system to reduce greenhouse gas and other pollutant emissions. Commenter s stated there are attributes of energy storage technology that may enable it to contribute to this transformation, however, energy storage also may facilitate the expanded use of incumbent technology, undermining t he environmental goals of the Clean Power Plan. Commenter s stated therefore, the plan should anticipate the kind of incentives provided for the development of storage.

Commenter s stated conventionally, to meet the electricity demand, electricity suppliers would depend on instantaneous combustion of fossil fuels or use of other resources to create electricity when needed. Beyond the storage of fuels for electricity generation at various times of day, Commenter s stated energy storage technology has traditiona lly been limited to the use of hydroelectric resources. Commenter s stated increasingly, a variety of economic forces and concerns over the environmental impacts of fossil fuel combustion are driving a shift toward greater use of renewable energy sources. C ommenter s stated unlike fossil fuels, the temporal profiles of many renewable energy resources are often uncontrollable and the resources are available only intermittently. Commenter s stated this poses a barrier to the introduction of renewable energy sour ces into the electricity system. Commenter s stated energy storage offers a potentially potent technology to accelerate the introduction of renewable technology by enabling the system to respond to intermittent supply.

If associated with renewable energy te chnology, c ommenter s stated the ability to store energy allows the electricity system to maximize the potential contribution of renewable energy output and synchronize the delivery of clean, emissions

- free energy with the time when levels of electricity de mand are greatest. Commenter s stated storage devices are already enabling wind farms in Texas and solar arrays in California to capture production in excess of contemporaneous demand and to deliver energy services when they are most highly valued. Commente r s stated when there is an abundance of intermittent renewable energy, the available capacity to store excess renewable output provides an option to overcome the grid stability issues posed by the intermittency of renewable generation.

Commenter s stated en ergy storage also could be used to support expanded use of fossil energy resources. Commenter s stated energy storage technologies can allow fossil fuel power plants to operate at peak efficiency. Commenter s stated this could have associated environmental b enefits, for example, if storage is used to avoid the need for conventional fossil

- fired generation to respond to small changes and power fluctuations due to instantaneous variation in electricity demand or the intermittency of renewable generation.202 Commen ter s stated however, energy storage may allow the greater utilization of low variable cost, baseload fossil

- fired generation, which typically is relatively high emitting generation. Where there is excess supply of baseload fossil generation over some hours of the year,

c ommenter s stated storage would enable that supply to be brought into or kept in service, and thereby spawn negative environmental outcomes. Commenter s stated further, this could lead to a reduction in the average system cost, thereby enablin g an expansion in the demand for energy services, amplifying this outcome.

In summary, c ommenter s stated how energy storage will be used in the future will be influenced strongly by the requirements and implementation of the Clean Power Plan. Commenter s stated in general, storage can enable a more efficient balance of supply and demand and smooth out the peaks and valleys that currently challenge grid operators. Commenter s stated by regulating electricity generation, storage can mitigate peaks in electri city price and lower the average electricity price. Commenter s stated it can empower a more responsive and reliable grid

- power system. Commenter s stated it can also be used to mitigate the environmental and public health impacts of pollutant emissions prof iles. Commenter s stated most importantly, energy storage, including the inherent storage function of electric vehicles, can greatly expand the role for renewable energy technology to meet the nation's electricity demands.

Commenter s stated that although no t a technology that reduces energy demand or carbon emissions on its own, energy storage technologies (e.g., batteries, thermal storage, flywheels, compressed air, etc.) can help optimize generation and reduce CO2 emissions by matching supply to demand in three primary ways, including:

• Energy storage enables electricity generated at night to be discharged during peak hours of the day when carbon

- intensive generation is operating at a high capacity factor.

• Energy storage technologies facilitates the integrat ion of high levels of renewable energy on the grid by smoothing out fluctuations in production due to the variable nature of wind and solar generation.

• Energy storage improves the heat rate of fossil fuel generating units by allowing them to avoid ramping up or down in response to demand, thus letting them operate in their optimal and least

- polluting range.

Commenter s stated energy storage is a set of technologies that should be implemented by states, in particular as they seek to install increasing amounts of renewable energy as a means of complying with building block three, as they seek to dispatch less carbon

- intensive generation under building block two, and as they improve the efficiency of their existing electricity generating units under building blo ck one.

Commenter s commented on electricity storage with respect to pumped storage. Commenter s stated an unintended consequence of this proposed rule is penalizing using electricity storage as a dispatch planning and air quality mitigation strategy. Commen ter s stated one example of electricity storage is hydro

- pumped storage, which is a way of storing electricity via pumping water up during the night while electricity demand is relatively low and letting the water run203 down through the turbines during peak d emand hours during the day. Commenter s stated this can help reduce the need for peaking units to operate, which are usually among the dirtiest and least efficient units. Commenter s stated it also helps reduce peak emissions from EGUs during the day, which can help control ambient concentrations of traditional pollutants, however, the use of pumped storage results in an efficiency loss since more electricity is required to pump the water up than is generated by letting the water run back down through the tu rbines. If the energy required to pump the water is generated with fossil fuels, c ommenter s stated this results in more CO2 emissions in aggregate. Commenter s stated this could discourage the use of pumped storage, especially since the proposed rule does n ot allow generation from existing pumped storage facilities to be used for compliance purposes under a rate

- based approach (because of the exclusion of existing hydropower). Commenter s stated the Department suggests that EPA rectify this issue in the final rule. Commenter s stated one potential remedy is to give generation credit to electricity storage facilities. Commenter s stated the amount of generation credit for electricity storage facilities (such as pumped storage facilities) would be the difference b etween their consumed generation (i.e. to pump the water) and their created generation.

Comment 2 6 : Transmission and Distribution Efficiency

Response 2 6 : Multiple commenters requested EPA to include electricity transmission and distribution improvements t o BSER, in part due to the opportunity to reduce total energy use by managing voltage and other demand

- side measures enabled by smart grid technologies. EPA decided not to include DS

- EE (building block 4) in BSER for the final rule. A response is not
prov ided here on how transmission and distribution improvements relate to BSER as this comment is now outside the scope of the CPP. See section s V.A and V.B of the final rule preamble of the CPP for details. However, DS

- EE does remains generally available for compliance, inclusive of transmission and distribution energy efficiency measures. As is the case for all DS

- EE, such measures must meet the requiremen ts and criteria related to proper quantification and verification of MWhs from demand

- side EE savings as described in Section VIII. of the final rule preamble of the CPP. See also the Demand

- side Energy Efficiency TSD for CPP Final Rule for additional disc ussion of DS

- EE opportunities to reduce energy losses across electricity lines. For comments related to the other building blocks and how transmission and distribution would affect them, refer to Section V. that discusses EPA’s final determination and
rat ional of the building blocks for the Final CPP.

The following are summaries of the specific public comments under this comment:

Commenters said that the EPA should add "expanding and upgrading high

- voltage transmission networks" or "grid modernization " as part of the BSER or even make it a separate building block.

Commenter s agreed with EPA statements that the U.S. electricity systems is highly interconnected and noted that goals of interconnectivity, flexible generation, and fungible electricity se rvices would not be possible without high

- voltage transmission networks. Commenter s added that the existing high

- voltage system is limited in geographic scope, constrained in its capacity to transfer power from one region to another, and congested at times204 of high demand, all of which increase the cost of providing electricity services to customers, limit access for new zero carbon renewable generation, reduce the availability (i.e. " capacity factor" ) of existing renewable generation, and constrain the abil ity of grid operators to dispatch lower carbon generation in place of higher carbon resources. Commenter s stated that a more robust and efficient transmission network would be more flexible, increase access and availability for low and zero carbon generati on, and make the system more efficient as a whole and in separate regions and states.

Commenter s noted that barriers to building new high

- voltage lines for clean energy are not technical or economic but rather bureaucratic and that inefficient institutions and insufficient policies are the main obstacles standing in the way of critically important transmission expansions and upgrades. Commenter s added that the EPA should also explore, in the revised rule and beyond, opportunities to engage and cooperate wit h other federal agencies, state regulators, transmission planners and stakeholders, barriers to collaborative approaches and how to overcome them, and the potential for improved information sharing and analytical coordination. Commenter s said that absent c hanges to directly incorporate transmission planning and investment into state implementation plans, the proposed rule could have unintended and negative effects on electric reliability and on regional cooperation on transmission planning, cost allocation, and siting.

Commenter s said that the EPA should revise the proposed rule to explicitly add " Expanding and Upgrading High

- Voltage Transmission Networks " as part of the BSER. At a minimum,
commenter s said, that the EPA should include them as supportive mea sures under Building Blocks 2 and 3. However, commenter s said that the EPA could justify making high

- voltage transmission measures a separate building block because doing so:

• Validates widespread and successful state and regional use of transmission inves tments to enable increased development and use of renewable energy generation.

• Highlights the enormous potential for transmission expansions and upgrades to reduce the cost of achieving electric sector carbon emission goals.

• Obliges the EPA and states to cooperatively engage in and provide substantive input to the transmission planning process, and to incorporate relevant analytic findings and investment decisions directly into compliance plans.

• Recognizes improvements to a component of the integrated el ectric system not addressed by measures under any of the other building blocks.

If, the EPA chooses not to include transmission expansions and upgrades as part of the BSER,
commenter s believed that it would be wholly unacceptable for EPA to offer anything less than a detailed explanation similar to those provided under the section entitled: "Potential E mission Reduction Measures Not Used To Set Proposed Goals."

Commenter s also recommended that Grid Modernization be called out as a new, and separate, "Building Block" as an acceptable mechanism to help states and regions achieve compliance205 with the CO2 emission reduction targets set forth in this Proposed Rulemaking. For the purposes of this Proposed Rule, commenter s suggested that grid modernization consist of the following: grid efficiency, i.e., having a good power factor, saving fuel; and, "smart" load management, which can encompass optimizing the use of low

- or zero

- car bon emitting resources or, offsetting generation altogether, as well as levelizing loads (e.g., running appliances at times when excess low

- or zero

- emitting generation is available, thereby maximizing the use of clean energy resources to serve the load). Commenter s said that smart load management can also "fill the valleys" by utilizing available power, when feasible, thereby making the entire electric system more efficient, recognizing that this would have to be done with nuclear or renewable energy, to

m eet the objectives of this Proposed Rule. Commenter s added that demand response

- i.e., helping to reduce peak load(s)

- is a subset of "smart" (or " advanced ") load management. Commenter s also recommended that:

• The greenhouse gas (GHG) reduction methodolo gy outlined in the Proposed Rule be modified to account for grid modernization in order for this mechanism to help aggregate and provide credit to states in achieving compliance with the reduction targets established in this Proposed Rule;

• Similarly, the Agency explicitly recognize grid modernization, as defined herein, in the guidance it provides to the states to use in developing their plans to reduce CO2 emissions from existing power plants; and,

• Grid modernization technologies, e.g., Advanced Metering Infrastructure (AMI), be used to facilitate accounting, monitoring, and verification.

Commenter s emphasized that they supported each of the four building blocks included in the proposed rule, and that their recommendations do not interfere with a state's ability to pursue them:

1. heat rate improvements;

2. re

- dispatch;

3. expansion of zero and low carbon ge nerating capacity; and

4. increased demand side energy efficiency. To the contrary, commenter s said, transmission expansions and upgrades directly support and are a prerequisite for, building blocks 2 and 3, and enhance the value of measures under building b locks 1 and 4 by making their benefits more widely available across the system.

Commenter s specifically recommended that the EPA:

• Make expansions and improvements to the high

- voltage grid an explicit element of the strategies states and utilities can empl oy in both building blocks 2 and 3 to meet their de

- carbonization requirements, particularly in the context of regional integration and strategies. Without such expansions and enhancements, the potential for clean energy to be better integrated and made mo re fully available to the market cannot be achieved. The EPA should directly recognize those facts and206 declare that actions to facilitate more and better transmission of clean power, transmission without which that power could not be accessed or used, will be credited under the rule.

• Require states to work directly with utility and regional transmission planners to analyze the potential for transmission expansions and upgrades to reduce the costs of meeting carbon emissions targets, and to report the resul ts of those analyses to the EPA as part of their state plans.

• Establish clear guidelines for "the process and requirements under a state plan for quantifying, monitoring, and verifying the effect of" expansions and upgrades to high

- voltage transmission ne tworks, including "treatment of interstate effects" for both state and regional approaches to compliance. ACEG recognizes the challenge of definitively quantifying the effects in tons of CO2

- equivalent attributable to policies that, like building out and e nhancing the high

- voltage grid, have a critical but indirect effect on those emissions. In the case of transmission, one can at least be certain of the volume of electricity that flows into and out of the grid from clean versus polluting sources, and can u se contract

- path analysis to allocate that energy to those who are bearing its costs (including its transmission costs) so it is probably easier to quantify and attribute emission benefits achieved by specific transmission infrastructure development than i t is to do so with other indirect actions such as energy

- efficiency investments.

• Create positive incentives for states to incorporate transmission expansions and upgrades as part of their compliance strategies, and additional incentives for states to part icipate in regional and interregional transmission planning processes with binding cost allocation. ACEG does not attempt in these comments to propose a specific formula or procedure for awarding emission credits to transmission projects, but would be read y and willing to do so, working in conjunction with the EPA staff and other parties, should the EPA accept this recommendation.

• Create positive incentives for states to adopt expedited procedures for siting and permitting transmission lines identified in approved state implementation plans.

Commenter s suggested that the EPA encompass improvements to the electrical system infrastructure within a fifth building block that would be a categorical option that regulators could implement in their states imple mentation plans. Commenter s noted that the EPA does not include electricity delivery or efficiency and operational improvements to the transmission, distribution, and metering components of the grid among the existing building blocks. Commenter s noted that Electric Power Research Institute (EPRI) studies have shown that modernizing the transmission, distribution, and metering infrastructure can reduce the total energy distributed by utilities an average of 3 percent without reducing end

- use service quality. Commenter s noted that these improvements lead to reduced generation requirements and associated carbon emissions by a proportional amount. Commenter s stated that these improvements are cost

- effective and may be economically positive. Commenter s also noted that these improvements are closer in scope to what has historically been included within the regulatory definition for a system of emission reduction.207 Commenters requested EPA recognize supply side EE as a state option. Commenters supported the EPA's recognition that energy efficiency gains are available through the more efficient operation of the transmission and distribution grid and from upgrades to the electrical system and implementation of smart grid technologies. Commenters said smart grid techn ologies are being developed that have the ability to produce energy savings and associated emission reductions. Commenters said voltage optimization (" VO ") software platforms, such as developed by Dominion Voltage, Inc. (" DVI "), a Dominion subsidiary, repr esent the evolving capabilities for grid

- side efficiency that should qualify as approvable emissions reduction measures in state plans. Commenters stated the American National Standards Institute (" ANSI ") sets the range of voltage levels at which electrici ty is to be delivered to a home or business between 114V and 126V, with the level typically being around 120V. However, commenters said customer devices are generally designed to operate with 108V input voltage. Commenters said when input voltage is higher than needed to power customer devices the result is energy waste. Commenters stated that utilities have historically used conservation voltage reduction (CVR) to reduce this source of wasted electricity. Commenters said, however, the combination of today' s smart meters and VO technologies can now accelerate the rate of energy savings beyond the historically rate accomplished by CVR. Commenters noted that grid operators can use advanced meters' communication capabilities to capture voltage data and communic ate that information to automated voltage control software, which then provides the appropriate signal to the transformer or other voltage regulation equipment to manage the circuit

- level voltage within the lower ANSI range of 118

- 114 volts, resulting in r educed energy consumption. Commenters requested that EPA explicitly recognize supply

- side energy efficiency as an option for states to use when demonstrating compliance.

Commenters recommended EPA include improvements in electrical transmissions and distri bution as part of EE programs.

Commenter s believed there are clearly areas of energy efficiency that should and could be counted. Commenter s stated the issue is the definitions of quantifiable, continuous and permanent. Commenter s stated there are many areas in transmission and distribution of electricity that can offer carbon reductions through energy efficiency. Commenter s stated here is a wide range of opportunities such HVDC transmission, better substations, meters and a full

r ange of T&D products. Commenter s encouraged EPA to consider more closely the benefits and efficiency that can be achieved through transmission and distribution, particularly through the application of the best, state

- of

- the

- art technology.

Commenter s st ated the final guidelines should affirm that states can include transmission and distribution (T&D) efficiency improvements in compliance plans. Commenter s stated that line losses (the loss of power during transmission) can range from nearly zero to more t han eight percent of the electricity being transmitted as a function of line and weather conditions, and the current national average is that roughly six percent of power generated at central stations is lost during transmission to customers. Commenter s s tated that various technologies such as volt/VAR optimization, high voltage direct current (HVDC) transmission lines and high temperature low sag lines, can help reduce T&D losses, which CO2 emissions. Commenter s stated T&D systems are part of the interco nnected power system upon which EPA relies as the basis for its proposed BSER. Commenter s stated the final guidelines should encourage the208 deployment of grid modernization technologies

--- and the emissions reductions that they can help achieve

--- by allowin g their inclusion in state compliance plans.

Commenter s stated savings from transmission and distribution system efficiency investments that reduce utility losses or reduce the energy used by appliances and devices by optimizing voltage can add an addit ional 0.2 percent per year. Commenter s recommended savings from transmission and distribution efficiency improvements should be included in the BSER for Block 4 and credited in state plans. Commenter s indicated that 6.3 percent of electricity is used in T &D. Commenter s cited an EPRI study that estimates the potential to reduce electricity use in this area is about 10 to 15 percent. Commenter s noted that electricity losses in the distribution system can be reduced substantially through the use of efficien t transformers, improved voltage control, phase balancing, and balancing of reactive power needs. In the transmission system,
commenter s noted opportunities include voltage overlays, voltage and line efficiency. Commenter s stated these measures can enhan ce not only the efficiency, but also the flexibility and reliability of the electric system, facilitating integration of renewables into the system. Commenter s stated EPA excluded Volt VAR Optimization/Conservation Voltage Reduction, a
cost

- effective optio n for states and utilities to save energy and reduce pollution. Commenter s stated maintaining voltage in the lower half of the 114 to 126 volt range saves energy, because reducing voltage reduces the energy used by customer appliances and equipment. Comme nter s stated utilities often have set a strategy of " setting voltage high enough ," however with recent advances in sensors, communication, and information processing and control techniques, utilities can use a process called " Volt Var Optimization ," and th ese practices are termed "Conservation Voltage Reduction." Commenter s stated 26 projects are funded by the Smart Grid Investment Grants through the ARRA implemented VVO or CVR; AEP Ohio implemented VVO on 17 circuits and yielded a 3 percent reduction in r esidential customer energy use during the test period (measured for those customers with AMI meters); and a large pilot in the Pacific Northwest, the Distribution Efficiency Initiative Project, tested CVR practices, and average energy savings using end

- of

- line voltage regulation was 2 and 3 percent, voltage regulation with minor system improvements saved 1 to 2 percent of energy use. Commenter s stated the Regional Technical Forum of the Northwest Power & Conservation Council is developing a protocol for me asuring the savings from Conservation Voltage Reduction. Commenter s recommended EPA raise the best practices level of energy efficiency by 0.2 percent per year, to account for the savings from conservation voltage reduction and other transmission and dist ribution system investments. Commenter s stated in developing EM&V Guidance, EPA's designated entity, should consider developing or validating a protocol for estimating savings from CRV and T&D system that reduce line losses.

Commenter s stated EPA should encourage and credit energy efficiency in the electrical transmission and distribution system. Commenter s stated commercially available technologies exist today (such as voltage control and optimization) that may provide states with cost

- effective emissio ns reductions and compliance options.

While not a part of Building Block 4, c ommenter s supported EPA's inclusion of system level electric distribution utility efficiency measures as a compliance option and encourage EPA to allow for flexibility and innovation in including these types of measures in a compliance plan. Commenter s stated both new and existing technologies can be used by the electric distribution utilities to reduce system

- wide energy use.209 Commenter s provided volt/VAR support at the distribution level as an example technology. Commenter s stated advancements in distribution syst em hardware and software is now making it possible for utilities to more precisely control the power quality of distribution lines, all the way down to individual homes and businesses. Commenter s stated this allows utilities to lower voltage levels to cust omers while maintaining the reliability of the grid. Commenter s stated this will improve system efficiency and lower customer consumption in a manner that is completely seamless to customers, and not dependent on the specific appliances in the home.

Commen ter s provided lowering line losses as an example technology. Commenter s stated utilities can increase the capacity of their systems by increasing the voltage of existing lines rather than adding new lines. Commenter s stated converting a 138kV line to a 230 kV line will lower line losses, improving the system efficiency of the system and lowering the amount of electricity (and fuel) needed to serve its customers. Commenter s stated these are but some of the
many new way s utilities can improve system efficiency, and EPA should ensure that its compliance framework allows for innovations like these to be included.

Commenter s stated NEMA members are leading the way in developing and manufacturing grid technologies that re sult in emission reduction derived from energy efficiency gains in the electric transmission and distribution system (outside the EGU but in front of the meter). When utilities install these products, c ommenter s stated EPA should recognize the emissions sa vings and count them as a means of state compliance under building block four.

Commenter s stated system losses and inefficient EGU dispatch, and therefore CO2 emissions, can be reduced through replacement of less efficient assets with more efficient assets , as well as through operational practices enabled by certain technologies. Commenter s stated because these improvements are often confined within a utility's area of operation, they are measureable and verifiable.

Commenter s stated transformers are a wide ly recognizable piece of the electric system and nearly all electricity consumed passes through transformers on its way to the customer. Commenter s stated transformers enable electricity to be moved efficiently over long distances and allow electricity to be delivered at the proper voltage to the customer. Commenter s stated while a transformer is not intended to use electricity per se, as a matter of physics no transformer is 100 percent efficient. Commenter s stated as a result each time an electrical curre nt is passed through a transformer, some electricity is lost.

Commenter s stated manufacturers have invested heavily in transformer technologies that dramatically improve efficiency, such as NEMA Premium Efficiency

- rated transformers. Commenter s stated yet because of the ability to repair old units, many aging transformers continue to persist on the electric grid, despite their lower levels of efficiency compared to modern transformers. Commenter s stated indeed, the average age of a substation transformer an d a distribution transformer is 42 years. Commenter s stated EPA should recognize and give credit to emissions reductions gained through utility replacement of inefficient transformers.

Commenter s stated approximately 7 percent of the energy generated is lo st in the transmission of power to the customer. Commenter s stated the use of more efficient conductors and cable could reduce these losses, reducing the excess power generation, and subsequent emissions, required to210 meet actual demand and improve system r eliability. Commenter s stated lower loss, low sag conductors can also improve grid reliability and capacity in a more economical and environmentally responsible manner. Commenter s stated these conductors improve reliability as they maintain clearance durin g emergencies and periods of high power loadings thus reducing the chance of system failure. Commenter s stated they also reduce the environmental impact of increasing grid capacity by allowing utilities to use existing structures thereby eliminating the

en vironmental disruption caused by new line builds.

Commenter s stated an Intelligent Grid uses wide area monitoring technologies and real time two way communications, to maximize the efficiency of the transmission and distribution grid, as well as the dispat ch of renewable energy and a reduction of peak load through demand response. Commenter s indicated that types of Intelligent Grid solutions include:

• Wide area monitoring systems (WAMS) that allow for optimized power flow and renewable energy dispatch on th e grid. For example: Sensors, Weather Nodes, and Base Stations. These devices function as an integrated system to monitor the capacity of a power line. The sensors clamp directly onto the conductor and can be used to determine the clearance and capacity of the line. The Weather node collects data and atmospheric conditions surrounding the transmission line and the base station transmits the data to the utility. The use of this type of equipment allows a utility the ability to continuously monitor transmissi on lines thus allowing for more optimized integration of the most efficient and least carbon intensive generation sources by eliminating "apparent" capacity constraints resulting from the use of overly conservative static line ratings.

• Reducing peak demand through demand

- response systems that remotely adjust power consumption thereby reducing the need for additional power generation capacity. Demand Response: Demand response is the process of reducing peak demand instead of dispatching additional EGUs in o rder to maintain balance between supply and demand on the electric grid. Demand response has traditionally been most effective during hot summer days when air

- conditioning loads increase, although during the winter of 2013

- 2014 when the U.S. experienced a polar vortex, demand response was used to manage the wholesale price of electricity, maintain grid reliability, and keep people safe and warm while at the same time reducing the need to operate the least efficient, most

- carbon

intensive EGUs.

Commenter s st ated the FERC estimates that peak demand can be reduced by anywhere from 38 to 188 gigawatts (4 to 20 percent reduction in peak demand) between 2009 and 2019. Commenter s stated if all of the cost

- effective demand response were utilized, it would eliminate the need for 2,000 peaking power plants. Commenter s encouraged EPA to explicitly allow states to implement demand response programs as a means of reducing peak CO2 emissions and complying with building block four.

• Improving the efficiency and quality of el ectrical transmission through enhanced control of voltage and power flow. Volt/VAR Optimization (VVO): Traditional Volt/VAR (volt

- ampere reactive) management technologies have been used by211 the power industry for over 30 years to reduce electric line losse s and increase grid efficiency. Today, technologies like smart meters have advanced to allow increasing levels of Volt/VAR Optimization (VVO), thus reducing overall distribution line losses by 4

- 6 percent through tight control of voltage and current fluctu ations.

Commenter s stated conservation voltage reduction (CVR) is a VVO technology that has numerous potential benefits. Commenter s stated this type of VVO solution can be used to flatten voltage profiles and then lower overall system voltage while staying within the specified ANSI voltage limits. Commenter s stated in short, doing this reduces overall system demand by a factor of 0.7 to 1.0 percent for every 1 percent reduction in voltage. Commenter s stated from a consumer perspective, this reduces the ene rgy they consume. Commenter s stated from a utility perspective it reduces the amount of power they need to generate or purchase from a generator, reducing emissions.

In Virginia, Dominion Power has successfully implemented VVO and CVR to deliver only the level of voltage needed to ensure the safe and effective operation of electricity consuming devices, thus reducing energy waste by 2.8 percent on average.31 These savings are easily quantifiable and verifiable, making VVO and CVR an ideal activity for stat es to include in their plans to help them reduce CO2 emissions under building block four.

Commenter s asked that EPA describe its treatment of EE options within Building Block 4 and state targets such as programs like Volt Var Optimization to reduce ener gy on transmission and distribution circuits.

Commenter s stated in Building Block 4, energy efficiency is defined solely as "end

- use" efficiency. Commenter s noted this is the traditional definition of energy efficiency (i.e. modify a device or piece o f equipment to make it more efficient), but that is not the modern, evolving definition of energy efficiency. Commenter s stated that today, several different types of efficiency are being deployed in the electricity sector. Commenter s stated demand respons e represents dynamic, dispatchable efficiency. Commenter s stated use of new informational technologies and practices has created behavioral efficiency and automated intelligent efficiency. Commenter s stated deployment of smart grid technologies and practices has created new options to increase the efficiency of the distribution system.

Commenter s stated the definition used in Building Block 4 may be the appropriate one for its purposes in goal

- settin g, however the adverse impact on DR and smart grid created by the confusion over the building blocks as menus is being compounded by the Building Block 4 definition of energy efficiency.

Commenter s stated various studies have documented the energy savings associated with demand response and smart grid technology. Commenter s stated the savings occur in six types of programs, as follows: (1) Demand response: kWh savings from increased awareness of energy usage associated with dynamic pricing programs; (2) De mand response: kWh savings from demand response events and reliability programs; (3) Intelligent efficiency: kWh savings associated with energy consumption feedback made possible by smart meters or resulting from more efficient operation of HVAC systems vi a smart thermostats; (4) Grid efficiency: kWh212 savings from conservation voltage control; (5) Grid efficiency: kWh savings from reduction in technical and non

- technical line losses; (6) Grid efficiency: KWh savings from the modernization and more efficient operation of distribution systems.

Commenter s stated Grid Efficiency, Conservation Voltage Regulation (CVR) or Voltage Optimization improves the efficiency of the grid by optimizing voltage on feeder lines that run from substations to homes and businesses. Commenter s stated CVR is made possible by the addition of smart meters and other smart grid technology. Commenter s stated in the US, regulations require that voltage is available to consumers at 120V +/

- 5 percent, which yields a range of 126V to 114V. Co mmenter s stated on any feeder line, voltage on the line gradually decreases as the cumulative load (number of customers) and distance on the line increases. Commenter s stated because of this line drop, power must be transmitted at a high enough voltage tha t the last house on the end of the line gets at least 114V. Commenter s stated without smart meters, utilities have had to use statistical models to estimate the end

- of

- line voltage. Commenter s stated in order to ensure regulatory compliance, utilities have built in a small reserve margin, setting the substation voltage higher. Commenter s stated now, by knowing actual voltage at the end of the line, utilities can lower the substation voltage. Commenter s stated this, in turn, lowers consumption, because the c onsumption at lower voltage requires fewer kWh. Commenter s stated numerous CVR pilots have been conducted, and a few utilities are now deploying CVR technology on a system

- wide basis. Commenter s stated based on the pilots and other programs, the consumptio n at lower voltage requires fewer kWh.

For Grid Efficiency, reduction in losses, c ommenter s stated that between the injection of electricity from large power plants and deliveries to customers, about 7 percent of electricity is typically lost. Commenter s stated transmission losses during hot, peak periods can be much higher. Commenter s stated most of these losses occur via transformer losses and resistance in lines that would not be cost effective to reduce, however, other losses can be addressed cost

effe ctively through the application of smart grid technology. Commenter s stated technical losses that occur due to minor equipment problems, unbalanced loads across feeders, and other technical issues can be corrected with more detailed smart meter and network information. Commenter s stated technical and non

- technical losses can be reduced by an estimated 5

- 10 percent to increase grid efficiency. Commenter s stated at the higher end, this translates into total electricity savings of about 0.5 percent, though the opportunity may ultimately be up to 1 to 1.5 percent.
With respect to efficiency of the distribution system, c ommenter s stated the role of smart, transactive distribution grids in enabling energy efficiency in the grid itself, plus better integration of d istributed resources such as microgrids is quickly gaining prominence and promises to introduce entirely new types of efficiencies into the electricity system. Commenter s stated major state regulatory efforts are underway in New York State and California t o pursue increasing the efficiency of the distribution systems, and more information on such will be available over the coming year.

Commenter s recommended that the EPA grant credit for improvements in transmission and distribution efficiency. Commenter s referred to technical comments submitted by SWEEP.

Comment 2 7 : Water and e nergy efficiency programs should be included in BSER213 Response 2 7 : Multiple commenters requesting water programs that provide energy savings benefits be included in BSER. The EPA is excluding BB4 from BSER. See section s V.A and V.B of the final rule preamble of the CPP for EPA’s response to this comment. The EPA agrees that a wide variety of energy efficiency measures in the water sector can be cost

- effective and produce multiple b enefits including emissions reductions, water savings, reduction in customer bills, positive investments and job creation. Even though DS

- EE is not used in calculating emission performance rates, the final rule gives states the flexibility to use DS

- EE mea sures to achieve their emissions performance rates during compliance. See multiple subsections of section VIII of the final rule preamble of the CPP for details. Such measures must meet the eligibility requirements and provisions related to demand

- side EE and the requirements and criteria related to proper quantification and verification of MWhs from demand

- side EE savings as described in Section VIII of the final rule preamble of the CPP.

The following are summaries of the specific public comments under th is comment:

Commenters recommended EPA include w ater and energy efficiency as part of EE measures.

Commenter s recommended EPA issue guidance identifying an approved protocol for how states may obtain credit in their 111(d) compliance plans for water ef ficiency programs. Commenter s stated there are many opportunities to reduce water use through water efficiency measures, which in turn directly reduce the electricity used to pump and treat water and wastewater. Commenters stated EPA should provide guidan ce on acceptable methods for translating water savings into energy savings, building on several published and forthcoming studies on this issue.

Commenter s pointed out that the treatment and delivery of water and wastewater services requires about four percent of all U.S. energy consumption each year and that policy makers at all levels are examining opportunities to achieve greater efficiencies in water and energy usage. Commenter s shared a November 2014 meeting resolution that urges EPA to provide Sta tes with maximum flexibility to: [i] support energy efficiency measures stemming from the water

- energy nexus, and [ii] incorporate those efforts, and their positive impacts on the environment, into any compliance plan that might emerge. Commenter s included the full text of the resolution as Appendix C of their comment letter.

Commenter s stated the electric and water sectors are closely aligned

- more so than most realize. Commenter s stated as the U.S. DOE and numerous others have observed, these sectors intersect at critical " nexus " points, which means that, among many other things, energy efficiency efforts in one sector will have significant impacts in the other. Commenter s stated in general, this nexus encompasses the interlinking aspects of these two industries, which are highly interdependent: energy is required to extract, pump and deliver water to consumers, while water is used throughout the process of energy extraction and el ectricity production. Commenter s stated water companies are large energy users. Commenter s stated that by one estimate, " Some 4 percent of the nation's electricity goes toward moving (80 percent) and treating water/wastewater. " Commenter s stated this 4 per cent equals approximately $4 billion in energy costs. Commenter s indicated that as the EPA has noted, "[W]ater and wastewater utilities are typically the largest consumers of energy in municipalities, often accounting for 30

- 40 percent of total energy

cons umed."2 14 Commenter s stated similarly, energy companies are large consumers of water. Commenter s stated a recent report stated, " In 2005, the nation's thermoelectric power plants

- which boil water to create steam, which in turn drives turbines to produce ele ctricity

- withdrew as much water as farms did, and more than four times as much as all U.S. residences. " Commenters stated that i n the proposed rule, the EPA's building blocks include increased use of natural gas as a fuel replacement for coal in power pla nts across the country. Commenter s stated even this turn to natural gas implicates significant water use as hydraulic fracturing increases in the United States. Commenter s stated while the hydraulic fracturing industry has been increasing its efforts to re use and recycle water, EPA estimates that hydraulic fracturing's annual national " water requirement[s] may range from 70 to 140 billion gallons. This is equivalent to the total amount of water [used] each year in roughly 40 to 80 cities with a population o f 50,000 or about one to two cities of 2.5 million people."

Commenter s stated with regard to their increasing interdependence, recent droughts in the Southwest and major storms in the Northeast have underscored how closely these two sectors work together and how much they rely on each other: droughts can create challenges for energy companies to keep up with demand, while blackouts can compromise the ability of water companies to deliver water to customers. Commenter s stated in short, there are numerous u nder

explored opportunities for aligning the ongoing work of water companies with the EPA's goal of cutting carbon emissions from existing stationary sources.

Commenter s stated opportunities to leverage water company efforts to cut energy use are natural extensions of two of the EPA's four "building blocks" that it identified as foundational to state efforts vis

- a

- vis developing mechanisms to lower carbon intensity. Commenter s stated the EPA's third building block, and the first of relevance here, emphasiz es the use of zero

emission/renewable energy sources like solar and wind. As discussed in more detail below, Commenter s ha ve been leader s in harnessing these sources to drive down energy use and shrink its carbon footprint. Commenter s stated the EPA's four th building block encourages energy efficiency measures.

Commenter s stated with regard to energy efficiency, there are certainly many opportunities for leveraging progress on this front in the water sector. Commenter s stated water and wastewater
treatment plants have not historically been designed with energy efficiency in mind. Commenter s stated today, we better understand that upgrading water and wastewater infrastructure with innovative water and energy efficiency technologies can yield more effective ma nagement of our energy use and our water system outputs (making the best use of every drop of water we have), thereby easing customer rate burdens and facilitating delivery of energy efficient, reliable, and safe drinking water.

Commenter s stated they are an industry leader in energy efficiency innovations, and provided the following examples of innovations provide significant and measurable energy efficiency benefits:

• NPXpress. American Water has been awarded three patents for a technology called NPXpres s to reduce aeration energy consumption, which uses the most energy during wastewater treatment, by up to 50 percent and supplemental carbon source by 100 percent. This technology has been implemented at seven full

- scale215 wastewater treatment plants in New Jersey and New York, and is currently being implemented at a system in California as part of the company's overall initiative to achieve sustainable, energy

- neutral wastewater treatment.

• Energy Usage Index Management. American Water manages its energy pro gram using the Energy Usage Index (EUI) metric derived by dividing total power usage in megawatt

- hours (MWh) by the volume of water sold in million gallons (MG) during a discrete period of time. The EUI data is collected and monitored to serve as a baromet er for the condition of the pump inventory. Specifically, as pumps age, they wear and become less hydraulically efficient, which translates to more power required to deliver the same volume of water. American Water's pumping inventory is comprised of about 7,500 centrifugal pumping units. Of this, it is estimated that about 20 percent of the largest pumps consume 80 percent of American Water's total power usage. Significant reductions in energy usage and CO2 emissions can be achieved by replacing older, ine fficient pumps. For example, replacement of 5 large (10 and 20 MG/day) pumps and motors at a Pennsylvania American Water plant resulted in a quantifiable reduction of 2,200 MWh per year of electricity demand at this single facility.

• Smart Grid Technology. American Water is the first U.S. water utility to use the Smart Grid technology of ENBALA Power Networks. This innovative technology manages the way American Water's treatment plants and pumps use electrical power, allowing us to offer capacity to the ele ctric regulation market. The regulated market provides short term grid balance service critical to the integrity of the electric grid. A successful pilot program at Pennsylvania American Water's Shire Oaks Pumping Station offset 2 to 3 percent of the site' s total energy bill and has led to a larger partnership between American Water and ENBALA Power Networks, one that will bring ENBALA's Grid Balance technology to large treatment facilities throughout American Water's service territory.

Commenter s stated in order to prompt change in states that have not yet sought to reduce emissions and to mitigate the burden that states like New York face in achieving significant further reductions of GHG emissions on top of already realized reductions, the federal
gove rnment should provide funding for efficiency measures and best management practices at government

- owned infrastructure. Commenter s stated specifically, the water and wastewater sector represents a significant opportunity for the implementation of energy ef ficiency measures and the construction of renewable generation capacity. By EPA's own account, c ommenter s stated the Rule is expected to increase electric prices by 6 to 7 percent by 2020 and increase costs for water utilities by approximately $250 millio n per year. While the water and wastewater sector represents a significant opportunity for the implementation of energy efficiency and renewable energy programs that may assist states in meeting the Rule's emissions guidelines,

c ommenter s stated energy eff iciency programs have traditionally been targeted at other sectors. Commenter s stated therefore, there are significant reductions that remain to be captured and investment in efficiency measures will have high returns, as water infrastructure operates
cont inuously and includes long

- lived assets. Commenter s stated Federal funding for municipal water and wastewater utilities to implement efficiency and renewable energy projects would achieve significant reductions. Commenter s stated further, EPA should ensure that standard216 definitions of energy efficiency and renewable energy include processes and tools specific to this sector, such as water loss mitigation and water demand management, and biogas generated from anaerobic diges tion, respectively.

Commenter s commended the EPA for including building block four to demand

- side energy efficiency within the Clean Power Plan. By including demand

- side energy efficiency measures,
commenter s said impacted sectors that are not directly regulated by the plan will be able to nevertheless offset at least some of their increased costs of increasing electricity prices to reducing consumption.

According to commenter s , the water utility sector is estimated to use approximately one percent of th e nation's electricity supply to provide the water services, and in some areas a larger percentage. By translating the projected increased costs as electricity to the water sector,
commenter s sa y it is likely that this rule will cost utilities approximatel y $250 million per year by 2020, which is more expensive than most drinking water regulations have been historically. If the sector is able to secure just one percent of the funding likely to become available for energy efficiency measures, commenter s esti mated the sector's cost is likely to be reduced by about $100 million per year.

Commenter s strongly believes that the water utilities sector could be an important part of reaching the state's goals laid out within the EPA's Clean Power Plan. Commenter s not ed that there is an ever

- increasing body of literature about ways to increase energy efficiency at water treatment plants, in drinking water distribution, and in wastewater collection and treatment.

Commenter s argued that, in many ways, water utilities are a golden opportunity for energy efficiency programs as they are professionally staffed, continuously operated, are present in most communities around the country and their efficiency gains can be easily verified as needed.

Although water utilities can par ticipate to some extent in the more common replacement of lighting and heating and air conditioning systems that are presently in current state plans,
commenter s believe d that there are great gains to be made throughout the Water

- Energy nexus not only cove red by existing state rebate incentive programs, but to include other items such as more efficient pumps and motors, reducing lost water and rehabilitation and replacement of worn and less

- efficient infrastructure with more efficient equivalents.

Therefore , commenter s encouraged the EPA to include language in the final rule as well as in guidance and supporting materials for the states, electric utilities and the public that the water sector can be included as an important part of achieving energy efficienc y upgrades. Commenter s further encouraged the EPA in their discussions with and guidance to states to allow for custom energy efficiency improvements to be eligible for funding rebates and incentives as many of the solutions throughout the water sector wil l be custom solutions for the particular circumstances in that area.

Commenter s stated that research under the UCS

- led Energy and Water in a Warming World initiative (EW3) found that high use of energy efficiency and renewable energy could lead to deep reductions in water impacts and cited the following findings:217 " A pathway focused o n renewable energy and energy efficiency, we found, could deeply cut both carbon emissions and water effects from the power sector. Water withdrawals would drop 97 percent by 2050

-- much more than under business as usual. They would also drop faster, with 2 030 withdrawals only half those under business as usual. And water consumption would decline 85 percent by 2050. This pathway could also curb local increases in water temperature from a warming climate ."

Comment 2 8 : Innovative Program Design and Financin g
Response 2 8 : The EPA decided not to include DS

- EE (building block 4) in BSER for the final rule. A response is not provided here on how innovative energy efficiency financing programs relate to BSER as this comment is now outside the scope of the CPP. See section s V.A and V.B of the final rule preamble of the CPP for details. However, DS

- EE does remains generally available for compliance, inclusive of energy efficiency financing programs which facilitate or indirectly result in greater demand

- side energ y efficiency. As is the case for all DS

- EE, such measures must meet the requirements and criteria related to proper quantification and verification of MWhs from demand

- side EE savings as described in Section VIII of the final rule preamble of the CPP.

The following are summaries of the specific public comments under this comment:

Commenters supported use of innovative EE program design and financing.

Commenter s stated improvements and innovations in EE program design and implementation can enable custo mers to capture a greater share of the available EE resource base, even absent technological improvements or reductions in technology cost. Commenter s stated for example, recent innovative programs such as PACE financing have enabled more customers to inve st in EE improvements. Commenter s stated PACE financing effectively allows property owners to borrow money from a local government to pay for renewable energy systems and/or EE improvements. Commenter s stated the amount borrowed is typically repaid via a s pecial assessment on property taxes, or another locally

- collected tax or bill, such as a utility bill. Commenter s stated only property owners within a local jurisdiction that opt in to a PACE program may receive financing; local PACE programs are currently operating in at least nine states (California, Connecticut, Florida, Maine, Michigan, Minnesota, Missouri, New York and Wisconsin) and the District of Columbia.

Commenter s stated on

- bill financing (OBF) is another innovative program that has been offered by some utilities and other EE program administrators to overcome the financial barrier faced by customers when investing in EE improvements that have a high upfront cost. Commenter s stated OBF allows utility customers to invest in EE improvements and rep ay the funds through additional charges on their utility bills. Commenter s stated if structured properly, an OBF program can substantially reduce the cost of and improve access to financing. Commenter s stated in many cases, the product can be " bill

- neutral ," meaning that energy savings are sufficient to cover the monthly payments for the financing so that the total monthly charge on utility bills is218 less than or equal to the pre

- investment amount. Commenter s stated on

- bill programs have been piloted as earl y as 1993 but have recently seen a surge in popularity. Commenter s stated currently, utilities in at least 23 states have implemented or are about to implement OBF programs, many of which (Illinois, Hawaii, Oregon, California, Kentucky, Georgia, South Caro lina, Michigan, and New York) have legislation in place that supports adoption.

Commenter s stated achievable potential can be increased by utilities and state agencies through concerted investment and improvement in program design and financing. Comme nter s at least twenty states now have utilities that offer "on

- bill" loan programs that allow ratepayers to finance energy efficiency projects at competitive rates, and repay the cost of the loans through monthly energy bills. Commenter s stated that since 2009, over two dozen states have authorized local governments to implement PACE programs to provide competitive financing for energy efficiency projects by allowing property owners to repay the costs of energy efficiency investments gradually through thei r property taxes. Commenter s stated individual utilities are increasingly devising other creative customer outreach and financial incentive programs that enhance participation in energy efficiency initiatives and help achieve greater levels of energy savi ngs. Commenter s cited a recent analysis of innovative energy efficiency program designs that estimated that such programs could achieve total savings of almost 1,200 TWh in 2030, or approximately 27 percent of baseline electricity demand, which is well in excess of EPA's target.

Commenter s argued that EPA m ust bolster its action plan with an accelerated time table and incentive for EE. Commenter s stated that a partial alternative to the replacement of coal with fracked gas is to reduce the consumption o f electrical energy. However, commenter s said the national effort to improve energy efficiency has unfortunately not received the support it deserves. Commenter s noted that a recent analysis by the American Council for an Energy Efficient Economy, which studied measures taken to reduce energy consumption, ranked the U.S. 13 out of 16 of the world's major economies, with Germany number one. Commenter s provided a li nk to that analysis.

Commenter s understood that the EPA has developed a national action plan for energy efficiency, but guessed that very few people in the audience for the public hearing were aware of that plan and its accomplishments. Commenter s stated t hat there is a need to significantly bolster the action plan that EPA has developed with an accelerated time table and incentives for energy efficiency in buildings, homes, manufacturing plants, etc., and cited the comments from
commenter s on the subject.

Commenter s argued that the Clean Power Plan must include stronger incentives for energy efficiency and renewables. Commenter s w ere concerned that the Clean Power Plan incentivizes conversion of coal towards natural gas and nuclear, over conversion to wi nd, solar and most importantly for the commenter s ' state, energy efficiency. Commenter s stated that the plan focuses on end

- of

- stack emissions instead of the Best Available Technology approach, which would create more incentives for renewables and efficien cy. As the plan stands now,
commenter s noted that it only lists energy efficiency as an "option" not a mandate. According to
commenter s , this needs to be addressed in order to promote a healthy diversification of energy sources that will in turn promote be tter reliability of energy capacity.219 Commenter s noted that Kentucky is far behind many other states when it comes to diversifying its energy portfolio. Commenter s noted that their state has no Renewable Energy Portfolio Standard or Energy Efficiency Resour ce Standards and ranks third among states in per customer electricity use, while having some of the lowest per

- capita income rates in the nation. In other words, according to commenter s , due to the fact that their per capita energy consumption is among the highest in the nation, energy efficiency is one of their best avenues for real progress yet they have some of the least incentives. For Kentucky to not remain at the bottom,
commenter s stated that the plan must promote strong incentives for increasing ene rgy efficiency.

Commenter s remarked that, in addition to using Federal, state, and local energy efficiency building codes and energy efficiency product standards, evidence indicates that the adoption of financial mechanisms that encourage electric utili ty investment in energy efficiency can facilitate the achievement of incremental energy efficiency. The commenter s explained that such measures include allowance for the recovery of energy efficiency program and administrative costs, allowance for the reco very of lost contribution to fixed costs, and incentives for shareholders or ratepayers to produce the desired best practice efforts.

Comment 29 : EE Programs Lead to Economic Growth and Job Creation

Response 29 : EPA agrees that a wide variety of energy ef ficiency measures can be cost

- effective emissions reductions strategies which create multiple benefits, including lower electric bills, positive investments and job creation. Energy efficiency measures also continues to offer future emissions reductions op portunities. However EPA is excluding BB4 from BSER. See section s V.A and V.B of the final rule preamble of the CPP for EPA’s response to this comment. Even though DS

- EE is not used in calculating emission performance rates, the final rule gives states the flexibility to use DS

- EE measures to achieve their emissions performance rates during compliance. See multiple subsections of section VIII of the final rule preamble of the CPP for details. EPA’s RIA’s illustrative plan scenarios incorporate a level of DS

- EE (illustrative DS

- EE plan scenario) and, thus, reflects the economic impacts of DS

- EE: lower electric bills, lowering demand, and creating jobs. See the RIA for the final CPP for specifics.

The following are summaries of the specific public comments under this comment:

Commenters noted the economic benefits of EE programs.

Commenters noted that energy efficiency will lead to economic growth and job creation.

Commenter s stated that the Clean Power Plan will create jobs in Pennsylvania. Commenter s ha ve already seen the job creation impact of demand side energy efficiency. Commenter s noted that Pennsylvania's Governor, Tom Corbett, and his energy plan released in January s tated a booking study that reported that Pennsylvania has the fifth highest number of energy and resource efficiency jobs in the nation with over 42,000 employees.

Commenter s noted another recent study showing that Act 129 our energy efficiency resource
st andard here in PA may have created over 10,000 jobs.220 Commenter s stated that looking forward, the American Counsel for an Energy Efficient Economy projects that almost 8,000 new efficiency jobs could be created by 2020 and almost 17,000 by 2030 if Pennsylva nia utilizes demand side reductions to meet the Clean Power Plan.

Commenter s stated that they are not aware of a comprehensive snapshot of current jobs associated with energy efficiency in Iowa. However, according to commenter s , Iowa utilities are regul arly saving 1% to 1.5% annually and have been achieving these savings levels for a number of years. Commenter s noted that there is a substantial infrastructure in place to support energy efficiency programs, including audit and analysis firms, retail, manu facturing, architects, and firms that handle service and installation for HVAC and other efficiency equipment. According
to commenter s , energy efficiency programs certainly support significant direct jobs among a wide range of firms. Commenter s noted, in a ddition, consumer savings from energy efficiency are most frequently spent in the local economy, meaning many indirect and induced jobs are supported by energy efficiency in Iowa.

According to commenter s , several recent analyses have been conducted on the economic benefits of using efficiency to comply with carbon pollution standards. Commenter s noted that The American Council for an Energy Efficient Economy found that using a set of energy efficiency policies to comply with carbon standards could create 5, 900 net jobs in Iowa by year 2030 while saving electric customers money. According to commenter s , The Natural Resources Defense Council recently found that using energy efficiency to comply with carbon standards could create up to 2,500 jobs in Iowa by 202 0 while saving electric customers money. According to
commenter s , these studies are consistent with a 2008 Iowa Policy Project study indicating that high levels of energy efficiency savings (e.g., 1.5% annually) could create up to 4,473 net jobs in 2030.

Commenter s provided an analysis of incentivizing EE through carbon pollution or other policies provides opportunity for economic growth and job creation. Commenter s provided analysis of the 20 percent electricity savings by year 2030, showing a gain of 800,000 jobs for the American economy and wage gain of $45 billion; an increase in GDP of $26 million; and reduction of 971 million mt CO2, 700,000 tons of SO2, and 80 0,000 tons of NOx.

Commenter s stated EE has played an enduring and critical role in our nation's economy, is a low

cost resource, reduces energy bills, reduces operations and maintenance costs at industrial plants, and improves the quality and speed in th e production of goods and services. Commenter s cited a McKinsey study that estimated that a holistic approach to efficiency would save $1.2 trillion, reduce end

- use energy consumption by 9.1 quads in 2020, and reduce 1.1 Gton GHG annually. Commenter s sta ted infrastructure improvements and displacement of existing capital stock for newer productive EE technologies, reducing the distance people and goods are transported could reduce total energy use by 59 percent by 2050 (compared to BAU EIA projection).

Co mmenter s cited the 2009 McKinsey study that found EE measures would save family and businesses $680 billion over 10 years and require 600,000 to 900,000 workers to develop, produce, and implement efficiency improvements, administer programs, and verify res ults.221 Commenter s stated studies suggest that energy efficiency can provide the largest single source of GHG emission reductions. Commenter s cited a recent study by Synapse Energy Economics that indicated a 0.1 percent reduction in electricity use by 2050, power sector CO2 emission would fall 25 percent below 2010 levels; a combination of EE and renewable energy technologies could reduce CO2 emission to 81 percent below 2010 levels and could avoid $450 billion in health effects from 2010 to 2050 (based on N RC damage factors).

Commenter s stated EE is cost

- effective and EE benefits exceed the costs over the investment life of measures and improvements. Commenter s cited a LBNL study that demonstrated one

- third of electricity and NG use in buildings could be sa ved at total cost of 2.7 cents/kWh for electricity and between $2.5 and 6.9/million Btu for NG (2007 dollars) and costs savings would be 3.5 times larger than upfront investment, or benefit

- cost ratio of 3.5. Commenter s cited a 2006 Amann study that non

- e nergy benefits of EE might range from 50 to 300 percent household energy bill savings, allowing financial savings, energy bill relief, comfort, aesthetics, noise reduction, health and safety, and convenience. Commenter s cited 2003 Worrell and 2005 Lung
st udies that found non

- energy benefits enhance the cost

- effectiveness of EE within the industrial
sector.

Commenter s stated efficiency reduces emissions and mitigates health costs.

Commenter s stated efficiency stimulates economic growth by reducing the cost of energy services and spurring job creation. Commenter s cited ACEEE analysis for two policy scenarios: Advanced Case (42 percent energy savings from 2050 reference case) and Phoenix Case (59 percent energy savings from 2050 reference case). Commenter s i ndicated the Advanced Case resulted in $2.4 trillion cumulative capital investment from 2012 to 2050, $15 trillion in energy bill savings, and a 1.3 million job gain in 2050. Commenter s indicated the Phoenix Case resulted in $5.3 trillion cumulative capit al investment over the same time period, $23.7 trillion in cumulative energy bill savings, and a gain of 1.9 million jobs in 2050. Commenter s provided Figure 2 showing the employment benefits from the two policies.

Commenter s provided an analytical framew ork to evaluate the net economic and employment impacts of EE. Commenter s indicated they used the EIA BAU scenario as the baseline/backdrop; evaluated an Efficiency

- Led scenario based on a more production investments in EE technologies, systems, and infra structure. Commenter s’ assessment s w ere based on

1. T he standard projection for U.S. electricity consumption over the period 2012 through 2030;

2. T he key characteristics of the alternative investment scenario; and finally,

3. A description of the DEEPER modelin g system used to evaluate the efficiency scenarios characterized in this report.

Commenter s provided background on the EIA BAU scenario. Commenter s stated the foundation for this assessment is the Annual Energy Outlook published by the Energy Information Administration (2012). Commenter s stated that although the forecast of energy and other market trends covers all uses of energy within our economy ( including transportation fuels, natural gas,222 and other resources), here we will explore possible changes in our nation's electricity use beginning in 2012 through the year 2030. Commenter s stated this includes the growth in the number of households, commer cial, and industrial customers over that time along with the anticipated growth in the demand for electricity services by those users, and it also includes both expected trends in electricity prices as well as a discussion of potential drivers of important shifts in electricity demand. Commenter s stated since we are exploring the impacts on the economy, we will review the anticipated growth in the nation's jobs and Gross Domestic Product (GDP), also through the year 2030. Commenter s provided a table with the assumed reference case projections for key metrics against which they compared the impacts of an efficiency

- led scenario.

Commenter s stated the summary in Table 1 forecasts several positive trends even under the reference scenario: EIA projects the eco nomy will grow at a faster clip than either the number of households or their increased use of electricity consumption, as measured by EIA's assessment of the nation's GDP, and jobs will also increase. Commenter s stated while electricity expenditures will grow as well, they will rise more slowly than GDP. Commenter s stated EIA's forecast clearly anticipates that the economy will make increasingly efficient use electricity to provide the nation's homes and businesses with needed goods and services. Comment er s stated the business

as

- usual rate of efficiency improvement still requires an increase in overall electricity consumption since the economy is projected to grow more quickly than the rate of efficiency improvement. Commenter s stated while pollution con trol technologies are likely to reduce future air pollution from emissions of sulfur dioxide (SO2) and nitrogen oxides (NOx), as shown in Table 1, carbon dioxide (CO2) emissions are likely to increase due to the increased fossil fuel combustion associated with the generation of electricity.

Commenter s stated that fortunately, we can do much better. Commenter s stated we can reduce overall pollution levels and, at the same time, lower the nation's total electricity bill. Commenter s stated the many studies su mmarized in Section II of this report indicate that a much larger set of energy efficiency gains beyond the business

- as

- usual improvements is possible. Commenter s stated this is true for the residential, the commercial, and the industrial sectors of the

ec onomy. Commenter s stated for example, if the energy efficiency opportunities highlighted in the study by Laitner et al. (2012) were to be developed and implemented, the total electricity demand for 2030, as shown in Table 1, would decline to 3,370 billion kilowatt

- hours rather than increase to 4,258 billion kilowatt

- hours. Commenter s stated what may be less obvious, however, is that the efficiency gains will prove to be less expensive than increasing the generation capacity to meet the higher electricity demands. Commenter s stated some readers may be surprised to learn how much the economy depends every year on the flow of normal investments as they affect our nation's homes, schools, businesses, roads, and bridges, as well as the many electric power plant s, transmission lines, and industrial facilities needed to maintain a functioning economy. Commenter s stated in Table 1 it appears that we will invest about $1,875 billion in new buildings and infrastructure, or in routine upgrades to existing infrastructu re. Commenter s stated by 2030 this will grow to an estimated $4,066 billion or about 18.7 percent of GDP. Commenter s stated as we might imagine, and as shown in the analysis that follows, redirecting even one percent of the nation's annual investment to g reater gains in electricity efficiency can provide the foundation to achieve a significant level of cost savings compared to the normal rate of energy efficiency improvements. Commenter s stated in addition, as we shall also see, more productive investments will drive a small but positive gain in the nation's job223 market and achieve a cost

- effective reduction in the nation's air pollution and greenhouse gas emissions.

Commenter s provided notes on the key attributes of the Energy Efficiency Scenario. Commenter s stated in this assessment, they drew upon two previously referenced studies to define an exploratory scenario that helps evaluate energy efficiency as a pollution control strategy; and, more critically, to explore how energy efficiency investments might drive both significant cost savings and overall gains in employment. Commenter s stated the first assessment is from Laitner et al. (2012), which explored the long

- term energy efficiency potential for two scenarios through the year 2050. Commenter s stated that report examined a more complete set of efficiency options, including natural gas and petroleum efficiency improvements as well as electricity savings from all sectors of the economy. Commenter s stated the second is Keith et al. (2011), a report from S ynapse Energy Economics that focused explicitly on electricity savings alone. Commenter s stated both assessments found that productive investments in energy efficiency upgrades generated a net positive economic benefit. Commenter s stated although both stu dies indicate that electricity savings of 30 to 37 percent from the reference case projected for 2050 are possible, the central case of this analysis is an assessment of the economic impacts of achieving a 20 percent efficiency gain by 2030.

Commenter s pro vided Table 2 ( Key Metrics from Year 2050 Alternative Energy Future Studies ) that highlights key metrics from both the ACEEE and Synapse scenarios, to give a sense of scale and cost

- effectiveness of the efficiency resource more broadly. Commenters also inc lude d two other studies: the Energy Technology Perspectives study published by the International Energy Agency (IEA/ETP 2010) and Reinventing Fire released by Lovins et al. (2011).

Commenter s stated there is a wide range in the assumed future GDP growth am ong the five scenarios outlined in Table 1. Commenter s stated the IEA projects an economy in 2050 that is about 1.95 times bigger than in 2010. Commenter s stated ACEEE and Synapse, generally following the EIA's Annual Energy Outlook, suggest economic activ ity that will be 2.71 to 2.79 times larger than 2010. Commenter s stated Reinventing Fire suggests a more moderate growth path so that economic activity is 2.58 times larger in 2050 compared to 2010. Commenter s stated in comparing the business

- as

- usual energy growth in the five scenarios with their respective 2050 efficiency gains, the evidence suggests potential 2050 savings that range between 42 and 59 percent. Commenter s stated moreover, all of the scenarios suggest a net positive savings to investment ratio, ranging from 2.1 to 5.2 over the period of analysis within each scenario. Commenter s stated to test the idea of how effective efficiency might be as a pollution control strategy, but reflecting larger un certainties in the out

- years, we take the analysis here to only 2030.

Commenter s stated our core scenario for this exploration assumes an electricity savings that, beginning in 2014, slowly ratchets up to reach 20 percent by 2030. Commenter s stated the ben efit

- cost ratio of this scenario (as we shall see) is over 2.0. Commenter s stated as we explain further in the section that follows, we assume that program costs will drive investments that, in turn, generate a 20 percent reduction in conventional electric ity generation by 2030 so that the electricity savings, in constant dollars, are twice as large as the combination of program costs and investments, also in constant dollars.224 Commenter s described the Dynamic Energy Efficiency Policy Evaluation Routine (DEE PER) Modeling System, which is an econometric input

- output analytical tool. Commenter s stated although recently given a new name, the model's origins can be traced back to modeling assessments that were first completed in the early 1990s . Commenters presen ted Appendix B for historical information and other details on the DEEPER model.

Commenter s stated the DEEPER model is quasi

- dynamic in that the costs of energy efficiency improvements are based on the level of efficiency penetration over some period of ti me. Commenter s stated the greater the efficiency penetration, the higher the costs, and the resulting payback periods begin to increase. Commenter s stated moreover, the model adjusts labor impacts given the anticipated productivity gains within key sectors of the U.S economy. Commenter s stated as an example, if the construction and manufacturing sectors increase their output as a result of the alternative policy scenario, the employment benefits are likely to be affected, depending on assumptions about the expected labor productivity gains within each of those
sectors.

Commenter s stated input

- output models initially were developed to trace supply linkages in the economy. Commenter s stated for instance, an input

- output accounting framework can show how purchases of lighting technologies or industrial equipment benefit the lighting and other equipment manufacturers in a state. In addition, because the input

- output model has coefficien ts linking both directly and indirectly affected industries, the model can also reveal the multiplicative impacts that such purchases are likely to have on other industries and businesses that might supply the necessary goods and services to those manufact urers.

Commenter s stated the net economic gains of any new investments in energy efficiency will depend on the structure of the economy, and which sectors are most affected by changes in new spending patterns that are promoted by investments in energy prod uctivity rather than electricity supply. Commenter s provide d Figure 3 (titled: “ Labor Intensities for Key Sectors of the U.S. Economy ”) to illustrate this point, by comparing the direct and total employment impacts that are supported for every one million dollars of revenue received by different sectors of the U.S.
economy. Commenter s stated these include electric utilities, manufacturing, personal and business services, and construction. Commenter s stated for purposes of this study, a job is defined as s ufficient economic activity to employ one person full

- time for one year.

Commenter s stated of immediate interest in Figure 3 is the relatively small number of direct and total jobs supported by energy sector spending. Commenter s stated within the United St ates the electric utility industry provides, for example, only 6.7 total jobs per million dollars of revenues that it receives. Commenter s stated this total includes jobs directly supported by the industry as well as those jobs linked to businesses which, in turn, provide goods and services to maintain the utilities' operation. Commenter s stated it also includes the additional jobs supported by the respending of wages within the U.S. economy. Commenter s stated on the other hand, one million dollars spent in construction supports a total of 19.3 jobs, both directly and indirectly. Commenter s stated as it turns out, much of the job creation from energy efficiency programs is derived by the difference between jobs within the utility supply sectors and jobs that are supported by the respending of energy bill savings in other sectors of the economy.225 Commenter s provided an illustration of jobs created from improvements in commercial office buildings. To illustrate how a simplified job impact analysis might be done , Commenter s stated we will use the example of installing one million dollars of efficiency improvements in a large office building. Commenter s stated office buildings (traditionally large users of energy due to heating and air

- conditioning loads, signific ant use of electronic office equipment, and the large numbers of persons employed and served) provide substantial opportunities for energy

- saving investments. Commenter s provided a table with the results of this example.

Commenter s stated the assumption us ed in this example is that the investment has a positive 4

- year payback. Commenter s stated in other words, the assumption is that for $1 million of energy efficiency improvements, the upgrades might be expected to save an average of $250,000 in reduced ele ctricity costs over the useful life of the technologies. Commenter s stated this level of savings is conservatively low but consistent with the low end of ranges cited elsewhere in this report. Commenter s stated at the same time, if we anticipate that the efficiency changes will have an expected life of roughly 15 years, then we can establish a 15

- year period of analysis. Commenter s stated in this illustration, we further assume that the efficiency upgrade s take place in the first year of the analysis, while the electricity bill savings occur in years 1 through 15. Commenter s stated moreover, we assume that only half the savings occur in the first year as it may take several months to actually start an aver age project with savings not beginning until halfway through the year.

Commenter s stated the analysis further assumes that we are interested in the net effect of employment and other economic changes. Commenters stated t his means we must first examine all changes in business or consumer expenditures, both positive and negative, that result from a
movement toward energy efficiency. Commenters stated e ach change in expenditures must then be multiplied by the appropriate multiplier for each sector affected by the change in expenditures. Commenter s stated the sum of these products will then yield the net result.

Commenter s stated in the example, there are four separate changes in expenditures, each with their separate effect. Commenter s stated as Figure 3 indica tes above, the overall impact of the scenario suggests a gain of 33.7 job

- years (rounded) in the 15

- year period of analysis. Commenters stated t his translates into an average gain of about 2.2 jobs each year for 15 years. Commenter s stated in other words, the efficiency investment made in the office building is projected to sustain an average gain of 2.2 jobs each year over a 15

- year period compared to a BAU scenario. Commenter s stated roughly speaking, if comparable projects like this scaled to more like $ 100 million in a single year, the number of jobs gained would similarly scale upward (to 3,370 job

- years).

Commenter s reviewed the appropriate modifications in the energy efficiency scenarios. Commenter s stated the economic assessment of the alternative e nergy scenarios was carried out in a very similar manner as the example described above. Commenter s stated that is, the changes in energy expenditures brought about by investments in energy efficiency and renewable technologies were matched with their appr opriate employment multipliers. Commenter s stated there are several modifications to this technique, however.

Commenter s stated first, it was assumed that only 90 percent of both the efficiency investments and the subsequent savings are spent within the Un ited States. Commenter s stated we based this226 initial value on the 2010 IMPLAN dataset as it describes local purchase patterns that typically now occur in the United States. Commenter s anticipated that this is a conservative assumption since most efficiency projects are likely to be (or could be) carried out entirely by contractors and dealers within the United States. Commenter s stated by way of illustration, if the share of domestic spending turned out to be 100 percent, for example, the overall job gain might grow another five percent or more compared to our standard scenario exercise.

Commenter s stated second, an adjustment in the employment impacts was made to account for assumed future changes in labor productivity. Commenter s stated as outlined in th e Bureau of Labor Statistics Outlook 2010

- 2020, productivity rates are expected to vary widely among sectors. Commenter s stated for instance, the BLS projects an economy

- wide 1.5 percent annual average productivity gain as the economy better integrates inf ormation technologies and other improvements. Commenter s stated to illustrate the impact of productivity gains on future employment patterns, let us assume a typical labor productivity increase of 2.2 percent per year. Commenter s stated this means, for exa mple, that compared to 2012, we might expect that a $1 million expenditure in the year 2030 will support only 68 percent of the number of jobs as in 2012.

Commenter s stated third, for purposes of estimating electricity bill savings, it was assumed that

current electricity prices for the residential, commercial, and industrial sectors in the United States would follow the same growth rate as those published by the Energy Information Administration in its Annual Energy Outlook 2012.

Commenter s stated fourth, it was assumed that the large

- scale efficiency upgrades are financed by bank loans that carry an average 6 percent interest rate over a 5

- year period. Commenter s stated while this does raise the cost to end

- users as a result of the interest that must be pa id on bank loans, raising or lowering the interest rates in this analysis will not appreciably affect the results otherwise reported. Commenter s stated that to limit the scope of the analysis, no parameters were established to account for any changes in in terest rates as less capital

- intensive technologies (i.e., efficiency investments) are substituted for conventional supply strategies, or in labor participation rates, all of which might affect overall spending patterns.

Commenter s stated while the higher cost premiums associated with the energy efficiency investments might be expected to drive up the level of borrowing (in the short term), and therefore interest rates, this upward pressure would be offset to some degree by the inve stment avoided in new power plant capacity, exploratory well drilling, and new pipelines. Commenter s stated similarly, while an increase in demand for labor would tend to increase the overall level of wages (and thus lessen economic activity), the job bene fits are small compared to the current level of unemployment or underemployment. Commenter s stated hence, the effect would be negligible.

Commenter s stated fifth, for the buildings and industrial sectors it was assumed that a program and marketing expendit ure would be required to promote market penetration of the efficiency improvements. Commenter s stated based on other program reviews, this was set at 15 percent of the efficiency investment in the early years but declining to 5 percent of the much larger i nvestments in the last year of the assessment 64.227 Commenter s stated finally, it should again be noted that, by design, this analysis does not account for the full effects of the efficiency investments since the savings beyond 2030 are not incorporated into the modeling assumptions. Commenter s stated nor does the analysis include other productivity benefits that are likely to stem from the efficiency investments. These can be substantial, especially in the industrial sector. Commenter s stated industrial inve stments that increase energy efficiency often advance other economic goals such as improved product quality, lower capital and operating costs, increased employee productivity, or capturing specialized product markets. Commenter s stated to the extent these co

- benefits are realized in addition to the energy savings, the net economic impacts would be amplified beyond those reported here.

Commenter s provided an analysis of the economic impact of a cost

- effective energy efficiency scenario. Commenter s stated the investment and savings data from the efficiency identified above (again reaching a 20 percent electricity savings through efficiency gains by 2020) were used to estimate the financial and the economy

- wide impacts for the key benchmark years of 2014, 20 20, 2025, and 2030. Commenter s stated each change in sector spending was evaluated by the Investment and Spending module within the DEEPER model for a given year, relative to the baseline or business

- as

- usual scenario. Commenter s stated these were then mat ched to their appropriate sector impact coefficients.

Commenter s stated these changes were further evaluated by DEEPER's macroeconomic module to estimate the larger overall job and wage benefits for the U.S. economy. Commenter s stated starting with very sm all impacts in 2014, the end

- use energy efficiency target of a 20 percent savings by 2030 spurs both program costs and technology investments that, in turn, begin to change the patterns of electricity consumption and production. Commenter s stated program

s pending of $635 million in 2014 is assumed to drive an initial $4,231 million in technology investments in that year. Commenter s stated that these investments are assumed to be financed over time so that the actual outlays in 2014 are only $1,004 million. Commenter s stated the initial impacts on electricity production are relatively small, reducing electricity bills by an estimated $2,834 million (about 0.8 percent of the reference case electricity expenditures otherwise projected in that year). Commenter s stated both program spending and the annualized efficiency payments rise to 2.3 and 39.5 billion dollars by 2030, respectively. Commenter s provided Table 4 (titled: “ Key Annual Financial and Economic Impacts from the Efficiency Scenario ”) of the impacts re sulting from the analysis.

Commenter s stated the net savings on electricity bills (i.e., the savings after program costs and the annual payments for investments have been paid) exceeds $46 billion (rounded) in 2030, which is about 11 percent of the nation' s reference case electricity bill for that year. Commenter s stated the net residential or household savings start at only $6 in 2014, slowly increasing to $62 in 2020, and then rise steadily to an annual $147 savings for an average household by 2030.

Comme nter s stated as might be expected, the program spending and changed investment patterns have a distinct economic impact. Commenter s stated the second set of impacts in Table 4 highlights the key employment and wage benefits for the same years. Commenter s s tated overall employment benefits begin with about 49,504 jobs in 2014, but grow steadily as both investments and electricity savings increase over time. By 2030, the total job gain reaches 818,827 jobs, about 0.51 percent of the jobs otherwise available i n that year. Wages associated with the added jobs similarly increase to just short of $45 billion by 2030. Commenter s provided228 a table with employment impact results from the analysis (see Table 5 of the comment letter, Net Employment Impacts (Actual Jobs )).

Commenter s stated they also ran a series of sensitivity simulations to test the robustness of the 20 percent savings target in 2030. Commenter s provided a table that summarizes those findings. Commenter s stated in effect, we compare the year 2030 savi ngs target with the net savings (in millions of 2010 dollars) in that year, the average savings per household (in actual but still constant 2010 dollars) also in 2030, and finally, the overall job gain that might be created in that last year of the efficie ncy scenario. Commenter s stated we provide a benefit

- cost ratio that discounts the savings and the program and investment costs over the period 2014 through 2030 using a 5 percent discount rate.

Commenter s stated beginning with a 5 percent savings target, we find that the smallest effort shows the largest benefit

- cost ratio (assuming all costs are discounted 5 percent annually). Commenter s stated this makes sense as the least

- cost resources are likely to be used up first. Commenter s stated by themselves, however, the very cheapest efficiency resources do not generate sufficient savings to drive a very large gain in employment, in this case 169,112 jobs. Commenter s stated the maximum net savings per household tops out at about 15 perc ent efficiency savings. Commenter s stated that provides an average net return of $157 per household. Commenter s stated at that level employment increases by about 563,013 jobs per
year.

Commenter s stated the maximum net energy bill savings is reached at ab out the 20 percent target with a net return of $46,185 million which helps drive the gain of 818,827 jobs as we described in the text surrounding Tables 4 and 5. Commenter s stated the least cost

- effective scenario calls for a 30 percent savings target; alt hough less cost

- effective, this scenario also generates the greatest number of total jobs because of the substantial construction activity generated in the later years to achieve this level of savings. Commenter s provided Figure 4 (titled: “ Net Job Impact s of Energy Efficiency Scenarios by Year 2030 Percent Savings ”) with a graphic summary of overall job impacts by year as a function of the year 2030 savings from the reference case. Commenter s stated beginning with the assumption that first year savings in 2014 is about 0.75 percent of reference case sales, each of the scenarios slowly increases the gain in jobs as greater investments drive a greater level of savings. Commenter s stated the year 2030 end

- points are consistent with the results presented in Ta ble 6.

Finally, c ommenter s provided, although not part of the DEEPER modeling system, a working estimate of the reduction in air pollution and greenhouse gas emissions in the year 2030 for the 20 percent savings scenario. Commenter s stated this is roughly calculated as the difference in the year 2030 electricity generation in the BAU compared to the efficiency

- led scenario multiplied by the 2030 (avoided) average rate of emissions (pounds per kWh) of sulfur dioxide, nitrogen oxides, and carbon dioxide emiss ions. Commenter s stated the average rates of emissions in the 2030 efficiency

- led scenario are further reduced by the 20 percent savings under the assumption that it is the marginal generation power plants (essentially the generally dirtier units) that wil l be displaced by the alternative pattern of investments guided by carbon pollution standards. Commenter s provided a table that summarizes the reduced impacts of air pollution and greenhouse gas emissions.229 Commenter s stated in short, mobilizing energy eff iciency as a pollution reduction mechanism can provide dramatic reductions in air pollution and greenhouse gas emissions. Commenter s stated achieving a 20 percent improvement in efficiency by 2030 could reduce emissions of sulfur dioxide and nitrogen oxide s by 700,000 and 800,000 tons, respectively, and cut carbon pollution by 971 million metric tons, nearly a full gigaton, even as consumers and businesses save money and new jobs are created. Commenter s stated the emission reductions described in Table 7 a re about 57 percent of the emissions projected in the power sector for the year 2030 in the BAU case.

Commenters said that EE brings socio

- economic and energy infrastructure benefits.

Commenter s commented that implementing a broadbased set of energy efficiency measures would generate new jobs. C ommenter s cited a recent study that found that energy efficiency measures were both technically feasible and cost effective, would reduce utility bills in Georgia by $3.8 billion annually, and would create 32,0 00 new jobs each year by 2020. C ommenter s explained that using less electricity means that consumers pay lower power bills and can spend more money on other things, such as cars, houses, food and education, and that the production of these goods and servic es generate many more jobs than money spent on electricity bills because power generation is resource

- and capital

- intensive, and not labor intensive.

Commenter s stated that the EPA can strengthen the Clean Power Rule to ensure that the greatest amount of emissions reductions are delivered at their lowest cost by taking into full account the benefits of energy efficiency and distributed generation. C ommenter s added that the efforts by the city of Chicago to enhance neighborhoods and strengthen the economy by making energy efficiency improvements and distributed generation sources more accessible to its residents and businesses can be further encouraged and exp anded under the proposed rule.

Commenter s said that " efficiency is the most affordable, fastest, and cleanest path to reducing carbon emissions. To businesses and households, it literally pays for itself. To cities, reducing business and household ener gy costs means more money stays in the local economy ."

Commenter s highlighted the importance of EE. Commenters said :
"Energy efficiency touches all aspects of our economy and, in the context of any rule related to 111(d), can help states meet the requi rements of such a proposed rule by recognizing the importance of states finding energy savings across all sectors. Admittedly, there is more than one way to assess the cost equation that policy makers must wrestle." "Energy

- efficiency solutions can, withou t consideration of its capacity to reduce carbon emissions, yield economic benefits to consumers and business, and the marketplace, either alone or when combined with cost

- justified and technically feasible energy conservation regulation, can reduce carbon emissions."

Commenters elaborate d on how residential and commercial buildings, and the industrial and manufacturing sectors benefit from EE and provide statistics of current energy consumption by these sectors and potential emissions reductions from EE. C ommenter s ended by saying that :230 "the electric grid itself can be modernized to operate more efficiently." "A modern grid uses information and communications technologies, such as smart meters and high

- tech sensors, to isolate problems and repair them remo tely; recover more quickly from extreme weather outages; and maximize the efficiency, reliability and affordability of electricity. New grid technologies and solutions consume less energy and decrease the carbon

- intensity of the grid through the use of eff icient transformers, volt/VAR optimization, energy storage, microgrids, and combined heat and power (CHP) applications; allow energy efficient buildings and residences to sell power to the grid; and accommodate a growing number of electric vehicles, all of which contribute to lower emissions and economic growth." "States and tribes should adopt energy efficiency programs and activities that may vary substantially by state but reflect local conditions. Recognizing this diversity, EPA should invite multiple approaches to allowing energy efficiency emissions reductions to be part of compliance plans."

Commenter s stated that :
"EPA should encourage states to use energy efficiency as a low

- cost compliance option by including a deeper discussion of the possibl e economic benefits that would accrue to businesses and households. State experiences show that energy efficiency programs are cost

- effective, win

- win opportunities that can save money for customers and provide broader benefits including economic growth, j ob creation, and improved local air quality."

C ommenter s provide d examples for these statements.

Commenter s also said that " The Regional Greenhouse Gas Initiative (RGGI), a cap

- and

- trade program for power sector carbon dioxide emissions among 9 states in the Northeast and mid

Atlantic regions, which could serve as a model for compliance with EPA's new standards, has several years of practical experience linking emissions standards and energy efficiency ."

" Whereas energy efficiency is typically the lowest cost compliance option, this rule could encourage states to increase the ambition of their efficiency targets and other utility programs and spur some of the 26 states that do not currently have robust, bin ding efficiency programs to adopt them. Doing so can help reduce the costs of implementing the standards and produce net benefits for electricity customers over time, as well as inject more revenue into the economy and create new jobs."

Commenters said aca demic analysts have concluded that hundreds of thousands of jobs can be created by California's expanding energy efficiency programs.

Comment 3 0 : Funding Is Needed
Response 3 0 : The EPA decided to not include DS

- EE in BSER in the final CPP. See section s V.A and V.B of the final rule preamble of the CPP for details. However, DS

- EE remains generally available for compliance, as EPA recognizes that a wide variety of EE programs have231 been achieving significant energy savings for years with additional opport unity to achieve energy savings in the future. DS

- EE programs are being implemented widely across the sector and investments are increasing. See multiple subsections of section VIII of the final rule preamble of the CPP for details. Further, EPA recognizes that regulatory options do exist, and are generally available for states to consider in support of greater use of DS

- EE policies and programs. See the Demand

- side Energy Efficiency TSD for CPP Final Rule for additional discussion of energy efficiency fund ing and related state regulations.

The following are summaries of the specific public comments under this comment:
Commenters stated funding is necessary for implementation of EE programs.

C ommenters recommended federal government spending to support energy efficiency programs used to meet Clean Power Plan goals.

According to commenter s , significant future energy efficiency measures are not likely without massive investment in newer housing. Comme nter s saw significant energy efficiency improvement after Hurricane Katrina, when, unfortunately, thousands of housing units were destroyed and replaced with newer energy

- efficient houses that contained newer energy

- efficient appliances. According to comme nter s , that improvement was not possible, though, without a massive federal assistance.

Commenter s also recommended increased government funding of energy efficiency projects, especially those administered by public power utilities. While there is certainly room to advance energy efficiency as the Proposed Rule contemplates, commenter s said the signifi cant work done to date means far more expensive improvements lay ahead. Commenter s stated that additional federal support of this nationwide endeavor is necessary and appropriate.

Commenter s stated that their company has a strong tradition of providing energy efficiency programs and has been recognized for outstanding energy efficiency program delivery. Commenter s fully supported energy efficiency as a building block to help meet Clean Power Plan goals. In order to meet the Clean Power Plan goals, commen ter s said an increase in energy efficiency funding available to New Hampshire's electric utilities to administer energy efficiency programs is needed.

Drawing on their experience implementing and observing robust energy efficiency programs in other New Eng land states and around the country, commenter s stated there are key structural components needed in the State of New Hampshire to support an effective economic model for a successful expansion of efficiency programs. According to commenter s , these key conc erns include:

• Program cost recovery coincident with spending, including a reconciling mechanism in the subsequent program year.

• Lost revenue recovery on energy efficiency driven savings.232 • Performance

- based incentives that transform energy efficiency into a sustainable line of business for utilities

. Absent additional funding and implementation of the key structural components needed to support an effective economic model, commenter s said the recommended Clean Power Plan energy efficiency goals for New Hampsh ire cannot be met. Commenter s said that their company is ready to work with New Hampshire's state agencies and other energy efficiency stakeholders to develop a framework for meeting the Clean Power Plan goals and expanding the level of energy efficiency s ervices offered to their customers.

Commenter s recommended that the federal government finance and support the construction of energy efficient affordable housing and the implementation of efficiency measures in existing housing stock, award grants to e nvironmental justice communities to construct zero to low emission generation capacity and install energy efficiency measures, and implement programs to educate communities about the availability of other funding and programs that are available to achieve reductions. According to commenter s , the City's One City programs provide several initiatives that will achieve GHG reductions in New York communities, and those programs would be strengthened with additional federal funding and support.

Comment 3 1 : T&T

-- Support EE
Response 3 1 : The EPA is excluding BB4 from BSER. See section s V.A and V.B of the final rule preamble of the CPP for the EPA’s response to this comment. Even though DS

- EE is not used in calculating emission performance rates, the final rule gives states, tribes and territories the flexibility to use DS

- EE to achieve their emissions performance rates during compliance. See multiple subsections of section VIII of the final rule preamble of the CPP for details.

The following are summaries of the spec ific public comments under this comment:

Commenter s support the implementation of Building Block 4.

Comment 3 2 : T&T

-- Unique Circumstances

Response 3 2 : The EPA decided not to include DS

- EE in BSER for the final rule. A response is not provided here as this comment is now outside the scope of the CPP. See section s V.A and V.B of the final rule preamble of the CPP for details. DS

- EE remains generally available for compliance, with flexibility provided for tribal governments. See multiple subsections of se ction VIII of the final rule preamble of the CPP for details.

The following are summaries of the specific public comments under this comment:

Commenter s noted that EPA did not consider the unique circumstances of the Navajo Nation. According to c omment er s , EPA's fundamental error in its application of Building Block 4 to the Navajo Nation was its reliance, in crafting Building Block 4, on data from energy efficiency233 programs in states and regions of the country that have vastly different circumstances f rom those of the Navajo Nation. According to commenter s , EPA proposed a program for the Navajo Nation based upon what it learned from examination of the state programs but noted that circumstances for the Navajo Nation more closely resemble the poorer nati ons in the world, such as Bangladesh or Ghana, than the Navajo Nation's neighboring states or any other state, for that matter. Commenter s noted that a program that works well for a state may not work for the Navajo Nation and is unlikely to do so. In fact , according to commenter s , if there is a problem with electricity demand on the Navajo Nation, it is that it is too low, not that electricity use is inefficient.

Commenter s also noted that per capita electricity consumption on the Navajo Nation is well be low that of any of the states. According to commenter s , the purpose of demand

- side measures is to reduce electricity usage through more efficient devices (LED lights or more efficient appliances, for example) or through behavioral changes: however, per cap ita energy consumption on the Navajo Nation is already well below that of any of the states, even the most
energy

- efficient states such as Hawaii and California.

Supplied figures from commenter s showing per capita residential and per capita total electrici ty consumption (in MWh/yr), developed from EIA Form 861 data and U.S. Census data and as shown, demonstrate that the Navajo Nation already uses far less energy per person than even the most energy efficient states.

According to commenter s , it is apparent t hat EPA did not factor in energy usage or ability to pay in establishing energy efficiency goals, but it should have. Commenter s stated that it is unfair and unjust to require a people who use so little electricity and live in extreme poverty to bear a bur den similar to that of people who use so much more electricity and are in a much better position to afford increased electric rates.

Commenter s noted that EPA should recognize the Navajo Nation's unique situation and should allow it to increase its electri city usage to be closer to that of its neighbors. According to
commenter s , EPA did not evaluate actual electricity demand trends, ability to pay, or per capita electricity use in developing its goals under Building Block 4. Commenter s noted that this proposed approach is very harmful to the Navajo Nation.

At current electricity usage levels, commenter s noted that the Navajo Nation economy cannot grow, the Navajo Nation cannot develop a modern economy and the Navajo people are confined to a state of extreme poverty. According to commenter s , the Supplemental Proposed Rule does nothing to alleviate this condition, but rather exacerbates it. According to commenter s , under EPA's proposed approach, the Navajo Nation's annual rate of electrici ty usage shrinks at an average rate of about 1.06% per year and the per

- capita demand in 2019 drops to only 26% of that of its neighbors. Commenter s noted that EPA's approach to Building Block 1 reduces the electricity usage of the Navajo Nation and makes it an even smaller fraction of what its neighbors use, guaranteeing continued poverty levels on the Navajo Nation. According to
commenter s , if the Navajo Nation were to increase its electric energy usage to a level comparable to where its neighbors will be in 2029 after application of Building Block 4, it would result in an average annual electric energy growth rate or 12.8% over the 17 years from 2012 to 2029 to a rate of 2,144,947 MWh. Commenter s stated " This is what is called the Parity234 Glidepath ." Comme nter s noted that such a high rate of growth is not likely to occur without substantial investment, but it demonstrates the disparity that exists between electricity availability to the Navajo Nation versus its neighbors. Commenter s stated that EPA should h ave accounted for this disparity.

According to commenter s , EPA's proposed application of Building Block 4 to the Navajo Nation will not reduce CO2 emissions and will increase the cost and decrease the availability of electricity on the Navajo Nation, thereby denying the Navajo Nation the possibility of developing a modern economy and preventing an improvement in the living standards on the Navajo Nation so that they are comparable to the living standards of the states. Commenter s noted that EPA should develop a goal that would allow the Navajo Nation to follow the Parity Glidepath and end up on a par with its neighbors.

Comment 3 3 : Commenters said that, energy efficiency has been adequately demonstrated, cost

effective, imposes minimal environmental costs, and reduces overall energy requirements.

Response 3 3 : The EPA agrees with commenter s that energy efficiency offers a substantial and
cost

- effective strategy for reducing greenhouse gas emissions from the power sector. The EPA has determined not to include demand

- side energy efficiency (building block four) in the BSER of this final rule and therefore we do not need to address further comments supporting the removal or changes in the level of DS

- EE in BSER. This determination is discussed in section s V.A and V.B of the final rule preamble of the CPP. Even though demand

- side energy efficiency is not being included in the BSER in this final rule and, thus, not included in the determination of emission performance rates, the final rule provides states t he flexibility to use demand

- side energy efficiency measures in their state plans for compliance to meet the emission guidelines set forth in the final CPP, provided they meet the applicable requirements established in section VIII of the preamble for the CPP. The EPA recognizes that one of the major approaches available for achieving CO2 emission reductions from the electric power sector is demand

- side energy efficiency. The EPA continues to believe that significant emission reductions can be achieved by
t he use of such measures cost effectively and that such measures are likely to represent an important component of state plans. Accordingly, the EPA is including a level of DS

- EE as a component of our illustrative plan scenarios that are the basis for the a nalysis discussed in the RIA that supports the final CPP and in the Demand

- side Energy Efficiency TSD for CPP Final Rule

. The following are summaries of the specific public comments under this comment:

Commenters said that the energy efficient lighting programs offer the least expensive compliance option to increase energy efficiency. Commenters g ave four examples of utility funded programs that are as follows:

1. Commenters said e lectric utility customer

- funded EE programs represent 89% of all
state

- level EE programs resulting in $14 billion dollars in savings by 2015.

2. Commenters said Edison Foundation funded an EE program that saved 126TWh of electricity in 2012.235 3. Commenters said ACEEE estimates that the energy savings due to a 111(d) performance standard c ould save consumers Dollar 143 billion and reduce CO2 emissions by a total of 4.9 billion metric tons if states only utilized utility EE programs.

4. Commenters said r ecent analysis by Lawrence Berkeley National Laboratory (LBNL) concluded that utility custom er

- funded EE programs delivered energy savings at a cost of roughly 2 cents / kWh over the lifetime of the investment. The same analysis concluded that lighting EE measures delivered energy savings at half the cost of all EE measures at 1 cent / kWh.

Comm ent 34 : Observing need for shareholder/utility incentives for EE in vertically integrated
states.
Response 34 : The Demand

- side Energy Efficiency TSD for CPP Final Rule discusses utility regulatory models for supporting utility EE investments including sha reholder incentive mechanisms and other strategies for leveling the impact on utilities and their shareholders relative to non

- EE capital investments. The EPA recognizes the ongoing progress made by states across the country in adopting regulatory models t hat support utility EE investment and believes that effective state models exist and have demonstrated their effectiveness in practice as discussed in the TSD. Adoption of these models will better support the use of DS

- EE in state strategies in response to the final rule.

The following are summaries of the specific public comments under this comment:

Commenter s stated that in the Southeast, where most southeastern utilities remain vertically integrated, incentive mechanisms will likely be needed to eliminate return

- on

- investment gaps with energy efficiency as compared to other capital investments.

3.4.2 State goal setting

This section discusses the annual incremental savings target rate as it applies to demand

- side EE
programs.
Commenters have raised a number of issues related in this subsection which are organized by comments below. Responses are provided for these topics.

• Support State Goal of 1.5%/1.0%

− Adequately demonstrated and supported

− It could be more stringent236 • Oppose 1.5%/1.0% state goals

− It has not be adequately demonstrated; it is not sustainable over time; there are errors in the EPA’s analysis; and the EPA didn’t consider unique factors

• Ramp rates are too aggressive or not aggressive enough

• EPA should change specific elements of the EE BSER calculations

− T h e EPA should use BAU sales projection to determine achievable EE

− Useful l ife and expiring savings can be longer than 10 years.

− Targets should be modified to include electric vehicle effect on load growth

− The EPA should use adjusted gross savings for target setting.

• State specific comments

− The 1.5% goals are too stringent for m y state because of various reasons

• Tribes BB4 goal setting shouldn’t be applied in the same manner

Comment 1: Support State Goal of 1.5 Percent

Response 1: One of the major approaches available for achieving CO2 emission reductions from the utility power sector is demand

- side energy efficiency. The EPA continue s to believe that significant emission reductions can be achieved through use of suc h measures at re asonable costs and that demand

- side energy efficiency will represent an important component of state plans

. However, the EPA is excluding DS

- EE from BSER. See section s V.A and V.B of the final rule preamble of the CPP for the EPA’s response to this comment . DS

- EE remains generally available for compliance. Demand

- side EE that are tied to a state plan and achieve quantified and verified MWh savings may be used to achieve the emission guidelines specified in the CPP Final rule, provided they meet the eligibil ity requirements for resources described in Section VIII. of the final rule preamble of the CPP. Even though Demand Side EE is not in the final rule under BSER, the EPA is using a DS

- EE target level of 1.0% for the illustrative demand

- side energy efficienc y plan scenario

. See the Demand

- side Energy Efficiency TSD for CPP Final Rule for support and details

. The following are summaries of the specific public comments under this comment:

C ommenters supported the 1.5 percent incremental annual energy savings proposed by EPA.

Commenter s supported the determination that a 1.5 percent incremental annual energy savings rate is feasible, cost

- effective, and adequately demonstrated. Commenter s confirmed EPA's determination that an annual energy savings rate of 1.5 percent per year in utility

- based energy237 efficiency programs for BSER is achievable, reasonable, and sustainable. Commenter s cited an ACEEE report that indicates six states have achi eved this savings rate in 2013 through utility and

non

- utility energy efficiency programs, and another five that have achieved greater than 1 percent savings. Commenter s stated that two states, Massachusetts and Rhode Island, exceeded 2 percent savings in 2013, while Vermont has achieved savings greater than 1.5 percent for the past 7 years. Given these historical reductions, c ommenter s stated the target set by EPA is conservative, it would be inappropriate/unjustified for EPA to use the alternative propose d level of 1 percent annual incremental energy savings, and EPA itself notes that 1.5 percent is conservative because it does not include EE measure from many existing policies.

Commenter s stated the annual incremental electricity savings rate to meet the 2030 EE building block target is already being achieved by states. Commenter s stated the annual incremental savings target rate of 1.5 percent is a reasonable estimate of the savings that can be achieved at reasonable costs by states and within a reaso nable timeframe. Commenter s stated that as noted in the proposed rule, " twelve leading states have either achieved, or have established requirements that will lead them to achieve, annual incremental savings rates of at least 1.5 percent of the electricity demand that would otherwise have occurred ".

Commenter s supported EPA's conclusion, on the basis of recent potential studies as well as the experience of states that have succeeded in developing energy efficiency programs, that all states can eventuall y achieve annual incremental energy savings of at least 1.5 percent of retail sales each year. Commenter s stated this assessment is amply supported by individual energy efficiency potential studies that have been performed around the country, as well as b y broader national and regional studies. Commenter s stated EPA's assessment is conservative because it is based largely on efficiency opportunities that have historically been captured through ratepayer

funded energy efficiency programs. Importantly, c omme nter s stated these are programs where the cost effectiveness of energy efficiency investments are typically evaluated in the absence of carbon dioxide emissions standards for the power sector, and factoring in those avoided compliance costs will inherently increase the amount of cost effective energy efficiency investments. Commenter s stated EPA's analysis does not fully account for many existing energy efficiency technologies and practices

- such as whole

- building retrofits, commercial building commissioni ng, upgrades to transmission and distribution infrastructure, voltage/VAR optimization, and combined heat and power, that are typically not included in achievable potential studies but are nonetheless available to states and utilities , and added that n or d oes EPA's analysis fully reflect the many emerging energy efficiency technologies that will increase future technical and economic potential for energy savings. Commenter s noted EPA's assessment does not capture the many innovative mechanisms now being de veloped by states, utilities, and the private sector to streamline the financing and delivery of cost

- effective energy efficiency solutions, all of which will have the effect of increasing achievable potential. In light of these considerations, c ommenter s stated EPA's 1.5 percent target likely understates the actual magnitude of savings that states can and will achieve as they implement state plans.

Commenter s stated EPA's assessment of energy efficiency potential is conservative and readily achievable. C ommenter s stated EPA's proposed annual energy savings target of 1.5 percent of retail sales is readily achievable and, indeed, likely underestimates the full potential for cost

effective energy savings. Commenter s stated that as EPA notes in the TSD accom panying the proposed rule, the 1.5 percent target is consistent with average achievable energy savings in238 twelve recently

- conducted potential studies from around the country, and with an ACEEE analysis from April 2014. In addition, c ommenter s stated three states were already achieving this level of energy savings as of 2012, and an additional nine states will be required to achieve this level by 2020 under existing energy efficiency policies. Commenter s stated these considerations all indicate that the 1.5 percent target is adequately demonstrated.

Commenter s indicated States have made these [EE] investments because these programs are good for consumers, even absent limits on carbon pollution. Commenter s stated that according to analysis by the World Reso urces Institute, these programs "regularly save customers over $2 for every $1 invested, and in some cases up to $5." Commenter s stated that according to ACEEE, ramping up every start target to 1.5 percent would increase GDP by over $17 billion by 2030 whi le creating over 600,000 new jobs.

Commenter s cited white paper prepared by the Analysis Group (submitted separately to this docket) that focuses specifically on the 1.5 percent target, evaluating both EPA's meta

- analysis and a recent comprehensive study by ACEEE (2014), as well as other literature. Commenter s stated the Analysis Group's review confirms that the studies considered by EPA and ACEEE are thorough, geographically diverse, and represent sound methodologies for evaluating energy efficiency pote ntial. Commenter s stated the Analysis Group review finds that energy efficiency potential studies have found economic and achievable energy savings potential well in excess of 1.5 percent per year in all major regions of the country, and over varying fore cast periods ranging up to 20 years. Commenter s stated the Analysis Group report also includes a critical evaluation of the EPRI (2009) analysis reported in the TSD, which found significantly lower energy savings potential than other studies reported in th e literature; the Analysis Group notes that, among other flaws, the EPRI analysis excluded savings from a wide range of efficiency measures and did not take into account the potential to reduce energy consumption through accelerated replacement of equipmen t.

Commenter s stated, as the Analysis Group report also explains, the methodology used by EPA (and other similar analyses) to quantify achievable potential is likely to lead to a conservative result that understates the full scale of energy savings that can be achieved by states and utilities. Commenter s stated this is because "achievable" potential is typically defined to represent only a fraction of cost

- effective energy efficiency potential, and is often intentionally restricted to reflect current energy efficiency p rogram budgets and limitations. Commenter s stated that as the National Academy of Sciences described it in a 2010 review of potential studies, "The risk of overestimating efficiency potential is minimal, owing to the methodologies that are used in the
stu dies, the studies openly and intentionally make assumptions that lead to "conservatively" low estimates of the efficiency resource." Commenter s stated these are considerations that are not binding in the context of an emission reduction program such as the Clean Power Plan.

Commenter s stated that i n addition to the Analysis Group white paper, many of the regional and national studies cited above in the context of EPA's 1.5 percent target also lend support to EPA's assumptions regarding ramp

- up rates and sustained savings. Commenter s stated these regional and national studies report aggregate reductions in demand in future years, which can be compared to EPA's projected demand savings in 2020 and 2030. Commenter s stated EPA's projected energy savings, in turn, are based on both the 1.5 percent savings target and the ramp

up rate. Commenter s stated the fact that the demand reductions in these regional and national239 studies either meet or significantly exceed EPA's projections therefore indicates that the

co mbination of savings target and ramp

- up rate is reasonable and achievable.

Commenter s stated there are two other aspects of EPA's goal

- setting approach that lead to an overall conservative assessment of potential energy savings, and that further indicate EPA's proposed energy savings levels in Building Block 4 are readily achievable. First, c ommenter s stated EPA assumes that each year's energy efficiency investments have a limited measure lifetime of 20 years, and that the energy savings resulting from any given measure decline at a rate of 5 percent per year starting the year after the measure is installed. Commenter s stated this means that cumulative savings in the year 2030 reflect only 50 percent of the first

- year energy savings achieved by energy effic iency measures installed in the year 2020, and just 35 percent of the first

- year energy savings from measures installed in 2017. Commenter s stated this is a highly conservative assumption, given data from LBNL indicating that minimum lifetimes for energy efficiency measures are at least 5 years. Commenter s stated that moreover, the practical effect of this assumption is to reduce the cumulative savings that are used to calculate each state's goal. Commenter s stated EPA's TSD, for example, shows that for S outh Carolina the "expiring" savings reduced the state's cumulative savings by approximately 5 percent in 2025. Second, Commenter s stated EPA applies the 1.5 percent goal in a way that results in annual average reductions of slightly less than 1.5 percent

. Commenter s stated as noted above and in the TSD, the 1.5 percent goal was drawn from analyses of annual average energy efficiency savings, defined as cumulative savings divided by the total time period over which those savings can be achieved, however, when calculating state goals, EPA does not determine annual savings by applying the 1.5 percent goal to a fixed baseline, as the potential studies do; rather, EPA applies the 1.5 percent goal to the prior year's sales in each year (after the state has ramp ed up to that level). Commenter s stated as a result, EPA's target

- setting approach results in annual average savings that are slightly less than 1.5 percent over the 13

- year period in the proposed emission guidelines. Commenter s provided a table that illus trated this effect (see Table 6 of the comment letter), which shows the cumulative savings that would result from a 1.5 percent per year energy savings in a state with business as usual (BAU) demand growth of 0.8 percent. Commenter s stated as the table sh ows, the 1.5 percent target results in annual average savings of approximately 1.37 percent by 2013. Commenter s stated this only underscores that EPA's goal is readily achievable and well within the range of savings reported in energy efficiency potential studies.

Commenter s believed that it would be helpful for regulators, policy makers and the general public to understand the amount of energy wasted in the US and the size of the potential EE resource, and the amount of CO2 emissions reductions resultin g from the elimination of this waste. Commenter s provided two examples of rough benchmarking of the size of the energy efficiency potential: 1) converting EPA Energy Star's estimate of energy lost via transmission into potential CO2 emissions reductions an d calculating the potential percentage of the national CO2 reduction goal available from eliminating end

- use waste is one example of the potential savings that can be mined from the national building stock; and 2) converting the estimated improvement in en ergy efficiency over the past four decades (70%), a figure often cited by oil companies in advertising, into CO2 emissions reductions. Commenter s suggested that EPA begin the discussion of energy efficiency by estimating the potential size of the energy ef ficiency resource and providing an estimate of the amount of the target CO2 emissions reductions that240 could be met with energy efficiency. Commenter s believed that this information would reveal that the EPA's target for EE in perspective is easily attainab le.

Commenter s stated that a 1.5 percent per year annual incremental energy savings is readily achievable, as six states have already achieved or exceeded this level of savings (Arizona, Hawaii, Massachusetts, Michigan, Rhode Island, and Vermont) and a dditional states are on

record as planning to ramp

- up to this level of savings, including Maine, Maryland, Minnesota, New York, and Washington. Commenter s stated that these levels of annual savings are also supported by several "bottom up" studies of energ y efficiency potential that go beyond today's standard energy efficiency programs and also include new efficiency measures and program approaches.

Commenter s stated that EPA's proposed 1.5% level for energy efficiency can be achieved especially in state s that have not yet undertaken meaningful energy efficiency programs. Commenter s stated that their own experience demonstrates that there are significant benefits in addition to GHG emission reductions that can be achieved with energy efficiency programs a nd that energy efficiency programs can be deployed at a level consistent with EPA's assumed levels for the fourth building block. Commenter s encouraged EPA to ensure that the regulations stimulate the implementation of similar programs in states that have not yet tapped this important resource, as well as support the more mature programs in their region.

Commenter s urged EPA to include at least a 1.5% savings target in the final rule, with a 10

- year compliance period and higher performance standards. Co mmenter s noted that they have worked with many individual program administrators that achieve savings at incremental rates far greater than the statewide levels noted in the TSD (GHG Abatement Measures TSD, p. 5

- 17) and therefore enthusiastically supported the notion that a 1.5% target would drive broad

- based efficiency investment among a much larger set of electricity distribution companies. Commenter s noted that attaining these standards will require massive market transformation: redirection of public an d private funds, new policies, new industries and companies, innovation, and behavior changes. Commenter s stated that many states have just begun to tap their cost

effective energy efficiency and thus a longer time horizon and higher targets creates a "vir tuous cycle" of investment and innovation.

Commenter s believed that achieving annual EE savings of 1.5% of total retail sales is possible. Commenter s acknowledged that this is an aggressive goal, but believed that if utilities are provided with the pro per incentives to invest in EE, along with supportive state policies and regulatory structures, it can be achieved on a consistent, reliable basis. Commenter s suggested potential examples such as obtaining a rate of return of EE investments or obtaining an incentive payment or return on equity ("ROE") adder for performance.

Commenter s stated that the targets proposed by EPA are not as conservative as those for renewables in the sense that they are characteristic of the best performing states in the country and are not depressed by no action states; however, the targets in Building Bloc k 4 fail to account for demonstrated, robust efficiency options such as building codes and combined heat and power (CHP) technology, so in this regard the target for energy efficiency also substantially understates achievable potential. Commenter s noted th at the inclusion of these options would push achievable efficiency impacts well above the 1.5 percent level of the Proposed Rule.241 Commenter s noted that reducing the savings level would needlessly weaken the Clean Power Plan since EPA already underestimated energy efficiency potential. Therefore, c ommenter s believed that the target set under Building Block 4 should not be reduced below 1.5% annual growth in energy efficiency.

Commenter s urged EPA to consider the possibility it has underestimated the pote ntial for efficiency technologies and overestimated costs by favoring its own "conservative" calculations over those of the 2014 study by the American Council on an Energy Efficient Economy and by not assuming the continuation of federal efforts to update efficiency requirements in its baseline. Commenter s stated that because EPA underestimates the potential for energy efficiency, it is important that it not abandon its 1.5% annual goal for improvement.

Commenter s stated that EPA should not exceed the a nnual energy efficiency savings rate of 1.5% of retail sales and the incremental improvement in annual energy efficiency savings of 0.2% per year because these goals are already very aggressive for rural states like Montana and will be a significant challe nge for such states to achieve. Commenter s noted specifically that achieving a savings rate of 1.5% will be a significant challenge for Montana because of its high rural population and the abundance of electricity cooperatives and private electricity suppl iers in

state that do not currently have significant energy efficiency programs.

Commenter s validated that the 1.5 percent per year savings rate for electric utility programs because, based on their industry experience, they saw this rate of energy cons ervation as reasonable and sustainable.

Commenter s stated that EPA's targets are attainable and are supported by data from other industry analysis like ACEEE.

Commenter s stated that EPA's assessment of EE potential is reasonable, but conservative, and they find that EPA's conclusion likely significantly understates the potential for EE savings in states over the compliance period.

Commenter s discussed the NERC's critique of EPA's assessment of energy efficiency improvements.

Commenter s stated t hat the NERC critiques EPA's assessment of the potential for energy efficiency improvements, particularly casting doubt on the potential for industrial and commercial customers to realize future efficiency gains, and on the long

- term sustainability of effi ciency improvements. C ommenter s stated that the premise for NERC's contention that industrial and commercial customers will not be able to achieve the same level of cheap savings as residential customers is that companies, and particular industrial users, already "are designed to use as little energy as possible in order to maximize profits of daily operations and may have already invested in energy efficiency programs, leaving minimal and costly opportunities remaining for incremental improvement." C omment er s stated that there is an apparent logic to this assertion, because they expect companies to maximize their own self

- interest, but it has been proven wrong many times. C ommenter s noted that new technologies and changing cost parameters mean that new ener gy efficiency opportunities arise continually for commercial and industrial sectors. Similarly, C ommenter s noted that innovative financing structures are emerging242 to improve payback and internal rates of return. C ommenter s stated that many states have run industrial and commercial energy efficiency programs for years that continue to produce significant cost effective savings. Finally, c ommenter s noted that the attractiveness of an investment in energy efficiency by commercial and industrial facility owners will increase if these entities stand to gain revenue under the CPP for energy efficiency credits that can be sold to owners of power plants f or compliance.

C ommenter s stated that the NERC's argument is based on a misunderstanding of the difference between industrial firm economics and utility system economics. C ommenter s stated that for a variety of reasons, including split incentives, and financial limitations, commercial and industrial customers will typically pursue only energy efficiency investments with a short, typically less than two

- year, payback period. In contra st, c ommenter s noted that a utility seeking to procure the lowest

- cost resource over the next decade will find it advantageous to incentivize measures with longer payback periods that otherwise would not be implemented. C ommenter s noted that what is a cost

- effective measure from an individual consumer's perspective does not correspond perfectly to what is cost

- effective from a system

- wide perspective

-- thus there are untapped energy efficiency opportunities in the industrial and commercial sector.

C omment er s stated that the high potential for efficiency gains in industrial and commercial users was confirmed recently in a study analyzing a wide range of programs, in 31 states, from 2009 to 2011. C ommenter s stated that the study found that commercial and ind ustrial participants in efficiency programs achieved efficiency improvements at a levelized cost of about $21 per megawatt hour, only $3 more than that achieved in residential programs. C ommenter s stated that commercial and industrial users also achieved s ignificantly more efficiency gains overall than residential users did from their programs: commercial programs spent $3.2 billion, more than double the $1.5 billion spent on residential programs, to achieve double the lifetime gross efficiency savings.

C o mmenter s stated that NERC also claims that the world of efficiency gains is so finite that 1.5 percent gains in demand

- side management cannot be sustained annually until 2030. First, the
commenter s noted that few states

-- aside from those that already hav e ambitious energy efficiency targets

-- will be expected to sustain 1.5 percent annual savings over the full interim period. On average, the commenter s noted that states are not expected to attain the 1.5 percent annual savings rate until 2025. Second, c o mmenter s stated that high levels of savings have been sustained around the country. C ommenter s stated that EPA notes the long

- record of high savings in the Pacific Northwest, and California's history of efficiency improvements alone belies NERC's claim. Un til about 1975, c ommenter s noted that California's per

- person megawatt

- hour use tracked national usage almost exactly. Since the 1970's, c ommenter s noted that California's energy use per person has virtually flat

- lined, at least partially because Californi a in 1977 took the lead in improving building and appliance efficiency to improve the productivity of its electricity usage. C ommenter s stated that in spite of this leadership, and the significant efficiency gains it has already achieved, California contin ues to invest significantly in energy efficiency, and has projected up to 50 percent additional energy savings for existing homes and commercial structures by 2030. Finally, states are not required to sustain this level of savings for any particular period of time, or to achieve it at all; NERC's argument mistakes EPA's target setting with compliance requirements.243 Commenters continued, stating that after reviewing historical data on state efficiency programs and analyzing the requirements of state energy e fficiency policies, EPA identified twelve leading states that have achieved, or put in place requirements that will achieve, annual incremental savings rates of at least 1.5 percent of the electricity demand (retail sales) that would otherwise have occurre d, that is, avoided energy use, or reduced demand attributable to energy efficiency. (Id. at 34,872) Commenters stated, based on that analysis of efficiency potential, EPA set as its target a 1.5 percent incremental savings rate per year that can be achiev ed by all states, at a reasonable cost, over an adequate period of time. (Id.) Commenters said EPA then set specific rates for each state. Commenters stated that states currently achieving a 1.5 percent annual energy savings rate are assigned that rate in 2017, and all future years; states not yet achieving that rate are assigned their 2012 annual incremental rate, and that rate is increased by 0.2 percentage points per year until it reaches 1.5 percent, where it remains. (Karen L. Palmer, Resources for the Future, Energy Efficiency in 111(d): Understanding Building Block 4 (June 16, 2014), available at http://common

- resources.org/2014/energy

- efficiency

- in

- 111d

understanding

- building

- block

- 4 )

Commenters stated, in the Northwest, the Northwest Planning and Conservation Council gives the states of Idaho, Montana, Oregon, and Washington guidance on implementing energy efficiency measures and the Bonnevil le Power Administration provides funds to consumer

owned utilities to implement energy efficiency measures. Commenters continued, stating that in the Northeast, the market

- based Regional Greenhouse Gas Initiative (RGGI) has driven increased investment in e nergy efficiency; because the RGGI states invest a portion of their RGGI auction proceeds in end use energy efficiency, demand for fossil fuel

- fired power further decreases

- a powerful co

- benefit that also reduces CO2 emissions. Commenters stated e nergy

e fficiency programs funded through reinvestment of the $700 million generated by RGGI auctions through 2012 is projected to offset the need for approximately 8.5 million MWh of electricity generation, thereby avoiding the release of approximately 8 million short tons of CO2 into the atmosphere. (RGGI, Regional Investment of RGGI CO2 Allowance Proceeds, 2012, at 3

- 4 (Feb. 2014), available at http://rggi.org/docs/Documents/2012

- Investment

- Report.pdf) Commenters stated that EPA's estimate of efficiency potentia l is not based on, and did not take into account, additional energy savings that will be achieved by private businesses delivering energy efficiency services, building codes, or combined heat and power. (See Comments of Advanced Energy Economy on Proposed Rule, at 43

- 44 (Nov. 5, 2014) (Accounting for the contributions of the well

- established [performance

- based contract] market by incorporating [performance

- based contracts] as viable tools for state emission reduction under the Clean Power Plan would result in an additional cumulative savings of 104 to 190 million MWh by 2030.), available at http://info.aee.net/hs

- fs/hub/211732/file

- 2034410148

- pdf/EPA/Testimony/AEE

Clean

- Power

- Plan

- Comments

- Nov

- 2014.pdf) Commenters stated, for that reason, the target
energy e fficiency savings rate is conservative. As well, commenters stated that EPA's target assumes that there will be no improvement by those states that currently are not achieving the 1.5 percent savings rate during the period between 2012 and 2017, which also demonstrates that EPA's estimate is conservative. (Id. at 44

- 45) Commenters said, because the 1.5 percent target is, based on states' experience, achievable and adequately demonstrated, they do not support EPA's alternatively proposed 1 percent annual inc remental rate.

Commenters stated " that if EPA raised its projections for BBs 3 and 4, Arkansas would achieve a higher carbon emissions reduction level and create unprecedented economic development and244 job growth in the state's advanced energy industry ." Commenters furthermore stated that they thought the key energy technologies in Arkansas would be " cost

- effective investments in renewable energy (up to 15% or more of energy generated); EE with annual savings of 1.5% or more; and full deployment of Combined Heat and Power (CHP)."

Comment 2 : Oppose 1.5 Percent

– value not demonstrated and does not fit criteria of BSER

Response 2: The EPA has determined not to include demand

- side energy efficiency (building block four) in the BSER of this final ru le and therefore we do not need to address the
commenter s ’ concerns as they are now out of scope. This determination is discussed in section s V.A and V.B of the final rule preamble of the CPP. Although the EPA has determined to not include demand side

- ener gy efficiency in the BSER in this final rule we are using 1.0% as a target level for incremental savings as a % of electricity demand in our illustrative EE scenario. See the RIA Chapter 3 and the Demand

- side Energy Efficiency TSD for CPP Final Rule for details on the illustrative demand

- side energy efficiency plan scenario

. The following are summaries of the specific public comments under this comment:

C ommenters did not support the 1.5 percent annual incremental savings goal because they believ ed that the proposed goal had not been adequately demonstrated and therefore does not represent BSER for this building block.

Commenter s did not fully support either option 1 or 2 to its fullest, however, if one option is required, the commenter s propo sed the use of option 2. Commenter s saw the 1 percent performance level with a 0.15 percent ramp

- up rate in option 2 as a more reasonable approach than the 1.5 percent performance level with a 0.2 percent ramp

- up rate in option 1. Commenter s noted that the option 2 performance level is more justifiable and still aggressive in nature. Under option 1, all states theoretically achieve the 1.5 percent incremental savings level by 2025, whereas all states reach the 1.0 percent level by 2024. This shows that opti on 1, while more reasonable in its approach, is still aggressive. Commenter s stated the stringency of the reduction goals generally necessitates the use of all building blocks, thus any claimed flexibility is illusory. Commenter s stated EPA should re

- analy ze its methods and assumptions used to calculate the potential for energy efficiency in each state and take a less aggressive approach.

Commenter s stated EPA proposes that states can achieve emissions reductions by reducing electric consumption. Comme nter s stated the cleanest energy is certainly the energy you never need to produce. Commenter s ha ve established that the EPA baseline for energy efficiency potential is quite shaky. Commenter s also noted that EPA has not appropriately considered costs and that its estimated gains of 1.5 percent each year seem excessively ambitious in the context of other analysis. Commenter s stated that in comments to EPA, both NERC and EPRI note that their own estimates of demand side energy efficiency fall far short of EP A's levels. Commenter s stated that EPRI further notes that ambitious energy efficiency targets will require programs that overcome substantial financial, market, communications, and perceptual obstacles to the adoption of economic efficiency improvements.245 Commenter s stated that EPA does not display substantial evidence that its projection in the state goal calculations is " reasonably reliable ," " reasonably efficient " or will " produce the performance necessary to achieve the goal ." Commenter s noted that EPA used only one data source, EIA Form 861, in making its claim that states will be able to achieve an annual incremental savings rate of at least 1.5% of electricity demand. Commenter s also noted that EPA does not future as state programs move beyond the "low

- hanging fruit" and increasingly focus on achieving deeper and broader energy savings.

Commenter s recommended EPA revise its analysis of estimated savings from electric efficien cy activities to more realistic estimates. Commenter s stated EPA's assumptions on the projected EE savings and growth rates used in calculating the interim and final state goals go well beyond current experience with EE programs and the best practices of l eading states. Commenter s referred to comments by NERC, that notes "EPA appears to overestimate most states' energy efficiency savings potential, resulting in setting performance targets too high for individual states." (Initial Reliability Review at 14) C ommenter s stated for the majority of states, achieving such dramatic increases in EE savings rates will require correspondingly dramatic increases in utility EE program budgets and customer expenditures, which EPA does not address. Commenter s stated EPA fa ils to address the existence of a range of constraints that will make attaining the state goals both more difficult and more expensive than EPA presumes. Commenter s stated, at minimum, EPA should address state

- specific concerns about the proposed emission rate goals before finalizing these EE goals. Commenter s suggested EPA should work with the states to set achievable state goals that reflect in

- state conditions.

Commenter s stated any across

- the

- board energy efficiency savings goal would be arbitrary a nd capricious. Commenter s stated per Section 111(d)'s command that standards of performance for existing sources be set by the State, the individual States should determine what goals from energy efficiency savings, if any, can be realistically achieved an d maintained given the unique circumstances of the State and its utilities. Commenter s stated EPA should eliminate the Building Block 4 goal. Commenter s stated it was arbitrary and capricious for EPA to assume that all 48 covered States can achieve the ann ual savings target for energy efficiency of 1.5 percent of kWh sales. Commenter s stated each State needs to have an energy efficiency potential study completed for its geographic territory in order for the EPA's approach to be realistic and credible. Comme nter s stated the cost of achieving EPA's EE goals will place a significant economic burden on cooperative consumers. Commenter s stated the EE program in these [rural] areas will likely result in limited EE benefits towards meeting the state goals.

Comment er s stated that small businesses or even larger ones that face tough economic conditions such as the 2008 recession will focus all resources on keeping the business profitable and are unlikely to invest in a program viewed as adding to their short

- term cos t. Commenter s stated businesses and States tend to put EE programs on hold during tough economic times. Commenter s stated when businesses are downsizing their work force and reducing shifts, it is much harder to justify expensive investments that do not pa y off for many years. Commenter s stated that for States, tax revenue from business and residences are down, which reduces the State's opportunity to provide tax incentives or grants and rebates that might make EE programs more attractive. Commenter s stated all of these factors have been in play in recent years due to a slow and uneven recovery from the 2008 recession ; so the energy efficiency gains EPA has noted during this period are likely driven more by reduced demand from idled factories,246 scaled back co nstruction, and reduced customer spending rather than widespread adoption of energy efficiency programs.

Commenter s provided background on the Demand Side Management (DSM) working group that was established and facilitated by the Georgia Public Service Commission (Commission); the DSM working group consists of diverse stakeholders that provide meaningful input and expertise in the development of Georgia Power's DSM programs, meets quarterly for the two year period before the IRP is filed by the utility, and comprises a robust methodology for determining effective EE and DSM programs for Georgia.

Commenter s stated that a 2012 Technical, Economic, and Achievable Potential (TEAPot ) Study was conducted by Georgia Power through coordination with the Commission and other stakeholders, and an updated TEAPot will be filed with the Commission early in 2015. Commenter s stated the TEAPot identified all economically viable energy efficiency measures for Georgia Power customers and provided a basis for the design and planning for the EE and DSM programs in the 2013 IRP. Commenter s stated that the proposed rule bases EE/DSM reductions on studies reporting the "Achievable" potential for variou s states, however this is a fundamental misuse of this data and leads to more stringent reduction targets. Commenter s stated that achievable potential assumes that all programs that pass the Technical and Economic tests are able to be initiated and that 10 0 percent expected customer participation in the programs will be realized, however no program can reach, or could be expected to reach, this goal. Commenter s stated the methodology for setting a realistic target for Georgia needs to be revised by the EPA in the final rule.

Commenter s stated that during the 2013 IRP, Georgia Power committed to spending nearly $500 million on DSM/EE programs over the next 10 years. Commenter s stated these programs are projected to save 3,596,976 MWh during the period of 20 14

- 2023. Commenter s stated the programs achieved energy savings of 0.4 percent in 2013, 0.27 percent in 2012, and 0.15 percent in 2011, as a percentage of gross retail energy sales for the state of Georgia. Commenter s stated the proposed rule calls for an energy savings increase of 0.2 percent each year starting in 2018 and then tops out at 1.5 percent per year by the mid

- 2020s on total energy for the state. Commenter s stated any assumption that these programs could be increased to achieve net energy reduc tions equal to 9.8 percent of the overall electricity demand in a 15 year timeframe is not feasible and is cost prohibitive. Commenter s stated that to date, there is currently not a state managed program that has been able to achieve the proposed level of sustained demand reduction. Commenter s stated this goal is well outside of a reasonable expectation for expansion of Georgia Power's EE programs over the next several years. Commenter s stated the final rule must be modified to reflect a realistic and feasi ble target for Georgia that is a compliance option and not a mandated level of energy efficiency.

Commenter s stated the success of utility

- sponsored energy efficiency programs rely on customers to choose to participate and not a mandate by this rulemaking process. Commenter s stated that while studies may show that there is potential for further adoption of certain measures, the success of all programs is dependent on consumers to adopt new technologies and to participate in the utility sponsored programs. Commenter s stated us ing the best case scenario of states located on the west coast or in the northeast is not a relevant model for what can be done in Georgia. Commenter s stated that demographic and ideological differences between states will247 cause significant variation in th e adoption of measures and success of programs across the country, even if those programs are identical and well managed. Commenter s stated that to better model the possible reductions for Georgia, the basis for rulemaking should be limited to what other s outhern states have been able to achieve in order to determine what is truly feasible. Commenter s stated that the Georgia Power TEAPot helps determine the energy savings that are feasible specific to Georgia Power's territory and the cost

- effectiveness of achieving certain levels of energy savings. Commenter s stated the EPA's goal of net annual incremental energy savings of 1.5 percent per year is not feasible and cost effective based on Georgia Power's 2012 TEAPot Study and lies outside the bounds of " Achi evability " identified in the studies the EPA uses to set the benchmark goals.

Commenter s stated that they would accept EPA's 0.97 percent growth rate as being within a reasonable range. Commenter s stated it is important to note that, as shown on Wyomin g's album on EIA's Flickr page, in 2013 Mining had nearly a 35 percent share of the Wyoming economy, nearly fourteen times higher than the nation as a whole, and higher than any other state. Commenter s stated given this sector leverage, the actions that EP A intends to affect the coal and power sectors of Wyoming's economy will affect the state as a whole. Commenter s stated without the exclusions, the 0.97 percent is excessive.

Commenter s stated Wyoming's ability to achieve energy efficiency goals is affect ed by the heavy weighting of industrial use in its electricity consumption. Commenter s stated 2012 industrial sales in Wyoming were 58.98 percent of statewide total sales, a substantially heavier proportion than the next closest western states, Idaho (40.3 8 percent) and Nevada (39.04 percent). Commenter s stated the general rule in the west, readily apparent from the EIA data for 2012, is that energy savings do not keep pace with industrial sales (the commenter s duly noted 2012 exceptions in Idaho and Oregon ). Commenter s stated the PacifiCorp data for Wyoming follows the general rule, with industrial efficiency effects being about 0.1 percent of sales, while residential efficiency is about 0.7 percent and commercial efficiency is about 0.5 percent; the

commen ter s provided a table (see page 24 of the comment letter) that presents PacifiCorp 2012 sales (MWh) and 2012 EE Savings (MWh) for Residential, Commercial, and Industrial. Commenter s stated Cheyenne Light Fuel & Power did not report any 2012 efficiency

sav ings associated with its industrial class to EIA, although its commercial program was available to industrial customers.

Commenter s stated predominance of the industrial sector makes a difference. Commenter s stated as the EIA observed in its March 4, 2013 issue of Today in Energy, the national industrial sector's demand for electricity is relatively flat compared to the other two sectors; the
commenter s provided diagrams of retail sales for 2009 to 2012 for residential, commercial, and industrial retail sa les. Commenter s stated rate cases have shown that the same is essentially true in Wyoming on a daily and weekly basis. Commenter s stated the EIA sketched the practical
context:
"Serving an industrial customer tends to cost less on a dollars

- per

- megawatt h our because there is less hourly and seasonal variation in demand. Industrial facilities often run 24 hours a day to avoid ramp

- up times or to meet manufacturing requirements. Also, industrial customer can take advantage of interruptible service contracts, in which the customer agrees to reduce its248 electricity use when the utility asks, in exchange for a lower rate. At such time, the industrial facility can switch to onsite backup generation or shut down temporarily."

Commenter s indicated that stated anot her way, the industrial sector makes more efficient use of the electrical system from the outset. Commenter s stated the potential for efficiency gains is greatest for the residential class, and least for the industrial class. Commenter s stated the rough

or ders of the differences of potential are shown in the diagram above.

Commenter s stated industrial sales affect energy efficiency programs in several ways. Commenter s stated first, the nationally familiar programs for residential and commercial sectors hav e much less overall impact in Wyoming. Commenter s stated if Arizona's outstanding program rates of success were achieved, but with the weight of Wyoming's sectors, Arizona's high overall first year savings performance would drop from 1.61 percent of sales to 0.76 percent of sales; the commenter s provided a table with that presents energy efficiency data for AZ and adjusts/weights it to Wyoming's sector percentages.

Commenter s stated second, the relatively constant demands on the system reduce the economic consequences of daily fluctuations in electricity demand, and in doing so, reduce the attraction of many common demand side management measures. Commenter s stated time of use pricing, for example, has never found favor in Wyoming, because peak demands are already modulated into insignificance by industrial loads. Commenter s stated the system efficiencies also keep prices to all consumers somewhat lower, dampening the economic appeal of energy efficiency programs.

Commenter s stated third, industrial energy efficiency opportunities tend to be dominated by the character of the industry, and its capital cycles. Commenter s stated a significant percent of PacifiCorp's overall Wyoming load is fewer than three dozen large industrial customers. Commenter s stated about 85 percent of PacifiCorp's industrial usage is related to mining and mineral extraction. Commenter s stated when commodity prices are up, these customers are normally preoccupied with producing as much as possible; when prices are down, the sa me customers are focused on cost cutting, and capital budgets are constrained. Commenter s stated opportunities to influence decision makers may take years to develop.

Commenter s stated further, PacifiCorp has concluded, based on a study prepared to suppor t its upcoming Integrated Resource Plan revision, that 75 percent of the Wyoming industrial energy efficiency opportunity through 2034 is tied to process loads, and hence to motors, compressors, pumping, and the like. Commenter s stated this type of equipme nt often has a long life and represents expensive investment with little analogue to a residential context. Commenter s stated industrial customers tend to be receptive to addressing energy efficiency possibilities when the motor fails, but otherwise tend t o avoid disturbing ongoing operations to install new capital equipment.

Commenter s stated as a corollary to the capital cycle and efficiency opportunities, first year industrial energy efficiency savings tend to be lumpy, up one year and down the
next. C ommenter s stated this is true of industrial opportunities in other states as well (a California example appears below). Commenter s stated EPA's decision to rely on one base year, supplemented mainly by assumptions, masks significant year

- on

- year variations in data, and249 particularly industrial data. Commenter s stated it is not clear that this lumpiness can be smoothed out by something as simple as a three year average, given the lengthy lives of heavy capital equipment.

Commenter s stated fourth, industrial customers present a service risk. Commenter s stated if electricity prices are driven too far, too fast, industrial customers are capable of self

- generation, and leaving the company's customer base. Commenter s stated this gives added poignance to the PREC orp problem described above. Commenter s stated efficiency programs that do not demonstrably add value may drive industrial customers off the grid.

Commenter s stated aside from its industrial base, Wyoming is also affected by an urban/rural divide. Comment er s stated this is illustrated by PacifiCorp's experience and reflected in EIA data. Commenter s stated PacifiCorp prepares and files Form 861 data for its service territories in six states: Wyoming, Idaho, Utah, Oregon, Washington, and California (in Orego n, PacifiCorp data is consolidated with the filing of the Oregon Energy Trust and hence not shown). Commenter s stated it offers essentially the same energy efficiency programs in all six states, but its service territories in every state but Utah tend to b e rural with dispersed populations. Commenter s provided a table of the data readily available from EIA, which shows PacifiCorp Residential, Commercial, and Industrial sales and energy efficiency data for WY, ID, CA, WA, and UT. Commenter s stated looking at the residential performance in the five service territories, the best performance is in Utah, the most densely populated service territory. Commenter s stated performance in the sparsely populated service territories in Wyoming, Idaho, and California is le ss than half of Utah. Wyoming outperforms California in the residential context. Commenter s stated it is important to remember that overall state performance is not necessarily indicative for a rural territory. Commenter s stated further, rural territories may have more in common with one another than with their respective states.

Commenter s noted they viewed Washington as being similar to its other rural territories. Commenter s stated in 2012, 13,610 MWh of the company's reported residential efficiency wa s related to market transformation savings reported by a regional non

- profit organization in which PacifiCorp participated. Commenter s stated market transformation typically involves market intervention, typically upstream and ahead of utility programs, wo rking with product manufacturers and retailers to build and stock higher efficiency products than would otherwise be available over a similar timeline. Commenter s stated this includes intervention in the supply chain of big box stores like Costco, as disti nct from programs which typically involve offerings directly to ratepayers. Commenter s stated PacifiCorp only applies for ratepayer support when there is a reasonable relationship between the supply chain intervention and its service territory. Commenter s stated this does not include Wyoming. Commenter s stated in PacifiCorp's Wyoming territory, there is neither a Costco nor a Lowe's. Commenter s stated PacifiCorp's trade allies for its appliance program include only two Home Depots, five K

- marts, two electri c supply stores, five Sears stores, a Sutherlands, seven Walmarts, and a Sam's Club, for a service territory occupying more than a third of the state. Commenter s stated if one eliminates the market transformation activity, Washington's program performance falls to the low end of residential performance in the five service territories.

Commenter s stated much the same pattern applies to commercial performance, with Utah again being well in the lead with 1.11 percent, and this time, California the laggard wi th 0.41 percent.250 Commenter s stated in the industrial class, California is the 2012 leader with a 1.92 percent performance, although with sales that are a small fraction of either Wyoming or Utah. Commenter s stated in the Form 861 filed by PacifiCorp for 20 13, California's savings drop to 786 MWh from 2314 MWh the preceding year, and its overall performance percentage dropped to 0.56 percent from 0.74 percent.

Commenter s stated there is not time during the comment period to prepare a formal study of why

rur al service territories underperform, but part of the answer is density. Commenter s stated Wyoming has only six people per square mile, fewer than any state but Alaska. Commenter s stated as noted above, this affects markets and opportunities available to th e consumer. Commenter s stated it also affects all aspects of program design, administrative expense, and customer service. Commenter s stated for example, the refrigerator retirement programs of PacifiCorp and Cheyenne Light Fuel & Power relied on the same out of state contractor with out of state personnel, and often required wait times of several weeks before an appliance was removed, a deferral not popular with customers. Commenter s stated the contractor now has one location in the state.

Commenter s stat ed programs have been imported into Wyoming without sufficient thought about how likely they are to succeed. Commenter s stated when Cheyenne Light Fuel & Power first proposed an efficiency program, its consultant relied on a portfolio of measures that had been successful with sister companies in other states. Commenter s stated the consultant's budget included 100 high efficiency electric water heaters. Commenter s stated skeptical because hot water was commonly heated with natural gas supplied by the same ut ility, the Commission authorized a budget that included 50 units, and after a year, only one customer had taken advantage of the offering, which was then eliminated because the volume was too low to support administrative expense.

Commenter s stated the r eason for failure may be obscure. Commenter s stated in February 2013, PacifiCorp attempted to augment distribution of CFLs by mailing 28,000 coupons to customers in ten cities in Wyoming, redeemable at Walmarts in three cities. Commenter s stated only 193

c oupons were redeemed, a response rate of 0.69 percent. Commenter s stated the program was cancelled.

Commenter s stated air conditioning is another source of insight for residential consumption. Commenter s stated while there is not granular federal data on the penetration of central air conditioning in Wyoming, periodic PacifiCorp surveys of appliance saturation provide suggestive data that reflects on residential consumption in PacifiCorp's service territo ries. Commenter s provided a table that shows CAC saturates for WY, ID, CA, WA, and UT where PacifiCorp operates. Commenter s generally observed that the addition of air conditioning increases residential consumption by forty percent (2014 Rocky Mountain Po wer General Rate Case, Volume 3, p. 642, lines 6

- 13).

Commenter s stated with EIA data available for 2010 to 2013, they can summarize the performance in PacifiCorp's five service territories with percentages of annual incremental savings, broken out by clas s. Commenter s provided a table with incremental savings data for Residential, Commercial, and Industrial in WY, ID, CA, WA, and UT from 2010 to 2013. Commenter s stated based on Wyoming's experience, we assume that all of these jurisdictions251 have provided P acifiCorp with all the resources the company requested to conduct its programs. Commenter s stated there is nothing in the documented experience of the rural service territories to suggest that EPA's steady annual increase of 0.2 percent a year is feasible or reasonable. Commenter s stated to the contrary, actual experience suggests that increases will be much less dramatic, and difficult to sustain. Commenter s stated there is also nothing in this data to support a final rate of 1.5 percent, or to support EPA 's view that a rate of 1.5 percent first year savings can be sustained. Commenter s stated the 1.5 percent becomes even more problematic when considered in light of EPA's intended results for Wyoming's economic base. Commenter s stated it is also speculative in view of the fact that the majority of expected savings will be in lighting (see discussion elsewhere), and the rate lighting savings will be declining. Commenter s stated the change from historical incandescent lighting technology to more efficient inca ndescent lights and to CFL has already been largely accomplished now that federal standards have been implemented. Commenter s stated the savings resulting from a transition to LED bulbs from CFL bulbs are far less dramatic. Commenter s understood that part of EPA's intention is to challenge states to higher levels of performance, but it is one thing to present a challenge, and another thing entirely to set a standard which no one can reasonably expect to be accomplished. An annual increment of 0.1 percent a nd a final rate of 0.75 percent would be a challenge. Commenter s stated an annual increment of 0.2 percent with a final rate of 1.5 percent is a non

- starter.

Commenter s stated EPA notes that the national average energy savings rate in 2012 was 0.58
per cent and the median was 0.48 percent. Commenter s stated that

, consistent with the CAA's requirement that BSER be "adequately demonstrated" and that the resulting standards be

" achievable ," the use of the mean or median savings rate would be a better measur e of what the states actually achieved in 2012. Commenter s stated that States that do not have robust energy efficiency portfolios or energy efficiency resource standards overseen by public utility commissions are at a disadvantage as EPA assumes they can bring their programs up to the "best practice" scenario level. Commenter s stated EPA should consider in setting goals the retail rate of electricity in those 12 states compared to other states across the nation. Commenter s stated this comparison between th e 12 leading states and the rest of the nation along with demand side energy efficiency impacts is a crucial comparison since the price of energy is a significant factor in the calculation of EE potential. Commenter s stated that just as generating plants s erve large areas across state boundaries, energy efficiency potential studies used by EPA could cross state boundaries and would add additional burden where goals are overestimated. Commenter s stated there are no state potential studies to derive actual or estimated potential savings.

Commenter s stated that they have estimates of realistically achievable potential for customer EE projects that are much lower than EPA's estimates, which they feel are unrealistic. Commenter s noted that customer adoption of EE measures is beyond the control of states and utilities and recommends that each state have authority over assumptions since each state has methods to determine cost

- effectiveness of EE, as well as reduction verification methods.

Commenter s stated that EPA's arbitrary standard ignores the economic potential for energy efficiency, which varies with local and regional demographics. Commenter s noted that the Northeast states have a very different electric consumption foot print than Southern states, relying much more on natural gas to fuel more energy intensive applications such as space and water heating unit. Commenter s noted that this logic suggests that the Northeast has a greater EE potential than the South, but EPA's proposal does not recognize this difference. Commenter s252 stated that any standards based on EE opportunities in a state should be based on reasonable review of state

- specific factors that affect potential for reducing electrical demand including population, building stock, cost impacts, and customer behavior trends.

Commenter s stated that EPA's assumptions go well beyond current experience with EE programs and best practices of leading states, Commenter s stated that achieving such dramatic increases in E E savings rates will require correspondingly dramatic increases in utility EE program budgets and customer expenditures, which EPA does not address. Commenter s also noted that EPA did not take into account how its assumption that all states can achieve a 1 .5 percent annual incremental savings rate would impact load forecasting for states. Commenter s noted that not only do electricity demand forecasts directly influence the required level of generation from existing and affected generating units under the proposed guidelines, they also affect the required amount of new construction of generating units that are needed to meet expected electricity demand and provide reliable power. NERC Initial Reliability Review at 16. Commenter s stated that EPA should, at a minimum, address state

- specific concerns about the proposed emission rate goals before finalizin g these EE goals.

Commenter s noted that EPA's on analysis shows that annual incremental savings as a percentage of sales varies tremendously by state. Commenter s stated that the key inquiry it not whether some states already have achieved the target savin gs rate, but whether this achievement can be replicated by other states and over what timeframe. Commenter s stated that a single year's snapshot data does not allow EPA enough information to answer this question. Commenter s also stated that it is not clear that the achievements of three states with respect to annual incremental savings rate are indicative of what is sustainable for these states or feasible for the rest of the states. Commenter s noted that to be consistent with the CAA's requirements that BS ER be "adequately demonstrated" and that the resulting standard would be "achievable", the use of the median savings rate would be a better measure of what the states actually achieved in 2012. Commenter s stated that EEI analysis shows that the median savi ngs rate in 2012 was 0.48 percent but EPA notes that the national average was 0.58 percent.

Commenter s noted that Minnesota was one of the 12 states cited by EPA as having successfully implemented a 1.5% annual conservation goal. Commenter s stated that when establishing the 1.5% annual goal, Minnesota policy makers assumed that by treating all utilities the same

-- every electric utility was given the same conservation goal

-- they were treating every utility fairly. Commenter s stated that unfortunately , the 1.5% annual conservation has proved to be significantly more difficult and costly for electric cooperative members because of the significant variations in demographics, load growth, and usage patterns among utilities. Commenter s stated that as a res ult, electric cooperatives in Minnesota face a significant higher cost to achieve the 1.5% goal, costs that are paid for by electric co

- op members and the average cooperative cost per kWh saved through adoption of cooperative conservation programs is more than double the cost to other utilities in the State. Commenter s stated that electric cooperatives in Minnesota also spent 6.95% of their gross operating revenue to achieve the reductions, which is, again, almost twice the cost of other utilities. Commente r s found that success in meeting the conservation goal is dependent on significant financial investments by end users, something a utility can't control. Commenter s stated that the Minnesota experience demonstrates clearly that conservation investments at large industrial and commercial users provides significantly more bang for the buck when it comes to energy savings.253 Commenter s noted that EPA's benchmark represents a significant increase above the current energy efficiency achievements of 0.4% to 0.5 % annually verified by the commenter s

. Commenter s stated that their experience with over 10 years of aggressive EE program implementation suggests that EPA's assumptions regarding EE programs are unrealistic. Commenter s stated that EPA must examine the "be st practices" employed in successful energy efficiency programs to determine an achievable metric for energy efficiency

- related emission reductions. Commenter s noted that it is not clear whether the 1.5% energy efficiency goal represents only savings attri butable to utility efficiency programs, or whether it also includes savings due to increasing efficiency codes and standards that are driven by federal, state, and local regulations (e.g., the 2007 Energy Independence and Security Act's phase out of genera l

duty, standard incandescent bulbs). Commenter s stated that such regulation

- driven efficiency can be highly effective in saving energy, but is typically excluded from energy savings attributable to utility efficiency programs. Commenter s noted that it wil l be important for electric utilities to understand how much of the 1.5% energy savings will come from regulation

- driven efficiency, who will be responsible for ensuring it is achieved, and how it affects the energy savings the utilities will be responsibl e for achieving.

Commenter s stated that EPA's analysis was not robust enough to assume that all states can achieve and sustain the proposed amount of energy savings over ten years. Commenter s stated that EE programs historically have been financed by u tilities and EPA must recognize that expansion and consumer use of these programs depends on state laws and regulations that allocate resources and approve of demand

- side programs.

Commenter s noted that no member of the LPPC (Large Public Power Council ) has been able to achieve a 1.5% annual savings rate over a ten

- year period. Commenter s noted that the LPPC's comments on this rulemaking state that based on the experience of LPPC members with more than ten years of implementing aggressive energy efficie ncy programs, EPA's assumptions on energy efficiency have not been adequately demonstrated.

Commenter s stated that EPA's goal may not be achievable because many states do not have enabling legislation in place requiring energy efficiency goals and with out the necessary legislation to implement such goals, it is unreasonable to assume that this goal will be met. Commenter s also noted that some states have already undertaken significant actions to reduce electricity consumption through state

- specific ener gy efficiency programs and in those states, it will be difficult to achieve further increases, making it unfair to impose the same standard on all states. Commenter s added that if the EE reduction goals are not achievable, it will require that additional c arbon reductions are realized from the other building blocks contained in the CPP proposed rule.

Commenter s believed that EPA's proposed rate of annual incremental reduction is totally unrealistic. Commenter s noted that the high cost of energy and inten se price competition in the global marketplace compel companies in Virginia, as elsewhere, to maximize the ratio of production to energy consumption. Commenter s noted that over the past years, Virginia companies have continuously improved their energy effi ciency and reduced their electricity demand and that they have already applied " best practices " to reduce their energy consumption. Commenter s concluded that there are no additional cost

- effective ways to achieve a 1.5 percent reduction in electricity consumption every year from now until 2030.254 Commenter s noted that in California in particular, utilities are already implementing the most

cos t

- effective EE measures possible given our climate and economic constraints, c ommenter s noted that despite taking aggressive action, the state's 2012 incremental level of EE deployment was only 1.24%, while the state's cumulative savings level was 13.67%. Commenter s stated that California's cumulative EE saving rate is second in the nation, while California's 2012 level of incremental EE deployment is fourth in the nation, slightly behind Arizona and two significantly less populous New England states. Comme nter s stated that this level of incremental EE improvement reflects the fact that municipalities and other utilities in California are already harvesting most of the " lowest hanging fruit ," as well as a number of less cost

effective opportunities to save e lectricity. Commenter s concluded that higher levels of savings thus are not achievable in light of the costs and technological barriers of increasing EE beyond California's already

- ambitious level of EE savings.

Commenter s stated that EPA's projections regarding achievability of cost

- effective EE targets are not consistent with Idaho's experience and projections. Commenter s noted that Idaho's historically achieved cost

- effective EE reductions have been significantly less than 1.5% on an average annual b asis. Commenter s also noted that EPA failed to include state

- specific studies, such as Idaho Power's most recent EE Potential study, which projected an annual average of 0.6% achievable EE potential over a 20

- year study period, in the EPA's " Summary of Rec ent (2010

- 2014) Electric Energy Efficiency Potential Studies ." Commenter s acknowledged that EPA cited information published by the Northwest Power Conservation Council (NPCC), of which Idaho is a member, but noted that NPCC's analyses are limited to a regi onal overview and do not address the ability of specific states to increase future cost

- effective EE savings. Commenter s disagreed with EPA's use of historical reductions to predict future success and noted that the NPCC reports historic utility EE savings in the Northwest ranging from 0 .65% (2005) of sales to 1.38% (2011), but decreasing to 1.22% in 2012 with a U.S. average of 0 .58%. Commenter s stated that EPA's unrealistic load growth assumptions will exacerbate future compliance problems, as EPA inapprop riately assumes that demand reductions from cost

- effective EE measures will more than offset future load growth. Commenter s noted that Idaho's largest utility, Idaho Power, prepared projections through its 2013 integrated resource planning ("IRP") process that anticipate load growth in excess of 1% per year, even after accounting for the projected effects of existing EE programs.

Commenter s noted that based on their personal experience, achieving a 1.5% annual incremental savings rate is not realistic f or their Colorado, South Dakota, and Wyoming service territories. Commenter s stated that their customers would have to achieve a staggering 22,256,969 kWh in savings annually for the next 15 years in South Dakota and offer programs aimed at achieving addit ional energy savings of 5.982,492 kWh in Colorado to achieve EPA's goal. Commenter s noted that based on the historical cost

- per

- kWh

- saved the commenter s ' Colorado savings figure would amount to an estimated additional $1.3 million in annual expenditures de voted to EE programs in the state. Commenter s stated that achieving EPA's goal would require the
commenter s ' Wyoming territory would cost approximately $3.5 million annually, which would result in increasing the approximate annual cost per customer for EE/ DSM programs from $8.00 to $40.00.

Commenter s noted their support of EE measures in state compliance programs for the Proposed Rule and stated that their members have very successful EE programs; however, none of their255 members have ever been able to ac hieve a 1.5% annual savings rate over a ten

- year period. Commenter s disagreed with EPA's assumption that this level of EE has been adequately demonstrated. Commenter s noted that while several states may currently achieve an annual savings rate of 1.5%, no state has maintained annual energy efficiency savings rates at or near that level for a ten

- year period, as EPA assumes in establishing state emission rate targets. As an example, c ommenter s noted that one of their members spent in excess of 2.5% of retail revenue from electricity sales on efficiency projects for the past several years, and has been able to verify efficiency savings of about 0.5% annually.

Commenter s stated that by relying on actions at the retail level, over which the commenter s ha ve

no control, to inform a standard that is intended to reflect emission reductions available at the generation level, EPA relies on assumed efficiency that commenter s cannot reasonably achieve and with which it cannot reasonably comply. Commenter s noted that they and their members have invested more than $22 million in demand

- side energy efficiency programs between 2010 and 2012, or between $6.5 million and $9 million annually and more recently in 2014 invested $6.9 million in energy efficiency mea sures and saved a total of 81,868,000 kWh. Commenter s stated that the savings from these measures, however, do not approach the 1.5% savings that EPA assumes to be achievable in any one year, much less compounded year

- over

- year.

Commenter s stated that based on prior studies and experience, the proposed savings due to energy efficiency are unrealistic and unattainable. Commenter s noted that since the Iowa State Legislature passed SF 2386, municipal utilities came together to conduct a study to determine potential energy efficiency gains in our Iowa communities. Commenter s noted that study and the annual results of the Iowa municipal utilities' energy efficiency programs have since been reported annually to the Iowa Utility Board. Commenter s s tated that they already touched many of their customers with their existing energy efficiency programs.

Commenter s noted that Iowa has required its utilities to implement EE programs since 1990 (Iowa Code 476.6(14) and (16)), and the state has already achieved significant savings from EE programs. Commenter s stated that in recent years, Iowa utilities have achieved results close to one percent incremental savings, for both electric energy and natural gas; however, there are significant differences among various types and sizes of Iowa utilities in terms of energy efficiency results. Commenter s stated that for both investor

- owned and consumer

- owned utilities, much higher levels of savings implied by the EPA's Building Block 4 calculation may imply much hi gher utility and participant costs. Commenter s also worried that EPA's EE methodology may create problems due to inadequate consideration of the interaction of state and utility energy efficiency measures with non

- utility efficiency standards.

Commenter s stated that there is no national

- level precedent for EPA's highly aggressive assumptions as to the amount of electricity that can be saved year

- over

- year based on energy efficiency measures. Commenter s stated that the fact that three states have achieve d a 1.5% annual savings goal and nine other states have targeted this level falls short of evidence "adequately demonstrating " the ability of all states to meet EPA's proposed target.

Commenter s believed that the Proposed Regulation selectively conside rs the policies of some States over those of Virginia and other States. Commenter s noted that Virginia has an energy efficiency goal, rather than a requirement, is disregarded and, in effect, " vetoed " by the different256 policies of other States

-- States wit h demographics, climates, load and generation profiles different from those of Virginia. Commenter s stated that this approach to setting Virginia's carbon emission rate is arbitrary and capricious and does not establish what is achievable, much less what h as been adequately demonstrated, in Virginia.

Commenter s noted that North Carolina electric utilities have actively developed EE programs under the incentives provided in REPS but despite this flexibility, the past six years of historical EE implementa tion shows that a 1.5% annual incremental rate and a 10.3% annual cumulative rate by 2030 are unrealistic for North Carolina. Commenter s noted that the most recent Integrated Resource Plans filed by North Carolina utilities indicate EE savings in 2030 of 0 .9%, 4.3% and 6.5% for Dominion North Carolina Power, Duke Energy Progress, and Duke Energy Carolinas, respectively.

Commenter s noted that the national EE rate is only 0.58% and that EPA failed to provide adequate support that a 1.5% incremental saving s goal would be attainable by all states. Commenter s stated that EPA did not discuss how states with admittedly more limited opportunities

- as well as different energy use and other relevant characteristics

- will maintain incremental gains at the same pa ce as leading states. Commenter s believed that
any standards based on EE opportunities for states should be based on a reasonable review of the state specific factors that affect the potential for reducing electrical demand, including but not limited to po pulation, building stock, cost impacts and customer behavior trends.

Commenter s stated that a review of the most recent IRPs and potential studies indicates the EPA's assumption that a 1.5 percent annual incremental savings rate is aggressive unless Mi ssouri IOUs can meet the maximum achievable potential (MAP) analysis. Commenter s noted that maximum achievable potential, by definition, is the hypothetical upper limit of achievable potential; while MEEIA is measured relative to realistic achievable poten tial which establishes a realistic target for demand

- side savings that a utility can expect to achieve.

Commenter s stated that the actual experience of North Carolina IOUs since Senate Bill 3 was enacted and the IOUs developed EE programs shows increme ntal EE savings rates for the IOUs lower than the 1.5% goal in the Proposed Rule. Commenter s stated that it would be reasonable to expect an increase in the incremental rate if North Carolina utility policy and ratemaking had not already encouraged EE prog rams, but that is not the case. Commenter s concluded that it is unrealistic to expect the IOUs to achieve a significantly higher savings rate than they have achieved with financial incentives in the recent past.

Commenter s noted that they have a long history of administering demand

- side management programs through their member

- owner distribution cooperatives effectively harvesting the available fruit of energy efficiency options. Commenter s stated that their long

term, mult i

- pronged approach to influencing their load curve through end

- use member initiatives is inclusive of EE and load management programs. Commenter s noted that that have achieved
near cost

- effective saturation of their EE programs, and therefore the complianc e obligations under Building Block 4 are overly optimistic and do not provide adequate flexibility for a utility to modify its load curve to reduce emissions of CO2.257 Commenter s noted that they engaged in concerted efforts at conservation, both for thei r member utilities and for their members' customers, since 2008 and their experience has consistently demonstrated actual efficiency gains that average 0.7% per year.

Commenter s noted that while several states may currently achieve an annual savings ra te of 1.5 percent, no state has maintained annual energy efficiency savings rates at or near that level for a ten year period, as EPA assumes in establishing a state's emission rate target. Commenter s stated that EPA provides no evidence that states can do so and therefore EPA's assumptions on energy efficiency have not been adequately demonstrated.

Commenter s stated that EPA selected the most optimistic values rather than an average of the different analysis that would give appropriate effect to the cr edibility of all of the analysis. Commenter s stated that as U.S. EPA correctly noted, EE/DSM has been evolving; past experience may not prove to be an accurate predictor of future results and therefore, achieving a 1.5% annual increase in EE/DSM is suspect

.
Commenter s noted that Florida achieved incremental energy efficiency savings of 0.27% of total retail sales, and per EPA's compliance model, in 2020, Florida's annual incremental energy efficiency savings would have to reach 0.85% of total retail sal es

--- a 300% increase. Commenter s also noted that the EPA model would further require this annual incremental savings level increase to 1.5% of retail sales year over year through 2030 which is unprecedented.

Commenter s stated that EPA lacks support for its conclusion that Pennsylvania and other states can achieve and maintain incremental energy efficiency savings of 1.5 percent per year. Commenter s noted that cumulative EE savings contemplated by EPA represents 22 percent of total emission reductions re quired under Pennsylvania's proposed emission target.

Commenter s believed that EPA should reevaluate its energy efficiency expectations to make sure its assumptions are achievable for all states based on state

- specific circumstances.

Commenter s stated that EPA should not be using yet

- to

- be

- determined achievable requirements that have not been adequately demonstrated to establish state goals, as the 2020 targets set by 11 states that EPA relies on have not been demonstrated.

Commenter s stated that in their experience, the reductions proposed by EPA are not being achieved with any consistency now, and are unlikely to be achieved in the future.

Commenter s stated that EPA's assumptions simply do not relate to the current and future projected e conomic growth in North Dakota and must not be furthered.

Commenter s noted that EPA's goal would be a totally unrealistic and unattainable goal for their region, as they would have to reduce their demand and energy requirements by 20 to 25 percent by 2 030 which would increase electric energy costs and shift those costs between customers.

Commenter s stated that EPA's 1.5 percent annual incremental savings rate is greater than industry's assessment of energy efficiency program potential.258 Commenter s stated that it is not clear that states will be able to achieve a 1.5 percent annual incremental savings rate without constraining, or even stalling, economic growth.

Commenter s stated that this goal does not have any benefits while EE programs come at a cost to the entire rate base, not just to residential consumers. Commenter s stated that EE is unclear and almost unenforceable with EPA's lack of clarity.

Commenter s stated t hat EPA's proposal is based upon a complex web of assumptions

-- many of them implausible

-- about future energy demand, dramatic shifts in generation sources, the addition of more intermittent sources for generation and reductions in energy use in 48 state s. C ommenter s stated that each of these assumptions, what EPA ironically calls " building blocks ", rests upon a weak foundation. C ommenter s stated that EPA's assumption of 1.5 percent growth in energy efficiency year

- over

- year lacks any credible basis. To r each that goal, c ommenter s noted that demand

- side energy efficiency would have to improve 250 percent nationally over a 10

- year period. C ommenter s stated that such an assumption means that energy efficiency gains outpace electricity demand growth resulting in declining retail electricity sales. In short,

c ommenter s stated that EPA assumes negative electricity demand growth that is inconsistent with the U.S. Energy Information Administration forecast as well as other respected demand forecasts. C ommenter s st ated that over time, potential energy savings decline significantly absent some major technological breakthrough. C ommenter s stated that EPA does not identify any breakthrough that would sustain an annual 1.5 percent growth in efficiency and if such breakt hroughs are not on the present horizon, they will not be available during the 10

- year period for achieving the targets in the proposal. C ommenter s stated that the gap between the agency's efficiency wish and technological reality has significant implicatio ns for the cost of the rule. C ommenter s stated that since most of the lowest cost efficiency measures are already being deployed, the next increment will be more expensive especially in states with the lowest retail power prices.

Commenter s stated that Building Block 4 is undemonstrated and arbitrary. C ommenter s stated that according to EPA, energy consumption reductions achieved over some period of time in three States and projected to be achieved in nine more qualify those jurisdictions as leading Sta tes and their legislative programs as best practices. C ommenter s stated that for building block 4 these best practices must be expected by EPA to be adopted by the remaining States because, despite claims of flexibility, the results of applying building bl ock 4 was baked into the cake of hard state " goals ." C ommenter s stated that the associated projections by EPA are completely undemonstrated. C ommenter s stated that consistent year

- over

- year reductions over long periods have never been achieved. C ommenter s stated that these projected decreases are arbitrary and capricious as well because they are contrary to all major official and unofficial projections of population growth and economic increase. C ommenter s stated that there are also arbitrary, discriminato ry penalties falling on States that purchase power out of state. C ommenter s stated that this is because the grid is not structured on a state

- by

- state basis, targets simply calculated by State cannot escape being arbitrary.

Commenter s recommended that EPA fix technical deficiencies inside CPP modeling, and re

- run building block assumptions and goals, incorporating the effects of one block's goals and assumptions on another. C ommenter s stated that EPA should fix the errors in the assumption used for ener gy efficiency programs results that form the foundation of building block 4 goals.259 C ommenter s stated that there is no demonstrated, credible evidence to support the proposed rule's assumptions of 1.5 percent annual EE reductions can be sustained ad

- infinit um equally among each state.

Commenter s stated that in fashioning Building Block 4, EPA evaluated energy efficiency studies and energy efficiency programs adopted by States to determine the potential for energy efficiency programs to reduce energy deman d and, thereby, reduce the need to operate fossil fuel

- fired EGUs. C ommenter s stated that based on these sources, EPA projected that States could achieve an incremental energy efficiency savings of 1.5% of retail sales, with a yearly rate of improvement of 0.2% until a State reached the 1.5% target.

C ommenter s stated that EPA's analysis falls short in numerous respects. C ommenter s stated that first, the Clean Air Act requires that each standard of performance must be "adequately demonstrated" for each type of source to which it applies and also must be cost

- effective. CAA section 111(a ) ( 2). C ommenter s stated that an emission control technology is "adequately demonstrated" under Section 111 when it "has been shown to be reasonably reliable, reasonably effici ent, and [it] can be expected to serve the interests of pollution control without becoming exorbitantly costly in an economic or environmental way." Essex Chem. Corp. v. Ruckelshaus, 486 F.2d 427, 433 (D.C. Cir. 1973). C ommenter s stated that under Section 111, EPA may " look toward what may fairly be projected for the regulated future, rather than the state of the art at present," but these projections are necessarily constrained by the effective date by which the performance standards go into effect. Portla nd Cement Ass'n v. Ruckelshaus, 486 F.2d 375, 391

- 392 (D.C. Cir. 1973). C ommenter s stated that standards of performance may not be based on emission control technologies that are "purely theoretical or experimental," Essex Chem., 486 F.2d at 434, nor "base d on a 'crystal ball' inquiry." Portland Cement Ass'n, 486 F.2d at 391; see Costle, 657 F.2d at 362 (emission limit could not be achievable based on test data from "non

lime/limestone processes" because they "are not widely available"). C ommenter s stated t hat even if EPA had such authority to regulate sources "outside the fence line" as it proposes to do in Block 4, the agency has not specifically demonstrated for each category of source "outside the fenceline" that the proposed requirements for customers o f utilities are both available and adequately demonstrated. C ommenter s stated that finally, the proposed rule also does not allow the States to consider the costs of certain emission control technologies may be unreasonable due to the source's limited rema ining useful life, as required by Section 111(d)(3).

C ommenter s stated that in addition, EPA has failed to account in its determination of BSER for Block 4 that there are fundamental differences in state's resources, the fact that many states already have required efficiency improvements in their state regulations, th e cost of energy efficiency measures, Clean Air Act prohibitions on efficiency changes that would result in "significant increases" in regulated air pollutants under the CAA's New Source Review Program, and the fact that the gains from most energy efficien cy measures are "elastic" in the sense that the performance of most energy efficiency equipment

- light bulbs, coils on refrigeration units, etc.,

- wane as the equipment ages. C ommenter s stated that even more fundamentally, EPA fails to explain how econom ic growth in the in the United States quickly will eclipse efficiency improvements and swallowed by international increases in CO2 emissions from industrial revolutions in other countries. C ommenter s stated that the fact that the emission reduction achieve d at a great cost may be overtaken by events suggests that if the agency is " going long " on a regulatory interpretation, some of these costs should be explored as well.260 Comment 3: Oppose 1.5 Percent

– value has not been shown to be sustainable
Response 3: The commenters expressed concern that the 1.5% target EPA set is unsustainable. A few commenters provided analysis showing that this level could be maintained over time. The EPA has determined not to include demand

- side energy efficiency (building bl ock four) in the BSER of this final rule and therefore we do not need to address the commenter s ’ concerns as they are now out of scope. This determination is discussed in section s V.A and V.B of the final rule preamble of the CPP. Although the EPA has dete rmined to not include demand side

- energy efficiency in the BSER in this final rule we are using 1.0% in our illustrative EE scenario. See the RIA Chapter 3 and the Demand

- side Energy Efficiency TSD for CPP Final Rule for details on the illustrative demand

- side energy efficiency plan scenario

. The EPA believes that 1.0% is a reasonable and sustainable level of savings.

The following are summaries of the specific public comments under this comment:

C ommenters did not support the 1.5 percent annual incremental savings goal because the value proposed by EPA has not been proven sustainable

.
Commenter s noted several factors that lead them to question whether a level of 1.5 percent incremental energy efficiency can be achieved as quickly as EPA assumes. Commenter s stated the levels of energy efficiency in the proposed rulemaking represent a realization of best

- in

- class performance as achieved or mandated by a select few states. While c ommenter s agreed that effici ency improvements in end

- use devices and advances in controls technology can make the realization of electricity savings equivalent to 1.5 percent of retail sales technically possible, economic, market, and perceptual barriers can inhibit or curb customer adoption. Commenter s stated these barriers can be overcome with federal, state, and local energy efficiency building codes and energy efficiency product standards. Commenter s’ energy efficiency potential study indicated it will be necessary to use these me thods to achieve the levels EPA assumes as energy efficiency programs alone will not reach these levels, however, these methods can take longer to implement and produce results less than utility best

- in

- class programs. Commenter s stated there is a "learnin g curve" associated with effective implementation of energy efficiency programs; states with more experience implementing energy efficiency programs are likely to have a higher proficiency at launching new energy efficiency programs, whereas, states with l ess experience may require more time bring their programs to market. Commenter s stated that while a small number of states are achieving electricity savings at level commensurate with the 1.5 percent incremental annual target, maintaining that level over d ecades has not been proven.

Commenter s w ere concerned about the assumption made in setting the carbon emissions goal that Arizona (and other states) can sustain a level of savings from EE at 1.5 percent of sales for the next 13 years (2017 to 2030) and believed that the rate of savings will decline over that period of time due to the limit on the market potential for savings. Commenter s noted that this position is also supported by the analysis conducted by Pace Global, which identified that the 1.5
per cent energy efficiency standard has only been demonstrated in top tier states for a single year. Commenter s also noted that EPA's data does not strongly support that a 1.5 percent energy efficiency standard can be achieved year over year for multiple years , and Pace Global261 recommends that for the purposes of goal setting, EPA should use the 0.6 percent per year standard identified in the EPRI study. Commenter s agreed with Pace Global's recommendation but stated that if EPA opted not to lower the goal, EPA s hould at least use a scaled rate rate between 0.6 percent and 1.5 percent per year during the 2017 to 2030 time frame based on the length of time that each state has been engaged in EE programs. Commenter s stated that the length of time that EE programs ha ve been implemented affects states' ability to achieve EE improvements as they approach the end of the initial compliance term and into the future. Commenter s noted that proactive utilities will find it more difficult and more expensive to maintain the sam e level of incremental EE savings that they have already achieved compared to a utility that has not yet achieved that same level of savings.

Commenter s noted that EPA's assumption that a 1.5 percent annual incremental EE savings can be maintained thro ugh 2030 and beyond produces a produces very large savings goals by the end of the interim compliance period with cumulative 2030 savings rates range from nearly 10 percent to almost 13 percent. Commenter s stated that because the savings rates are first

- ye ar rates, states must continually deploy new EE programs or attract additional customer participation in existing programs in order to achieve the incremental savings rate throughout the interim compliance period and the cumulative rate in 2030 and beyond. Commenter s noted that
states must also replace expiring EE measures, as they are assumed to produce reductions only for 10 years and that the result is that states, utilities and customers are not required simply to

" maintain " a certain EE savings rate, b ut must continually make additional, expansive investments just to keep up. Commenter s cited an analysis by the Lawrence Berkley National Laboratory (LBNL) that concluded that savings rates of 1.5 or 2 percent of retail sales go "well beyond current experi ence and practice in most leading states ." Accordingly , "[t]he challenge for program administrators will be to design and implement programs that can achieve both deeper savings, on average, at customer facilities and have a broader reach in terms of mark et penetration over a sustained period of time." LBNL goes on to note that "service providers will have to achieve savings levels of 25

- 40 percent of existing usage at customer facilities compared to current practice in utility customer

- funded programs, wh ich is typically in the 5

- 20 percent range. Commenter s noted that this means that the sustained achievement of greater levels of savings would require increasing EE program performance by a factor of two to five times; an unprecedented requirement which EP A cannot prove is either possible or probable.

Commenter s noted that EPA assumes that, once a state achieves 1.5 percent annual incremental EE savings, savings are "maintained at that level through 2029 and stated that because the savings rates are fir st

- year rates, states must continually deploy new EE programs or attract additional customer participation in existing programs in order to achieve the incremental savings rate throughout the interim compliance period and the cumulative rate in 2030 and be yond. Commenter s noted that EPA's focus on incremental EE savings rates does not address concerns about the achievability of the cumulative goals through 2030 and beyond. Commenter s stated that while these savings are meaningful and important, a "side effe ct" of increasing minimum codes and standards, which set the minimum efficiency levels for newly constructed buildings and a large range of residential, commercial and industrial energy consuming appliances, is that this significantly decreases the energy savings opportunities that would be available to EE program administrators, while driving up the costs to acquire additional energy savings above the new minimum efficiency levels.262 Commenter s worked with EPRI to evaluate the energy efficiency potential throughout their members' service territories. Commenter s noted that in their most recent evaluation in November of 2011, they discovered that due to the rural, residential nature of the comment er s ' membership, the lower density of end

- use members, and the lower percentages of commercial and industrial members within the commenter s ' members' service territories, the total energy efficiency potential identified through this evaluation falls far sh ort of the total energy efficiency that is called for within the Proposed Rule. Commenter s noted that the total achievable energy efficiency potential identified within the commenter's service territory was equivalent to approximately 8.3 percent of the ca lculated baseline residential and small commercial forecast for 2030. Commenter s noted that when assuming that the state goal for Minnesota is allocated to utilities on an equal percentage basis, the commenter's member cooperatives would need to increase t otal residential energy savings by more than 59 percent and total savings from the commercial and industrial end

- use members by more than 27 percent. Commenter s concluded that this analysis shows that there is tremendous uncertainty surrounding the ongoing achievement of these levels of energy efficiency achievements.

Commenter s stated that their experience is that although significant energy savings can be achieved through a myriad of EE measures, a 1.5 percent annual savings rate is likely not achievab le at reasonable costs over an extended period of time (from 2017 to 2029). Commenter s noted that they have spent in excess of 1.5 percent of retail revenue from electricity sales on efficiency projects for the past several years, and have been able to ver ify efficiency savings of about 0.5 percent annually. Commenter s noted that while several states may currently achieve an annual savings rate of 1.5 percent, no state has maintained annual energy efficiency savings rates at or near that level for a ten yea r period, as EPA assumes in establishing a state's emission rate target. Thus

, co mmenter s stated that it is unknown whether a continuous high level of savings is achievable given the costs and technological barriers of increased EE beyond California's ambi tious level of EE savings.

Commenter s did not believe that establishing a 1.5% is acceptable when little analysis was done much beyond the 2020 period. Commenter s conducted an independent study, which EPA referenced in its GHG Abatement Measures TSD, Ta ble 1

- "Summary of Recent (20110

- 2014) Electric Energy Efficiency Potential Studies", and noted that their study showed a one

- third reduction in cost effective achievable energy efficiency potential from the years 2013 through 2020, indicating that large p otential may not be sustainable over time. Commenter s stated that EE potential is a delicate balance of technological development, increasing energy codes and standards, and customer preferences; based on the commenter s ' experience, they believed that thes e three variables are unlikely to move in a predictable and favorable fashion over such an extended time period.

Commenter s noted that several factors influence the difference between an EE market assessment study potential and the actual EE savings ac hieved by a program, such as the economy. Commenter s noted that EE programs are voluntary and ask customers to install equipment that is more efficient than the code requires. Commenter s stated that typically, this more efficient equipment is more costly t han the equipment required to precisely meet the minimum energy code. Commenter s stated that it is difficult to ask customers to do more, especially in times of economic downturn, even if the customer can save money over time and pay for the added cost wit h energy savings over time. Commenter s stated that it is not realistic to263 assume a consistent annual EE savings goal over the next 16 years and not recognize the cyclic nature of these EE programs and the economy.

Commenter s noted that EPA has assumed that a savings rate of 1.5% can be sustained indefinitely, year after year, but states that have achieved savings rates of 1.5% in recent years have done so through programs dominated by lighting retrofits. Commenter s noted that this will continue until th e market for electric

- saving lighting is saturated, which is expected to happen within the next 10 years t hen this occurs, EE savings will become much more expensive and the level of savings available will also be much less.

Commenter s questioned wheth er the EPA's assumption of the incremental savings rate of 1.5 percent per year is sustainable on an ongoing basis as shown in the recently published study, "US. Energy Efficiency Potential Through 2035" by EPRI. Commenter s stated the study indicates an a chievable range of annual incremental electricity savings from EE measures to be in the range of 0.5 to 0.7 percent, less than half of EPA's estimated savings. Commenter s stated that Pennsylvania's Act 129 required a Phase II incremental reduction of 0.72 percent, and early indications from PA PUC's investigation into a Phase III scenario suggests a 0.75 percent annual incremental reduction which is in line with the EPRI study.

Commenter s stated that they have serious concerns about the sustainability o f 1.5% savings year after year after year as most of the low

- hanging conservation fruit has been picked in Minnesota. Commenter s stated that Minnesota electric cooperatives who have done conservation potential studies within their service territories have a growing concern over the dwindling potential for savings due to increases in lighting, motor and appliance efficiency over the past two decades. Commenter s noted that big box retailers and cable and telecommunications firms are making inroads into home control and conservation, reducing the opportunities for utilities to count savings, particularly in the residential setting.

Commenter s noted that only three of the twelve states EPA relies on have reported EE savings of 1.5%, and there is no evidence that these states can maintain that level of EE savings. Commenter s noted that while nine of the twelve states have legislati vely established 1.5% EE goals, the mere establishment of a goal does not mean it can or will be achieved. Commenter s pointed to Indiana, who recently modified its EE targets and goals for electricity suppliers due to cost considerations.

Commenter s st ated that EPA's assumption of a 1.5 percent growth in energy efficiency, year over year, lacks any credible basis because over time potential energy savings decline significantly absent some major technological breakthrough. Commenter s noted that EPA does not identify any breakthrough that would sustain an annual 1.5 percent growth in efficiency, and if such breakthroughs are not on the present horizon they will not be available during the 10 year period for achieving the proposed emission targets.

Comment er s stated EPA does not take into consideration the challenges in achieving and sustaining the proposed EE savings rate over time. Commenter s stated that EPA assumption that a state maintains a 1.5 percent annual incremental EE savings rate produces ver y large savings goals by the end of the interim compliance period. Commenter s stated because the savings rates are first

- year rates, states must continually deploy new EE programs or attract additional264 customer participation in existing programs in order t o achieve the incremental savings rate throughout the interim compliance period and the cumulative rate in 2030 and beyond. Commenter s indicated States must also replace expiring EE measures, as they are assumed to produce reductions only for 10 years. Com menter s stated the result is that states, utilities and customers are not required simply to "maintain" a certain EE savings rate, but must continually make additional, expansive investments just to keep up. Commenter s stated that the magnitude of this ch allenge should not be underestimated. Commenter s cited a LBNL report that stated savings rates of 1.5 or 2 percent of retail sales go " well beyond current experience and practice in most leading states ." (See LBNL Study at 28.) Commenter s stated accordingl y, " t he challenge for program administrators will be to design and implement programs that can achieve both deeper savings, on average, at customer facilities and have a broader reach in terms of market penetration over a sustained period of time ." Id. Co mmenter s stated that LBNL went on to note that "service providers will have to achieve savings levels of 25 to 40 percent of existing usage at customer facilities compared to current practice in utility customer

- funded programs, which is typically in the 5

- 20 percent range." Id. Commenter s stated this means that the sustained achievement of greater levels of savings would require increasing EE program performance by a factor of two to five times. This is unprecedented. EPA cannot point to any data showing t hat this is possible or even probable. Commenter s stated EPA's focus on incremental EE savings rates does not address concerns about the achievability of the cumulative goals through 2030 and beyond. Commenter s stated that EPA notes that California and Mi nnesota achieved cumulative savings rates in excess of 13 percent, respectively, in 2012. (See Abatement Measures TSD at Table 5

- 4.) Commenter s stated that achieving this level of cumulative savings in one year is, however, no indication that this level c an be achieved indefinitely. In fact, c ommenter s stated it may become more difficult for these states to maintain such savings rates going forward. Commenter s stated EPA has not proffered any evidence to support its belief that individual states have the E E potential to support and maintain high levels of cumulative EE savings. Commenter s further stated that EPA has not considered the "combined effect of economic torpor, moderate gas prices, and tightening energy codes and minimum standards." (LBNL Study
at 30.) Commenter s stated according to LBNL, these will "pose challenges for continued growth in electric efficiency programs." Id.

Commenter s stated EPA has not demonstrated that the projected EE savings rate is achievable by all states. Commenter s stated EPA concedes that the 1.5 percent annual incremental EE savings rate has not been achieved and sustained nationwide previously. See Abatement Measures TSD at 5

- 37. When examined in closer detail, c ommenter s stated none of EPA's assertions provide adequate support that all states can achieve and maintain annual incremental EE savings rates of 1.5 percent; in fact, in 2012, the average incremental EE savings as a percentage of U.S. electricity consumption was only about 0.6 percent. Commenter s further state d that as EPA's own analysis shows, annual incremental savings as a percentage of sales varies tremendously by state. See Abatement Measure TSD at 5

- 17.

Commenter s noted that experience shows that this level of savings can be achieved for many years in a row, noting that Vermont first achieved 1.5 percent per year savings in 2007 and has sustained at least this level of savings since then. Commenter s noted the state recently reviewed efficiency opportunities still available, and based on this, Efficiency Vermont (the program operator) and the Vermont Public Service Board recently decided to establish savings goals for 2015 to 2018 averaging over 2 percent per year (S cott Johnstone, executive director, Vermont265 Energy Investment Corporation, pers. comm., September 23, 2014). Commenter s stated that both Massachusetts and Rhode Island recently decided to increase their savings targets above 2 percent per year, even though they have been aggressively implementing energy efficiency programs since the late 1980s.

Commenter s stated many new efficiency program approaches are emerging that will allow this level of savings to be sustained. For example, ACEEE's 2013 report Fronti ers of Energy Efficiency: Next Generation Programs Reach for High Energy Savings examined 20 different program areas that collectively could reduce 2030 electricity use by about 27 percent relative to EIA's Annual Energy Outlook forecast.

Commenter s noted the savings targets are typically limited to ratepayer

- funded, utility energy efficiency programs, however these programs represent only a subset of the cost

- effective, adequately demonstrated, technologically feasible end

- use energy efficiency that can b e used to reduce CO2 emissions from the power sector. Commenter s indicated there are potential savings from the adoption of building energy codes and CHP, and the savings from these types of policies are different from and largely additional to the savings that utility energy efficiency programs have achieved. Commenter s noted that utility support for increased compliance with building codes is a new and emerging practice and does not result in any significant overlap in our calculations of potential saving s from building energy codes and utility programs. Commenter s stated these emerging energy savings opportunities mean that the 1.5 percent per year savings level is actually a conservative estimate of what states have demonstrated can be achieved.

Comment er s stated most importantly, Analysis Group's review of these factors [analysis of EE potential studies and state and utility EE programs] demonstrates that leading states

- including states that have implemented EE for over a decade

- continue to be able t o achieve high levels of annual energy efficiency savings as programs grow.

Commenter s assessed the reasonableness of EPA's sustained savings level assumption by evaluating the actual historical experience of states and program administrators in captur ing savings from energy efficiency, and found that numerous examples exist of states and utilities that achieved relatively high levels (1.0 percent of retail sales or greater) of energy efficiency savings over time. Commenter s provided a figure showing t he annual energy efficiency savings expressed as a percentage of retail sales from 2006 to 2013 (see Figure 11 of the comment letter). Commenter s stated this is significant because it indicates the ability of utility

- driven efficiency programs to react qui ckly to changes in policy by aggressive ramping and sustained savings levels, analogous to the potential impact on EE providers that may flow from expanded opportunities associated with Clean Power Plan compliance activities. Commenter s provided a number o f illustrative examples of states that have achieved relatively high levels (1.0 percent of retail sales or greater) of energy efficiency savings, and sustained these levels over time.

Commenter s stated that while it cannot be assumed that continued savin gs are inexhaustible, it is clear that achieving savings at the rate assumed by EPA can be sustained for many years. Commenter s stated this suggests, in part, that as technological innovation advances and the cost of new technologies falls, more cost

- effec tive energy efficiency potential becomes available and in some sense continuously building the resource of EE potential.266 Commenter s noted that EPA asserts that states can sustain a level of 1.5 percent of incremental EE achievements indefinitely. Commen ter s stated that EPA offers no justification for this assertion, and in fact there is no evidence of any program sustaining this level of EE achievement over the length of time covered by the proposed rule.

Commenter s stated EPA further assumes the EE programs, once implemented to a level of 1.5 percent annual savings, can be sustained at that level. Commenter s stated that EPA acknowledges that this level of savings has been achieved by only a few States, and no State has demonstrated that these rates c an be sustained over several years.

Commenter s found that the experience of leading states and utilities, coupled with the vast additional potential for energy savings not included in EPA's 1.5 percent target, provides ample support for EPA's expectatio n that a savings rate of up to 1.5 percent can be sustained through 2030.

Commenter s stated that in addition to supporting EPA's conclusions regarding feasible rates for increasing energy efficiency savings, the Analysis Group also documents the ability o f states and utilities to sustain high savings levels over time. Commenter s noted the existence of massive technical and economic potential for energy savings, including savings from measures and programs that are not explicitly included in EPA's analysis , strongly suggests that states will be able to achieve high levels of energy savings over an extended period of time. Commenter s stated the Analysis Group also provides many examples of leading states and utilities that have demonstrated this ability in recent years; for example, the Analysis Group notes that San Diego Gas & Electric, one of California's "big three" large investor

- owned utilities, has reported energy savings well in excess of 1.5 percent of sales every year since 2007, and in 2009 alone, SDG&E reported energy savings of over 2.5 percent of sales; the state of Massachusetts achieved energy savings exceeding 1.5 percent of sales in each year from 2011 to 2013, with savings exceeding 2 percent of sales in both 2012 and 2013; and Vermont has e xceeded the 1.5 percent target every year from 2007 to 2012, with energy savings in three of those years at or exceeding 2 percent of sales. Commenter s stated these and other examples in the Analysis Group report demonstrate that high savings rates can not only be reached at the rate that EPA projects in building block 4, but can also be met over extended periods.

Commenter s asked a series of questions regarding BB4, including: Are EE programs, and their associated electrical generation savings rates, e xpected to be maintained after the final goal year of 2029? Similarly, why does EPA expect the top performing states to maintain 1.5 percent annual EE savings for more than 10 years (GHG Abatement TSD states "For states currently at or above the best prac tices level of performance, this effects an ability to sustain the target level for thirteen years")? To what extent has the Agency considered literature that suggests that the pace of incremental EE savings slows over time and the largest gains come earl iest?

Commenter s noted that while other major power market forecasters' electricity sales compounded annual growth rates (CAGR5) for the period between 2020 and 2030 are strictly positive (AEO 2013: 0.7 percent, EPRI: (achievable potential) 0.4 percent , NERC average of assessment studies: 1.5 percent), the EPA assumes a CAGR of

- 0.2 percent for the same time period. Commenter s noted that between 2020 and 2030, the EPA assumes incremental year

- over year reductions from energy efficiency to be almost 41 T Wh nationally on average, outpacing267 year

- over

- year national electricity sales growth of 31.6 TWh, on average. Commenter s stated that this result is based on EPA's assumption of states being able to sustain an annual incremental growth rate of 1.5 percent o nce achieved. Commenter s did not believe that this sustainability is support by any peer

- reviewed of technical studies of EE potential.

Commenter s worked with EPRI to evaluate the EE potential throughout their members' service territories and noted that their most recent evaluation in November of 2011 found that total EE potential falls far short of what is called for within the Proposed Rule and is not likely to be achievable in the long term because of the rural, residential nature of the commenter s ' membership, as well as the low density of end

- use members and the lower percentages of commercial and industrial members within the commenter s ' service territories.

Commenter s believed that EPA's assumption of a sustainable 1.5% annual load reduction goal from utility energy efficiency programs through 2030 is extraordinarily aggressive, and based on the analysis above, likely unattainable. Com menter s noted that their technical potential for energy efficiency through 2030 averages to be 1.95% per year; however, "technical potential" is an academic construct with unfounded assumptions that lacks real world applicability and verification. Commente r s noted that "economic potential" is another construct wherein only the cost effective technology included in technical potential is quantified. Commenter s estimated customer participation in its EE programs through regularly scheduled surveys and found t hat the realistic achievable potential for energy efficiency programs is 0.37%.

Commenter s noted that they participated in a bottom

- up, statewide evaluation of available cost effective (Total Resource Cost test

- TRC) energy efficiency for the Florida Public Service Commission's goal setting proceedings under the Florida Energy Efficiency and Conservation Act this year which found that, for the commenter s , there is insufficient energy efficiency potential to meet the 1.5% target as the highest level ind icated was no more than one percent per year. Commenter s stated that the ability to achieve and sustain indicated levels of EE are beyond their control.

Commenter s noted that the U.S. electricity demand grew over the last decade at an average annual ra te of 0.7%, according to the Energy Information Administration (EIA). Commenter s stated that while this energy agency sees a slight increase in the near future to 0.9% a year tied to a projected overall U.S. economic growth at around 2.4%, these decade lo ng trends are well below the past energy demand which typically exceeded the annual rate of economic growth. Commenter s stated that a combination of energy efficiency measures, declining costs of renewable energy rooftop solar photovoltaic (PV), and steady technology innovation with energy storage systems and distributed energy (DE) management systems through microgrids, could mean traditional base

- load electricity generation will likely see steady declines in future years.

C ommenter s stated that the pr oposal recognizes that levels of EE performance have not always been sustained, and that a 1.5 percent annual increase and the projected cumulative EE savings rate are larger than the average savings that most states have achieved. C ommenter s asked what ba sis does EPA cite to use the experience of a subset of states to determine a national annual incremental savings rate for all EE programs in all states?268 Commenter s discussed how EPA's reliance on demand reductions to reduce emissions is flawed and ille gal.

Commenter s stated that the EPA assumes that Georgia, like all states, can achieve and maintain a 1.5 percent annual reduction in electricity demand through 2030, representing a nearly 10% reduction in electricity demand in Georgia. C ommenter s stated t hat not only is this assumption beyond EPA's authority, it is also based on flawed assumptions about energy efficiency, particularly within the industrial sector.

C ommenter s stated that for example, EPA relies on data derived from the recent recession and subsequent slow economic recovery period. C ommenter s stated that EPA needs to analyze its energy efficiency assumptions during more robust economic periods in order to demonstrate the reasonableness of its assumptions.

C ommenter s stated that in addition, EPA's analysis does not account for energy efficiency improvements made to date. C ommenter s noted that over the last several years, business and industry in Georgia have already taken the initiative to invest in and implement cost

- effective energy efficiency measures. Thus, c ommenter s stated that much of the low

- hanging fruit has already been captured. C ommenter s stated that additional measures will be much more costly and difficult to achieve and sustain.

C ommenter s stated that fo r example, energy efficiency improvements that have been achieved have occurred in part due to the introduction of LED or other high

- efficiency lighting options, which represent the cheapest and most universal efficiency improvements currently available. C ommenter s stated that as those lighting efficiency improvements saturate the market, which can be expected in the next few years, states and electricity customers, will be forced to move towards more aggressive, and less cost

- effective, means of encouragin g further efficiency improvements.

C ommenter s stated that the EPA has not included anything in its analysis to account for increased costs associated with sustained efficiency improvements at the level it has proposed. C ommenter s stated that EPA's rule wil l effectively penalize business and industry in Georgia for early investments and put them at a competitive disadvantage. At a minimum, the commenter s stated that EPA must account for these additional costs in determining whether a 1.5 percent annual reduc tion is cost

- effective as required under section 111(d).

Comment 4: Oppose 1.5 Percent

– studies used by the EPA to form goal do not support goal/issues with studies used

Response 4: The EPA has determined not to include demand

- side energy efficiency (bui lding block four) in the BSER of this final rule and therefore we do not need to address the
commenter s ’ concerns as they are now out of scope. This determination is discussed in section s V.A and V.B of the final rule preamble of the CPP. Although the EPA has determined to not include demand side

- energy efficiency in the BSER in this final rule we are using 1.0% in our illustrative EE scenario. See the RIA Chapter 3 and the Demand

- side Energy Efficiency TSD for CPP Final Rule for details on the illustrative demand

- side energy efficiency plan scenario

. The269 TSD has updated information on evaluations of achievable EE potential. This information demonstrates that the illustrative DS

- EE plan scenario is fully supported by analysis from across the U.S. and is at the lower end of the range of results for such studies.

The following are summaries of the specific public comments under this comment:

Commenters believed that upon further examination of the studies referenced by EPA, none support the assertion that a ll states can achieve and maintain annual incremental savings of 1.5 percent. The commenters asserted that EPA has overstated achievable EE potential in Building Block 3 as a result of misinterpretation or incorrect reliance on certain studies.

Commenter s noted that EPA relied on 12 state studies to set its expanded annual program target savings improvement rate at 1.5 percent per year and out of the 12 studies, 11 contain multiple scenarios with different sets of assumptions to demonstrate wide ranges o f what is achievable under alternative financial, technological, and behavioral environments. However, c ommenter s noted that there is no documentation on how each study's respective average annual improvement rate was calculated. Commenter s stated that con sidering that EPA used these studies as the foundation for its 1.5 percent annual improvement rate, the commenter s ha ve a serious concern with whether or not 1.5 percent is an appropriate estimation for an achievable and sustainable annual improvement rate over a 13

- year period.

Commenter s noted that the incremental EE savings as a percentage of U.S. retail sales was 0.58 percent in 2012. Commenter s stated that achieving this aggressive level of EE savings will be challenging because utilities cannot gua rantee EE savings, as it takes customer participation, and in many cases some level of financial investment from customers. Commenter s concluded that EE savings are not as predictable as other resources and noted that they are subject to after

- the

fact eva luation, measurement and verification, which makes the ultimate savings levels difficult to estimate.

Commenter s noted that EPA concedes that the 1.5 percent annual incremental EE savings rate has not been achieved and sustained nationwide previously; however, the Agency asserts that a review of reported 2012 incremental EE savings data, the expected performance of a limited number of existing state EE programs in 2020, and a review of a select number of EE potential studies show that this level of savings is achievable by all states. Commenter s stated that when examined in closer detail, none of these provide adequa te support for EPA's assertions that all states can achieve and maintain annual incremental EE savings rates of 1.5 percent when in fact the average incremental EE savings as a percentage of U.S. electricity consumption was about 0.6 percent in 2012.

Comme nter s stated that EPA has incorrectly concluded that the studies it references support a 1.5 percent year

- on

- year increase in EE. Commenter s noted that EPA ignored the fact that these studies have different base years, some of which are in the past. Com menter s stated that the selection of base year is an important consideration because many subsequent actions to improve the efficiency across sectors have already been taken; therefore the EE growth that would be projected by the studies with earlier base years overestimate the total potential for EE growth. Commenter s also noted that EPA did not adjust for the time period that the studies cover, which will alter how returns on EE programs are evaluated.270 Commenter s stated that the ten DSM potential stud ies cited by EPA as the basis for calculating an average annual sustainable load reduction target of 1.5% through 2030 are aggressive since they are based on highly uncertain results of maximum achievable potential studies from an extremely small sample of 10 DSM potential studies, six of which do not attempt to estimate energy efficiency potential beyond 2020, which understates the detrimental effects of new appliance efficiency standards and building codes on IOU energy efficiency program potential.

C omm enters did not support the 1.5 annual incremental savings goal because they believed that the studies used by EPA to set the goal did not conclusively support EPA's proposed value, and without credible proof of potential, EPA 's target is arbitrary and c apricious.

Commenters found that only a single source

--- the American Council for an Energy Efficient Economy ( " ACEEE " ) top

- down, policy

- based study

--- produced an estimate as high as EPA 's proposed 1.5 percent goal. C ommenters noted that the next highest estimate, from the Electric Power Research Institute 's ("EPRI") bottom

- up engineering

- based study, is between 0.5 to 0.7 percent per year. C ommenters noted that only three states have ever achieved a 1.5% goal in a single year and stated doubts about wheth er states could realistically achieve 1.5% improvements in EE.

Commenter s stated that targets should be based on demonstrated best performance instead of a policy goal and suggested that the MACT concept could be used for EE potential. Commenter s sugge sted that EPA take the top 12% of actual savings performance to represent "best in fleet" or "best performance'.

C ommenters noted that EPRI 's " U.S. Energy Efficiency Potential Through 2035 " study indicated that an achievable range of EE potential from programs was equivalent to an annual incremental electricity savings of 0.5 to 0.7 percent of retail sales through 2035 and that the economic potential of energy efficiency, characterized by 100 percent adoption of all cost

- effective energy efficiency meas ures as customers phase them in over time, was equivalent to only 0.9 percent of annual retail sales through 2035. C ommenters also noted that EPRI has stated that EPA 's 1.5 percent annual incremental savings is greater than their assessment of EE program p otential.

Commenter s recommended that EPA use the 0.6 percent value in its building block formula, instead of a policy

- based approach.

Commenter s also noted that EPA ignores the fact that utility

- sponsored EE programs have traditionally relied heavi ly upon lighting programs for the vast majority of their savings (generally, compact fluorescent lamp programs for residential customers and T

- 8 lighting retrofit programs for commercial customers). Commenter s noted that with the adoption of new lighting

s tandards from the Energy Independence and Security Act (EISA), the availability of this inexpensive EE resource will quickly diminish.

Commenter s also stated that of the 3 national studies EPA references, only one study predicted 1.5 percent incremental savings level, the Agency's use of top

- down, policy

- based studies to support analysis in the TSD has a serious technical flaw, and EPA should consider using a combination of studies, with a focus on bottom

- up analysis to make this determination since top

down analysis can fail to realistically validate the model. Commenter s stated that the EPRI271 analysis shown in EPA's TSD projects 0.6 percent high maximum achievable potential per year (see Table 15 of TSD, Summary of National EE Potential Studies), the ave rage and median incremental savings in 2012 is 0.55 percent and 0.48 percent, respectively (see Table 16 of EPA's TSD, Analysis of Baseline (2012) Energy Efficiency Data from EIA 861

- Survey Results), and a more reasonable performance level to use would be the third quartile at 093 percent as a bar for states in the lower quartiles to aim for. Commenter s stated it is irrational to require all states to achieve a 1.5 percent level of savings, which has not been attained by even the leading states in the are a of energy efficiency (states in the third quartile).

C ommenter s disagreed with EPA 's usage of EIA Form 861 data in order to determine that a 1.5 annual incremental savings goal is achievable. C ommenters were concerned with the consistency and quality issues with this data resulting from self

- reported sourcing and differing methodologies in estimating these data. C ommenters stated that EPA does not fundamentally address this issue and while EPA did use state

- specific data from Form 861 for establishing starting points for EE levels, it applies "national" estimates of EE potential to this data and applied an EE growth rate historically only experienced in other best

- practice states

--- both metrics which have some fundamental flaws based on the variability of state

- specific factors, such as relative industrial, commercial, and residential consumption; lighting standards; other EE options; and customer economic challenges.

Commenter s noted that according to the TSD, only 11 states currently have policies to achieve incremental savings of 1.5% by 2020, and even as to these 11 states, the TSD includes no inquiry into whether these policy goals can be and actually will be achieved. Commenter s noted that though the TSD cites a number of studies (including its own meta

- analysis) ostensibly indicative of growth in energy savings potential, the referenced studies reach widely diverging conclusions. Commenter s also stated that flaws in Building Block 4 are made worse by the agency's misinterpretation of other studi es it purports to rely upon. For example, c ommenter s noted that EPA cites one Pennsylvania

- specific study as supporting energy efficiency savings of 17.3% over a six

- year period, when in fact such savings would be accrued over 10 years. Commenter s also noted that the 17.3% energy efficiency savings estimate also reflected the unrealistic assumption that utilities would pay for the entire incremental cost of needed technology

-- an assumption directly counter to EPA's own assumption that half of all c osts would be paid by efficiency program participants. Commenter s noted that EPA's analysis does not: (1) account for
year

- to

- year variability in incremental energy efficiency savings potential; (2) provide any evidence supporting the continued application of single

- year "best practices" for a decade or more; and (3) account for substantial variation in state

- to

- state retail rates and corresponding differences in energy efficiency incentives.

Commenter s further stated EPA's analysis of the 48 States tha t submitted their 2012 data via Form 861 to the EIA shows that only three States (Arizona, Maine and Vermont) have actually achieved an incremental savings of 1.5 percent or greater, while 45 other reporting States (including nine States EPA deemed to be t op performers) have much lower savings ranging from 0.00 percent to 1.24 percent. Commenter s stated EPA also acknowledges that the EIA data

gathering process has gone through several significant iterations and that only in 2011 did the reporting through Fo rm 861 provide a more comprehensive and consistent assessment of what EE activities are taking place in States. Commenter s stated this suggests that EPA's approach to determining a nationwide goal for achieving EE savings was, at best, supported by data fr om272 2011 and 2012 and that much of the data from previous years were inconclusive, or not readily comparable.

Commenter s noted that EPA relies on an Arizona 2010 study to conclude that a 2.2% per year reduction is reasonable; however this study is based on gross savings and relies on assumptions that all codes and standards are applied and complied with. Commenter s added that EPA recognized that the definition and data categories may not be consistently applied across utility, state, and data year. Co mmenter s felt that for these reasons, EPA should not include values for demand

- side energy efficiency measures into state emission rate goal computations.

Commenter s also noted that EPA failed to ensure that the projected efficiency improvements are not already incorporated in EIA's aggressive "Reference Case" projections of electricity demand.

Commenter s also noted that EIA implicitly incorporates EE into their b aseline electricity demand forecasts and that EIA's consideration of EE can be evidenced through their measurement of energy intensity, typically measured in consumption per dollar of GDP. Commenter s noted that EIA has attributed about one quarter of the o verall improvement in energy intensity to these programs. Commenter s stated that many of the gains achievable by improving lighting efficiency have already been used, and some states have even eliminated their EE programs because the targets set by the sta te were unachievable.

C ommenters stated the metrics adopted by EPA in setting this standard differ substantially from the engineering

- based analyses that have historically been conducted on the topic. Commenters referenced the study conducted by Lawren ce Berkeley National Laboratory which reported potential estimates for EE savings from 0.5 percent (low case) to 1.1 percent (high case) and noted that several other individual studies and meta

- analyses of EE potential, conducted mostly by EE advocacy orga nizations or consultants to EPA, as well as EPA's own analysis are nearly all "top

- down, policy

- based approach" studies.

C ommenters conducted and/or referenced third party studies which looked further into EPA 's analysis and concluded that EPA 's 1.5 pe rcent annual incremental savings rate is overstated when considering actual EE growth and current EE program requirements.

Commenters noted that NERC evaluated EPA's analysis that served as the basis for the EE goals and concluded that the EE goals are higher than states can actually achieve. Commenters noted that NERC found that EPA applied the same EE potential for all electric sectors and did not account for implicit forms of EE measures from energy load grown projections on which EPA relied when form ulating the EE goals. Commenters stated that the 1.5 percent annual EE growth rate is wholly unsupported by the analysis conducted by NERC and EPRI. Commenter s believed that the EE goals expressed as a percentage reduction in energy delivered are inflat ed relative to national averages because of the reliance of their owner

- members on electric heat, as there are no reasonable fuel switching opportunities in much of the commenter s ' service area, and meaningful reductions in space and water heat system effi ciency require very expensive appliance replacements in addition to home sealing and insulation.273 Commenter s noted that GDS evaluated EPA's EE proposal and found that EPA relied on incorrect data when calculating the potential increase in EE and observe d that when the data errors are corrected, the 1.5 percent average kWh savings decreases substantially. Commenter s noted that of the twelve states EPA evaluated for EE growth, GDS found that the potential EE for many of the states was well below 1.5 percen t and only three of the fifty states saved more than 1.5 percent of annual kWh sales in 2012. Commenter s noted that the varying levels of EE programs in place at present can create disparity between leading and lagging states, and suggested that a study of each state's EE potential should be undertaken to ensure realistic goals are established.

Commenter s believed that EPA's basis for achieving large reductions through EE is not well

supported as EPA assumes over 450 TWh in cumulative savings from EE pr ograms nationally

--- almost twice the estimated savings found in an Institute for Energy Innovation white paper. Commenter s stated that the level of EE measures EPA included in Kentucky's goal calculation is set at an amount that greatly overstates the potential achievable results. Commenter s cited a report by the Cadmus Group, Inc. ("Cadmus") which assessed EE potential for e lectricity in the residential and commercial sectors for commenter s and found a range of 941 GWh to 1,478 GWh of achievable electricity savings, representing 3.9% to 6.1% of forecasted retail sales in 2033.

Commenter s stated that the Clean Power Plan cr eates a fundamental change in the portion of economic EE that is "achievable" by making EE a means of achieving compliance with federal carbon pollution standards. Commenter s stated several national and regional studies have found technical, economic, and achievable efficiency potential that significantly exceeds EPA's target, and these corroborating studies provide further confirmation that EPA's target is eminently reasonable and, in fact, conservative. Commenter s cited a February 2014 LBNL study that

es timated aggressive deployment of cost

- effective EE measures could reduce annual energy demand in Western Interconnection by 18 percent for 2021 and by 22 percent for 2032, above and beyond savings from programs already in place; these estimates greatly exc eed EPA's proposed targets, which imply a 3 percent decrease in overall electricity demand in 2020 and a 11 percent decrease in electricity demand by 2030. Commenter s cited a January 2013 ORNL study that found a limited suite of 12 selected policies that incentivize or require greater efficiency in residential, commercial or industrial buildings would reduce total electricity use in the Eastern Connection by 7 percent 2020 and 10.2 percent in 2032; these are double the level of demand savings implied by EP A's target for 2020 and is comparable to EPA's target for 2030. Commenter s cited a 2012 Southwest EE Project (SWEEP) that included review of best practice EE programs and estimated the saving for 6 Southwestern states to be 20 percent of retail sales by 2 020, reducing electricity demand to 18 percent below reference case; this analysis is based on savings and participation rates achieved by actual EE programs implemented across the country and is an achievable assessment. Commenter s cited an exhaustive 20 09 McKinsey analysis for deploying already

- available technologies in buildings and industrial processes found a 23 percent reduction in total end

- use energy consumption by 2020, relying on measures that pay for themselves over time; the result exceed the e nergy savings expected by EPA for 2030. Commenter s cited a 2020 NAS report that reviewed EE studies in residential and commercial buildings and found 25 to 30 percent energy saving for the building sector could be achieved between 2030 and 2035 at a cost of 2.7 cents/kWh saved and industrial electricity274 demand could be cost

- effectively reduced by 2020; these estimates exceed the energy savings EPA's target implies for 2030.

Commenter s stated that when comparing EPA's EPA analysis with the commenter s ' c urrent program requirements, the following inconsistencies are revealed: EPA's incremental percentage of 1.5% is essentially double what is required to meet the Act 129 Phase II requirements that are to be met in 2016. Commenter s noted that early indicatio ns of a PAPUC investigation into a Phase III scenario suggests a 0.75% annual incremental reduction which is just slightly above the realized EDC average of 0.72% required in Phase II. Commenter s further noted that staff adjusted this incremental reduction value taking into account the different baseline years (2012 for EPA and 2009/2010 for Act 129) and the result is an annual adjusted incremental reduction value of 0.74% through 2030. Commenter s noted specifically that, for Phase II of Act 129, West Penn has a target of 1.6% reduction by the end of the three years, whereas PECO has a 2.9% reduction requirement.

Commenter s stated that the studies on which EPA relies to set the contribution of EE programs to state CO2 emissions rate targets do not suppor t EPA's conclusion. Commenter s noted that EPA merely averages results from twelve studies to conclude that 1.5 percent year

- on

- year growth in EE is achievable, resulting in demand reductions of around 10 percent in every state. Commenter s believed this app roach was arbitrary and unreasonable because the studies contain multiple scenarios and EPA does not attempt to rectify the different scenarios in each study, but merely averages across all the scenarios without consideration of the assumptions therein. In so doing, Commenter s stated that EPA fails to adjust for impacts to the potential EE growth rate under different assumptions.

Commenter s studied the highest potential of cost

- effective energy savings achievable in the four states it serves and observe d consistent results in several of the studies undertaken in the last ten years. Commenter s stated that these studies found that about 0.7 % savings is the maximum of
cost

- effective energy savings achievable, although this value is specifically tailored to the
commenter.

Commenters noted that much of the data and methods used by the EPA in EPA's GHG Abatement TSD were derived from studies by EE advocacy organizations employing a "top

down, policy

- based approach" and therefore, it is possible that some of the information on which the EPA relied to develop its EE targets was based on best

- case scenarios rather than average results in the field.

Commenters noted that much of the data and methods used by EPA in this TSD were developed by EE advocacy organ izations and the metrics adopted by EPA largely incorporate these findings, and differ substantially from the engineering

- based analyses that have been conducted on the topic.

Commenters noted that other mechanisms complementary to energy efficiency pr ograms, including federal, state, and local energy efficiency building codes and energy efficiency product standards, would be needed to attain the target levels. The commenters also noted that these mechanisms could take longer to implement than EE progra ms and have the potential to become more costly. (Commenter s provided details on their Energy Efficiency Potential model.)275 Commenter s stated that while efficiency improvements in end

- use devices and advances in controls technology can lead to energy savings; economic, market, and perceptual barriers can inhibit or curb customer adoption. Commenter s stated the assumptions used to determi ne the economic viability of the proposed levels of energy efficiency should be reviewed to ensure that adverse economic impacts are avoided.

C ommenters stated that EPA's assumptions are too aggressive and the proposal should be withdrawn.

Commenter s stated that EPA's proposed "building blocks" contain unrealistic assumptions on the potential for large

- scale renewable energy and energy efficiency development within the short timetable of the EPA rule, and untenable projections of the potential for pow er plant efficiency improvements.

Commenter s stated that EPA's assumption on heat rate, natural gas, renewables, nuclear, energy efficiency are all too aggressive. C ommenter s stated for example that the Georgia Public Service Commission has worked for y ears to develop and implement energy

- efficient programs that make sense for their customers. Yet, c ommenter s noted that EPA assumes Georgia can increase cumulative energy

- efficient measures to 14 times the 2012 levels, with minimal cost. C ommenter s stated that their research tells just the opposite. C ommenter s stated that the energy efficiency levels proposed in the guidelines could cost their customers $4 to $5 billion in higher rates, costs that are not factored into this rule. Farther, commenter s stat ed that the cost only covers the impact to their customers, which are roughly half the electricity users in the state.

Commenter s stated that EPA projects that in 2030, electricity usage will be 10 percent below the business

- as

- usual case. C ommenter s s tated that according to EPA, electric consumption in 2030 will be little more it is today and will actually decline between 2020 and 2030. C ommenter s stated that according to the U.S. Census, population is expected to rise to 358,471,000 people by 2030, an increase of 37,108,000 from the projected 2015 level of 321,363,000, or an average of more than 2 million people per year. C ommenter s stated that although economic growth has been slow

- paced, presumably at some point in the next 15 years, it will pick up to more normal rates of growth. C ommenter s stated that EPA's proposal thus assumes that the country's population and economy can grow without electricity growth. C ommenter s noted that there is no precedent to back up this extraordinarily aggressive assumpt ion. C ommenter s stated that NERC disbelieves it. C ommenter s noted that NERC examined various load growth projections and energy efficiency program data that it collects for its annual grid reliability assessments. C ommenter s noted that this data shows far lower efficiency gains than EPA projects. C ommenter s noted that as NERC concluded, " the CPP assumes energy efficiency gains outpace electricity demand growth through the compliance period. However, c ommenter s stated that this assumption does not reasonably reflect energy efficiency achievability and is a departure from normalized forecasts."

C ommenter s stated that in contrast to EPA's projection that, under building block 4, electricity usage in 2030 would be little higher than electricity usage today and w ould decline between 2020 and 2030, even the states that EPA says have achieved the level of demand

- side savings that EPA projects have not been able to prevent electricity consumption from growing over time nor do they project zero or negative load growth in the future. C ommenter s stated that with the276 exception of recessions, California's electricity consumption has always grown and it is projected to continue growing in the future. C ommenter s noted that similarly, ISO New England's most recent forecast projected that the region's overall electricity demand would grow at a rate of 1.1% annually over the next decade.

C ommenter s stated that there is no national

- level precedent for EPA's highly ag gressive assumptions as to the amount of electricity that can be saved year

- over

- year based on energy efficiency measures. C ommenter s noted that EPA reports that states have implemented energy efficiency programs for decades, that all states fund energy ef ficiency in some measure, and that state funding for energy efficiency has rapidly increased. C ommenter s stated that yet EPA is forced to concede that, for its primary option, only three states have actually achieved, for some period, the level of savings that EPA projects for all states. C ommenter s stated that only another nine states have even targeted (but not achieved) that level. C ommenter s stated that this falls far short of evidence "adequately demonstrating" the ability of all states to meet EPA's t arget.

Commenter s stated that Pace reviewed the technical merits behind EPA's proposed 1.5% annual EE improvement assumption. C ommenter s stated that the basis appears to be a study from the American Council for an Energy Efficient Economy (ACEE), an adv ocacy group. C ommenter s stated that other studies in the electric industry, such as one by the Electric Power Research Institute (EPRI) have found lower figures, with a high of 0.6%. Pace Study, section 3.1, at 17. C ommenter s agreed that a 0.6% figure is m ore reasonable for year

- over

- year projections over a decade.

C ommenter s stated that the EPA selected a 1.5% annual reduction based on a review of the top tier states' efficiency performance in the 2012 baseline year, noting that three states actually achie ved this level in one year and that nine other states had mandates to achieve this level for at least one year by 2020. C ommenter s stated that achieving a 1.5% efficiency improvement has been demonstrated in top tier states in a single year. However, c omme nter s stated that the EPA's assumption in building block 4 is that this high level is achieved by all states for the years 2017 to 2029. C ommenter s noted that in the EPA's Clean Power Plan technical support document on GHG Abatement Measures, only one sour ce, the American Council for an Energy Efficient Economy (ACEEE), reported efficiency potential of 1.5% per year. C ommenter s stated that the next highest efficiency potential was reported from the Electric Power Research Institute (EPRI),

a non

- partial sou rce, in a 2014 study to be 0.6%, representing the high end of achievable efficiency penetration levels. Thus, c ommenter s stated that even the EPA's scientific support is not fairly supporting the fact that 1.5% efficiency penetration in all states is feasi ble, much less the achievement of this level consistently for more than a decade.

Commenter s stated that EPRI, which has researched potential power sector energy efficiency in great depth, warns that EPA has far overstated the amount realistically achie vable. C ommenter s stated that the NERC report sets forth a complete critique of EPA's building block four assumptions, showing that EPA misread the studies it relied on and far overstated the potential for energy efficiency. C ommenter s noted that as NERC stated, EPA's conclusion that states can make and sustain the energy efficiency measures EPA relies on "is not supported by any peer reviewed or technical studies of energy efficiency potential." C ommenter s noted that as NERC concluded, "By overestimating efficiency savings resulting in declining electricity retail sales, the results of the EPA's entire Regulatory Impact Assessment are concerning from a reliability277 perspective and have implications to electric transmission and generation infrastructure. Underlying electricity demand forecasts directly influence the required level of generation

-- and hence, CO2 emissions

-- from existing and affected generating units under the CPP. They also affect the required new construction of generat ing units that are needed to meet expected electricity demand, which is projected to increase during the next 10 years."

Commenter s stated that EPA identified Arizona as one of the top performers in the country and utilized Arizona's performance over t he last few years to outline the "Best Practices Scenario" for establishing targets for other states. C ommenter s stated that as a result of Arizona's strong performance in the past, its annual incremental energy savings assumption was set at the highest le vel, 1.50% of retail sales. C ommenter s stated that this annual savings assumption is expected to be achieved in years 2017 through 2030 in the EPA goal setting calculation.

C ommenter s stated that EPRI likewise has similar concerns, as noted in their commen ts on the Proposed Rule.

"The level of energy efficiency performance in this proposed rulemaking

-- 1.5% annual incremental electricity savings as a percentage of retail sales

-- is greater than EPRI's assessment of energy efficiency program potential. EPR I research indicates that achieving this level of energy efficiency will require[d] the addition of measures beyond energy efficiency programs and will occur over a longer period and at a higher cost than suggested in the proposed rule and accompanying RIA . While efficiency improvements in end

- use devices and advances in controls technology can lead to energy savings; economic, market, and perceptual barriers can inhibit or curb customer adoption."

C ommenter s stated that based on research conducted by EPRI, which was published in their

" U.S. Energy Efficiency Potential Through 2035 " study and discussed in their comments on the Proposed Rule, the level of achievable incremental savings values is much lower than the 1.50% value proposed by EPA. C ommenter s stat ed that specifically, EPRI's study " indicates an achievable range of energy efficiency potential from programs equivalent to an annual incremental electricity savings of 0.5% to 0.7% of retail sales through 2035 ." C ommenter s recommended that EPA take this research under advisement when establishing energy efficiency savings values for use in the goal setting calculations.

Commenters agreed with EPA that demand

- side energy efficiency opportunities offer potential economic benefits to consumers through red uced electricity bills, as well as environmental benefits due to reduced carbon emissions but has concerns regarding EPA's analysis, which applies assumptions that State could achieve incremental energy efficiency savings of 1.5% of retails sales (with a y early rate of improvement of 0.2% until a State reach the 1.5% target) uniformly across all the States. Commenters were concerned with EPA's reliance on data derived from the recent recession and slow economic recovery period that followed, explaining that while the energy efficiency gains observed during this period are promising, those periods do not reflect representative economic conditions. Commenters believed the periods used are not representative of higher demand scenarios associated with periods of more rapid economic growth. Commenters stated to demonstrate the reasonableness of EPA's assumptions for energy efficiency, EPA must expand its analysis and provide assurance that the incremental savings278 target can be achieved under a more robust set of e conomic conditions. Commenters added that EPA did not attempt to account for the extent to which States have already adopted energy efficiency programs, explaining that a State that has a mature and established program cannot be expected to achieve the sam e levels of demand reduction as a State that has only just begun its program and is able to target the most easily implemented, lowest

- cost reduction programs.

Comment 5: Oppose 1.5 Percent

– issues with the EPA’s analysis of states to form annual incremental savings goal

Response 5: The EPA has determined not to include demand

- side energy efficiency (building block four) in the BSER of this final rule and therefore we do not need to address the
commenter s ’ concerns as they are now out of scope. This determination is discussed in section s V.A and V.B of the final rule preamble of the CPP. Although the EPA has determined to not include demand side

- energy efficiency in the BSER in this final rule we are using 1.0% in our illustrative EE scenario. See the RIA Chapter 3 and the Demand

- side Energy Efficiency TSD for CPP Final Rule for details on the illustrative demand

- side energy efficiency plan scenario

. The following are summaries of the specific public comm ents under this comment:

C ommenters did not support the 1.5 percent annual incremental savings goal, as they had issues with EPA's analysis of high

- performing states to form the goal.

C ommenters stated that basing state performance targets on potential future performance is very problematic and that a more accurate projection of future energy savings could be made by considering states ' past performance.

Commenters noted that, according to EPA, nine states are anticipated to achieve incremental EE savings rates of 1.5 by 2020 by virtue of existing state policies, and EPA notes that 12 states have achieved or will have achieved the target savings rate by 2020. C ommen ters stated that at this time, these nine states have not achieved the target rate, and, in fact, the 2012 reported savings rates for all except three states were below 1.0 percent. C ommenters noted that one of the states EPA expects to achieve 1.5 percent incremental EE savings by 2020 is Indiana, which repealed its energy efficiency standards in March 2014.

Commenter s also noted Florida, while not projected to reach a 1.5 savings rate by 2020, was one of the top three states in terms of EE spending i n 2012. Commenter s stated Florida's Public Service Commission (PSC) currently is reviewing the state's energy efficiency goals; as part of this proceeding, the four main investor

- owned utilities have asked the PSC to consider scaling back the current EE pr ogram goals because the EE gains made in recent years make further efficiency improvements harder and more costly to achieve. Commenter s stated the utilities argue that slow economic growth, lower electricity consumption and the relatively low cost of
natu ral gas

- based power mean that the goals of Florida's EE program are being met through industry trends.

Commenter s stated EPA's meta

- analysis of achievable potential EE studies does not support the target EE savings. Commenter s stated EPA's meta

- analysis p rovides interesting information279 about the amount of EE potential that might exist, but does not speak to the levels that have been adequately demonstrated to be achievable. Commenter s stated that a better, more reliable metric of what can be achieved is w hat states have done to date. Commenter s stated such an analysis would focus on the existence of supportive regulatory policies and the sufficiency of expected budgets for utility managed, customer

- funded EE programs. Commenter s stated NERC echoed these co ncerns regarding EPA's analysis, pointing out that EPA applied one national energy efficiency growth factor to all state situations without considering program performance or cost. Commenter s cited NERC as stating

"t he discrepancies are subsequently compo unded by extrapolating these annual energy efficiency performance targets as incremental improvements that can be sustained through 2030, beyond the 12 studies evaluated. Out of 12 studies, 11 contain multiple scenarios with different sets of assumptions t o demonstrate wide ranges of what is achievable under alternative financial, technological, and behavioral environments. There is no documentation on how each study's respective average annual improvement rate was calculated, which was used as the foundati on to calculate the incremental performance improvement target of 1.5 percent per year." (Initial Reliability Review at 14.)

Commenter s stated that NERC concluded that, "this sustainability is not supported by any peer

- reviewed or technical studies of en ergy efficiency potential."

C ommenters stated that EPA 's use of a set of top 12 states in terms of EE performance as measured by incremental savings as a percentage of retail sales, based on 2012 reported data, was not enough to prove that a 1.5 percen t value is adequately demonstrated because it is not appropriate to base the feasibility of a goal by a minority of states.

Commenter s believed that the three states EPA indicates have already achieved the highest level of performance, more than 1.5 per cent annual incremental savings, are incomparable to others as a whole. Commenter s also believed that EPA ignored that two states they cited (Indiana and Ohio) have recently taken legislative action to reconsider the degree of achievability of their long

- t erm targeted EE requirements in part because of their concerns of the potential rate impact that these programs will have on retail customers.

Commenter s noted that of the twelve states cited by EPA as "leading states", the 2014 ACEEE Scorecard showed e ight of those states had reported 2013 incremental annual savings of less than 1.5%, with five of those showing incremental savings of less than 1.0%. Commenter s stated that the historical experience of other states that have had incentivized EE programs i n place for several years suggests the EE savings rates in the Proposed Rule are unrealistic.

Commenter s stated EPA relies almost exclusively on three states, Arizona, Maine, and Vermont, to demonstrate the achievability of 1.5 percent annual incremental DSEE savings. Commenter s stated EPA, however, displaces two important factors: (1) the demonstration of s ustaining 1.5 percent and (2) the achievements of other states. Commenter s stated first, Arizona and Maine have only demonstrated annual incremental savings of 1.5 percent for one year (2012) thus negating EPA's reliance on these two states as adequately d emonstrating the sustainability of 1.5280 percent annually. Commenter s stated second, between 2006 and 2012, the 50 states plus the District of Columbia had 357 opportunities to achieve EPA's DSEE target. Commenter s stated during this time period, EPA's targe t was met by states on only 10 occasions (i.e., less than four percent of the total opportunities). Commenter s stated only two states besides Arizona, Maine, and Vermont achieved 1.5 percent annual incremental savings: California in 2010 and Hawaii in 2008 . Commenter s stated California and Hawaii did not maintain these levels of savings. Commenter s stated in fact, Hawaii went from achieving 1.97 percent annual incremental savings in 2008 to 0.04 percent in 2012. Commenter s stated EPA must recognize that its savings target has not been adequately sustained to justify its inclusion as BSER.

Commenter s noted that states within the 11

- state " best practice " group varied in the application of their efficiency requirements as some states applied their regulatio ns only to investor owned utilities, whereas others included municipal utilities, and/or cooperative utilities. Commenter s stated that those states with limited applicability will not achieve their regulatory goals on a full
state

- wide basis, but EPA treat ed these states as evidence of the general practicality of its 1.5 percent/year efficiency improvement rate. Commenter s also noted that EPA's overarching logic used to develop end

- use efficiency and renewable energy targets is flawed and inconsistent. Comm enter s noted that end

- use efficiency goals are based on the 11 most aggressive state targets in the U.S. while renewable energy generation targets are based on average RE generation targets by region. Additionally, Commenter s noted that EPA stated that the state RPS targets "reflect expert assessments of RE technical and economic potential that can be cost

- effectively developed for that state's electricity consumers," and then overrode a state's assessment if it was less or more than a regional average. Com menter s stated that there is no reason to believe that state agencies able to render "expert assessments" for RE are somehow unable to make such judgments regarding Energy Efficiency Resource Standards (EERS), yet EPA only recognized the expertise of state s that had adopted at least a 1.5 percent/year efficiency improvement requirement.

Commenter s stated that EPA's presumed fairness of applying goals deemed reasonable by 11 states to the 39 states which have not adopted such goals lacks support, particu larly given the fundamental differences in energy generation, energy use, and electricity demand growth by state. Commenter s also noted that even states within the "best practices" group have programs to exclude major sources of electricity, such as munici pal power entities, electric cooperatives, or investor owned utilities serving a relatively small number of customers; hence, the targets of the state efficiency programs EPA relied on will not achieve the reduction in total electricity consumption in the state which is embodied in EPA's rule.

Commenter s stated the 12 states selected do not appropriately represent the nation's landscape nor do they represent the various energy efficiency capabilities across each state. Commenter s stated among three state s listed as having already met the 1.5 percent goal, many Arizona utilities, including cooperatives, have not met their standard since 2010.Commenter s stated that nine utilities in Arizona are required to file Energy Efficiency Implementation Plans (EEIP) with the Arizona Corporation Commission (ACC) because they have annual revenues in excess of $5 million. Commenter s stated all nine of these utilities have requested waivers from the ACC because they could not achieve the required energy efficiency targets based on the rule's cost

effectiveness requirements, and the types of programs permitted. Commenter s stated these waivers allow the entities permission to not attain the standard targets or otherwise deviate from281 the requirements as written. Commenter s st ated of those nine, five utilities are distribution cooperatives and the remaining four are municipalities or investor

- owned utilities. Commenter s stated every utility required to file an Energy Efficiency Implementation Plan with the ACC has at one point requested and been granted waivers to deviate from the parameters of the energy efficiency rule due to their inability to reach the targets as originally designed. Commenter s stated that by choosing Arizona as an example, the EPA presented a state that co uld not make their energy efficiency mandates work universally throughout the state; even recognizing from the onset that electric cooperatives have special challenges by setting their mandate 25 percent lower than other utility groups.

Commenter s stated the EPA claims they have chosen a conservative 1.5 percent requirement for each state, however only 11 states nationwide have previously adopted this same target as part of their state mandate. Commenter s stated in making this claim, the EPA ignored the d isparate impact a uniform energy efficiency requirement has across the nation, and ignored the various demographics that are not conducive to this overly ambitious standard. Commenter s stated the 12 states represented do not appropriately represent the nat ion's landscape nor do they represent the various cost

- effective energy efficiency capabilities across each state.

Commenter s stated Arizona is one of the three states the EPA cites as achieving a 1.5 percent of savings in 2012 due to Energy Efficiency Re source Standards (EERS), but even in the creation of the state EERS, the Arizona Corporation Commission (ACC) accounted for the dissimilar nature of investor

- owned utilities and distribution cooperative utilities. Commenter s stated this is shown in the dis counted standard allowed for distribution cooperative utilities written into the EERS. Commenter s stated for every cumulative percentage of savings that investor

- owned utilities must achieve, distribution cooperatives are only required to achieve 75 perce nt of that level. Commenter s stated despite this discount, many Arizona utilities, both investor

- owned and distribution cooperative utilities, have not met their standard since 2010, and a number of Arizona entities are granted waivers from the Arizona Co rporation Commission which allows the entity permission to not attain the standard targets. Commenter s stated the waiver process is also written into EERS language, further emphasizing that from the outset, the ACC understood that the original standards we re potentially set higher than entities could attain, so a waiver process was necessary. Commenter s stated this mirrors what is occurring with several other electric utilities and distribution cooperatives in other states who have not been able to meet or exceed their required energy efficiency goals either. Commenter s stated even though the EPA cites Arizona as achieving the stated 1.5 percent mandate in 2012, a closer look at the individual utilities' savings over several years in response to the EERS pro gram shows that a 1.5 percent mandate is unreasonable and unsustainable, particularly for distribution cooperatives.

Commenter s stated given the EPA's basis for determining the 1.5 percent goal, it is clear that the EPA has ignored several cases across th e country where annual energy efficiency savings are declining and are unsustainable. Commenter s stated this can be seen in the actual kWh savings data as filed in Maine, Vermont, and Washington among others. Commenter s stated these case studies are further detailed in the Appendix 1 Statewide Energy Efficiency Programs.

Commenter s provided a case study describes the outcome of the Energy Efficiency Resource Standards as established in Arizona and how the utilities and the Commission Staff have responded to the standards, now several years past their implementation. Commenter s provi ded282 several case studies for other states as well (including Arizona, Vermont, Maine, Hawaii, Iowa, Maryland, Michigan, Minnesota, Washington, and Wisconsin ) . Commenter s also provided a table entitled "Table 1. EPA's Best Practices References as Basis for Energy Efficiency Goals" that highlights the States that represent the 12 states that the EPA considers "on track" to meet the 1.5 percent incremental energy efficiency goal by 2020.

Commenter s stated that it is not appropriate for the EPA to use the experience of 3 out of 50 states to determine a one

- size

- fits

- all nationwide annual incremental savings rate for all EE programs in all states and that the sustainability of past achievements is not guaranteed going forward, particularly over a long time h orizon through 2030.

Commenters believed that EPA should not have relied solely on historic EE savings to set EE savings targets for the future, as they felt that historic EE savings are not a good indicator of potential EE savings because the EE measu res available change over time. Commenters noted differences in generation mix and ownership as well as the electricity regulatory structure may make it more difficult for some states to implement EE programs than others; for example, the Northeast Power C oordinating Council ("NPCC"), a regional group EPA cited for its historical EE savings, cautioned against using its history of EE savings to set state EE targets, because EE opportunities are not equally accessible in all the Northwest states that are part of the regional group, thus, while the Northwest as a region may meet combined state EE goals, particular states within the Northwest may not meet their individual goals. Commenters stated that depending on the type of EE measures that a state has employe d in the past, a state may have less EE potential in the future. Commenter s provide d Idaho as an example, where Idaho achieved a significant amount of energy savings from lighting in the residential and commercial sectors in the past; while Idaho Power' s analyses indicate that it can maintain cost

- effective EE savings from lighting over the performance period, the potential to expand lighting programs is very low during the performance period. Commenter s noted that Idaho Power is limited in alternative EE measures because Idaho employs a cost

- effectiveness test for EE measures, thus, despite greater annual energy savings rate in the past, Idaho Power projects an annual energy savings rate of 0.6 percent throughout the performance period. Id. at 49. Comme nter s further indicated that a state may change the way that EE programs are deployed, shifting from a utility

- led EE programs to a
state

- led EE programs, for example (See Dan York et al., Frontiers of Energy Efficiency: Next Generation Programs Reach for High Energy Savings (ACEEE 2013) )

.
Commenters stated EPA's use of 2012 snapshot data ignores key contextual information about what is required in order for states to achieve an incremental annual savings rate of 1.5 percent. Commenters indicated that while it is true that these states reported this level of savings, this 2012 snapshot data does not provide any historic context. In particular, c ommenters noted it does not address how long it took these states to achieve these rates or whether the state regulatory environment supports EE. Commenters stated this information would provide important context about whether the achievements of these states actually could be replicated by other states. Commenters stated the key inquiry, therefore, is not whethe r some states have achieved the target savings rate, but whether this achievement can be replicated by other states and over what timeframe, and a single year's snapshot data does not allow EPA to answer this question.283 Commenter s stated EE savings are dependent on EE budgets approved by state regulators. Commenter s stated EE savings and budgets are highly dependent on whether a particular state's regulatory framework supports utility investment in EE programs. See IEE Regulatory Frameworks. Commenter s noted that some states like Maine and Vermont have had aggressive EE programs in place for more than two decades but this is not the case for other
states. Commenter s also noted it is important to note that the three states with the largest EE expenditu res in 2012 had not yet reached the target 1.5 percent incremental savings level by 2012: California spent $1.3 billion in 2012 and only achieved incremental savings of 1.24 percent; New York spent $600 million and only achieved incremental savings of 0.9 3 percent; and Florida spent $370 million and only achieved incremental savings of 0.27 percent, despite aggressively pursuing EE and DR programs for decades. Accordingly, c ommenter s stated EPA cannot rely on three states' reported EE savings rates in one year as adequate support for the achievability of a 1.5 percent annual incremental savings rate for all states. Commenter s note d that EPA asserts, but provides no evidence, that achievement of a 1.5 savings rate in one year demonstrates that a state can sustain this target level of savings for 13

- 17 years.

If anything, commenter s stated 2012 reported data shows that the demonstrated annual incremental EE savings rate is closer to 0.5 percent. Commenter s stated consistent with the CAA's requirement that BSER be "adequately demonstrated" and that the resulting standards be "achievable," the use of the median savings rate would be a better measure of what the states actually achieved in 2012. Commenter s pointed out that an EEI analysis shows that the media n savings rate in 2012 was 0.48 percent; EPA notes the national average was 0.58 percent; and recent LBNL report found the national average was 0.49 percent in 2010 (see LBNL Study, supra, n.102). See Abatement Measures TSD at 5

- 17. Commenter s indicated t hat because the 2012 data are skewed, a median is a better measure of central tendency than a mean, with 14 states reporting incremental savings rates of between 0.5 and 0.99 percent and 25 states reporting rates of less than 0.5 percent. See id. at Table 5

- 8. Commenter s further stated that regardless of whether the mean or median is used, both figures are considerably less than EPA's proposed 1.5 percent annual incremental savings rate, and thus, the 2012 reported savings rates do not support EPA's assert ion that all states can achieve 1.5 percent annual incremental savings. Commenter s stated if the reported data demonstrate anything meaningful about the feasibility of different levels, it would be that the median savings rate achieved in 2012 is a better measure of an achievable annual incremental savings rate.

Commenters noted that to reach EPA's goal, demand

- side energy efficiency would have to improve 250 percent nationally over a 10

- year period

--- such an assumption means that energy efficiency gain s outpace electricity demand growth resulting in declining retail electricity sales. Commenters stated that this assumption of negative electricity demand growth is inconsistent with the U.S. Energy Information Administration forecast as well as other resp ected demand forecast. Commenters stated that over time, potential energy savings decline significantly absent some major technological breakthrough, but EPA does not identify any breakthrough that would sustain an annual 1.5 percent growth in efficiency a nd if such breakthroughs are not on the present horizon, they will not be available during the 10

- year period for achieving the targets in the proposal.

Commenter s noted that EPA purported to use a seven step process to derive its estimates of achievabl e results using demand

- side management energy efficiency (DSM energy efficiency);284 however, the EPA provided very little evidence regarding its process. Commenter s stated that the three states EPA noted had achieved a 1.5% rate self

- reported this data which they felt was not particularly believable. Commenter s noted that even having set the EE goal, EPA acknowledges that this level of performance has not been sustained nationwide previously and that the annual percentage increases, as well as the cumulative energy efficiency savings, are well above the
average savings that most states have achieved to

- date. Commenter s stated that EE savings rarely result in the savings expected and should not be included as a building block.

Commenters noted that EPA relies on data derived from the recent recession and the s low economic recovery that followed. Commenter s stated that EPA needs to provide analysis of their energy efficiency assumptions during more robust economic periods in order to demonstrate the reasonableness of its assumptions.

Commenter s noted that state targets under building block 4 are not differentiated based on the potential for associated carbon reduction, as states with some of the highest building block 4 requirements have some of the lowest historic CO2 emissions rates and some high emitting states, including Wyoming and West Virginia, have some of the lowest efficiency potentials. Commenter s stated that the latter observation is not surprising as high emissions rates tend to be correlated with low electricity prices and thus weak economic in centives to encourage energy savings through investments in efficiency, setting aside environmental arguments for such investments. Commenter s stated that there is a small negative correlation between efficiency potential and average CO2 emissions rates in 2012 across all 50 states and noted that this lack of correlation raises the question of whether a more targeted approach would improve both the effectiveness and cost

- effectiveness of this building block.

Commenter s noted that their annual MWh saving s have not been included with the statewide MWh savings that USEPA has counted as it formulated the regulation and anticipated the potential CO2 savings due to electric efficiency programs going forward, therefore, USEPA has

over

- estimated the amount of sa vings that remains to be captured. Commenter s noted, in their case, that there are 30,763 MWh of savings that USEPA might incorrectly assume is yet to be garnered, when, in fact, those MWh are already being saved.

Commenter s noted that EPA's analysis d oes not appear to consider state or locality's future growth when assuming a reduction percentage for demand side management by 2030.

Commenter s stated that the energy efficiency targets are based on flawed assumptions and are overly aggressive as a re sult, particularly as they impact the rural consumers served by cooperatives who traditionally cannot achieve the energy efficiency potential seen in other sectors of the economy. Commenter s noted that their engineers found major flaws with the analysis de veloped by EPA, including incorrect data extracted from some of the 12 potential studies examined. Commenter s noted that on top of the flaws gleaned from information provided by EPA, there are several trends that have emerged over the past few years (lower electric and natural gas avoided costs, higher baselines for energy conservation measures, limited utility load growth and the subsequent impact on utility revenues, and competing options for utility investments from limited funds) and are expected to las t over the next 5

- 10 years, that also do not align with the goal of achieving 1.5% incremental annual savings from energy efficiency.285 C ommenter s stated that EPA's target of 1.5% net year

- over

- year savings is unrealistic for Indiana.

Furthermore, c ommenter s stated that currently no study exists to support the 1.5 percent net savings goal between years 2020

- 2030. C ommenter s stated that the EPA does not confirm or support whether EE is cost

- effective at this savings level. C ommenter s stated that Feder al building codes and standards will diminish the 1.5 percent net savings opportunity over the years, resulting in making achievement of goals even more challenging if not impossible.

C ommenter s added that, similarly, it precludes the state from determining what could be achieved and setting those requirements. C ommenter s concluded that, in order to meet the goal of 1.5 percent annual savings, states may well feel pressured to require all utilitie s to achieve the same level, even when in reality they cannot.

Furthermore, c ommenter s stated that currently no study exists to support the 1.5 percent net savings goal between years 2020

- 2030. C ommenter s stated that the EPA does not confirm or support whether EE is cost

- effective at this savings level. C ommenter s stated that Federal building codes and standards will diminish the 1.5 percent net savings opportunity over the years, resulting in making achievement of goals even more challenging if not impo ssible.

Comment 6: Oppose 1.5 Percent

– EPA did not consider important factors in its analysis

. Response 6: The EPA has determined not to include demand

- side energy efficiency (building block four) in the BSER of this final rule and therefore we do not ne ed to address the
commenter s ’ concerns as they are now out of scope. This determination is discussed in section s V.A and V.B of the final rule preamble of the CPP. Although the EPA has determined to not include demand side

- energy efficiency in the BSER in this final rule we are using 1.0% in our illustrative EE scenario. See the RIA Chapter 3 and the Demand

- side Energy Efficiency TSD for CPP Final Rule for details on the illustrative demand

- side energy efficiency plan scenario

The following are summaries of the specific public comments under this comment:

C ommenters did not support the 1.5 percent annual incremental savings goal because they believed that EPA did not consider important factors in its analysis to determine an appropriate value.

Commenter s stated EPA's proposed nationwide 1.5 percent energy savings goal is unrealistic in many States, because it fails to account accurately for extreme variations in demographics, regulatory environments, load growth, and usage patterns among States and ut ilities. Commenter s stated that in fact, EPA has ignored several examples across the country where annual energy efficiency savings are declining, and this unrealistically inflates the Proposed Rule's state

- level CO2 emissions targets and increases the bur den on the other three CO2

- reducing building blocks. Commenter s stated that actual kWh from Maine, Vermont, and Washington, among others, shows that EPA's across

- the

- board 1.5 percent savings goal is unrealistic. Commenter s stated these States set out ag gressive energy efficiency savings goals286 and yet in each case they have not been able to achieve them, and the reasons for the shortfall typically include challenges in fully funding the programs and in building broad and rapid adoption of the program by r esidential, commercial and industrial consumers. Commenter s stated that while they have made some progress, ramping up the programs and sustaining funding for them has been a significant challenge.

Commenter s stated not all States can cost

- effectively ach ieve and sustain the 1.5 percent annual energy efficiency goals. Commenter s stated its association conducted an analysis that further demonstrates that EPA's nationwide 1.5 percent annual EE savings goal cannot be achieved and sustained at the state level or by many individual utilities. Commenter s noted the study shows that EPA's own data is inconsistent with its assumption that all States can achieve, and then maintain, a 1.5 percent annual EE savings goal. Commenter s stated EPA's assumed savings goal is flawed because it is based on insufficient data that draws comparisons among a limited number of States that are not representative of the savings that are actually achievable across the Nation. Commenter s stated that at the individual utility level, part icularly from the cooperative perspective, the commenter s ' analysis demonstrates why many cooperatives cannot technically or
cost

- effectively achieve EPA's 1.5 percent annual savings goal.

Commenter s asked how EPA and States will account for situations wh ere consumers do not adopt EE. Commenter s stated that even with incentives, the cost to consumers can be quite high, and in many cases the consumer will simply not choose to take action. Commenter s stated that historically, EE programs have largely been vo luntary and incentive

- laden efforts, and particularly for residential EE programs, success of the program is based upon the consumer being willing to participate. Commenter s stated this often means the consumer has to make what are often substantial up

- fr ont investments in a product in the short

- term, with the hope that over the long

- term they will receive a greater savings; for example, a consumer would purchase a $1200 energy efficient refrigerator with an expectation that it will save them more energy o ver time compared to continuing use of their existing refrigerator, or the purchase of a less expensive, less energy efficient unit. Commenter s stated that in this example, even if the State were to provide a rebate or tax incentive, the out

- of

- pocket expe nse may well exceed the potential savings. Commenter s stated this choice can be much more difficult, if not impossible, for those with limited means. Commenter s stated yet EPA's approach assumes that for EE programs, "if States build it," they will have a steadily increasing customer base that will adopt it. Commenter s stated based upon the EIA data of EE savings, it appears that in many States that simply is not the case.

Commenter s provided a list of considerations that EPA should adopt when determinin g if the 1.5% savings goal is realistic, including: (1) As more and more customers participate in EE programs, it becomes more challenging, both in terms of simply finding new participants as well as incurring significantly increased costs to market progra ms, to achieve savings; (2) As building codes and mechanical standards continue to advance and become more stringent, energy savings from EE programs are more difficult to achieve; and (3) Existing state laws and regulatory rules (Colorado) likely need to be reviewed and revamped to enable utilities a better opportunity to offer programs that are deemed to be cost effective, while at present other states (South Dakota and Wyoming) lack specific EE mandates and rules. Commenter s also stated that the cost imp acts do not factor in additional resources required for the informing and reaching customers in order to drive the participation needed to achieve energy savings.287 C ommenters stated EPA has not addressed the considerable uncertainty about whether states can actually achieve the EE rates predicted by EPA, and whether EE will result in reduction of CO2 emissions from fossil generation. Commenters stated EPA also lacks reliable projections of EE potential for each state, and a nationwide EE target applied to each state fails to account for state

specific constraints on EE potential.

Commenter s stated there are market considerations that can inhibit or curb the realization of energy efficiency measures, even when they are economically beneficial to consume rs. For example, commenter s pointed out that dislocations in customer awareness of energy efficiency measures or the market availability of energy efficiency measures can hamper adoption. Commenter s stated that while such market considerations can be, and have been, overcome with federal, state, and local energy efficiency building codes and energy efficiency product standards, these methods will increase the customer's cost of energy efficiency implementation. Commenter s stated this is because the consumer cost of energy efficiency measures implemented through codes and standards is not offset by energy efficiency program incentives. Commenter s stated this introduces another risk of decreased or slower adoption rates than EPA's assumptions.

Commenter s noted that while efficiency improvements in end

- use devices and advances in controls technology can lead to energy savings; economic, market, and perceptual barriers can inhibit or curb customer adoption. Commenter s stated that the assumptions used to det ermine the economic viability of the proposed levels of energy efficiency should be reviewed to ensure that adverse economic impacts are avoided. Commenter s urged EPA to consider both the spatial effects of regional variation in the electric power generati on mix, and temporal effects of changes in electric system load shapes resulting from changes in energy efficiency, and their associated impacts on marginal CO2 emissions.

Commenter s stated additionally, the EPA failed to properly address the different regional demographics that disproportionally favor greater energy efficiency potential in the 12 states that does not exist in other states. Commenter s indicated States with the highest energy efficiency savings also have some of the highest electric retai l rates in the country. Commenter s stated electric consumers in states with high electric retail rates are more willing to implement and participate in energy efficiency programs because every kilowatt hour they save carries a higher monetary savings valu e, thus reducing their individual payback period for that investment compared to states with lower electric retail rates.

Commenter s stated that EPA needs to factor differences in climate and appliance saturations in setting guidelines and that ignoring these differences could inadvertently penalize the industrial sector of the U.S. economy, a sector extremely important to the national economy as it continues to struggle to regain its footing since the Great Recession.

C ommenters stated that EPA failed to address the different potential EE adoption available to different classes of electricity consumers as this potential can vary wid ely across different customer sectors, and it is unreasonable to assume that an individual state 's sectoral composition has no bearing on its ability to achieve and sustain 1.5 percent annual increases in incremental EE. Commenters noted that many of the s tudies cited by EPA break down the potential for increases in EE by residential, industrial and commercial sectors and in doing so, those studies recognize the different potential for improving efficiency that exists in the different sectors.288 Commenters used the same 2012 EIA data that EPA used in the Proposed Rule and found that of the 2012

- delivered MWh in the United States, 36% was consumed by commercial customers, 37% by residential customers, and 27% by industrial customers but noted that the obser ved effects of annual energy efficiency did not accrue in the same proportions

--- 42.5% of incremental MWh reductions were realized by commercial customers, 39.4% by residential customers, and 18.1% by industrial customers. Commenters stated that this indic ates that the mix of customer classes within a state will have a significant impact on the availability of cost

effective energy efficiency savings

--- a fact that should not be surprising because competition provides industrial customers a strong incentive to improve efficiencies of processes and lower electricity consumption.

Commenters stated that in general, the residential sector has the highest potential for improving efficiency, while industrial and commercial consumers have lower potential to impr ove. Commenters noted that potential can even vary greatly among residential consumers and pointed out that industrial and commercial sectors already have a profit motive for improving efficiency and have therefore already adopted many energy efficiency me asures; therefore, the states in which industrial or commercial electricity consumers make up a large portion of electricity consumption will have limited EE improvements available.

Commenter s stated that the EE assumption also does not account for the fact that states such as New Mexico have a low level of electric energy use per customer compared to many other states, and the cost to achieve the same savings rate is much higher. Commenter s noted that many homes in New Mexico do not have refrigerated a ir or any air conditioning and thus it is not cost

effective to add insulation or replace windows to save air

- conditioning energy because the cooling requirement is much lower than other states. Commenter s also noted that New Mexico has a significant rural population and that 19.5% of New Mexicans live below the poverty rate and simply do not have the means to upgrade their homes. Commenter s stated that low income programs often provide free services but they are very expensive and hard to design as cost

ef

fective programs.

Commenter s stated that EPA should allow states to demonstrate that the composition of their customers varies and the ability to attain the target incremental EE savings rate will be unique to each state. Commenter s noted that their se rvice territory is predominately rural and, based upon their experiences, rural customer EE participation rates are typically lower.

Commenter s noted that the coal

- heavy states tend to have a much larger percentage of their sales to industrial customer s, and the more populous states have a larger percentage of their sales to the commercial sector.

Commenter s noted that EPA provides options for introducing and increasing residential EE, including financial incentives (rebates and loans) and technical services (audits and retrofits) as well as educational campaigns, yet the Clean Power Plan does not consider whether all residents can afford to invest in new EE appliances.

Commenter s stated that the state data that EPA relies upon for its 1.0% and 1.5% annual efficiency targets may not be appropriate for all states, such as those experiencing high rates of population and economic growth.289 Commenter s stated that because of the many s erious flaws, C ommenter s urged EPA to withdraw the proposal. C ommenter s stated that EPA bases its proposal on flawed information and assumptions for its four building blocks that are the basis for each state's target.

Comment 7: Oppose 1.5 Percent

– erro rs in the EPA’s calculations to reach the proposed goal

Response 7: The EPA has determined not to include demand

- side energy efficiency (building block four) in the BSER of this final rule and therefore we do not need to address the
commenter s ’ concerns as they are now out of scope. This determination is discussed in section s V.A and V.B of the final rule preamble of the CPP. Although the EPA has determined to not include demand side

- energy efficiency in the BSER in this final rule we are using 1.0% in our illustrative EE scenario. See the RIA Chapter 3 and the Demand

- side Energy Efficiency TSD for CPP Final Rule for details on the illustrative demand

- side energy efficiency plan scenari o, including the basis for and full detail of the calculations of the sce nario

The following are summaries of the specific public comments under this comment:

C ommenters did not support the 1.5 percent annual incremental savings goal because they believed that EPA's calculations to reach this value contain various errors.

C ommenters noted that EPA made an error when referencing Pennsylvania 's annual incremental achievement rate from the Pennsylvania 2012 Potential Study. Commenters noted that in referencing the Pennsylvania 2012 Potential Study, the GHG TSD27 references a value of 2.9% as annual incremental achievement which is incorrect. Commenters noted that Table 1

- 3 and 1

- 4 from this Study show program potential of cumulative values for the periods of 2013

- 2016 and 2013

- 2018 of 2.3% and 3.7%, respectively. Commenter s also noted that the study assumes an 85% participation rate, is based on gross, not net, savings, and assumes yet

- to

- be discovered future energy efficiency technologies

--- none of which are borne out in practice.

Commenter s believed that EPA misinterpreted DSM studies when EPA erred in transposing DSM Potential study results for some of the potential studies. Commenter s noted, for example, that EPA shows Pennsylvania as having the largest average annual potential of 2.9%. Co mmenter s stated that EPA made a transposition error as the 10

- year potential on an average annual basis is 17.3%/10 = 1.7% and there is no average annual potential of 2.9% in the Pennsylvania study cited by the EPA. Commenter s stated that if 1.7% was subst ituted for the 2.9% used by the EPA to calculate an achievable sustainable annual load reduction target of 1.5%, the average would decrease to 1.3%. Commenter s also noted that six of the ten potential studies cited by EPA to arrive at the average annual lo ad reduction of 1.5% are based on studies that are ongoing, which overstates potential by not capturing the full impact of the most significant federal and states appliance efficiency standards and building codes

-- most especially residential lighting.

C ommenter s stated that on an incremental basis, this would be approximately 0.75% per year (before considering effects of degradation) which is significantly lower than EPA's assumption of 2.9%/year. Commenter s noted that the Pennsylvania value was the h ighest in the range of290 potential studies quoted (see GHG TSD, at Appendix 5

- 1) used to support EPA's assumed 1.5% incremental EE savings.

Commenter s noted that the EnerNoc 2012 EE Market Assessment study compared its results to studies from two other s tates referenced in Appendix 5

- 1 of EPA's GHG Abatement Measure TSD: Delaware and Pennsylvania. Commenter s noted that EPA declares that Delaware and Pennsylvania have reported N/A and 2.9% as achievable average annual projected potential as percentage of b aseline sales; however, Chapter 11 "Comparison to recent Regional Potential Studies" of the NJ EE Market Potential Study asserts 0.7% and 0.8% for Delaware and Pennsylvania, respectively.

Commenter s compared the estimated EE/DSM available as included in the Integrated Resource Plans ("IRP") for each of their utility companies with EPA's estimated potential outcomes by state. Commenter s stated that when one considers the internal estimates prepared for inclusion in the IRP cases, it is clear that EPA's estimates for EE/DSM are overly optimistic, which especially apparent for the Arkansas and Texas utility companies, which have the most experience with the EE/DSM efforts. Commenter s noted that EPA estimates exceed the reference cases included in the IRPs , except for Mississippi. Commenter s noted that for other states, EPA's estimates exceed the IRP high case while others are higher than the reference case, but lower than the expected high cases.

Commenter s stated that the proposal's Technical Support Document on GHG Abatement Measures acknowledges that only three states in 2012 achieved incremental energy savings of 1.5% or greater: Arizona, Maine, and Vermont but of those states, only Vermont is among the leaders in cumulative energy savings as a perc entage of load; Arizona and Maine are both roughly average.

Commenter s stated EPA's state goal calculations are riddled with technical data errors. Commenter s stated for example, EPA's data includes inaccurate unit ratings, units that do not meet appli cability criteria, and units that are retired.

Commenter s stated that GDS Associates identified at least 19 areas in which EPA's calculations for EE savings for each state are inaccurate and as a result of these mistakes, EPA's projected energy saving s is too high. Commenter s stated that when data errors are corrected, the EE savings goal of 1.5 percent kWh on average decreases substantially. Commenter s noted that of the twelve states EPA evaluated for EE growth, GDS found the potential EE for many of the states was well below 1.5 percent as GDS calculated that only three of the fifty states saved more than 1.5 percent of annual kWh sales in 2012.

Commenters stated that it performed a detailed review of the EIA Form 861 data and energy efficiency po tential studies that EPA assessed to develop the target 1.5 percent annual savings goal. Commenters also indicated it evaluated each "energy efficiency potential" study relied upon by EPA's meta

- analysis and compared the detailed information in those studi es to the Table on pages 5

- 65 and 5

- 66 of EPA's Technical Support Document. Commenter s identified several major flaws with the analysis developed by EPA including:291 - In the potential study meta

- analysis, EPA used incorrect data extracted from some of the 12 potential studies examined. For example, for the Commonwealth of Pennsylvania, EPA has used a cumulative annual savings figure of 2.9 percent that covered a three

- year future period as a

one

- year kWh savings figure. This is an obvious error that Commenter s ha ve confirmed with the author (GDS Associates) of the 2012 Pennsylvania energy efficiency potential study. When this and other data errors are corrected, the 1.5 percent average kWh savings calculated by EPA decreases by at least 20 percent.

• EPA incorrectly calculated the achievable potential savings percentage for the 2010 Salt River Project potential study in Arizona. Arizona is one of the States EPA touts as achieving the 1.5 percent annual energy efficiency goal. For the Salt River Project potential, however, the average incremental annual percentage savings was shown as 1.4 percent per year, not 2.2 percent.

• The achievable energy efficiency savings poten tial for 6 of the 12 States examined in the EPA meta

- analysis is much less than 1.5 percent per year. Commenter s believe d it ma de no sense to assume that all 12 States included in the EPA Technical Support Document can achieve 1.5 percent energy efficiency savings annually when many of the studies reviewed by EPA found that the potential in those States individually, and on average, is far less than 1.5 percent.

• When the meta analyses examined by EPA are corrected for data errs and to remove studies from Ca nada, the average incremental EE potential savings drops to 1.2% per year from the 1.5% estimated by EPA. At a minimum, EPA should correct the data errors and remove the Canadian utilities from the meta

- analysis data.

Commenters reviewed the electricity savings and retail kWh sales data from the 2012 EIA Form 861 and recalculated the 2012 Incremental and Cumulative Savings for each State. Commenters found mistakes for 19 areas of EPA's Table 5

- 4 on pages 5

- 17 through 5

- 19 (17 States and the Continental U S Total and US Total). In all of the 19 areas where NRECA identified these errors, the EPA results were higher than the actual values, resulting in an EPA average 2012 Incremental Savings of 0.58 percent versus Commenters corrected calculation of 0.51 perc ent (i.e., EPA's results were 14 percent too high). Commenters stated EPA also assumed a 0.2 percent per year "conservative" improvement in annual Incremental Savings for each State. Commenters stated t his EPA assumption means each State would need to incr ease the actual average U.S. Incremental Annual Savings percentage by approximately 40 percent (0.2/0.51) each year from 2012 into the future.

Significantly, commenters stated, EPA failed to take into account state

- to

- state differences in the legislative, regulatory, economic, demographic, and geographic and climate characteristics. Commenters stated t here are also state laws in effect that place a cap on the amount that can be spent on energy efficiency programs. Moreover in some instances, commenters sai d, state energy efficiency programs have simply run out of money such as the Maine program. Commenters stated w hen evaluating data from both leading and lagging state energy efficiency programs, it is not clear that all States can achieve savings of 1.5 pe rcent a year with energy efficiency programs, because of key differences among States.292 Commenters stated that Sreedharan (2013) and Eldridge (2008) do not justify the 1.5 percent annual energy efficiency goals, as EPA contends they do. Commenters added t e n of the fifteen Eldridge studies and 7 of the 10 studies in the Sreedharan analysis did not achieve the 1.5 percent goal.

Commenters stated t he three States that have achieved the 1.5 percent annual savings have had their EE programs for over 20 years, y et EPA's proposal would require all covered States to achieve similar or greater savings by 2025, just over 10 years away. Commenters stated that b ased upon EPA's own data, achieving the 1.5 percent annual savings is well beyond what has actually been acco mplished in practice.

Commenter s argue d that EPA used data from EIA Form 861 filings to determine each state's starting point in 2012, which only reflect energy efficiency savings from utility

- driven programs. However, commenters stated, many of the states that EPA used to establish the level of performance include measures implemented by non

- utility entities programs, the implementation of which are beyond the control of utilities. C ommenter s also argue d that there is insufficient time fo r the development of state plans for states that do not have sufficient existing renewable or energy efficiency programs already underway. Commenters stated e xperience indicates that programs requiring state legislative approval typically need more time th an allotted under the proposed schedule.

C ommenter s stated that a cost

- effective EE not included in base case. C ommenter s stated that regardless of the ultimate disposition of EPA's proposed rule, some states already have plans to continue existing utility

- administered programs. C ommenter s stated that EPA's analysis is flawed in that it doesn't recognize the future impacts o f these existing EE programs, or future impacts of new (incremental) EE programs, both of which will occur regardless of the implementation of the rule. C ommenter s stated that this has the effect of attributing all future EE achievements solely to this pro posal, even though they would occur regardless of its implementation. Therefore, C ommenter s noted that much of the benefit ascribed to the CPP's implementation is overstated, relative to business

- as

- usual.

Comment 8: Oppose State Goal of 1.0 Percent

.
Res ponse 8: The EPA has determined not to include demand

- side energy efficiency (building block four) in the BSER of this final rule and this determination is discussed in section s V.A and V.B of the final rule preamble of the CPP. Although the EPA has determ ined to not include demand side

- energy efficiency in the BSER in this final rule we are using 1.0% in our illustrative EE scenario. See the RIA Chapter 3 and the Demand

- side Energy Efficiency TSD for CPP Final Rule for details on the illustrative demand

- si de energy efficiency plan scenario

. The following are summaries of the specific public comments under this comment:

C ommenters believed that reducing the annual incremental savings goal to 1.0% is too conservative and should be rejected by EPA.293 Commenter s stated EE building block approach taken to set the 2030 goals should not be changed under an alternate approach [i.e., the 1 percent goal], as [the 1.5 percent goal] captures attainable energy saving goals informed by a broad range of state s uccesses across the country. Commenter s did not support a reduction to 1.0 percent for annual incremental electricity savings. Commenter s stated that the 2025 alternate set of state

- specific goals for the EE building block is a low bar, and its carbon poll ution reduction potential does not reflect what is already achievable. Commenter s stated EPA recognizes that the alternate set of goals "may underestimate the extent to which the key elements of the four building blocks... can be achieved rapidly while pre serving reliability and remaining reasonable in cost". Commenter s believed that if the alternate approach is to be an option, widespread past state successes with EE demonstrate that it is reasonable to expect states can achieve annual incremental electri city savings of 1.5 percent by 2025.

Commenter s stated that the 1 percent level is far below the cost

- effective EE potential and is excessively conservative as demonstrated by the number of states already achieving higher levels of performance and the number of states with plans to exceed that level of performance by 2020. Commenter s noted that a meta

- analysis of 45 studies of efficiency published in August 2014 (after publication of the proposed rule) found that "average annual maximum achievable savin gs range from 0.3 percent to 2.9 percent with a median of 1.3 percent." Commenter s noted that this study also found that assessments of potential savings did not vary by geography. Commenter s urged EPA to keep in mind that estimates of achievable EE are he avily dependent on energy prices and the utility's avoided costs.

Commenter s stated that the suggested alternative of 1 percent savings per year, with a ramp up rate of 0.15 percent per year is far too conservative and should be rejected by EPA, partic ularly given the example of leading states that are already achieving high levels of energy savings.

C ommenter s stated that the EPA has also invited comment on a less stringent alternative of 1.0% savings per year with a ramp rate of 0.15% per year (p. 34873; p. 34898). C ommenter s stated that these values are much too conservative and do not reflect what well performing utilities and states are already achieving with respect to utility energy efficiency programs let alone what all utilities and states ar e capable of achieving. C ommenter s stated that the EPA should adopt energy savings values in Building Block 4 that are higher, not lower, than those contained in the Proposed Rules.

Comment 9: Support State Goal of 1.0 Percent

. Response 9: The EPA recognizes that one of the major approaches available for achieving CO2 emission reductions from the electric power sector is demand

- side energy efficiency. The EPA continues to believe that significant emission reductions can be achieved by the use of suc h measures cost effectively and that such measures are likely to represent an important component of state plans.

The EPA has determined not to include demand

- side energy efficiency (building block four) in the BSER of this final rule and this de terminatio n is discussed in section s V.A and V.B of the final rule preamble of the CPP. Although the EPA has determined to not include demand side

energy efficiency in the BSER in this final rule we are using 1.0% in our illustrative EE294 scenario. See the RIA Chapter 3 and the Demand

- side Energy Efficiency TSD for CPP Final Rule for details on the illustrative demand

- side energy efficiency plan scenario

. The following are summaries of the specific public comments under this comment:

C ommenters supported EPA's al ternate annual incremental savings goal of 1.0 percent instead of the proposed value of 1.5 percent if energy efficiency remains a Building Block in the Proposed Rule.

Commenter s stated the proposed EE savings are based on complex assumptions of existin g states programs and extrapolations of those technical potentials, and do not fully account for issues such as state legislative support actions and EE budget setting with public service commissions.

Commenters described the growth of Michigan's current energy optimization program and stated that this strong EE program is a perfect example of why EPA must make allowances for early acting states to benefit for their progressive view on EE savings, as Michigan had already achieved 3 years of EE savings prior to EPA's 2012 baseline. Commenters stated that the necessary expenditures for states like Michigan to achieve steeper requirements will escalate more quickly since the easiest, most cost

- effective EE savings ha ve already been achieved. Commenters therefore requested EPA set a standard no greater than 1 percent per year.

Commenter s believed that an annual growth rate of 1.5 percent is too aggressive, relies on flawed data, and may not be sustainable. Commente r s noted that energy efficiency, as a component of a best system of emission reduction, is complex and will require careful evaluation by states in implementing energy efficiency programs into their compliance plan as well as in assessing whether or not to enter into multistate compliance plans. Commenter s noted that their analysis shows that increasing annual energy efficiency savings to 1.5 percent of total sales will not be cost effective as it would increase program spend to 5 percent of revenue by 2029 which is unsustainable, and also raises concerns about the availability of achievable savings potential during the compliance period. Commenter s recommended an annual energy efficiency growth rate of no more than 1 percent for states goals based on these issues.

Commenter s stated that even with their 20+ years of experience implementing energy efficiency programs, they are not projected to achieve a 1.5 percent incremental savings rate over the current plan period. Commenter s noted that they seek to ef fectuate significant energy efficiency savings; however, they must demonstrate that energy efficiency program elements meet a cost

benefit test in order to receive regulatory approval for that program element in each of their three jurisdictions. Commenter s noted that if an energy efficiency measure does not provide more benefits to customers than it costs, state regulators will not approve it for inclusion in the company's energy efficiency plans. Commenter s suggested that EPA require a 1 percent per year maximum energy savings to account for the technical and economic challenges associated with implementing energy efficiency savings.

Commenter s noted that several important factors limit the EE potential in some state's municipal utilities. Commenter s stated that municipal electric utilities may serve small rural communities with little or no growth which typically have a limited industrial and commercial base. Commenter s noted that new construction and co mmercial/industrial EE programs are typically295 some of the most cost

- effective EE programs a utility can offer, but municipal utilities that do not have significant new construction or commercial/industrial customers will have their EE programs limited larg ely to existing residential customers. Commenter s also noted that the ever increasing stringency of building EE codes and Federal efficiency standards for appliances and equipment may limit energy savings as utility EE programs typically can only count ene rgy savings above and beyond those achieved through energy codes and appliance standards. Commenter s supported the 1% performance level in response to these limiting factors, but still had concerns about the cost that will be incurred to try to meet the 1% level.

Commenter s stated that EPA's proposed method of determining BSER from energy efficiency does not match their current practices or their understanding of the leading policies that have been adequately demonstrated to acquire the most significant savings over time. Commenter s referenced information from the American Council for an Energy Efficient Economy (ACEEE) to show that Oregon is a leader in energy efficiency programs and significantly outpaces the rest of the nation and other leading states in per

- customer energy savings. Commenter s went on to list Oregon's EE accomplishments and stated that rather than recognizing these accomplishments, EPA's proposed approach of using energy efficiency to set state goals serves to penalize Oregon for the h igh level of demand

- side savings already achieved. Commenter s noted that Oregon has a very stringent final goal, and with the energy efficiency efforts already achieved in the state, Oregon would have to spend a large amount of money in order to meet EPA's goal. Commenter s stated that by adopting the proposal's energy efficiency 1.0% Option, the final rule would more closely resemble the amount of energy savings available from customer energy efficiency programs that are cost

- effective with existing technol ogy.

Comment 10: Support State Goal Beyond 1.5 Percent
Response 10: The EPA recognizes that one of the major approaches available for achieving CO2 emission reductions from the electric power sector is demand

- side energy efficiency. The EPA continues to believe that significant emission reductions can be achieved by affected EGUs by the use of such measures cost effectively and that such measures are likely to represent an important component of state plans.

The EPA has determined not to include demand

- si de energy efficiency (building block four) in the BSER of this final rule and this determination is discussed in section s V.A and V.B of the final rule preamble of the CPP. Although the EPA has determined to not include demand side

energy efficiency in the BSER in this final rule we are using 1.0% in our illustrative EE scenario. See the RIA Chapter 3 and the Demand

- side Energy Efficiency TSD for CPP Final Rule for details on the illustrative demand

- side energy efficiency plan scenario

. Even though demand

- side energy efficiency is not being included in the BSER in this final rule and, thus, not included in the determination of emission performance rates, the final rule provides states the flexibility to use demand

- side energy efficiency m easures in their state plans for compliance to meet the emission guidelines set forth in the final CPP, provided they meet the applicable requirements established in section VIII

. of the preamble for the CPP.

The following are summaries of the specific pub lic comments under this comment:296 Commenters supported state energy efficiency goals beyond 1.5 percent.

Commenter s recommended BSER should include energy efficiency savings from utility programs of 1.5 percent per year or greater by 2030. Commenter s believed the 1.5 percent is a reasonable target, but state utility efficiency programs can achieve much more. Commenter s noted that their ACEEE 2014 State Energy Efficiency Scorecard finds that six states achieved or exceeded this level of savings in 2013 (Arizona, Hawaii, Massachusetts, Michigan, Rhode Island, and Vermont). Commenter s noted that several additional states are between 1 percent and 1.5 percent savings per year. Commenter s provided Table 1 that lists the states with annual utility energy effi ciency savings greater than 1 percent. Commenter s stated that more states are on record as planning to ramp up to this level of savings, including Maine, Maryland, Minnesota, and Colorado, with several more states approaching 1.5 percent per year ( T able 2) . Commenter s provided a table that shows the annual utility energy efficiency savings targets by state.

Commenter s stated EPA should ensure that energy efficiency potential assumptions reflect Alabama's true potential. Commenter s stated resource plann ing in Alabama is a notoriously opaque process; any assessments of energy efficiency potential by or on behalf of Alabama's regulated utility, Alabama Power, are not available. Commenter s stated nevertheless, earlier this year, the ACEEE determined that G eorgia could reduce electricity consumption by 22 percent below 2012 levels by 2030 by implementing four common efficiency practices , including: implementing an annual energy efficiency savings target of 1.5 percent; enacting national model building code s; constructing combined heat and power systems; and adopting efficiency standards for products and equipment

- and these practices are well within Alabama's power to implement.

Commenter s stated moreover, recent savings and new targets in other states de monstrate the increasing achievability of energy efficiency. Commenter s stated 11 states achieved energy savings of over 1 percent of retail sales in 2012. Commenter s stated national investments in utility energy efficiency programs have grown at a rapid p ace, increasing from $1.6 billion in 2006 to $5.9 billion in 2011, and are projected to continue to increase to between $8.1 billion and $12.2 billion over the next decade, with the most significant increases occurring in regions with lower levels of histo rical program spending. Commenter s stated given these trends, and the comparatively low levels of energy efficiency currently being realized in Alabama, the potential to quickly ramp up energy savings across the state is enormous. Commenter s stated accord ingly, EPA should revise its assumptions upward to reflect Alabama's substantial potential for progress at efficiency.

Commenter s stated that EPA was conservative in calculating targets for energy efficiency under Building Block 4 due to the omission o f any forms of energy efficiency beyond state and utility efficiency programs. Commenter s stood by the assertion that states can achieve much higher levels of emission reductions through energy efficiency than anticipated by EPA's BSER methodology.

Commenter s recommended EPA strengthen the targets for end

- use energy efficiency to reflect the full extent of achievable efficiency as demonstrated in the market. While c ommenter s confirmed 1.5 percent is achievable, the calculations underestimate what is achievable because it does not include end

- use energy savings from major market sectors and strategies that utilities297 have typically left to others, including ESCO efficiency improvements, CHP, and building codes. Commenter s stated that ESCO efficiency improvements take place outside of traditional utility programs and the market was $4.8 billion in 2012 (compared to utility efficiency budgets of $5.7 million). Commenter s stated CHP could drive 565 million MWh of energy savings by 2030.

Commenter s stated EPA's proposed CPP determined that energy efficiency could supplant 1.5 percent of retail sales per year (79 FR 34849). Commenter s stated this figure underestimates the reductions achievable using energy efficiency. Commenter s stated EPA's 1.5 per cent numbers fails to account for important opportunities for energy savings that many states are already using or could be using, including: building codes, transmission and distribution efficiency savings, voltage optimization, and combined heat and pow er. Commenter s stated EPA should revise its reduction estimates for building block 4 to include these additional available energy efficiency opportunities. Using an approach that properly considers the full range of energy savings, NWF believes that energy efficiency can achieve savings equal to 2 percent of retails sales per
year. Commenter s stated EPA also assumes an unnecessarily slow adoption rate for these energy efficiency programs. Commenter s stated energy efficiency programs can be implemented much more rapidly than EPA assumes, as demonstrated by the faster expansion of efficiency programs achieved in several states. EPA should use a faster ramp up rate, allowing for greater overall emission reductions from energy efficiency.

Commenter s state d in its current form, EPA's proposed regulation would vastly alter this dynamic [i.e., the constrained pace of EE investment] by opening the door to states, new and existing market entities, owners of affected units, and utilities all investing in energy efficiency to profit from the use of EE as a compliance mechanism. Commenter s stated EPA's proposed regulations would thus dramatically alter the delivery mechanisms, pace, magnitude, and market size of energy efficiency investments across the country over the next decade, compared to rate

driven or customer

- funded utility programs. Commenter s stated EPA's meta

- analysis is consistent with other meta

- analyses that have been conducted on energy efficiency potential. Commenter s stated that their independent r eview of the studies reveals that they are thorough, geographically diverse, and representative of other studies conducted in the last five years. Commenter s stated an examination of the methodologies of the studies reveals that the common bottom

- up assess ment, described above, is the dominant methodology.

Commenter s stated the "economic" EE potential (well in excess of EPA's 1.5 percent finding) available for compliance activities generates savings in excess of costs even absent CPP compliance benefits. C ommenter s stated EPA's conclusions regarding a sustainable annual savings of 1.5 percent are reasonable and, if anything, conservative in light of the findings of the underlying EE potential studies reviewed both by EPA and ACEEE. Commenter s stated despite these low reported numbers, EPRI states that the "reduction in growth and the creation of minimum efficiency standards that have the effect of reducing efficiency potential this report suggests that there continues to be an ample supply of cost effective energy efficiency for utilities to tap into." Commenter s stated EPRI reports 473 TWh of economic potential in 2009 compared to McKinsey's 1,080 TWh of NPV

- positive potential for 2009. Commenter s noted they found evidence that there is ample opportunity for states to include CO2 reductions through the expansion and enforcement of these types of policies [strengthened building codes and298 appliance standards] in their State Plans, indicating that there are multiple energy efficiency strategies that could be ado pted by states in complying with the Clean Power Plan.

Commenter s cited IEE savings estimates and noted that the IEE's results find that significant electric savings from codes and standards are possible: in 2025, savings from improved codes and standards range from 351 TWh under the moderate scenario to 556 TWh under the aggressive scenario, which is equivalent to 8.6 percent and 13.6 percent of the baseline electric forecast (included in the 2011 EIA AEO), respectively. Commenter s provided a table of the data. Commenter s stated that the EPA estimates that compliance with the Clean Power Plan will result in cumulative demand

- side energy savings that lead to an 8 percent reduction in total generation relative to the base case in 2025, and an 11 percent red uction in 2030; therefore all of the demand

- side energy savings needed for compliance could potentially come from aggressive improvements in building codes and equipment and appliance standards alone. Commenter s stated the results of this literature review are illustrative in nature but provide a clear take

- away message: strengthened building codes and appliance standards have and could provide ample energy efficiency savings and corresponding reductions in carbon emissions.

Commenter s stated, in short, by selecting a highly

- conservative approach to develop an estimate of what the potential contribution of EE is to CO2 emission reductions within each state through 2030, EPA is in effect ignoring potentially significant components of state EE potential. Comm enter s stated in their view, failing to incorporate the evolution of EE technologies, particularly in an environment that could include innovative market

- driven investment in EE for CPP compliance, represents a downward bias in existing EE potential estima tes, and suggests that the results of shorter

- term studies are better indicators of energy efficiency potential in the current context. Based on their analysis, c ommenter s concluded that EPA's estimate of annual average EE potential does not consider the i mpact of expanded market reach that would flow from the eligibility of EE for Clean Power Plan compliance, understates the impact of building codes and appliance standards, and focuses solely on conservative measures of EE potential.

Commenter s stated that by including explicit opportunities to harness EE, EPA has opened the door to states developing compliance approaches that include investment in EE programs and measures, by states, compliance entities, or others (e.g., through revenues created from t he sale of allowances in cap

- based approaches or other compliance mechanisms). Commenter s stated this introduces the possibility of an expanded set of EE investments, to supplement traditional utility programs, and an expanded set of EE investors and provi ders that are motivated to invest in EE, rather than deterred

- as have utilities in the past

- by an underlying profit disincentive. Commenter s stated further, the geographic scope of EE investment will likely expand, creating new business opportunities, sinc e it will no longer be limited to utility

- administered EE programs in states that find it in their economic, energy and/or environmental policy interests to require such investment.

Commenter s noted that States' prior experience with EE program ramping/sa vings levels varies substantially across states, and over time within states. Commenter s recanted experiences from various states (Iowa, Massachusetts, New York, North Carolina, Oregon, Rhode Island, California, and Vermont) which they believe provides amp le support for EPA to increase its target under Building Block 4. Commenter s noted that state EE has been largely the result of utility

- driven investments constrained by legislation and regulation limiting EE practices to those29 9 deemed appropriate from a st ate regulatory perspective. Commenter s stated a handful of states have, at times, allowed for relatively aggressive levels of investment in EE by utilities, where investments are found to be cost

- effective relative to alternative investments. Commenter s stated but investment in EE in states has rarely

- if ever

- approached a rate of growth or sustained levels that would be justified solely based on cost effectiveness, or actual technical or economic potential. Commenter s stated the pace and level of histori cal EE investments, and the performance of utility EE programs, have also sometimes faced the headwind of fundamental disincentives at utilities for investment in programs that reduce revenues and profits (incentives, lost

- base revenue adjustments and deco upling rate designs partially

- but not fully

- address these disincentives). Commenter s stated thus, while EPA set state emissions rate using an adequately demonstrated BSER, the pace and level of past EE investments must be viewed as a poor indicator of the potential pace and level of state EE investment within states.

Commenter s stated consequently, past experience with administration of energy efficiency programs as required (and limited) by states must be viewed as an imperfect and extremely conservative indicator of the potential investment in EE going forward. Commenter s stated while there certainly have been leading states pursuing substantial investments in EE, in most states the rate, policy and financial disincentives have all served to constrain the pace, level, and effectiveness of EE investment. Commenter s stated in its current form, EPA's proposed regulation could alter this dynamic by opening the door to states, new and existing market entities, owners of affected units, and utilities all investi ng in energy efficiency to take advantage of the use of EE as a compliance mechanism. Commenter s stated EPA's proposed regulations could thus dramatically alter the delivery mechanisms, pace, magnitude, and market size of energy efficiency investments acro ss the country through the compliance period, compared to
current customer

- funded utility programs.

In short, c ommenter s expected that the possibility of complying with the Clean Power Plan's requirements in whole or in part through EE installations will u nshackle EE investment from constrained state regulatory policy, and open up EE activity to new players, new programs, an expanding market for EE services, and new revenues. Commenter s stated in their view this is a fundamental consideration in judging the value of historical data, and must be kept in mind when judging the reasonableness of EPA's key assumptions surrounding states' ability to scale and sustain energy efficiency programs.

Commenter s stated the results of a regression analysis using these da ta (from a study presented at the 2012 ACEEE's Summer Study on Energy Efficiency in Buildings) indicated that the cost per kWh

- year of energy avoided (expressed in $2011) falls as savings increase, until approximately 2.5 percent of annual energy savings a re achieved, as shown in a figure provided by the
commenter s . Notably, commenters added, the Clean Power Plan's fourth building block assumes that states could scale their energy efficiency programs until they achieve and maintain annual energy savings of 1.5 percent of retail sales

- only sixty percent of the level of annual energy savings at which the study suggests an inflection in the cost of maintaining annual savings levels.

Commenter s stated that in setting state goals, EPA can better reflect the l arge efficiency opportunity and multiple options for states and EGUs to save energy by changing the best practices level of savings to 2 percent per year. Commenter s recommended EPA's assumption of300 a 1.5 percent reduction in retail sales per year from ener gy efficiency for BSER is achievable, but low. Commenter s stated EPA should adopt at least a 2 percent reduction in retail sales per year as BSER for Block 4 energy efficiency. Commenter s stated EPA's conservative approach to the assumptions for Block 4 l ed to an underestimation of the potential for compliance using energy efficiency, and an overestimation of the costs of efficiency deployment. Commenter s stated EPA concluded that states could ramp up their savings at a rate of 0.2 percent per year, and b y 2030, could sustain annual average savings of 1.5 percent of the state's retail electricity sales. Commenter s stated EPA relies on experience with energy efficiency programs in several key states in order to determine the potential impact of energy effic iency as a compliance mechanism and identify the energy efficiency component of BSER. Commenter s stated EPA acknowledges that its assumptions are very conservative.

Commenter s stated the evidence shows that EPA's assumptions understate the potential am ount of energy efficiency that can be achieved in all states. Commenter s believed that more than 1.5 percent annual savings can be achieved for every state, and that energy efficiency programs can expand faster, and at a lower cost than EPA assumed in sett ing the targets in the proposal. Commenter s stated in fact, many are already doing so, or planning to do so. Commenter s cited evidence to support their recommendations for strengthening Block 4, and thus the proposed standard. Commenter s stated that like E PA, their recommendations also represent an underestimate, since they also rely on examples of what is possible in a world without the Clean Power Plan, which will itself open up new energy efficiency opportunities. Commenter s ha ve updated the assumptions EPA used to calculate their proposed savings level to reflect today's technologies and performance for utility and state energy efficiency programs, and evaluated the potential savings from other proven energy efficiency measures in the BSER not included i n EPA's 1.5 percent savings estimate; EPA limited its analysis only to programs that " are realized exclusively through the adoption and implementation of energy efficiency programs." Commenter s believed that a minimum level of 2 percent annual reduction in retail sales is achievable; there is no justification for the EPA to use the alternatively proposed 1 percent annual reduction in total retail sales.

Commenter s stated energy efficiency programs alone already reach 1.5 percent of sales, and leading prog ram administrators save best practices amounts of energy efficiency year after year. Commenter s stated a savings level of 1.5 percent total reduction in retail sales per year is achievable. Commenter s stated in fact, 15 states have already achieved it, or have standards to achieve that level or above (Arizona, California, Colorado, Hawaii, Illinois, Iowa, Maine, Massachusetts, Michigan, Minnesota, New York, Ohio, Rhode Island, Vermont, and Washington). Commenter s stated Vermont and Massachusetts, and Natio nal Grid in Rhode Island have all delivered above two percent. Commenter s stated in all, 28 states now have a standard for either a specific energy efficiency resource standard or a requirement to pursue all
cost

- effective energy efficiency.

Commenter s s tated that EPA's approach understates the extent to which utilities around the country are implementing best practice

- level energy efficiency programs.

Commenter s stated they used the same EIA Form 861 data as EPA, but used the utility as the unit of anal ysis instead of the state, comparing retail sales (bundled and delivery) and incremental energy savings (Total Energy Efficiency Incremental Effects (MWh)), for years301 2012, 2011, and 2010, as detailed in Table 7.2 (titled: “ 2010

- 2012 Energy Savings for Lea ding Investor

- Owned Utilities ”) provided by c ommenter s

. Commenter s identified eight investor

owned utilities that saved more than 1.5 percent of electricity sales in 2012, and a further 27 investor

- owned utilities that saved between 1 percent and 1.5 percent that year. Commenters stated they also examined performance in 2011 for these utilities, and found that average performance among this group of top performers was higher in 2012 than 2011: average savings were 1.34 percent in 2012 and 1.14 percent in 2011. This shows that utilities ramped up programs in 2011. Commente rs stated they also identified 12 publicly

- owned utilities that saved more than 1.5 percent of electricity sales in 2012, and a further 17 publicly

- owned utilities that saved between 1 and 1.5 percent of sales. Commenter s stated the large differences betw een these leading utilities, in climate, utility size, urban/rural mix, show that states and program administrators around the country can run energy efficiency programs at best practice levels. Commenter s stated the track record of these utilities, saving best practice

- amounts of energy year after year, helps show that energy efficiency at EPA's best practice

- level is adequately demonstrated.

Commenter s stated energy efficiency is a sustainable resource that we will be able to rely on for the duration of this initial standard and beyond. Commenter s stated no one knows the upper limit of what we can achieve with energy efficiency because design biases found in most existing studies make even their sizable projections low. Commenter s stated but we do know th at we have not come close to capturing the immense capacity for cost

- saving efficiency since potential studies keep showing that cost

- effective investments and even longstanding efforts are not seeing diminishing returns in investments. Commenter s stated a recent ACEEE study found that estimates of energy efficiency savings potential had not changed noticeably over the past decade or more, despite having harvested all the savings from previous programs, and despite a major recession, a drop in natural gas p rices, and the impacts of codes and standards. Commenter s stated this observation shows that states and utilities are still finding a substantial amount of energy efficiency savings potential after more than ten years of aggressive pursuit.

Commenter s st ated an assessment by the Analysis Group (AG) found that states could achieve and sustain levels of energy savings (and associated emission reductions) for many years above 1.5 percent of state retail electric sales from energy efficiency. Commenters state d t he assessment also found that the "successful demonstration of states' ability to meet aggressive ramp rate and/or sustained savings levels holds true across a wide cross

- section of states and delivery mechanisms, representing different electric industr y structures; different electricity costs; different parts of the country with different climates and electricity needs; different mixes of residential, commercial, and industrial customers; and vastly different modes of implementation (e.g., by utilities, compacts/associations, state agencies, and third

- party contractors)". Commenter s stated AG also found that, for at least several years, leading states, including those that have implemented energy efficiency programs for over a decade, continue to achiev e high levels of annual energy efficiency savings as programs grow.

Commenter s stated energy efficiency is a renewable resource. Commenter s stated as companies innovate and produce more advanced products, they will develop new cost

- effective applications to improve energy use. Commenter s stated the Northwest Power and Conservation Council (a regional organization that develops and maintains a regional power plan that aggressively targets energy efficiency) estimated an available cost

- effective energy effi ciency potential in their Sixth302 Power Plan (2010) at more than double the already aggressive levels in the Fifth Power Plan, in large part due to technological innovation that resulted in creating new efficiency opportunities and reduced costs.

Commenter s stated EPA has set state targets in part based on achievable savings from state utility efficiency programs, of 1.5 percent. Commenter s stated this was based on the efficiency performance of 12 leading states that have either achieved or plan to achieve such efficiency levels. Commenter s stated in their assessment, and as described below, the efficiency potential from the industrial sector and recent demonstrated savings strongly support this level of energy reduction from efficiency and provides addition al evidence for at least 2 percent.

Commenter s stated first, assessing actions by industrial companies directly, a number of well

established and prominent companies have been able to achieve energy savings greater than 2 percent per year over a sustaine d period of time. Commenter s stated companies such as 3M, BPM Inc., General Motors, HanesBrands, PepsiCo, Raytheon, Saint Gobain, and Toyota have achieved average savings greater than 2 percent per year over a period of five years or more, with some compan ies achieving rates greater than 3 percent per year. Commenter s stated several other examples of efficiency successes in industrial companies exist, which amply demonstrate that industrial sector companies have the ability to do their part to sustain or e ven exceed annual energy efficiency savings of 1.5 percent.

Commenter s stated second, the value of utility

- sponsored efficiency programs for the industrial sector may be reviewed. In this regard, studying the Midwest can be instructive given the prevalen ce of manufacturing and, as a consequence, large industrial sector efficiency Potential. Commenter s stated in 2012, among the Midwest states, Iowa, Michigan, Minnesota and Wisconsin, achieved efficiency savings of between 1 and 1.5 percent. Commenter s st ated from our analysis, these states have reasonably well

- structured utility

- sponsored programs for the industrial sector; these programs result in measurable and verifiable savings that likely play a strong role in helping the states achieve their notewor thy annual savings. Commenter s stated these programs, especially with continued refinements and increased participation from industrial companies, should help these states meet and exceed the 1.5 percent and 2.0 percent efficiency guideposts that inform th e states' emissions targets.

Commenter s stated other Midwest states such as Illinois, Indiana, Kansas, Missouri, and Ohio achieved efficiency savings of less than 1 percent in 2012. From c ommenter s’ analysis, while Illinois has reasonably strong programs comparable to those discussed above, the other four states have either no industrial programs (Indiana, Kansas), or have industrial programs with the option for companies to opt

- out with little oversight (Missouri, Ohio). (Commenter s stated it is a possib ility that higher participation and removal of "opt

- out" provisions will allow greater efficiency savings from the industrial sector and in the states overall.) Commenter s stated as such, the industrial program offerings can be strengthened considerably i n order to increase participation from industrial companies and achieve meaningful and verifiable sectoral savings, which should help these states meet and exceed the 1.5 percent and 2.0 percent efficiency guidepost that informs the states' emissions targe ts.

Commenter s stated broadening the lens beyond the Midwest, it can be noted that Oregon and Vermont have achieved remarkable industrial sector energy savings. Commenter s stated the303 Energy Trust of Oregon has realized energy savings in the industrial sec tor of approximately 1.8 percent of current industrial energy usage; efficiency performance of the industrial sector is outperforming other sector. Commenter s stated in Vermont, energy efficiency performance in the industrial sector was greater than 2.2 p ercent on average in 2013, outperforming the 1.8 percent savings for all customer classes. Commenter s stated utility

- sponsored industrial sector programs in these states (as described earlier) are widely regarded as among the best in the country. Commenter s stated furthermore, demonstrated international experience from the Netherlands has achieved 30 percent savings over a 15

- year period, more than 2 percent per
year.

Commenter s stated from a national perspective, EIA Form 861 data suggests that nearly half of all energy efficiency (or load management) programs are devoid of industrial sector contribution, and, as discussed in the context of the Midwest states, driving participat ion where programs are available is yet another matter. Commenter s stated while better data and focused analyses are needed as verification, in reviewing these state utility

- sponsored programs, there appears to exist at least a loose correlation between s tates that have strong overall efficiency performance and ones that have strong industrial sector efficiency programs.

Commenter s stated accordingly, efficiency savings in the industrial sector may either be occurring outside of utility

- sponsored programs, or if included as part of utility programs, are likely underrepresented currently vis

- a

- vis efficiency from other sectors. Commenter s stated in either case, as significant savings are possible from the industrial sector, going forward, it should be able t o play a strong role in improving states' efficiency performance.

Commenter s stated that State energy efficiency programs and dedicated investments provide some of the most cost

- effective opportunities to reduce carbon pollution, reduce electricity costs
to rate

- payers, increase local economic activity, and create jobs. Commenter s stated that at least 25 states have energy efficiency resource standards or dedicated funding for energy efficiency established in law. Commenter s stated that independent analysis has shown that, when applied across the country, such energy efficiency pro grams can achieve incremental annual electricity savings in the range of 0.5 to 1 percent annually.

Commenter s indicated that experience in some of our states demonstrates that even greater annual savings are achievable; Vermont recorded annual savings of 1.8 percent last year through its Efficiency Vermont program and ISO New England forecasts that New England states' combined programs will effectively flatten projected demand growth through 2022. Commenter s stated these reductions in electricity use tran slate into very significant reductions in carbon pollution; for example, Massachusetts projects that its investment in energy efficiency from 2005 through 2015 will reduce Massachusetts' electricity demand by 17.1 percent, resulting in a total annual reduc tion of 3 million tons of CO2 in 2015. Commenter s stated that in reducing electricity use, these programs also reduce rate

- payer costs; for example, Vermont will see lifetime benefits of $136.1 million after spending $57.1 million on energy efficiency thro ugh its Efficiency Vermont program, Colorado Xcel Energy anticipates $227 million in net lifetime economic benefits for its customers as a result of its 2010 demand

- side management programs, and California's energy efficiency standards have saved consumers over $74 billion on their electric bills over their decades of operation.304 Commenter s stated in addition to saving rate

- payers on electricity costs, demand

- side efficiency programs also represent investment in the local economy and the creation of jobs, by creating positions for those who perform energy efficiency audits or install energy efficiency controls in commercial buildings. Commenter s stated investments in energy efficiency by states participating in RGGI were a large driver for the finding that th e RGGI program overall created 16,000 jobs as a result of the first three years of its operation. Commenter s stated these tremendous cost savings to rate

- payers and economic benefits help make energy efficiency programs among the most cost

- effective measur es for reducing carbon pollution.

Commenter s stated that nationally, the CPP is expected to deliver carbon emissions reductions of 30 percent from 2005 levels by 2030. Commenter s stated reductions of greater than 30 percent have already been achieved b y Massachusetts and other states, and faster reductions will be necessary for the nation to be on a path for meeting the goal of reducing emissions by 80 percent by 2050. As EPA considers comments and revises the rule, c ommenter s suggested that the
agency finalize steeper reductions that will more effectively drive the deployment of clean energy technologies and innovation. Commenter s stated that such increased aggregate emission reductions could for example be achieved by adjusting the expected contribut ion of renewable energy sources, to better reflect existing states' renewable energy targets and potentials, as well as actual observed renewable energy growth rates as reported by the Energy Information Agency. Commenter s stated EPA should increase the de gree to which the CPP holds states responsible for realizing the full potential of efficiency. Commenter s stated a simple way to do this would be to increase the amount of anticipated annual EE savings used to set state goals from 1.5 percent to 2.0 percen t, in line with Massachusetts' recent experience.

Commenter s noted that despite the benefits of EE and the necessity of implementing it at maximum achievable levels and as quickly as possible, EPA compares its "best practices level of performance" EE ta rget rate to studies assessing EE "achievable potential," a level much below EE's "technical potential." Commenter s noted that instead of considering what is possible, EPA based its "best practices" target rate exclusively on EE implementation programs tha t already exist in many states. Commenter s stated that this decision immediately and categorically excludes a host of other EE measures, such as building energy codes, appliance standards, improvements in transmission and distribution, and building energy benchmarking requirements, which may not be included in existing state programs. Commenter s also noted that EPA constrained its analysis further by refusing to assume that states will continue their existing EE programs on a business as usual level, and in stead assumes that states will cease all EE efforts on the current end dates of their existing EE programs. Commenter s noted that EPA also decreased the target by setting 2017 as the first compliance year instead of the 2012 baseline and by underestimating the EE "measure life". Commenter s stated that all of these factors systematically understate the adequately demonstrated energy savings level EE measures can and will achieve, and overstates their costs. Commenter s stated that together with the deficienci es in EPA's analysis of RE measures, these defects seriously and arbitrarily constrict the effectiveness of the Proposed Rule. Commenter s urged EPA to revise both the RE and EE targets sharply upwards.

Commenter s urged EPA to keep in mind that the curr ent utility revenue structure in most states provides a significant disincentive to implementing strong energy efficiency programs. Commenter s stated that the primary way that a load

- serving utility can elevate profits is to increase electricity sales abov e forecasts made during the utility's last rate case; thus, the utility305 has a deeply ingrained motivation not to reduce electricity sales, which is commonly referred to as the "throughput incentive." Commenter s noted that although some states have institut ed decoupling to some extent

--- a policy that breaks the link between electricity sales and utility
revenue recovery

--- for the majority of utilities in the country, it is counter to the utility's business logic to implement energy efficiency programs. Comme nter s stated that the picture of EE program achievement in recent years reflects this significant barrier and should be viewed as a conservative estimate of what is achievable with a proper incentive structure for utilities. Commenter s note d that EE achiev ement has also been hampered by the lack of long

- term political support in many states as some states either implement short

- term targets that inhibit optimization of long

- term plans or place caps on the amount that a utility may spend on utility
programs. Commenter s believed that the 1.5 percent best practice level of performance is sustainable and some states have found that annual efficiency targets as high as 2.5 percent remained feasible over the next ten

- year period.

Commenters stated that EPA underestimated the potential for energy efficiency carbon savings and that many states have shown they can far exceed the 10.7% cumulative savings by 2030. Commenters noted that the American Council for an Energy

- Efficient Economy (ACEEE) demonstrated a combination of four end

- use energy efficiency strategies that states could adopt to achieve much greater savings

-- 25% energy savings below 2012 levels. Commenter s noted that several states and utilities are already achieving savings of 2% or greater and several states have an annual energy savings goal between 1.5% and 2%. Commenter s stated that increasing the energy savings goal used to calculate a state's target to match ACEEE's expectation of 18.8% utility program energy savings would a chieve greater savings than EPA's model. Commenter s stated that while 40 states have adopted some version of model building code, most states are several years behind and could create substantial energy savings by adopting revised building codes. Commenter s also stated that states could develop policies under the Clean Power Plan to increase CHP generation to 13% of generation which would build on the President's E.O. calling for increased deployment of CHP. Commenter s also highlighted the benefits of appli ance energy efficiency standards which includes savings businesses and consumers money.

Commenter s believed that recent experience at the state level demonstrates that the ramp

- up period can be shortened and the ultimate efficiency targets can be increa sed. Commenter s noted that 24 states have implemented electric efficiency savings targets, and most have proven cost

effective. Commenter s stated that the portfolios of the programs states use to meet their targets regularly save customers over $2 for ever y $1 invested, and in some cases up to $5. Commenter s stated that the majority of these 24 states currently aim to save over 1 percent of annual electricity sales once programs are fully ramped

- up, and several states have pushed further with a few already requiring savings in excess of 2 percent of annual sales. Commenter s also noted that 12 states have already achieved, or plan to achieve, at least the 1.5 percent annual savings goal that EPA assumed all states would achieve by 2030. Commenter s also stated that the proliferation of state efficiency policies has contributed to a doubling in electric efficiency budgets over the past six years

--- a trend that is expected to continue, although it is not universal.

Commenter s stated that states should do more than the EPA model suggests, and should pursue a more aggressive path toward a clean energy economy. Commenter s noted that more than half of U.S. states have already adopted some form of renewable electricity generation requirements

-- requirements that sta tes' utilities generate a certain percentage of their electricity from renewable306 sources by a specific date. Commenter s believed that states should review their targets and commit to generating more electricity from zero

- carbon sources, such as wind and so lar power and that states that have not committed to increasing renewable electricity generation should enact a standard with an ambitious target. Commenter s noted that Massachusetts, Rhode Island, and Vermont have established EERS requirements of almost 2 .5% annually

-- well above the standard EPA recommends. Commenter s urged all states to enact the strongest possible EERS in their state in order to set clear energy savings targets.

Commenters stated that EPA's target is at the low end of the achievable potential as demonstrated by studies that show continuing opportunities for energy efficiency even after two decades of implementation across several states. Commenters noted that the agency's analysis does not consider the enormous potential for efficienc y improvements through building codes, energy service companies, voltage optimization, combined heat and power, and a host of other energy efficiency measures. Commenters also noted that EPA's analysis uses energy efficiency program costs that are well abo ve program costs observed in practice

- including under the assessments cited by EPA. Commenters urged EPA to use more realistic program cost numbers and data on the true scale of demand

- side energy efficiency potential in its analysis of the potential for c arbon reductions.

Commenter s recommended that EPA more realistically examine the true reductions that can be achieved through more robust EE goals in light of the NRDC's "Updated Costs and Performance" analysis by ICF International to run the Integrate d Planning Model (IPM) with updated data that in some cases dramatically alters the data inputs and resulting conclusions of EPA

- which also uses the IPM. Commenter s stated that this analysis, with updated data not reflected in this draft rule, indicates that far greater emissions reductions are possible than envisioned in this draft rule.

Commenter s urged EPA to consider the full potential of energy efficient buildings in its calculations, to encourage states to identify and assess the potential energ y savings from building retrofits and new construction (particularly from ultra energy

- efficient design), and to recognize building efficiency as a compliance strategy in the CPP as they believe that more energy savings can be delivered more cost effective ly than the proposed rule estimates.

Commenter s believed that energy efficiency should be the centerpiece of the Clean Power Plan but stated that the agency's analysis overstates the cost of efficiency and understates its potential to reduce emissions. Commenter s therefore stated that the agency's efficiency targets are far too low as they fail to capture significant carbon reductions and cost savings for consumers.

Commenter s stated that EPA's rule may underestimate what South Carolina could achieve because end

- use energy savings are not calculated

- only utility based Energy Efficiency programs. Commenter s urged EPA to consider strengthening the targets for End

- Use Energy Eff iciency to reflect the full of extent of achievable efficiency.

Commenter s specifically supported an annual incremental energy efficiency goal of 2.0%.

Commenters noted that according to the Southwest Energy Efficiency Program (SWEEP), the 2% altern ative is reasonable given the current state of energy efficiency efforts in the Southwest,307 especially when non

- utility policies and programs are included. Commenters noted that both building energy codes and public sector energy efficiency initiatives invo lving performance contracting through energy service companies (ESCOs) can provide significant energy savings above and beyond what is realized through utility programs. Commenter s believed that shifting to counting energy savings based on gross savings will simplify EM&V requirements and help justify moving up to the 2% per year savings target.

Commenters believed that increasing the annual incremental savings rate to 2.0 percent and the pace of improvement to 0.25 percent per year is unnecessary if all states are required to implement a minimum target level of EE measures by 2030 and that any additional E E savings that a state wants to take credit for can be based on technical and economic factors affecting that
state.

Commenter s believed that all states should be pushed to achieve at least 2% annual energy savings. Commenter s noted that a 2% target is contained in the Clean Energy Opportunity Act, a bill that has been considered, but not yet adopted, by the Kentucky legislature in recent years. Commenter s stated that they have plenty of evidence that utilities in their state can but will not deploy ene rgy efficiency programs at that scale unless or until they are required to do so. Commenter s noted that Kentuckians, especially lower income residents and people in fixed incomes, need the EPA to set and keep the bat high for emissions reductions achieved through energy efficiency.

Commenter s noted that the Pacific Northwest has seen an annual increase of much greater than 1.5 percent in the early stages of deployment of energy efficiency measures and that there are many states now at the point the Paci fic Northwest states were 10 years ago. Commenter s stated that the 1.5 percent level is appropriate only for a fully mature program when there have not been any significant technological improvements in the past several years. Commenter s stated that a high er level, say 2% in the long

- term, is also appropriate if EPA includes in

- direct energy efficiency measures such as building codes, state appliance standards beyond the federal standards, etc.

Commenter s stated that NBI's programs and projects have dem onstrated over the past 15 years that energy efficiency is the least expensive energy source available to electric utilities. Commenter s stated that EPA should also consider recent research done by the Union of Concerned Scientists and the Natural Resource s Defense Council on available cost

- effective efficiency for Clean Power Plan, and the NW Power Planning Council's Sixth and Seventh Power Plans because both of these important research efforts confirm that additional cost

effective energy efficiency in th e 2030 timeframe is available on which to base annual savings, and NBI 's programmatic efforts are consistent with these conclusions.

Commenter s noted that the Institute for Electric Innovation (IEI) estimates that codes and standards programs together have the potential to save between 420 TWh and 769 TWh of electricity in 2035, representing 9.5% to 17.3% savings relative to the Annual Energy Outlook baseline. Commenter s also noted that under the more aggressive IEI scenario, these programs would comple te flatten electricity consumption growth between 2010 and 2035. Commenter s believe this information supports increasing the annual incremental savings rate to 2.0% and the308 pace of improvement to 0.25% to reflect the future adoption and enforcement of stat e building energy codes and state appliance standards.

Commenter s stated that EPA should increase the rate to 2.0%, as well as incorporate CHP, equipment standards, and building codes. Commenter s noted than a 2014 analysis by the American Council for a n Energy Efficient Economy found that combining these four efficiency

measures

- utility programs, CHP, building codes, and equipment standards

- at a 1.5 percent rate of annual improvement would reduce emissions by 26 percent from 2012 levels by 2030 through energy efficiency alone. Commenter s stated that ACEEE explained that that its analysis is conservative in several ways: its CHP analysis omits some policies that could lead to greater reductions; its analysis of equipment standards includes only five produ cts; and it analysis of building codes includes only new buildings, not existing buildings, and does not calculate savings from reduced natural gas consumption. Commenter s therefore stated that savings higher than 1.5% can be achieved cost

- effectively.

Co mmenter s noted that in its calculation of 1.5% annual savings from energy efficiency, EPA did not account for other demand side energy efficiency programs such as building codes, appliance standards, energy retrofit ordinances, voltage optimization, tra nsmission and distribution efficiency improvements, etc. Commenter s therefore supported increasing the metric to 2% savings per year from both utility and other energy efficiency programs, given the vast energy efficiency potential across different states in the country. Commenter s noted that studies by the Lawrence Berkeley National Lab have shown that efficiency programs have had $0.021/kWh levelized cost of saved energy at the national level, in 2012 which means that these energy efficiency programs can provide electricity savings similar to traditional utility energy efficiency programs, and should be allowed to be included as part of state Plans as long as Evaluation, Measurement and Verification (EM&V) requirements and other rules established by the EP A are followed.

Commenter s stated that allowing energy efficiency to be applied only to offset in

- state generation has the effect of reducing the effectiveness of the energy efficiency building block. Commenter s also stated that if EPA were to increase the percentage of energy efficiency states can apply to their targets from 1.5 percent of retail sales/load to a greater percentage, states and regions such as the Northwest that have adopted aggressive DSM programs could be allowed to capture the savings from such things as building codes, voltage regulation, market transformation (such as accomplished by the multi

- state Northwest Energy Efficiency Alliance) and energy efficiency appliance standards. Commenter s stated the proposed 1.5 percent threshold sho uld be increased to at least 2 percent and that EPA should consider a more rapid ramp rate of new energy efficiency than currently reflected in the rule, which would remove some disincentives for states to implement efficiency measures and to realize emiss ion reductions as quickly as possible.

Commenter s stated that several states have now demonstrated that it is possible to achieve 2% per year energy efficiency for extended periods through cost

- effective utility programs. Commenter s also noted that ene rgy efficiency potential studies in many other states, including the 2013 Michigan study sponsored by the Michigan Public Service Commission have shown that 2% per year energy efficiency is achievable using only measures that pay for themselves in reduced electricity bills.309 Commenter s recommended that EPA strengthen Building Block 4 by adopting a ramp

- up rate of 0.25 percent and a final incremental annual energy efficiency rate of 2.0 percent of electricity sales.

Commenter s believed a more reasonable goal is 2.0 percent annual savings with a ramp up rate of 0.25

- 0.35 percent. Commenter s noted that if EPA included other opportunities to save energy from additional programs and activities, such as transmission and distributi on system efficiency improvements, state building energy and appliance standards, and savings delivered by energy service companies (ESCO) that do not get funding from utility and state programs, we believe that a 2.0 percent goal would be easily achievabl e in most states.

Commenter s stated that any concerns about proper accounting for the avoided emissions or emissions reductions associated with including the full range of existing end

- use EE in Building Block 4 can be addressed through strong evaluation, measurement, and verificatio n and EE crediting requirements in state plans. Commenter s additionally noted that EPA's economic evaluation of EE does not fully account for new and developing technologies such as smart thermostats, or the fact that existing technologies will become chea per as they are more widely deployed. Commenter s stated that instead of using cost estimates, which EPA acknowledges are 57% to 66% higher than actual surveyed EE costs in 2014, 79 Fed. Reg. 34874, EPA should assume that the cost of EE deployment will cont inue to decline as technologies advance, such that much greater levels of deployment are cost

- effective. Commenter s concluded that EPA should adopt the more stringent method for calculating state EE targets that is set forth in the proposed rule.

Commente r s stated that a 2 percent target can be achieved with strong monitoring and verification guidelines and direction from EPA to spur new technologies as well as more permanent projects such as combined heat and power systems.

Commenter s noted that uti lity energy programs have been demonstrated to deliver over 2 percent in annual energy savings and that other opportunities for energy efficiency, including transmission and distribution system efficiency, should also be included.

Commenter s detailed W isconsin's EE potential and stated that this this potential and other existing state practices, the 1.5% annual incremental savings goal is conservative. Commenter s endorsed a 2% annual incremental savings goal, and urged EPA to adopt this higher goal.

Co mmenter s stated that in establishing CO2 emissions rate targets state by state, the EPA has assumed that all electric utilities can ramp to 1.5% electricity savings per year from utility efficiency programs only, based on net savings (i.e., savings net of free ridership but including spillover effects). C ommenter s stated that savings start in 2017 at the level of savings that was achieved by electric utilities in each state in 2012 and savings increase from this starting point by 0.2% per year until reac hing 1.5% per year. C ommenter s stated that these are the key assumptions that determine the Building Block 4 values for each state that in turn influence the overall emissions rate targets for each state.

C ommenter s stated that these are very conservative assumptions for a number of reasons and should be revised upwards by the EPA. C ommenter s stated that first, numerous utilities and310 states are already surpassing the target of 1.5% savings per year from their energy efficiency
programs. C ommenter s noted th at in 2013, utilities or third party administrators of ratepayer funded efficiency programs in six states (Arizona, Hawaii, Massachusetts, Michigan, Rhode Island and Vermont) met or surpassed the metric of 1.5% savings from electric utility ratepayer funde d programs alone. C ommenter s stated that utilities in the top performing states, Massachusetts and Rhode Island, achieved more than 2% savings per year. In addition,

c ommenter s stated that utilities in California have exceeded 1.5% savings per year in the past, and achieved 1.25% savings statewide in 2013 according to the American Council for an Energy

- Efficient Economy (ACEEE).

C ommenter s stated that secondly, the key Building Block 4 assumption of ramping up to 1.5% savings per year is overly conservativ e because this assumption is based on savings from utility programs (or utility ratepayer funded programs administered by third parties) only, even though the EPA is proposing that states can receive energy efficiency credits from both utility and non

util ity programs. C ommenter s stated that the EPA requested comments on the alternative of ramping up to 2% savings per year from a combination of utility and non

- utility EE policies (p. 34875) along with a higher ramp rate. C ommenter s supported this alternativ e, or possibly moving up to 2.2% savings per year, for the reasons explained below.

C ommenter s stated that non

- utility policies and programs such as building codes, state tax credits and other financial incentives, state financing programs, state appliance efficiency standards, energy efficiency programs targeted to the public sector, and policies or programs to support adoption of Combined Heat and Power (CHP) systems offer significant incremental savings potential, in addition to the savings from utility programs.

C ommenter s stated that they believe it is legal and appropriate to include non

- utili ty policies and programs in both the Building Block 4 calculus and in the implementation phase because EPA has correctly defined the scope of the Rule to include actions that influence both electricity supply and electricity demand. C ommenter s stated that these non

- utility policies and programs influence electricity demand in a manner similar to utility policies and programs

- through education, financial incentives, regulations, etc. In many cases, c ommenter s noted that there is collaboration between utili ties and state or local governments in the adoption and implementation of energy efficiency policies and programs. For example, c ommenter s noted that many utilities provide training to support building code implementation and in some cases also support the adoption of state

- of

- the

- art building energy codes. Also, c ommenter s noted that many utilities provide rebates for projects implemented to help achieve public sector energy savings goals established at the state or local level. C ommenter s stated that ther e is considerable interaction and overlap between utility and non

- utility energy efficiency policies and programs

- these are only a few examples.

C ommenter s stated that increasing the adoption of efficiency measures in the public sector through setting energy savings goals, financing programs, use of performance contracting, and other mechanisms can provide additional energy savings including savings in public buildings, in street lighting and in water and wastewater treatment. C ommenter s stated that re searchers from Lawrence Berkeley National Laboratory (LBNL) estimate that public sector efficiency projects implemented by energy service companies (ESCOs) during 2003

- 2012 yielded savings of about 15 TWh per year in 2012, adjusting to exclude projects tha t utilized incentives from utility311 energy efficiency programs. C ommenter s stated that this is equivalent to about 0.4% of national electricity consumption. According to LBNL, c ommenter s noted that the annual incremental savings from public sector efficienc y projects implemented by ESCOs without utilizing utility incentives during 2010

- 12 was about 1.0 TWh per year, which is equivalent to about 0.025% of national electricity use. However, c ommenter s noted that this is a very conservative estimate of public s ector energy efficiency potential because it does not include projects implemented directly by state or local governments without use of an ESCO or the performance contracting approach.

C ommenter s stated that in summary, the combination of building codes, state appliance efficiency standards, public sector efficiency programs and CHP support programs could yield total electricity savings of 0.5% per year or greater, in addition to savings from utility efficiency
programs. C ommenter s stated that other types of non

- utility policies and programs, such as home or commercial building retrofit ordinances, state financing programs (including PACE financing), and state financial incentive programs (including state tax credits) could provide even greater savings.

C om menter s stated that for the nation as a whole, electricity savings achieved by ratepayer

funded programs increased from 18.4 million MWh per year in 2010 to 24.4 million MWh per year in 2013, a 33% increase in three years. Furthermore, c ommenter s stated that studies indicate that electric utility energy efficiency programs are still growing at this time and will continue to grow in the near future. C ommenter s stated that growth in savings is occurring in both leading states such as Arizona, Massachusetts and Rhode Island and in previously lagging states such as Colorado, Michigan and Illinois. Furthermore, c ommenter s noted that a recent ACEEE study found that estimates of energy efficiency savings potential had not changed noticeably over the past decade and that states and utilities are still finding a substantial amount of energy efficiency savings potential after m ore than ten years of aggressive energy efficiency efforts.

C ommenter s stated that researchers from LBNL have projected that electric utility energy efficiency program spending nationwide will increase from $3.9 billion in 2010 to $6.5 billion in 2015 and then to $7.4 billion by 2020 (medium case scenario). C ommenter s stated that increased funding will result in increased energy savings, including in the period 2012

- 2017. LBNL projects that electricity savings nationwide will increase from 18.4 million MWh per year from programs implemented in 2010 to 26.6 million MWh per year in 2015 and 28.6 million MWh per year in 2020 in a medium case scenario.18 By 2017, c ommenter s noted that many more utilities and states will be saving 1.5% or more per year given the growth in funding as well as energy savings goals or targets that call for this level of energy savings or greater. Given these trends and projections, c ommenter s recommended that the EPA modify the starting point for energy savings in 2017 in Building Blo ck 4. Rather than assuming no growth in savings between 2012 and 2017 as was done in the Proposed Rule, c ommenter s recommended that the EPA assume 7% annual growth in savings during 2012

- 2017, for each state. C ommenter s stated that this is slightly less th an the annual average growth in savings that LBNL is projecting will occur nationwide during 2010

- 2015, which is 7.6% per year. For example, c ommenter s noted that if a state was achieving 0.5% annual savings from electric utility programs in 2012, they

rec ommended that EPA assume it will achieve 0.7% annual savings from electric utility programs in 2017. In addition, c ommenter s recommended that EPA use 2013 actual data rather than 2012 data in deriving the starting point in 2017 for each state, given that 2 013 data will be312 available

- in other words, start with 2013 actual savings data and then escalate savings by 7% per year for the four years (2013

- 17).

Commenter s stated that in addition to the other sources of energy efficiency savings that the EPA

cou ld consider in its Building Block 4 assumptions, it could also revisit its assumption that
programs ramp

- up slowly and the energy savings achieved through utility programs will decline far more quickly than the actual experience from these programs demonst rates.

Commenter s stated that in the final rule, EPA could capture more cost

- effective savings potential from energy efficiency by adjusting its Block 4 assumptions to:

1. I nclude savings from non

- utility and non

- state run energy efficiency programs;

2. Lower the assumed cost of energy efficiency measures;

3. Increase the ramp

- up rate assumed for measures; and

4. Increase the average measure life assumed for measures.

Commenter s stated that one defect in this draft rule allows states to bypass renewables in energy conservation. C ommenter s stated that reduction targets are woefully inefficient and should be increased because, among other reasons, the targets are too lenient. C om menter s noted that state targets add up to a national goal that will not avert the worst impacts of climate change.

Commenter s discussed how EPA should account for decreasing market potential for Demand

Side Energy Efficiency activities over time

.
Comm enter s stated that while they recognize the value of Demand

- Side Management (DSM) as an important and cost

- effective component of the BSER, c ommenter s expressed concern about the assumption that the proposed DSM levels of 1.5% of retail sales per year can be consistently achieved for over a decade. C ommenter s stated that this is particularly true, if acceptable measure types are limited to traditional u tility incentive programs. C ommenter s noted that a recent survey of LPPC members found that for the 2012 year, few of our peer public

- sector utilities met or exceeded the 1.5%/year savings target. C ommenter s stated that the programs and market conditions t hat allowed exceptional public power programs to meet this goal in select markets may not be possible to replicate in all US markets, or to replicate consistently for many successive years. C ommenter s stated that as minimum efficiency baseline regulations improve and markets reach saturation for efficient products, utilities have fewer opportunities to implement DSM. C ommenter s stated that as noted in the EPA's technical supporting documentation for this rule, "Limited empirical data suggests the reasonable ness of this approach; however, comprehensive data, across all regions and states, does not exist because these levels of performance have not been achieved and sustained nationwide previously."[GHG Abatement Measures TSD]

Commenter s asked if there were ways by which the proposed rule could stimulate or encourage new technologies, such as requiring solid state lighting, by weighting the new technologies more to justify a higher target for states (e.g., 2 percent).313 Commenters remarked that EPA's target ra te is achievable, and even conservative, explaining that Massachusetts' energy efficiency programs, for example, reduced retail sales of electricity in the Commonwealth by 2 percent in 2012 (Mass. Dept. of Envtl. Prot., Commonwealth of Massachusetts Globa l Warming Solutions Act 5

- Year Progress Report, at 32 (Nov. 21, 2013), available at http://www.mass.gov/eea/docs/eea/gwsa/ma

- gwsa

- 5yr

- progress

- report

- 1

- 6

- 14.pdf); that number is expected to reach 2.6 percent in 2015, (Mass. Dept. of Pub. Util., Electric Th ree

Year Energy Efficiency Plans, D.P.U. 12

- 100 through D.P.U. 12

- 111, at 17 (2013), available at http://www.mass.gov/eea/docs/dpu/electric/2013

- 2015

- 3

- yr

- plan

- order.pdf) resulting in a cumulative annual CO2 emission reduction of three million metric tons in 2015 from electric energy efficiency programs implemented from 2005 through 2015. (Mass. Dept. of Envtl. Prot., supra note 94, at 3) Commenters noted that Massachusetts' electric efficiency programs, along with those in other New England states, have be en so successful that the Independent System Operator

- New England (ISO

- NE) (New England's Regional Transmission Organization) has begun to take the programs into account for purposes of its long term load forecasting. Commenters said, for the period 2014 t hrough 2023, ISO

- NE is projecting that, with state energy efficiency investments fully included, load growth will remain flat at about 130,000 GWh. (ISO

NE, 2014 Regional System Plan, at 47 (Nov. 6, 2014), available at http://www.iso

ne.com/system

- planning/system

- plans

- studies/rsp ) By contrast, commenters remarked, without including state energy efficiency programs in the projection, load growth is forecasted to increase to over 151,000 GWh by 2023. (Id. at 38)

Comment 11: Oppose State Goal Beyond 1.5 Percent

Response 11: The EPA has determined not to include demand

- side energy efficiency (building block four) in the BSER of this final rule and this determination is discussed i n section s V.A and V.B of the final rule preamble of the CPP. Although the EPA has determined to not include demand side

- energy efficiency in the BSER in this final rule we are using 1.0% in our illustrative EE scenario. See the RIA Chapter 3 and the Demand

- side Energy Efficiency TSD for CPP Final Rule for details on the illustrative demand

- side energy efficiency plan scenario

The following are summaries of the specific public comments under this comment:

Commenters opposed the approach to establish an even higher EE goal of a 2.0 percent annual energy efficiency savings and a 0.25 percent growth rate to ac hieve that goal.

Commenter s reiterated that most States are nowhere near achieving a 1.5 percent goal, and the compliance deadline EPA establishes to meet that goal is less than half the time it took the three leading States to achieve that level of annual savings. Commenter s noted that only one of those States has achieved over 2 percent.

Commenter s stated that no fewer than eight states in the Northeast region of the U.S. in 2013 achieved greater than 1 percent in electricity savings as a percentage of state retail electric sales as a result of their energy efficiency programs. Commenter s stated the leading states of Massachusetts, Rhode Isl and and Vermont (ranked number 1, 3 and 3, respectively, in the most recent ACEEE State Energy Efficiency Scorecard) are approaching or have exceeded 2 percent savings levels. Commenter s stated other states around the country have also exceeded 1.5314 percent in annual electricity savings. Commenter s stated in addition, several states in the Northeast, as illustrated in the table below, have set energy efficiency savings goals of at least 1.5 percent of electric sales per year. Commenter s stated thus, in estab lishing its emissions reductions targets for each state, EPA may have, in fact, underestimated the savings from electric utilities that it has assumed, that assumption being that all states can "ramp up" to 1.5 percent electricity savings per year. Comment er s stated as this assumption drives the emissions rate targets for each state, NEEP would urge the EPA to revise this savings estimate upward. Commenter s provided a table of the NEEP member states and their energy efficiency standards. Commenter s stated in its proposal for setting emissions targets for individual states, EPA has assumed that electric utilities can ramp to 1.5 percent electricity net savings per year from energy efficiency programs delivered by utilities or other designated program admini strators (hereafter referred to as "utility programs.") Commenter s stated those assumptions are based upon savings starting in 2017 at the level of savings that was achieved by utility programs in each state in 2012, with those savings assumed to increase at a rate of 0.2 percent per year until reaching the target of 1.5 percent per year. Commenter s stated these savings assumptions hence inform the emissions savings targets established for each state.

Commenter s stated based upon our experiences in the Nor theast, NEEP would suggest that these are very conservative assumptions and should be revised upward. As noted above, many of our state efficiency programs in the region are already at or surpassing 1.5 percent savings per year. Similarly impressive saving s have been achieved in other states around the country, including California, Michigan, Hawaii, Oregon, Washington and Arizona.

Commenter s stated the ramp

- up target of 1.5 percent savings per year is also based upon utility programs alone, without accou nting for additional savings to be realized through complementary programs and policies, including building energy codes and state

- based appliance efficiency standards. Commenter s stated as EPA has asked specifically for comment on an alternative
ramp

- up t arget of 2 percent savings per year from a combination of utility and non

- utility programs, NEEP would strongly support such an alternative, and might even suggest that, based on our experiences in the region, an even higher ramp

- up target be considered.

C ommenter s also stated that increasing the annual incremental savings rate to 2.0 percent and the pace of improvement to 0.25 percent per year is not feasible. C ommenter s noted that the cost of energy efficiency measures would increase so significantly due to the accelerated depletion of low cost measures, that it is unlikely that most states would be able to scale their programs up to cost effectively achieve a 2.0 percen t per year savings levels on an ongoing basis. C ommenter s noted that in fact, Vermont is the only state that has achieved a 2.0 percent per year savings. C ommenter s stated that however, looking at Vermont's achievements in 2011, 74.7 percent of the impact s came from lighting. C ommenter s noted that repeating this performance is unlikely in Vermont, much less all other states. Therefore, c ommenter s stated that EPA should not increase the incremental savings target to 2.0 percent and the pace of improvement to 0.25 percent.

Comment 12: Cost escalation rate

.315 Response 12: Commenters noted that EPA’s cost escalation for demand Side EE under BSER should change. The EPA has determined not to include demand

- side energy efficiency (building block four) in the BSER of this final rule. This determination is discussed in section s V.A and V.B of the final rule preamble of the CPP. Although the EPA has determined to not include demand side

- energy efficiency in the BSER in this final rule we are using 1.0% in our i llustrative EE scenario. See the RIA Chapter 3 and the Demand

- side Energy Efficiency TSD for CPP Final Rule for details on the illustrative demand

- side energy efficiency plan scenario

. The EPA has modified the approach for applying cost factors as savings levels increase. The basis for and details of the change are addressed in the TSD.

The following are summaries of the specific public comments under this comment:

Commenter s noted that EPA applied a 0% escalation rate when first

- year savings as a percentage of sales are less than 0.5%, a 20% escalation rate when first

- year savings are between 0.5% and 1.0%, and a 40% escalation rate when savings are greater than 1.0%. Comment er s also noted that EPA mentioned two studies it considered in establishing the cost escalation methodology: an LBNL analysis that suggested decreasing costs at savings levels up to 0.5%, leavings costs constant for savings between 0.5% and 1.5%, and incre asing costs at savings levels above 1.5%; and a 2014 ACEEE report, which EPA notes "provides weak statistical support for a cost increase of 20% when going from 0.5% to 1.0% savings rate and an additional cost increase of 20% when going from 1.0% to 1.5% s avings rate."

Commenter s stated, however, that other studies, such as a study by Green Energy Economics Group presented at the 2012 ACEEE Summer Study on Energy Efficiency in Buildings, suggest much less cost escalation than that which was adopted by EPA. Commenter s stated that this study indicated that program costs do not increase

--- and in fact decrease on a per unit savings basis

--- until savings reach 2.5% per year. Commenter s also cited two studies by Synapse Energy Economics: one which concluded that their analysis of actual program CSE found that program CSE seems to decrease as programs scale and impact grows, and one which concluded that the cost of saved energy could decrease if the utilities were to increase their program scale further, perhaps up to the level of annual savings equal to 2% or 3% of annual sales. Accordingly, Commenter s recommended that for years with EE savings forecast below 2.5% of annual sales, costs be held constant in real terms, but for years with EE above that level, an esca lation rate should be adopted.

Comment 13: Establishing a specified level of energy efficiency poses problems.
Response 13: The EPA has determined not to include demand

- side energy efficiency (building block four) in the BSER of this final rule and theref ore we do not need to address this comment. This determination is discussed in section s V.A and V.B of the final rule preamble of the CPP. Although the EPA has determined to not include demand side

- energy efficiency in the BSER in this final rule we are using 1.0% in our illustrative demand

- side energy efficiency plan scenario

. See the RIA Chapter 3 and the Demand

- side Energy Efficiency TSD for CPP Final Rule for details on the illustrative EE scenario.316 Even though demand

- side energy efficiency is not being included in the BSER in this final rule and, thus, not included in the determination of emission performance rates, the final rule provides states the flexibility to use demand

- side energy efficiency measures in their state plans for compliance to me et the emission guidelines set forth in the final CPP, provided they meet the applicable requirements established in section VIII. of the preamble for the CPP.

The following are summaries of the specific public comments under this comment:

Commenters stated that EPA should not mandate a level of energy efficiency under the Proposed Rule.

Commenter s stated they were particularly concerned about the way that EPA modeled energy efficiency in IPM. Commenter s stated according to the Regulatory Impact As sessment, " the fixed total electricity demand in IPM was adjusted exogenously to reflect the estimated future

- year energy savings ." Commenter s stated this means that EPA assumed the significant levels of energy efficiency it identified were always the leas t cost compliance approach. Commenter s stated this is an inappropriate assumption given the uncertainty associated with what may or may not qualify as energy efficiency and the absence of the availability of such measures within each state. Commenter s beli eved this is particularly important for states to consider when establishing compliance plans and, at a minimum, we believe that if energy efficiency is included in a compliance plan the level of energy efficiency should not be mandated. Commenter s stated this avoids the potential of making rule compliance, and ultimately customer electricity, more expensive.

Commenter s noted that EPA's analysis is based on estimates and that there is no uniform way of estimating energy savings. Commenter s stated that a standardized, national protocol for assessing energy efficiency programs must be put in place before EPA can rely on reported reductions from energy efficiency measures in setting state emission rate goals. Commenter s stated that due to the difficulties a ssociated with quantifying EM&V, EPA should not rely on energy efficiency measures to calculate state goals at this time.

Comment 14: Goal setting should not be a compliance obligation

. Response 14: The EPA agrees that setting the BSER is not an obligat ion for state plans. It is important to note that t he EPA has determined not to include demand

- side energy efficiency ( building block four) in the BSER of this final rule and this determination is discussed in section s V.A and V.B of the final rule preamb le of the CPP. Although the EPA has determined to not include demand side

- energy efficiency in the BSER in this final rule we are using 1.0% in our illustrative demand

- side energy efficiency plan scenario

. See the RIA Chapter 3 and the Demand

- side Energy Efficiency TSD for CPP Final Rule for details on the illustrative demand

side energy efficiency plan scenario

. Even though demand

- side energy efficiency is not being included in the BSER in this final rule and, thus, not included in th e determination of emission performance rates, the final rule provides states the flexibility to use demand

- side energy efficiency measures in their state plans317 for compliance to meet the emission guidelines set forth in the final CPP, provided they meet t he applicable requirements established in section VIII. of the preamble for the CPP.

The following are summaries of the specific public comments under this comment:

Commenter s asked EPA to ensure that goal setting does not become a compliance obligation , but rather enables entities to have flexibility to choose between renewable energy and energy efficiency to achieve compliance.

C ommenter s stated that in fact, because of the displacing effects of renewables and energy efficiency on fossil units, exa ct reliance on the four building blocks as used by EPA in the target setting would result in over

- compliance

-- i.e., Virginia would achieve a target rate lower than its 2030 goal. C ommenter s stated that this is an important reason to view application of t he building blocks for target

- setting as distinct from their use for compliance. C ommenter s stated that it also shows that Virginia's route to compliance is less burdensome than a narrow focus on the target

setting would indicate. C ommenter s stated that Vi rginia's pursuit of measures under building blocks 3 and 4 will result in substantial carbon reductions, especially if those measures are allowed to displace fossil generation on a pro

- rata basis.

Comment 15: Rural co

- ops should be treated differently

. Response 15: The commenters asked the EPA to take the unique situations of different states and utility types into consideration when using EE in BSER. The EPA has determined not to include demand

- side energy efficiency (building block four) in the BSER o f this final rule and therefore we do not need to address this comment. This determination is discussed in section s V.A and V.B of the final rule preamble of the CPP. Although the EPA has determined to not include demand side

- energy efficiency in the BSE R in this final rule we are using 1.0% in illustrative demand

- side energy efficiency plan scenario

. See the RIA Chapter 3 and the Demand

- side Energy Efficiency TSD for CPP Final Rule for details on the illustrative demand

side energy efficiency plan scena rio

. Even though demand

- side energy efficiency is not being included in the BSER in this final rule and, thus, not included in the determination of emission performance rates, the final rule provides states the flexibility to use demand

- side energy effic iency measures in their state plans for compliance to meet the emission guidelines set forth in the final CPP, provided they meet the applicable requirements established in section VIII. K of the preamble for the CPP.

The following are summaries of th e specific public comments under this comment:

Commenter s believed that EPA overestimated the amount of EE that can be achieved on a state

wide level, once EE mandates move beyond programs currently targeted at dense urban areas. Commenter s stated that their experience with utilities working in rural Arizona shows that EE is difficult and expensive to obtain. Commenter s noted that issues involved with obtaining EE include: (1) utility difficulty in certifying or approving contractors for app roved EE services or appliance installation; (2) customer difficulty in finding an approved contractor due to travel distances; (3) verification difficulty due to travel distance and expense in returning appliances or318 sending out verification personnel; (4 ) lower uptake due to poorer customer base diminishes the ability to handle the higher first costs, travel expenses, and similar issues; and (5) lower commercial and industrial customer base, with corresponding smaller opportunities for EE at any location, making much greater penetration required to achieve equivalent levels of EE compared to urban areas. Commenter s stated that these issues are in addition to other inherent challenges of rural electric cooperative or rural distribution company operation, su ch as higher transmission loss, fewer customers per line

- mile, and higher cost per customer for distribution equipment. Commenter s concluded that these challenges demand that rural cooperatives be treated differently in terms of what can reasonably be achi eved in their service territories.

Commenter s recommended that EPA account for the unique circumstances of electric generation and transmission cooperatives, including the very high percentage of sparsely populated residential and farm consumers and the few commercial and industrial consumers served by electric cooperatives. Commenter s noted that Building Block 4 can be especially complicated for cooperatives since they sell their power to member cooperatives, which are completely separate entities, who then sell to their members (the actual consumers). Commenter s noted, therefore, that cooperatives do not always interact directly with customers in the same way other utilities do. Commenter s noted that there are also logistical challenges electric coopera tives face, such as having a large body of residential customers and few commercial/industrial customers who are prime candidates for making strides in EE. Commenter s stated than an IOU could make significant gains in energy efficiency working with a handf ul of warehouses and factories, but that c ommenter s and their cooperatives would have to work with hundreds of home owners, farmers and small business owners in their sparsely populated service territory to achieve the same results.

Commenter s discussed how residential members are disadvantaged by EPA's Energy Efficiency Assumptions.

Commenter s stated that the proposal does not address the well

- established fact that EE measures undertaken in the residential sector are considerably less effective on a do llar

- per

- KWh

reduction basis than those undertaken in the industrial and commercial sectors. C ommenter s stated that instead, EPA erroneously applies one EE potential across the residential, commercial and industrial sectors. C ommenter s noted that applying a uniform EE potential percentage across all three sectors creates perverse incentives for industrial utility consumers to reduce their energy load proportional to residential customers, but by a much greater magnitude per capita.

C ommenter s stated that B uilding Block 4 thus imposes greater burdens on rural electric cooperatives, which have a disproportionately residential customer base, compared to municipal and investor

- owned utilities. C ommenter s stated that the proposed EE targets will result in member T&D cooperatives incurring additional cost per rural electric cooperative member/ratepayer.

C ommenter s stated that Generation & Transmissions (G&T) serve the poorest, most rural areas of the country. C ommenter s noted that compared to the rest of the count ry, rural areas have a higher proportion of detached single unit homes, manufactured homes and mobile homes, all of which are energy

- inefficient. C ommenter s noted that these challenges to successful EE programs are further exacerbated by the large size of G&T service territories. C ommenter s stated that319 many G&Ts serve one member per mile of transmission line or less making EE projects even more challenging, as well as reducing any EE gains by the line losses. C ommenter s stated that many homes served by co

- o peratives are under

- served because the customers that live in these houses cannot afford to comfortably heat and cool their homes. C ommenter s noted that often EE programs reduce the cost of electrical service and allow these families to increase usage to comfortable levels because of the savings. C ommenter s stated that PowerSouth regularly surveys its members and recent results show that 76% of members surveyed supported wind energy and 80% supported solar power. C ommenter s noted however, that the results also show that 87% of surveyed members would not be willing to pay more for renewable energy. C ommenter s stated that although they support the concept, those served by c ommenter s are not willing to pay for RE in their electricity bills.

Comment 16 : Banking mechanism needed.

Response 16: In the final CPP, there is a banking mechanism available for compliance with state plans. The EPA recognize s that banking reduces the cost of attaining the requirements of the regulation. The EPA has determined that the same rationale and outcomes apply under a CO2 emission rate approach, in that allowing banking will reduce compliance costs.

Banking also prov ides long

- term economic signals to affected emission sources and other market participants where actions taken today will have economic value in helping meet tighter emission constraints in the future, provided those emission sources expect that the banked ERCs or emission allowances may be used for compliance in the future.

In Section s VIII. J and K . of the Preamble in the Final CPP, the EPA discusses the availability to use banking mechanism for eligible measures. For details, see these sections in the fin al CPP rule.

The following are summaries of the specific public comments under this comment:

Commenter s urged EPA to understand the multiple ways to evaluate cost

- effectiveness of energy efficiency investments as not all tests are created equal, and not all are appropriate for measuring the full costs and benefits to society. Commenter s believed that states will find it easier to achieve higher savings targets if EPA includes all energy efficiency programs, not just those overseen by Public Utility Commissions (PUCs). Commenter s noted that municipal utilities, such as the LADWP, have proven that they can adm inister highly cost

- effective programs without PUC oversight. Commenter s believed it to be critical that EPA devise a banking mechanism to reward actions taken before 2020. Commenter s noted that allowing banking will reduce the incentive to back off on pro grams and lose momentum for the sake of "saving" savings opportunities for when they are allowed to count.

Commenter s referenced the North Carolina RETS system, and how, under the state's Renewable Portfolio Standards, the state could bank EE savings ov er 0.75% to use to meet targets in later years, when it would be more difficult. C ommenter s would like the Clean Power Plan to include320 a similar system, where EE savings over a certain percentage of total electricity production would be eligible to be bank ed and used to meet goals in later years.

Comment 17: Commenters noted issues for EERS policies.

Response 17: The EPA has determined not to include demand

- side energy efficiency (building block four) in the BSER of this final rule and therefore we do not need to address this comment. This determination is discussed in section s V.A and V.B of the final rule preamble of the CPP. Demand Side Energy Efficiency is still generally available for inclusion in state plans . See section VIII

. of the preamble of t he final CPP rule for eligibility requirements for EE in state plans. While EERS were one basis for using 1.0% as the target rate for the illustrative DS

- EE plan scenario used in the RIA, a comprehensive inventory of EE potential studies, and analysis of t heir results, confirms the feasibility and reasonableness of the levels of savings included in the illustrative plan scenarios. See the TSD for background, supporting information, and analysis.

The following are summaries of the specific public comments under this comment:

Commenter s noted that the vast majority of EERS policies in the country do not project or require energy savings 15 years in the future; rather, EERS policies tend to be short

- lived and then re

- upped. Commenter s noted that in states without EERS, savings projections are estimated for five

- years in the future as it is harder to forecast beyond that time. For example, c ommenter s projected the amount of electricity their programs could be expected to save between 2015 and 2019 given curr ent funding, known technologies, and projected energy costs. Commenter s stated that the result of this initial calculation was five

- year savings of 1,909,680 MWh. Commenter s stated that these are ambitious figures but these initial estimates assumed essent ially no new
energy

- efficient technologies. Commenter s noted that, unlike those faced with achieving energy savings to reliably serve load, the proposal assumes levels of savings based on technology that does not yet exist or that is not yet cost

- effective

.

Comment 18: Allow States to Establish the Limit/Programs

Response 18: The EPA has determined not to include demand

- side energy efficiency (building block four) in the BSER of this final rule and this determination is discussed in section s V.A and V.B of the final rule preamble of the CPP. Although the EPA has determined to not include demand side

- energy efficiency in the BSER in this final rule we are using 1.0% in our illustrative demand

- side energy efficiency plan scenario

. See the RIA Chapter 3 an d the Demand

- side Energy Efficiency TSD for CPP Final Rule for details on the illustrative demand

- side energy efficiency plan scenario

. Even though demand

- side energy efficiency is not being included in the BSER in this final rule and, thus, not included in the determination of emission performance rates, the final rule provides states the flexibility to use demand

- side energy efficiency m easures in their state plans321 for compliance to meet the emission guidelines set forth in the final CPP, provided they meet the applicable requirements established in section VIII of the pre amble for the CPP.

The following are summaries of the specific publ ic comments under this comment:

C ommenters stated that EPA should allow states the flexibility to develop their own demand

- side energy efficiency target and specific protocols for EM&V of EE since States have the best understanding of EE already develop ed in the state and what will work for consumers and generators within the state.

Commenter s stated that energy efficiency targets and goals have also been used by state utility regulators and state energy resource planning agencies as a means to delay the need for additional capital intensive base

- load generating resources, and to manage peak loads. Commenter s noted States should be given the option to take credit for these efforts if they prove to be cost

- effective, and as new technologies develop, how ever EPA is not an energy planning expert or rate regulator, and these measures can only be developed consistent with the reserved power of the states for retail energy rate regulation. Commenter s stated there is no single "best practice" that can be estab lished for all states. Commenter s stated each state should be allowed to incorporate its energy planning strategy into a plan under section 111(d) to the extent it determines is appropriate.

Commenter s felt that it is inappropriate for DSM programs to be included in federal environmental regulations. Commenter s noted that DSM programs in South Carolina are already regulated by the Public Service Commission (PSC) of South Carolina to ensure the public received cost

- effective and reliable utility services . Commenter s stated that predicting customer behavior is never an exact science and the success of Energy Efficiency programs are based largely on the behavior of the energy consumer. Commenter s stated that changes in the economy will often decide if a con sumer will spend the money to participate in energy efficiency programs and therefore basing a regulated state goal for CO2 emissions on unpredictable outcomes is not only a reach on EPA's part, but also creates a compliance metric that is difficult
to mea sure and is outside of the control of the regulated electric industry. Commenter s suggested that EPA remove these programs from the Clean Power Plan's state goal calculations and leave it up to states to determine appropriate credit towards compliance.

Com menter s urged EPA to eliminate the 1.5 percent and 1.0 percent targets and instead allow each state, with input from impacted utilities, to develop its own demand

- side energy efficiency target based on state

- specific Market Potential Studies. Commenter s noted that Market Potential Studies analyze applicable market conditions within a jurisdiction to develop economically and technologically feasible goals and are an industry accepted practice for determining achievable savings from the adoption of energy efficiency programs.

Commenter s stated that EPA's goals are based upon flawed assumptions about Indiana's electric consumption and costs to achieve the targeted efficiency savings. Commenter s urged EPA to provide Indiana, and other states, the flexibili ty to set state

- specific energy efficiency targets based upon the state's appraisal of the potential for realizable and cost

- effective energy savings.322 Commenter s stated States need to establish EE programs and goals based upon more reasonable assumptio ns that are, in turn, based on actual state

- specific data, and EPA needs to adjust the individual state baseline goals accordingly. Commenter s stated in its review of existing EE programs, it comes as no surprise that the programs are varied and that many States set their standards based upon a range of factors that include: economics (including funding for rebates and subsidies), reducing peak demand vs. overall energy demand, and residential vs. industrial or commercial customer bases. Commenter s stated t hat significantly, all state programs focus on situations where the EE benefits can exceed cost. Commenter s stated that for these reasons, the States and not the EPA should determine whether and, if so, how to implement EE programs and to set goals based u pon their unique circumstances. Commenter s stated EPA does not allow a State to conduct the unit

- specific analysis expressly contemplated by the statute and instead arbitrarily assumes all regulated sources can achieve the limits, or that some sources will have to exceed targets to offset lesser reductions from other sources.

Commenter s stated that under Section 111(d), EPA's role is to establish individuals ; it is up to each State to establish the standards of performance for and to apply those standards
to each existing source within its borders. Commenter s stated EPA cannot displace the States' authority to develop their own standards of performance, and therefore it should be the States and not the EPA making the decisions on whether or how they choose to implement an EE program. Commenter s stated the States will base such determinations on actual state

- specific data rather than EPA's arbitrary speculative assumptions about their abilities to make consumers use less electricity.

Commenter s stated not all individual utilities can achieve and sustain a 1.5 percent annual energy efficiency goal. Commenter s commissioned an analysis to determine the ability of individual utilities to meet EPA's 1.5 percent annual energy efficiency savings goal. Commenter s s tated that study concluded that many individual utilities will be unable to achieve the EPA's proposed 1.5 percent goal. Commenter s stated while EPA recognized the differences in energy generation between States in its detailed development of targets for C O2 emissions, EPA's uniform energy efficiency target inexplicably fails to account for the broad differences that likewise exist from State to State in the consumption of energy. Commenter s stated these differences, not just among States, but also among ut ilities within the same State, play a key role in determining the appropriate level of cost

- effective, achievable, and sustainable energy efficiency. Commenter s stated for example, Arizona is one of the three States that EPA cites as achieving a 1.5 perce nt of savings in 2012 due to Energy Efficiency Resource Standards, yet in the creation of the state EERS, the Arizona Corporation Commission (ACC) accounted for the dissimilar nature of investor

- owned utilities and distribution cooperative utilities. Comme nter s stated this is shown in the discounted standard allowed for distribution cooperative utilities written into the State's EERS. Commenter s stated that despite the flexibility provided, many Arizona utilities, both investor

- owned and distribution cooper ative utilities, have not met their standard since 2010, and a number of Arizona entities have been granted waivers from the ACC which allow the entity to not attain the standard targets.

Commenter s stated the waiver process is also written into the Arizo na EERS language, further emphasizing that from the outset the ACC understood that the original standards were potentially set higher than entities could attain, necessitating a waiver process. Commenter s stated this mirrors what is occurring with several other electric utilities and distribution cooperatives in323 other States that also have not been able to meet or exceed their required energy efficiency goals. Commenter s stated that even though EPA cites Arizona as achieving the intended 1.5 percent mandate in 2012, a closer look at the individual utilities' savings over several years in response to the state EERS program shows that a 1.5 percent mandate is unreasonable and unsustainable, particularly for distribution cooperatives. Commenter s stated in the t wo examples from distribution cooperatives cited by Enervision, one would only be able to meet 34 percent of its cumulative goal and the other would only achieve 11 percent of their goal.

Commenter s noted that South Dakota currently has a voluntary law regarding EE objectives with no penalties or sanctions for providers that fail to meet the objective and that the law does not specify the amount of conserved energy required to meet the objective. Com menter s stated that in order for South Dakota to meet EPA's feasible policy scenario, new legislation would be required that establishes a target energy efficiency savings standard of 1.5 percent of retail electric sales and that further allows for enforce ability of the standard. Commenter s stated that enacting such legislation in the state would be highly contentious, with little guarantee of any legislation being passed by state government and therefore, EPA cannot reasonably assume that South Dakota has the ability to meet EPA's scenario. Commenter s asserted that even if the assumption is made that South Dakota can enact a law that sets an enforceable energy efficiency standard at 1.5 percent of retail electricity sales, there is no guarantee that utiliti es will be able to meet such a standard. Commenter s noted that each state has unique energy demand characteristics (population, population density, types of industry) and recommended that EPA establish EE targets for each state based on the economically fe asible potential for energy efficiency savings specific to each state and that those determined economically feasible target levels be used in the state's emissions rate goal calculation.

Commenter s suggested the imposition of a state created glide pa th to the 2030 goals established by EPA because only the states can determine how to manage and deploy electricity production that maximizes the states assets and resources, while minimizing economic impact on consumers and industry. Commenter s noted that states can determine the right approach rather than the EPA's front loaded demand that will cause potential economic distortion and potentially significant impact on reliability and resilience.

Commenter s stated that EPA's approach includes serious err ors in methodology, including failure to ensure that differences in state conventions for accounting cost and performance of end

- use efficiency measures do not undermine the identification of states with "best practices" regarding end

- use efficiency. Comme nter s believed that EPA erred when basing CO2 reductions from end

- use efficiency on the most aggressive state programs, rather than recognizing the expertise of state regulatory agencies to determine the most appropriate role of end

- use efficiency for cond itions in that state.

Commenter s noted that utilities have no control over the actual amount of savings achieved, regardless of the incentive

--- only customers do. Commenter s also noted that despite the implementation of energy efficiency, demand may st ill grow and outstrip energy efficiency (EE) due to the introduction of new electric

- fueled technology, population growth, economic development, or for countless other reasons. Commenter s noted that states have a detailed understanding of what EE has been achieved in the state already, and they are in the best position324 to know what will work for the utilities and consumers in their own state, including the pace at which EE ramps up and whether that is even possible, let alone economical.

Commenter s noted that assumptions must be made to estimate the cost and the potential savings of alternate strategies for compliance, and it is crucial that much assumptions are reasonable and realistic. Commenter s noted that in their experience, utility DSM programs requ ire careful analysis of the remaining cost effective and achievable conservation potential in current and future customer electric usage, considering the results of past implementation of DSM both by consumers and by utility programs; average results of th e best states are simply not translatable into potential results for any state or utility service territory. Commenter s recommended that the final rule explicitly require state

- specific and utility

- specific calculation of cost

- effective and achievable DSM savings to reflect realistic potential DSM savings.

Commenter s noted that states are in the best position to assess a utility's potential for incremental new energy efficiency programs. Commenter s also noted that EPA failed to recognize that states with long running EE programs may have achieved near cost

- effective saturation of such programs. Commenter s stated that mandating incremental new EE programs in such cases cannot be achieved at EPA's pro posed costs, and therefore EPA should allow a state to determine what level of EE is appropriate for its goal calculation based on its historic EE efforts and the remainder of available EE programs that could be implemented in the state.

Commenter s sta ted that EE measures should not be mandated by EPA (explicitly or implicitly) to inclusion in state 111(d) plans.

Commenter s asked EPA to allow each state to assign its emission reduction value equal to the emissions rate of the power pools' marginal r esources.

Comment 19 : Realistic Achievable Potential (RAP) instead of Maximum Achievable Potential (MAP)

Response 19 : The commenters asked EPA to use the Realistic Achievable Potential instead of Maximum Achievable Potential. The EPA has determined not t o include demand

- side energy efficiency (building block four) in the BSER of this final rule and therefore does not need to address this comment. This determination is discussed in section s V.A and V.B of the final rule preamble of the CPP. Although the E PA has determined to not include demand side

- energy efficiency in the BSER in this final rule we are using 1.0% in our illustrative demand

- side energy efficiency plan scenario

. See the RIA Chapter 3 and the Demand

- side Energy Efficiency TSD for CPP Final Rule for details on the illustrative demand

- side energy efficiency plan scenario

. The EPA conducted a survey of recent (2009

- 2024) EE potential studies and found that the illustrative DS

- EE plan scenario is fully consistent with the results, using a scena rio where the average annual savings are below the range of results from the survey and, this, a reasonable and feasible scenario for the illustrative plan scenario analysis.

The following are summaries of the specific public comments under this comment:325 Commenter s stated that EPA should consider the realistic achievable potential (RAP) instead of the maximum achievable potential (MAP) when determining the BSER for the EE building block in order to realistically answer questions about future EE savings. Commenter s noted that EPA sets a sustainable target of 1.5 percent annual load reduction of sales as the long

- term EE load reduction target, based on the MAP estimates of potential, using a few (ten) studies from various states. Commenter s stated, however , that what the EPA labels as "achievable" potential is actually MAP rather than RAP. Commenter s noted that MAP, by definition in each DSM Potential study used by the EPA, is defined as the hypothetical upper limit of achievable potential. Commenter s concl uded that the DSM Potential studies cited by the EPA as the basis for calculating an average sustainable load reduction target of 1.5 percent through 2030 should be considered aggressive since they are based on highly uncertain results of MAP studies from a small number of DSM Potential studies.

Comment 2 0 : EPA cannot determine “best practices”

. Response 2 0 : The EPA has determined not to include demand

- side energy efficiency (building block four) in the BSER of this final rule and this determination is d iscussed in section s V.A and V.B of the final rule preamble of the CPP. Although the EPA has determined to not include demand side

- energy efficiency in the BSER in this final rule we are using 1.0% in our illustrative demand

- side energy efficiency plan sce nario

. See the RIA Chapter 3 and the Demand

- side Energy Efficiency TSD for CPP Final Rule for details on the illustrative demand

- side energy efficiency plan scenario

. This illustrative plan scenario reflects a reasonable and feasibly level of DS

- EE, suppo rted by the information and analysis provide d in the TSD.

The following are summaries of the specific public comments under this comment:

Commenters noted that EPA presumes to dictate "best practices" to states for energy conservation programs but, as with renewable energy, EPA neither has the expertise nor the authority to dictate to states what "best practices" are for adopting programs that conserv e energy. Commenters additionally noted that EPA cannot meet the statutory standard of showing that its energy efficiency projections have been "adequately demonstrated" as EPA's proposal assumes that the country's population and economy can grow without e lectricity growth in stating that electricity usage will be 10% below BAU in 2030.

Commenter s stated that EPA's proposed methodology overstates the potential for cost

- effective energy efficiency nation

- wide and overstates the potential statewide by usi ng a one

- size

- fits

- all approach.

Commenter s stated that Building Block 4 is based on inappropriate method of determining technical potentials. C ommenter s stated that chapter 5 of the EPA's GHG Abatement Measures TSD provides information regarding the EPA's determination of appropriate levels of demand

side EE as a component abatement measure within its BSER. C ommenter s noted that section 5.3 details the EPA's development of annual EE goals. C ommenter s stated that the EPA first determined what it refers to a s a "best practices" scenario for each state, which was used to estimate the potential for states to implement policies that increase investment in what the EPA326 believes are cost

- effective demand

- side energy efficiency technologies and practices. C ommenter s stated that the EPA created this scenario using a level of EE performance demonstrated or required by policies in leading states, while considering each state's existing level of EE performance and allowing "appropriate time" for states to increase from current EE levels of performance to the identified best practices level

.
C ommenter s stated that the EPA determined that all states should be able to reach an annual incremental EE of 1.5 percent of annual retail sales. Furthermore, EPA has determined a bes t practices rate of improvement of 0.2 percent of annual retail sales starting in 2017. C ommenter s stated that since within EPA's data Louisiana had no reported savings from EE in 2012, the EPA's proposed methodology would require Louisiana to continually increase incremental annual EE saving from 2017 through 2025, and furthermore continue this level of annual savings through 2030.

C ommenter s expressed concern that EPA's proposed methodology may be inappropriate for individual states, including Louisiana. C ommenter s stated that EPA's proposed methodology by definition applies a national goal for EE potential to all states, regardless of "on

- the

- ground" realities. C ommenter s noted that within Louisiana, the Entergy Companies (Entergy Louisiana and Entergy Gu lf States) serve approximately 63 percent of all Louisiana retail electric customers, and is by far the largest electric utility in the State. C ommenter s noted that Entergy included in its 2012 IRP a Demand

- Side Management ("DSM") potential study for its L ouisiana operating companies. C ommenter s noted that his study, conducted by ICF International for Entergy, evaluated EE potential for years 2013 through 2028 across three scenarios: Low, Reference, and High.

C ommenter s stated that Entergy's DSM potential study shows that while EPA's near

- term EE savings targets are arguably conservative, the EPA's proposed methodology overstates the ultimate potential for EE savings within Louisiana in all but the most optimistic scenar ios. C ommenter s stated that only under the study's high scenario did Entergy's 2012 study find EE potential sufficient to meet EPA's proposed EE goal for Louisiana. C ommenter s stated that Entergy recently released a new long

- term DSM potential study suppor ting its current IRP analysis. C ommenter s stated that this study's findings are lower than Entergy's earlier study, now finding that Entergy only has the technical potential to achieve 6.1 percent cumulative energy savings under the reference scenario comp ared to estimated sales by 2034. C ommenter s stated that even under the high scenario, it finds the utility only has the technical potential to achieve 9.6 percent cumulative energy savings by 2034, just slightly greater than EPA's proposed target for 2030.

C ommenter s stated that Louisiana major electric and natural gas utilities are in the early stages of implementing EE programs pursuant to the LPSC EE rules finalized August 21, 2013. C ommenter s noted that this situation explains the finding of cumulative EE savings greater than EPA's near

- term cumulative EE savings targets. C ommenter s noted however, it is clear that Entergy's DSM potential study examining only EE potential in Louisiana does not support the EPA's proposal of a 1.5 percent annual savings tar get relative to annual retail sales as an appropriate target for EE in Louisiana.327 Commenter s stated that EPA fails to recognize that prior technical potentials arose in high

- cost energy environment. C ommenter s stated that in addition to the EPA's omissi on of accounting for the cost

- effectiveness of EE, and the inherent differing economics seen throughout the country, EPA also fails to recognize structural changes occurring in energy markets in the past few years. C ommenter s noted that in most states, nat ural gas

- fueled power plants operate as the "marginal" unit in most hours throughout the year (i.e. natural gas fueled power plants are the most expensive per kWh unit typically dispatched to serve customers). Therefore, c ommenter s stated that the costs to operate these natural gas fueled

- plants typically set the overall wholesale electricity rate before transmission and local distribution costs to end consumers. C ommenter s stated that it follows that this operating cost would follow natural gas prices, as has been noted by many market analysts.

C ommenter s noted that from 1990 through the late 2000's, domestic production of natural gas was essentially flat, remaining under 20 Tcf per year. However, c ommenter s noted that the emergence of shale gas extracted through hydraulic fracturing significantly increased domestic production, more than displacing declining production in traditional onshore and offshore production. In 2014, c ommenter s stated that natural gas from shale deposits is estimated to account for nearly 40 percent of all natural gas produced. By 2030, c ommenter s stated that the production of natural gas from shale deposits is estimated to increase to account for over 49 percent of all domestic production. Likewise, c ommenter s stated that the total production of natural gas is expected to increase by nearly 42 percent. C ommenter s noted whereas historically the natural gas market represented a market that was supply constrained, forecasts now show production to keep pace with all projected growth in c onsumption.

C ommenter s noted that from 1997 through 2000, wholesale natural gas prices averaged just $2.79 per Mcf, and were relatively stable, as shown by a relatively low standard deviation. C ommenter s noted that this changed dramatically in late

- 2000 t hrough 2008, when natural gas prices increased sharply, averaging $6.24 per Mcf through the period. C ommenter s stated that wholesale natural gas prices were also much more volatile than seen previously, with a standard deviation of $2.39. C ommenter s noted that with the emergence of large

- scale hydraulic fracking in 2009, wholesale natural gas prices have dropped just as dynamically, averaging $3.86 per Mcf. C ommenter s noted that likewise, volatility in natural gas markets has also fallen, being

even more stable than prices were in the late 1990s.

C ommenter s stated that in its 2009 AEO the EIA projected that wholesale natural gas prices would increase from then current levels in real terms to a high of $9.91 per MMBtu by 2030. C ommenter s stated that w ith the significant change in natural gas markets, the EIA has revised these estimates in subsequent AEO publications. C ommenter s stated that in the 2013 AEO, the EIA projected that wholesale natural gas prices would only reach $5.29 per MMBtu in real term s by 2030, a nearly 47 percent reduction from 2009 estimates.

C ommenter s stated that the adoption of energy efficiency resource standards ("EERS") by various states mirrors this changing outlook on the future prices of energy. C ommenter s noted that of the 26 states that have adopted EERS, only 3 states (Arkansas, Oregon, and Wisconsin) have adopted such measures since 2010

. C ommenter s noted that 15 states adopted EERS in the years 2007 through 2009, when projections of future natural gas prices were at the ir highest.328 Since 2011, c ommenter s noted that not a single state has adopted an energy efficiency resource standard.

C ommenter s expressed concern with the EPA's proposed methodology of relying on " best practices " in general, as laid out previously. Howeve r, c ommenter s also expressed concern with the EPA's reliance on requirements of individual states' EERS to inform what a national "best practice" amount of incremental savings through EE would be. C ommenter s stated that the majority of these EERS were pass ed during a period when the consensus view was rapidly raising natural gas and electricity costs. C ommenter s stated that since the cost

- effectiveness of a proposed energy efficiency program is estimated over the useful life of the program, this pessimistic outlook resulted in higher benefits for proposed energy efficiency investments than would have been estimated if natural gas prices were assumed to be stable, as it is now viewed. C ommenter s stated that by its very nature, the EPA's proposed methodology o verstates the potential for cost

- effective energy efficiency nation

- wide and then it overstates the potential statewide by using a one

- size

- fits

- all approach.

Commenter s stated that EPA's methodology to establish BSER for EE is flawed and demonstrates that the proposed 1.5 percent level is not adequately demonstrated. C ommenter s noted that according to EPA, the best practices scenario is informed by "a level of performance that has already been demonstrated or required by policies of many leading states ." C ommenter s stated that this level of demonstrated or required performance is based on a single year of EE data (2012), which provides an incredibly narrow view of EE performance across all states. C ommenter s stated that without understanding each state' s regulatory circumstances and EE program characteristics and particular considerations (e.g., implementation date, lifespan, budget, growth, penetration potential, etc.), it is unreasonable to presume that all states are capable of achieving a 1.5 percent level of performance based on a single year snapshot. C ommenter s stated that moreover, this level of performance has only been achieved by three states (Arizona, Maine, and Vermont in 2012), and is expected to be achieved by nine additional states by 2020 (Colorado, Illinois, Indiana, Massachusetts, Minnesota, New York, Ohio, Rhode Island, and Washington). C ommenter s stated that in reality, the 1.5 percent level of performance has only been adequately demonstrated in 3 of 50 states, therefore it is not app ropriate to extend this level across all states in setting BSER. C ommenter s believed that EE as a " technology " or

" strategy " is so unique to the particular circumstances of each state and the operating utilities within the state that this building block presents the benefit of finalizing BSER as a presumptive number that can then be further evaluated by states during the state planning process.

C ommenter s noted that states, particularly Tennessee, need the time to work collaboratively with utilities, PUCs, EE utilities, and/or other EE programs to study EE potential, taking into consideration historic and current circumstances

. C ommenter s noted that states will then be in a better position to provide EPA with an annual incremental savings rate that is representative of its own potential market grow in developing BSER (i.e., the same annual incremental savings rate that could be applied presumptively across all states), c ommenter s recommended that EPA employ a national average of energy savings rates achieved over the past three to five years rather than utilizing performance reflective of achievement by a few states. C ommenter s noted that states must then still be given the opportunity to demonstrate, in state plans, what is achievable within the state; therefore, the national number, as applied to state goals, should still be presumptive, not mandatory.th and contextual factors.329 C ommenter s stated that they are not in a position to specifically comment upon the technical feasibility and reasonableness of with regard to utility EE potential in Tennessee as these programs are not currently managed nor have the oversight of a state entity that lends itself to understanding potential contribution and growth of energy efficiency to Tennessee's electricity demands. C ommenter s noted that TVA is better

- suited to comment upon utility energy efficiency program potential. C ommenter s stated t hat TVA has indicated that cost assumptions associated with EPA's best practices scenario do not reflect the utility's operations and " could prove burdensome on the rate payers in the Valley and make TVA programs cost .prohibitive." C ommenter s stated that current TVA energy efficiency programs must pass Total Resource Cost and Utility Cost Tests to ensure that rates remain as low as feasible. C ommenter s stated that EPA's assumptions in the proposed guidelines are based on program cost to utilities as well a s additional participant costs to the end

- user.

Commenters noted that all EE programs are not created equal. Commenters stated the rate
pa yer funding programs are usually required to pass a cost effectiveness test, and these tests are often implemente d in ways that are biased against deeper energy efficiency investments because they don't account for all the costs, and frequently ignore many benefits.

Commenter s stated that EPA fails to examine cost

- effectiveness.

C ommenter s stated that the EPA cr eated its " best practice " scenario by examining the level of EE performance demonstrated or required by policies in leading states. C ommenter s stated that EPA's proposed methodology by definition applies a national goal for EE potential to all states, and nowhere in its analysis did the EPA examine or recognize important differences between individual states. C ommenter s stated that this leads to many mitigating factors omitted from the EPA's analysis the LPSC believes needs to be considered. C ommenter s stated that the first among these is the large variance in electric rates themselves throughout the country.

C ommenter s stated that even ignoring Alaska and Hawaii, which due to geographic remoteness see higher electricity prices than the contiguous US, electric rates vary considerably throughout the country. C ommenter s noted that the most expensive state, Connecticut, reported electric prices in A ugust 2014 equal to 19.67 cents per kWh, while the least expenses state, Washington, had electric prices less than half this amount at only 8.93 cents per kWh. C ommenter s stated that this regional variation is due to many factors, but regional resource ava ilability accounts for a significant portion. C ommenter s noted for instance, electric prices in the Pacific Northwest have historically been less than the rest of the country due to the abundance of local hydropower. C ommenter s noted that likewise, New Eng land has historically seen higher electric prices due to the need to import fuel stocks a significant distance. C ommenter s stated that Louisiana is located within a prolific natural gas producing region, and thus has the third lowest residential electric

r ates in the country, behind only Washington and West Virginia.

C ommenter s stated that rarely, if ever, has EE been viewed as a goal in

- and

- of

- itself, but as a means to meet multiple policy objectives, such as reducing the escalation of energy prices throug h reduction of consumption or demand. C ommenter s noted that the consideration of the
cost

- effectiveness of potential EE programs has always been central to examination of the appropriate level of EE investment. C ommenter s noted that the EPA's GHG Abatement Measures TSD restates this role of EE, and further acknowledges that " m ost states evaluate their330 EE policy options through the application of cost tests, weighing the projected benefits with the costs of energy efficiency technologies and practices." C omm enter s stated that EPA's decision of a national " best practices " standard however does not recognize the cost

- effectiveness of potential levels of EE investments. C ommenter s stated that it is cost

- effective to have higher levels of EE investment in states with high energy costs due to the benefits of displacing these
costs. C ommenter s stated that however, these levels of EE investment may not be appropriate in low energy costs states, such as Louisiana, since the benefits of avoiding energy costs are much l ower.

C ommenter s stated that the EPA's discussion of states which have either achieved or have policies requiring EPA's chosen "best practices" levels of percent incremental annual savings demonstrate the relationship between EE and high retail electric pr ices. C ommenter s stated that of the twelve states that have either achieved or are required to achieve an incremental savings through EE of 1.5 percent per year, eight states are among the top 20 states in terms of residential retail electric prices. C omme nter s noted that likewise, of the 20 states that have either achieved or are required to achieve an incremental savings through EE of 1.0 percent per year, six (CT, NY, RI, CA, VT, MA) comprise the 6 states in the continental U.S. with the most expensive

r esidential retail electric rates. C ommenter s stated that fourteen of these states are among the top 20 states in terms of residential retail electric prices.

Comment 2 1 : The EP A’s goals conflict with state agency determination of expert assessment

. Response 2 1 : The EPA has determined not to include demand

- side energy efficiency (building block four) in the BSER of this final rule and this determination is discussed in section s V.A and V.B of the final rule preamble of the CPP. Although the EPA has de termined to not include demand side

- energy efficiency in the BSER in this final rule we are using 1.0% in our illustrative demand

- side energy efficiency plan scenario . See the RIA Chapter 3 and the Demand

- side Energy Efficiency TSD for CPP Final Rule for d etails on the illustrative demand

- side energy efficiency plan scenario

. This illustrative plan scenario reflects a reasonable and feasibly level of DS

- EE, supported by the information and analysis provided in the TSD.

Even though demand

- side energy effici ency is not being included in the BSER in this final rule and, thus, not included in the determination of emission performance rates, the final rule provides states the flexibility to use demand

- side energy efficiency measures in their state plans for comp liance to meet the emission guidelines set forth in the final CPP, provided they meet the applicable requirements established in section VIII of the preamble for the CPP.

The following are summaries of the specific public comments under this comment:

Commenter s stated that EPA offers no justification for forcing one state to use the " expert assessment of RE, or EE, technical and economic potential" developed and applied in another state. Commenter s stated that is EPA believes that state energy regul ators are competent and that their energy planning decisions are reasonable, then EPA should apply the reasoning of a state's energy regulators in that state. Commenter s suggested that for states that have determined that no EERS is appropriate "for that s tate's electricity consumers," EPA should assume no increase in end

- use efficiency for that state in the context of Building Block 4.331 Commenter s stated that EPA's " best practices " approach for identifying Building Block 4 contributions to a state goal is i n direct conflict with the Agency's determination that a state energy agency determination reflects an expert assessment of conditions specific to that state.

Comment 2 2 : Ramp Up of 0.20 Percent is u nreasonable

. Response 2 2 : The EPA has determined not to include demand

- side energy efficiency (building block four) in the BSER of this final rule and therefore we do not need to address this comment. This determination is discussed in section s V.A and V.B of the final rule preamble of the CPP. Although the EPA has determined to not include demand side

- energy efficiency in the BSER in this final rule we are using 1.0% in our illustrative demand

- side energy efficiency plan scenario

. See the RIA Chapter 3 and the Demand

- side Energy Efficiency TSD for CPP Final Rule for details on the illustrative demand

- side energy efficiency plan scenario

. This illustrative plan scenario reflects a reasonable and feasibly level of DS

- EE, supported by the information and analysis provide in the TSD. In the plan scenario, the E PA uses a ramp up of 0.20% per year, however, has lowered the target savings level to 1.0%. The TSD provides support for these levels. This illustrative plan scenario reflects a reasonable and feasibly level of DS

- EE, supported by the information and analy sis provide in the TSD.

The following are summaries of the specific public comments under this comment:

C ommenters stated that the proposed ramp rate of 0.20 percent per year is unreasonable.

Commenter s also oppose d EPA's assumption that the level of incremental savings is sustained through 2030. This assumption does not recognize that the pace of incremental energy efficiency savings slows over time and that the largest gains are made early in the life of most energy efficiency programs. The studies and information EPA used to justify the assumed levels of performance generally occurred during the recent economic recession and slow economic
recovery. C ommenter s oppose d EPA's assumption that the levels of performance would be sustained during period of more robust economic growth.

Commenter s stated that EPA proposes a "ramp

- up" rate 0.2 percent per year until each state achieves the 1.5 percent incremental savings rate target and that once achieved, states are expected to maintain the target rate. C o mmenter s stated that this results in each state having a different cumulative energy efficiency savings percentage by 2030. In addition, c ommenter s stated that the ramp

- up rate of 0.2 percent per year is applied to all states, except those that have alread y met the 1.5 percent target, regardless of the 2017 starting point for each state. C ommenter s stated that Maine, Arizona and Vermont are already starting at the target, but most states in the country are starting at an annual incremental savings rate less than 1 percent and over half are starting at an incremental savings rate less than 0.5 percent. C ommenter s noted that these states have clearly implemented fewer energy efficiency measures than "best in practice" states but the prolonged ramp up period allows them to reach this target slowly resulting in a lower cumulative savings percentage over the duration of the rule. C ommenter s suggested that EPA consider increasing the ramp

- up rate for those states that still have much progress to make in order to meet the 1.5 percent annual incremental savings target (or the target that EPA332 ultimately chooses) and this c ould make the cumulative percent savings more equitable among
states.

Commenter s said that the 0.2% " pace of improvement " is not reasonable.

Commenter s stated that the EPA's estimated 0.2 percent pace of improvement is not reasonable for two reasons. C o mmenter s explained that first, the EPA based this pace of improvement on a set of states that are not representative of the country as a whole because the subject states have had aggressive energy efficiency programs with supportive legislative and regulat ory environments in place for at least 20 years. C ommenter s added that secondly, the Agency's pace of improvement analysis is based on a period when relatively large and inexpensive lighting measures accounted for much of the savings. C ommenter s stated tha t, however, the Energy Independence and Security Act standard will limit future efficiency gains in the lighting sector. C ommenter s added that, as the EPA had noted, the pace of incremental energy efficiency savings will decrease over time, and consequentl y, the EPA's analysis overestimates the pace of improvement.

Commenter s stated the second reason EPA's goal is overstated is that EPA's 0.2 percent escalator for first year incremental savings is unreasonable, as is the ultimate annual target of 1.5 per cent. Commenter s stated EPA should consider the experience of Wyoming's largest utility, PacifiCorp, which has had an energy efficiency program in Wyoming for four full years. Commenter s stated PacifiCorp's EE program offerings are virtually identical to t hose in five other PacifiCorp states. Commenter s provided a table (see page 24 of the comment letter) expressing the growth of the Wyoming energy efficiency program (final numbers for efficiency were taken from annual reports to Wyoming Public Service Comm ission and vary slightly from Form 861) as a function of total PacifiCorp intrastate sales; the table presents PacifiCorp efficiency effects (MWh), the company's gross intrastate sales (MWh), and Efficiency as percent of total sales for 2010 to 2013 showin g a range of 0.14 to 0.29 percent. Commenter s stated that after a successful program inception, PacifiCorp has been unable to manage anything approaching incremental growth of 0.2 percent. Its best year for growth was 0.1 percent, but only after declining 0.09 percent from the previous year. Its next best increase was 0.05 percent. Commenter s stated in each of these years, the Wyoming Public Service Commission approved all of the proposed program expenditures PacifiCorp sought.

Commenter s noted that Sou th Carolina is an industry

- heavy state with 36.2% of delivered MWh to industrial consumers in 2012

-- 31% more than the national average

-- while residential customers used 36.5% of delivered MWh

-- 5% more than the national average

-- and commercial
customers con sumed only 27.3%

-- 28% less than the national average. Commenter s stated that these differences between the customer base of South Carolina's utilities and those of utilities elsewhere in the country are highly relevant to the question of whether EPA's annu al target is achievable in South Carolina. Commenter s recommended that EPA adjust the assumed EE reductions that comprise building block four downwards to a level of no more than 0.1% per year for South Carolina to reflect a more realistic estimate of annu al energy savings available in the state through end

- use EE measures.

Commenter s stated that ramp rates associated with energy efficiency load reductions simply do
not support EPA's assumed 1.5% goal. Commenter s cited a study titled "MISSOURI'S ENERGY333 E FFICIENCY POTENTIAL: OPPORTUNITIES FOR ECONOMIC GROWTH AND ENERGY SUSTAINABILITY" conducted by the American Council for an Energy

- Efficient Economy ("ACEE") which projected the following ramp rates in terms of annual energy efficiency load reduction potent ial: 0.3% in 2012, 0.5% in 2013, 0.7% in 2014 and 2015, and 1% in 2016.

Commenter s does not support an increase in either the annual incremental savings rate or the pace of improvement per year for states. Commenter s questioned the cost

- effectiveness of these increases and mentioned that they currently do not have the regulatory authority to require any type of EE program, and that the timing of this rule makes it impossible to get such authority in place by the proposed date of plan submittal.

Commenter s stated that EPA should maintain the 0.20 percent ramp

- up rate as proposed.

Commenter s stated the concept of lower

- hanging fruit recognizes that certain energy efficiency measures can be undertaken quickly, cost effectively, and as part of a wider range of reduction strategies. Commenter s stated this is supported by energy efficiency supply curves, such as the McKinsey Curve, which depict a number of efficiency measures by category and sector according to the average cost of the efficiency measure and the value of direct energy savings that the measure is expected to provide over its lifetim e. Commenter s indicated States just starting to implement energy efficiency measures likely have a wide variety of inexpensive strategies to choose from, while states that are already undertaking aggressive efforts to achieve their economic energy efficien cy potential may be targeting measures further up the supply curve, which requires a greater investment of resources and effort. Commenter s stated the endeavors of states already exceeding the national average for incremental or cumulative savings (calcula ted as a percentage of 2012 retail sales) should be recognized by maintaining the 0.20 percent ramp

- up rate as proposed by the EPA.

Commenter s stated that EPA's rule should require utilities to ramp up efficiency programs aimed at helping customers sav e money by saving energy

.
C ommenters supported a faster ramp

- up to the efficiency standard. Commenter s supported a faster ramp

- up for some states.

Commenter s stated that for reasons of equitable burden sharing among states for goal setting and expedited emissions performance, EPA should accelerate the rate at which states ramp up to EE goals of 1.5 percent. Commenters ’ experience has shown that EE programs can be developed and intensified relatively quickly. Commenter s stated the rate of increase in ene rgy savings in Minnesota's electric power system went from 0.8 percent to a required 1.5 percent between 2007 and 2010. Commenter s stated EPA should consider similar ramp

- up rates for states that have yet to achieve a level of 1.5 percent energy savings.

C ommenter s assessed the reasonableness of EPA's ramp rate assumption by evaluating the actual historical experience of states and program administrators in capturing savings from energy efficiency, and found that numerous examples exist of states and uti lities that achieved energy efficiency ramp rates at or above 0.2 percent annually, and in a number of instances at levels that greatly exceeded 0.2 percent. Commenter s provided a figure detailing the achievements of these states. Commenter s noted that oft en ramp rates of this magnitude have followed changes in state334 level policies requiring or otherwise increasing annual spending on energy efficiency programs. Commenter s stated that these same types of policy commitments and corresponding changes in
energy efficiency spending by states may result from compliance with the Clean Power Plan, and therefore we could see ramp rates that exceed 0.2 percent annually in many more than 12
states. Commenter s detailed the success of several states (Arizona, Illinois, M ichigan, and Ohio) with ramping rates meeting or exceeding EPA's proposed 0.2 percent.

Commenter s believed that the way the proposed rule calculates the energy efficiency budgets for states fails to take advantage of the much "low hanging fruit" efficie ncy gains in states that have invested little, if any, in efficiency programs and that EPA should be using an accelerated ramp

up of efficiency achievement for those states.

Commenter s stated that EPA should use a faster ramp up rate, allowing for great er overall emission reductions from energy efficiency. Commenter s believed that EPA underestimates the potential for energy efficiency by assuming that states will only be able to ramp up energy efficiency programs extremely slowly even though new EE progr ams can be implemented more quickly than EPA assumes, as demonstrated by faster expansion of efficiency programs achieved in many states.

C ommenters recommended that EPA increase the annual ramp

- up rate for energy efficiency standards to 0.25 percent pe r year, as the 0.20 percent per year growth rate is too conservative.

Commenter s stated that in setting state goals, EPA should recognize that states can and have ramped up to best practice levels of energy efficiency much faster than provided by EPA's ramp rate. Commenter s recommended EPA's assumption of a 0.2 percent ramp rate for BSER is achievable, but low. Commenter s stated EPA should adopt at least a 0.25 percent ramp rate in its BSER for Block 4 energy efficiency. Commenter s stated EPA concluded that states could ramp up their energy efficiency programs at a rate of 0.2 percent per year, but also requested comment on whether it should adopt a 0.25 percent growth rate. Commenter s stated when looking at actual program performance, EPA itself found a n average rate of improvement of the annual savings rate of 0.3 percent for states at the moderately performing level (0.8 to 1.5 percent annual savings levels), and 0.38 percent at the high performing level (>1.5 percent annual savings levels). Additional evidence exists to support the feasibility of at least a 0.25 percent annual growth rate.

Commenter s stated the assessment by AG found that states could achieve rates of growth in energy efficiency savings in excess of 0.2 percent per year and that many states and/or individual utilities have already demonstrated this ability, including a number of state s that achieved double and triple that rate. Commenter s stated in fact, they found that at least 12 states have achieved ramp rates of their energy efficiency programs at or in excess of 0.2 percent since 2006, and that most of these states achieved these ramp rates consistently over multiple years; c ommenter s provided a figure (see Figure 7.1, State Energy Efficiency Ramp

- up Rates) that shows ramp up rates for 12 States for 2006 to 2013. Commenter s stated that many more states and utilities achieved ramp rates at or above 0.2 percent than are included in the figure; for example, at least the following states have achieved a ramp rate at, or above, 0.2 percent in at least one year between 2006 and 2012: Arizona, California, Connecticut, District of Columbia , Hawaii, Idaho, Illinois, Indiana, Iowa, Maine, Maryland, Massachusetts, Michigan, Minnesota, Missouri,335 Montana, Nebraska, Nevada, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oregon, Pennsylvania, Rhode Island, Utah, Vermont, and Wisconsin. Commenter s stated these states represent a wide cross

- section of geographies, customer bases, electricity pricing contexts, and public policies.

Commenter s noted that Several states and utilities have ramped up very quickly, going from zero

or near

- zero to as much as one percent total annual load reduction in just three to four years in response to changes in policy. Commenter s stated this indicates that rapid and major expansion of energy efficiency programs does not require a long lead time. C ommenter s stated an Edison Foundation Institute for Electric Innovation report found five states (Indiana, South Dakota, Tennessee, Virginia, and West Virginia) more than doubled their electric efficiency expenditures in 2012 relative to 2011, and in 2011, three states (Indiana, Ohio, and Pennsylvania) had doubled their spending relative to 2010 levels.

Commenter s stated AG found that higher ramp rates have often followed changes in state level policies that support, encourage, or require savings from energ y efficiency programs, similar to what is expected under the Clean Power Plan. Commenter s stated a cross

- section of four state examples illustrates what is feasible with policy encouragement. Commenter s provided the following examples for Arizona, Illinoi s, Michigan, and North Carolina.

Commenter s stated that EPA's assessment of the historic energy savings of 73 separate efficiency programs found average annual first

- year energy savings of 0.3 to 0.38 percent, well above the 0.2 percent that was assumed in EPA's calculations (GHG Abatement Measures TSD, 5

- 70). Commenter s noted that several states have EERS in place that require increases in incremental energy savings greater than 0.2 percent annually and cited several states (Rhode Island's EERS requires utilities to increase energy savings by 0.4 percent between 2012 and 2013 and by 0.4 percent from 2013 to 2014; Massachusetts EERS requires utilities to increase energy savings by 0.6 percent from 2010 to 2011 and by 0.4 percent from 2011 to 2012; Arizona EERS requires increases in energy savings of 0.25 percent each year from 2011 to 2014; and Michigan's EERS requires increases in energy savings of 0.23 percent annually from 2009 to 2012) (ACEEE 2014). Commenter s pointed out that a number of states have recently achieved incremental increases in annual energy savings at or above 0.25 percent. Commenter s provided tables that show the increase in incremental energy savings 2011

- 2012 and 2012

- 2013 (see Tables 3 and 4 in their comment letter); these tables il lustrate that across multiple regions, energy mixes, and levels of experience with energy efficiency, states can achieve incremental annual increases in energy savings above 0.25 percent.

Commenter s noted EPA does not require all states to reach 1.5 per cent annual incremental savings starting in the first compliance year, 2020, but instead has specified a 0.2 percent rate of annual growth for each state's energy efficiency program is feasible. Commenter s cited a ACEEE report that demonstrates a 0.25 per cent per year energy efficiency growth rate could reduce nationwide emissions by 25 percent by 2030 with a net positive economic impact

. Commenter s stated top

- performing states such as Massachusetts and Rhode Island have achieved consistent growth in ener gy efficiency savings, with average annual increases of 0.30 and 0.25 percent, respectively, over the period 2009

- 2013.336 Commenter s noted that their experience in working with utilities in over 15 states shows that when a jurisdiction, or a utility, ch ooses to move forward with increased energy efficiency efforts, they are quite able to do that at a steady pace. Commenter s therefore recommended that EPA assume a quicker ramp

- up of energy efficiency programs to at least 0.25% annually.

C ommenters supported an increased ramp

- up rate for energy efficiency of up to 0.38 percent per
year.

Commenters stated that one mechanism to maximize the potential emission reductions contemplated by Building Block Four would be to assign an increased ramp

- up rat e to those states which by year

- end 2012 had not met or exceeded either the average U.S. total incremental savings as a percentage of retail sales (2012) or the average U.S. total cumulative savings as a percentage of retail sales (2012). Commenters state d the goal computation for these states should reflect a targeted 0.38 percent rate of improvement of incremental annual savings per year, as opposed to the 0.20 percent per year ramp

- up schedule. Commenters stated this heightened ramp

- up rate of 0.38 perc ent per year is: supported by data and analysis included in the EPA's technical support documents; is consistent with the demonstrated concept that "lower

hanging fruit" is ripe for the picking; and is supported by Vermont's experience implementing
energy efficiency programs.

Commenters stated that EPA could maximize the potential emission reductions contemplated by Building Block by assigning an increased ramp

- up rate to those states which by year

- end 2012 had not met or exceeded either the average U.S . total incremental savings as a percentage of retail sales (2012) or the average U.S. total cumulative savings as a percentage of retail sales (2012). Specifically, c ommenters stated that the goal computation for these states should reflect a targeted 0.3 8 percent rate of improvement of incremental annual savings per year, as opposed to the 0.20 percent per year ramp

- up schedule identified by the EPA in the current proposed goal computation. Commenters believed that this heightened ramp

- up rate of 0.38 per cent per year is supported by data and analysis included in the EPA's technical support documents, and is consistent with the demonstrated concept that "lower

- hanging fruit" is ripe for the picking. Commenter s also noted that certain EE measures can be undertaken quickly, cost

effectively, and as part of a wide range of reduction strategies which is supported by EE supply curves, such as the McKinsey Curve which depicts a number of efficiency measures by category and sector according to the average cost of the efficiency measure and the value of direct energy savings that the measure is expected to provide over its lifetime. Commenters noted that
states that are just starting to implement energy efficiency measures likely have a wide variety of inexpensiv e strategies to choose from, while states that are already undertaking aggressive efforts to achieve their economic energy efficiency potential may be targeting measures further up the supply curve, which requires a greater investment of resources and effo rt. Commenters recommended that EPA recognize these circumstances affecting these states already exceeding the national average by maintaining the 0.20 percent ramp up rate.

Commenter s urged EPA to improve its ramp rate assumptions by increasing the sta te ramp up rate to 0.38% per year, the "high group" identified in EPA's technical analysis on existing state practices.337 C ommenters believed that EPA should increase its ramp

- up rate to between 0.30 and 0.5 percent
per year.

Commenter s supported EPA's an alysis for the pace and timing of energy efficiency savings. Commenter s stated that based on current energy efficiency targets adopted by states around the country, and historical rates of increase in energy efficiency savings, EPA concludes that each state can reasonably increase its energy efficiency savings by 0.2 percent of retail sales
per year. Commenter s stated this projected "ramp

- up" rate is conservative based on the actual experiences of states and utilities. Commenter s stated that EPA's projected rate has been met or exceeded in numerous instances over the last se ven years. Commenter s cited a white paper prepared by the Analysis Group (submitted separately to this docket) that examines ramp

- up rates achieved by utilities in various states, and Commenter s concluded that EPA should increase the ramp rate to no less than 0.3 percent, and consider increasing it to 0.5 percent per year or more. Commenter s found that the experience of leading states and utilities, coupled with the vast additional potential for energy savings not included in EPA's 1.5 percent target, prov ides ample support for EPA's expectation that a savings rate of up to 1.5 percent can be sustained through 2030. Commenter s stated EPA's assumed costs for energy efficiency measures greatly exceed the most recent assessments in the literature, and recomme nded that EPA adopt lower and more realistic cost estimates that better reflect the opportunities for cost

- effective pollution reductions available under the proposed Clean Power Plan.

Commenter s stated EPA's projected rate of increase in energy savings is conservative and should be increased. Commenter s stated EPA's projection that states can increase energy savings at a rate of 0.2 percent of retail sales per year is conservative according to recent experiences at the state level, as Analysis Group conclu des in AG Ramp Rate Analysis. According to work by the Analysis Group, commenters stated, it is very common for states to achieve a ramp rate in excess of 0.3 percent per year, and most of those states were able to sustain this high rate of savings growth over multiple years, however, the Analysis Group also documents many cases where states recorded an annual rate of energy savings growth from 0.5 percent to 0.9 percent at various times from 2006

- 2013, including California, Massachusetts, Ohio, Oregon, Rh ode Island, and Vermont. In addition, c ommenter s noted that EPA's own analysis of past rates of energy savings shows that states achieving moderate levels of savings recorded an average rate of improvement of incremental annual savings of 0.30 percent per year, and that the high performers achieved an increase in incremental annual savings of 0.38 percent per year. Because the actual performance of programs so regularly exceeds the ramp rates from EERS targets, c ommenter s stated EPA should use historical data when determining what energy efficiency ramp rate constitutes the best system of emissions reductions. Based on these analyses, c ommenter s recommended that EPA increase the ramp rate to no less than 0.3 percent, and consider increasing it to 0.5 perc ent per year or more.

Commenter s stated that the "pace of improvement" rate of 0.2 percent of savings per year may not be appropriate and there are many factors to consider at the state level. Commenter s urged EPA to defer to the states to determine wha t is a feasible energy efficiency target and reasonable pace of improvement to that target.

Commenter s stated that EPA should assume quicker ramp

- up periods and greater sustained annual savings for energy efficiency, which is more accurate and realistic

. C ommenter s stated338 that in its proposal, EPA assumes states will expand energy efficiency programming by an annual rate of 0.2% and will reach a level of 1.5% annual savings from energy efficiency by 2025. C ommenter s recommended EPA increase this ramp

- up period to 0.25

- 0.3% per year and increase expected annual savings to 2%.

C ommenter s stated that to calculate each state's emission target, EPA assumes that all states will ramp up their energy efficiency programs

- which typically fall into a state's Ener gy Efficiency Resource Standard ("EERS," also known as an Energy Efficiency Portfolio Standard or "EEPS")

- to 1.5% annual savings, excluding savings from building energy codes or other policies for which measurement and verification protocols are less con sistently applied. C ommenter s stated that EERSs set a proportion of electricity that utilities are required to save over time by implementing energy efficiency initiatives. C ommenter s stated that EPA assumes this ramp

- up occurs over a period of years, star ting in 2017, at a rate of 0.2% each year, with all states reaching 1.5% annual savings by 2025

.
C ommenter s stated that EPA's assumed ramp

- up rate underestimates the ability of states to expand energy efficiency. C ommenter s noted that this is especially tr ue given that states with underdeveloped EE programs can more easily take advantage of low

- cost, "low hanging fruit" efficiency retrofits and installation opportunities that may be less readily available in states with longstanding programs. C ommenter s stated that many state programs have demonstrated the ability to ramp up more quickly than EPA has estimated. For example, c ommenter s stated that Arizona ramped up from near 0% in 2006 to 1.75% in 2012

- a rate of 0.26% per year. C ommenter s stated that th is mirrors the experience in Illinois where the state's EERS ramped up from near 0% in 2007 to 1.8% in 2014

- a rate of 0.25% per year. Given these realities,

c ommenter s stated that EPA should assume a ramp

- up rate of 0.25% to 0.30%, representative of

curr ent practice in states.

C ommenter s stated that similarly, EPA's assumption of 1.5% annual savings by 2025 from state energy efficiency initiatives does not recognize the fact that many states are already currently exceeding this target, and many more are o n pace to meet or exceed it by 2020. As such,

c ommenter s stated that EPA should increase its assumed savings from EE to more accurately and realistically reflect achievable savings. C ommenter s recommended a target of 2%, which many of the most progressive states are already achieving as noted in the table above.

C ommenter s also stated that the EIA data supports an energy efficiency ramp up level of 0.3 percent instead of the proposed 0.2 percent.

Comment 2 3 : Alternative n eeded i f n ot a ble to m eet s tanda rd

. Response 2 3 : The EPA has determined not to include demand

- side energy efficiency (building block four) in the BSER of this final rule and therefore we do not need to address this comment. This determination is discussed in section s V.A and V.B of the final rule preamble of the CPP. Although the EPA has determined to not include demand side

- energy efficiency in the BSER in this final rule we are using 1.0% in our illustrative demand

- side energy efficiency plan339 scenario

. See the RIA Chapter 3 a nd the Demand

- side Energy Efficiency TSD for CPP Final Rule for details on the illustrative demand

- side energy efficiency plan scenario

. The following are summaries of the specific public comments under this comment:

Commenter s stated that in the event that a state does not meet its goal due to the difference between projected and actualized savings from an EE measure, where the cause of the difference is not a result of an error on the states' part, EPA should have an alternati ve means of compliance. Commenter s noted there is a precedent for such a fee mitigation instrument (introduced during the reauthorization of the Clean Air Act in 1990 and was described in President Bill Clinton's July 1997 memorandum to EPA when it re vised the NAAQS for ozone and particulate matter )

. Commenter s indicated this fee payment has a cap placed on it and should not be used for other state purposes, such as increasing general revenue.

Commenter s stated that if full achievement of any of t he assumed building block reductions proves to be impractical for a state, the state must find a way of compensating, presumably by pushing other building block approaches beyond the levels deemed reasonable by EPA. Commenter s believed this issue to be par ticularly relevant for end

- use efficiency measures in BB4, because of:

1. the variability and uncertainty in how this efficiency is being measured by states, and uncertainty in how EPA will measure these generation reductions for compliance with the ESPS, an d

2. the state

- by

- state variability in electricity consumption by sector, in the age of existing equipment that would be replaced to improve efficiency, and in electricity demand growth. Commenter s stated that EPA should provide the basis for its conclusion that the prescribed state goals are technically and economically reasonable, and do not create additional electricity grid reliability risks, given the state

- based uncertainties cited above.

Comment 2 4 : Starting place for annual savings targe t

. Response 2 4 : The EPA has determined not to include demand

- side energy efficiency (building block four) in the BSER of this final rule and therefore we do not need to address this comment. This determination is discussed in section s V.A and V.B of the fina l rule preamble of the CPP. Although the EPA has determined to not include demand side

- energy efficiency in the BSER in this final rule we are using 1.0% in our illustrative demand

- side energy efficiency plan scenario

. See the RIA Chapter 3 and the Deman d

- side Energy Efficiency TSD for CPP Final Rule for details on the illustrative demand

- side energy efficiency plan scenario

. The EPA has updated to 2013 EIA

- 861 data as the basis for the start year savings levels, consistent with commenter suggestion.

The following are summaries of the specific public comments under this comment:

Commenters suggested EPA should use the most recent data

-- 2013 rather than 2012

- - regarding state savings rates.340 Commenter s recommended EPA should use 2013 energy savings as the starting place in determining state ramp

- ups to the 1.5 percent annual savings target. Commenter s stated EPA should use the most recent data available as the place to begin ramping up energy efficienc y savings. Commenter s stated many states increased savings in 2013 relative to 2012, and therefore the 2013 savings are a more appropriate base for ramping up savings to 1.5 percent per
year.

Comment 2 5 : Disagree with capping state performance

. Response 2 5 : The EPA has determined not to include demand

- side energy efficiency (building block four) in the BSER of this final rule and therefore we do not need to address this comment. This determination is discussed in section s V.A and V.B of the final rule p reamble of the CPP. Although the EPA has determined to not include demand side

- energy efficiency in the BSER in this final rule we are using 1.0% in our illustrative demand

- side energy efficiency plan scenario

. See the RIA Chapter 3 and the Demand

- side E nergy Efficiency TSD for CPP Final Rule for details on the illustrative demand

- side energy efficiency plan scenario

. This illustrative plan scenario reflects a reasonable and feasibly level of DS

- EE, supported by the information and analysis provide in the TSD.

Even though demand

- side energy efficiency is not being included in the BSER in this final rule and, thus, not included in the determination of emission performance rates, the final rule provides states the flexibility to use demand

- side energy efficiency m easures in their state plans for compliance to meet the emission guidelines set forth in the final CPP, provided they meet the applicable requirements established in section VIII. of the preamble for the CPP.

The following are summaries of the specific pub lic comments under this comment:

Commenter s believed that it is unlawful for EPA to cap a state's performance at 1.5 percent if existing state law requires a higher target. Commenter s noted that several states (Arizona, Colorado, Illinois, Maine, Massac husetts, and Rhode Island) are on track to exceed a 1.5 percent savings goal before 2030. Commenter s stated that just as it was contrary to the CAA for EPA to set state renewable energy targets below their established RPS targets, EPA cannot set state EE
t argets below established standards. Commenter s added that when EPA sets the 2017 start level of performance for each state, those levels cannot be below the mandates already established in that state.

Comment 26 : Business as Usual (BAU) Sales

. Response 26 : The EPA has determined not to include demand

- side energy efficiency (building block four) in the BSER of this final rule and therefore we do not need to address this comment. This determination is discussed in section s V.A and V.B of the final rule p reamble of the CPP. Although the EPA has determined to not include demand side

- energy efficiency in the BSER in this final rule we are using 1.0% in our illustrative demand

- side energy efficiency plan scenario

. See the RIA Chapter 3 and the Demand

- side Energy Efficiency TSD for CPP Final341 Rule for details on the illustrative demand

- side energy efficiency plan scenario

. This illustrative plan scenario reflects a reasonable and feasibly level of DS

- EE, supported by the information and analysis provide in t he TSD. The EPA has used a reasonable approach for estimating BAU sales, building off of EIA data and the recent AEO. The approach is addressed and supported in the TSD.

The following are summaries of the specific public comments under this comment:

Commenter s stated EPA should account for cumulative energy savings as a percentage of BAU sales.

Commenter s stated the rule should use estimates of BAU sales to determine the achievable number of MWh of energy savings under Block 4. Commenter s stated th is will more accurately capture the number of MWh of energy savings that would be expected from a 1.5 percent annual incremental savings rate from 2020

- 2030. Commenter s stated the incorporation of BAU energy sales projections into the calculation of the a ppropriate cumulative savings rate but not in the ultimate determination of energy savings in each compliance year is inconsistent, and final rule should calculate the expected quantity of MWh of energy savings for each state that results from 1.5 percent annual incremental savings using a projection of BAU retail sales.

C ommenter s stated that the assumed base year is of critical importance when comparing multiple studies

-- achievable potential for energy efficiency. C ommenter s noted that when drawing comparisons between percentages, the baseline level of electricity demand must be the same; otherwise, the total amount of energy avoided due to energy efficiency measures would be different. C ommenter s stated that under the CPP, all energy efficiency savi ngs are applied to Business As Usual (BAU) sales forecasts generated from EIA

- 861 data. C ommenter s stated that base years used in the 12 studies range from as early as 2007 to as recently as 2013 and are not consistent throughout the sample

. C ommenter s sta ted that comparing achievable energy efficiency potential percentages is therefore difficult, since BAU electricity demand levels are inconsistent between the studies.

Comment 27 : Useful l ife, u se m ore c ommon e valuation of me asure l ives

. Response 27 : The EPA has determined not to include demand

- side energy efficiency (building block four) in the BSER of this final rule and therefore we do not need to address this comment. This determination is discussed in section s V.A and V.B of the final rule preamb le of the CPP. Although the EPA has determined to not include demand side

- energy efficiency in the BSER in this final rule we are using 1.0% in our illustrative demand

- side energy efficiency plan scenario

. See the RIA Chapter 3 and the Demand

- side Energy Efficiency TSD for CPP Final Rule for details on how the EPA addresses measure lives for this illustrative demand

- side energy efficiency plan scenario

. The EPA has updated the approach to accounting for useful lives of DS

- EE. The revised approach is addr essed in the TSD and is based on recent analysis by LBNL using a uniquely comprehensive dataset of EE program results, including information on measure lives, where available.

The following are summaries of the specific public comments under this comment:342 C ommenters critiqued EPA 's evaluation of useful life and expiring savings of energy efficiency

measures.

Commenter s stated that EPA should recognize that some energy efficiency enhancements can last longer than 10 years as passive improvements for building envelopes in homes and buildings certainly can last for the life of the building.

Commenter s believed that an a nalysis of the life of the measures offered through utility scale EE programs would be an appropriate requirement for state plans to show that performance will be maintained after 2030.

Commenter s supported EPA's evaluation of expiring savings in the mo del. Commenter s stated EPA's proposed approach to expiring savings is reasonable and appropriately reflects a wide range of products in this analysis. Commenter s supported the assumption of a linear decline of expiring savings over 20 years since it provid es a steady regression instead of producing spikes and downturns in savings values for certain years.

C ommenters disagreed with EPA 's evaluation of expiring savings and measured life.

Commenter s noted that EPA is correct in stating that the distribut ion results in total energy savings over 20 years equivalent to the more common approach of assuming all measures have a set life (in this case 10 years). Commenter s stated that the LBNL study that EPA cites establishes the interquartile range of lives fo r different types of programs (from 5 to 25 years), however the Proposed Rule provides no justification for the use of a uniform distribution of measure lives. Commenter s stated that the uniform distribution effectively assumes that measures are as likel y to last 1 year as they are to last 10 years or 20 years, and this is not consistent with the data presented in the LBNL study that EPA itself cites

. Commenter s provided Figure 1 ( Distribution of Measures Lives in The Program Administrator Cost of Saved E nergy for Utility Customer

- Funded Energy Efficiency Programs ) that presents the distribution of energy efficiency measure lives as catalogued in the LBNL study cited by EPA and the distribution is clearly not uniform.

Commenter s pointed out that measures a re significantly more likely to last between 10 and 15 years than to last between 0 and 5 years. By assuming a uniform distribution, commenter s stated the rule overestimates the amount of energy savings that expire in early years and therefore underestima tes the amount of achievable savings over the Interim compliance period. Commenter s stated the Rule should utilize the distribution of measure lives included in the LBNL study rather than the inaccurate assumption that measure lives are uniformly distribut ed. Commenter s stated EPA should make it explicitly clear that the measure life figure used to calculate state targets is not an indication of what will be approved as part of state compliance plans; the final rule should clarify that EPA expects to see s tate plans that incorporate programs with a range of measure lives, and that any measure life that is determined with appropriate EM&V or M&V methodologies is acceptable.

Commenter s stated the second reason EPA's goal is overstated is that EPA's assumpt ion of the life of a portfolio measure at 19 years is too high. Commenter s stated 19 years over

- inflates the cumulative results. Commenter s stated EPA's calculations for Block 4 use nineteen years as the343 portfolio measure life (e.g., Data File: GHG Abateme nt

- Scenario 1 (XLS), Reference Table, Measure Decay Schedule). Commenter s stated the rationale for this number is to assume that a portfolio of measures with an average life of ten years will be evenly distributed with measures ranging from one year to t wice the average life, or twenty years (TSD, p. 5

- 36). Commenter s stated residential and commercial measures with greatest longevity are associated with structural elements of buildings, but the opportunities for energy efficiency improvements to structur al elements are much reduced where electricity is not the dominant source of energy for space heating and cooling, and water heating.

Commenter s stated as reported to and by the EIA, in 2009, 41.5 percent of national residential energy consumption was for space heating; 6.2 percent was for air conditioning; 17.7 percent was for water heating; and 34.6 percent was for appliances, electronics, and lighting. Commenter s stated in other words, about two thirds of United States energy usage goes to heating and co oling of air or water. Commenter s stated census data shows that state patterns of heating and cooling differ dramatically. Commenter s stated the Selected Housing Characteristics, 2008

- 2012 American Community Survey 5

- Year Estimates provide state by state data on the heating of houses. Commenter s provided a list showing electricity and its principal heating alternatives, for the states E PA has identified as achieving levels of incremental annual savings of 1 percent or more (GHG Abatement Measures TSD, p. 5

- 33), and c ommenter s added Wyoming to the list for comparison.

Commenter s indicated EPA states that cumulative EE savings take into ac count the lifetime of EE measures, but EPA improperly estimated the lifetime of EE measures based on the national average lifetime of EE measures across all sectors. In doing so, c ommenter s stated EPA failed to account that some states invested in EE earl ier than others and therefore their existing EE measures have a shorter lifetime. Commenter s indicated that states have not invested in EE measures in all sectors equally.

Commenter s stated obviously, if a house is heated by something other than electrici ty, there are fewer opportunities to implement efficiency programs with long

- lived structural elements. Commenter s stated in Wyoming, where 71.5 percent of homes are heated with utility gas or propane, programs addressed to structural elements are mainly b ailiwick of local gas distribution companies, including the gas distribution side of companies providing both electric and gas service. Commenter s stated the use of gas and propane for space heating tends to carry over to water heating as well. Commenter s stated while the energy for water heating may be different in the New England states which rely heavily on fuel oil for space heating, the list shows that a clear majority of states predominantly heat with something other than electricity.

Commenter s stated since so much Wyoming heating is done with gas and cooling is often not done at all, one would expect that appliances, electronics, and lighting would dominate residential portfolios of efficiency measures. Commenter s stated by using 19 years, EPA has assumed a value that cannot be proven, and calculated a target that cannot be met. Commenter s stated if EPA is going to assume a value, 10 years for all measures would be more appropriate.

Commenter s stated the average measure life is longer and sav ings do not stop at the end of measure life. Commenter s recommended EPA should at a minimum increase the average measure life to 12 years, and should consider reducing or eliminating the decline in savings344 expected due to the incorrect assumption that sav ings "disappear" after a measure's useful life. Commenter s stated the lifetime of energy efficiency measures is discussed in detail in the GHG TSD. Commenter s stated EPA assumes an average life of 10 years, and that savings from a measure end at the comp letion of its "useful life." Commenter s stated there are two problems with these assumptions. Commenter s stated first, in most cases usage does not jump back up at the end of a measure's useful life. Commenter s stated most often, the measure is replaced with one that is equivalent or more efficient than the previous measure due to market transformation, state or federal standards, or technology innovation. Commenter s stated heating and cooling systems installed today will be replaced with higher SEER/EER /HSPF ones in 20 years. Commenter s stated refrigerators will be replaced in 15 years with more efficient ones. Commenter s stated insulation will stay in attics and walls. Commenter s stated as a result, the sharp decline in savings shown in the GHG TSD is i naccurate and states will in most cases benefit from steady savings at the end of a measure's "useful life." Commenter s stated EPA should consider reducing or eliminating the decline in savings expected due to this effect. Commenter s stated however, if th e EPA chooses to take a conservative position and declines to acknowledge this effect, we offer our second point to adjust the average measure life. Commenter s stated second, EPA uses an average measure life of 10 years. Commenter s stated the recently

- rele ased data from Lawrence Berkeley National Lab (LBNL) which is the most complete dataset available and includes programs from at least four states in each U.S. region, should instead be used. Commenter s stated these data report an average savings

- weighted

m easure life of 12.5 years, and we recommend that the EPA use at least an average measure life of 12 years to set the BSER.

Commenter s stated EPA's use of " expired savings ", as outlined in the GHG Abatement Measures Technical Support Document, is an unor thodox and unjustified attempt to apply a one

- size

- fits all methodology that fails to recognize the very substantial variation in the duration of EE savings from particular measures (EE measure " life ").

Commenters disagreed with EPA's assumptions regard ing efficiency measure lifetimes and recommended that EPA recognize that many energy efficiency measures such as ENERGY STAR lighting measures are designed to last a minimum number of hours and while some products may fail early, the vast majority do not ( i.e., there is a relatively narrow band of lifetimes around an average lifetime value, with a few outliers). Commenters noted that although EPA's proposed measure life of 10 years incorporated residential efficiency programs from 2009

- 2012 developed from d ata used by ACEEE which relied heavily on compacted fluorescent lamps (CFLs

-- a measure with a relatively short life;) EE programs are shifting away from CFLs to LED lamps which can have a lifetime up to 20 years in residential applications.

Commenter s recommended that EPA use average lifetime values for different types of measures and programs in its Building Block 4 calculations, with savings remaining constant over the average lifetime rather than steadily declining from year one so that, for instanc e, all efficiency measures installed in year x providing y MWh of savings per year with a 12 year average lifetime would continue to provide that same level of savings for 12 years and then drop to zero savings. Commenter s believed this approach is more st raightforward and consistent with how utilities and states typically treat measure lifetime and persistence of energy savings when considering savings from programs implemented and measures installed over a multi

- year period, compared to the approach used by the EPA in the Proposed Rules. Commenter s345 suggested that EPA use a 12 year average lifetime in its Building Block 4 assumptions. Commenter s noted that a recent study of total cost of saved energy from more than 100 program administrators in 34 states co nducted by the LBNL found an average lifetime of 12.6 years.

Commenter s recommended that EPA use lifetime measure values with savings remaining constant over the average lifetime, rather than steadily declining from year one and that EPA should accept state use of this same methodology in their implementation place, or defer to states' adopted statewide technical reference manuals or deemed savings databases. Commenter s stated that EPA should also recognize that many states already have, or are seeking to develop, statewide TRMs or deemed savings databases that are acceptable to energy efficiency policymakers, utilities, and stakeholders in a particular state and reflective of individual state conditions (climate, for example). Commenter s noted that an a nalysis of the Michigan Efficiency Measures Database shows that 330 of the 482 commercial measures included in the MEMD have a lifetime of more than ten years, which c ommenter s stated also shows that an average lifetime of 10 years is too conservative. Com menter s also stated that while EPA should allow states to use the assumptions in these statewide, state

- adopted TRMs, it should recognize that TRMs vary from state to state and assumptions made in the TRMs will need to be evaluated for acceptance into a st ate's implementation plan.

Commenter s urged EPA to develop and incorporate the use of life

- time energy saving measures into the final guidelines for those states that develop TRMs through a similar process of validation as the Illinois TRM which was dev eloped through a stakeholder process that encompassed consumer advocates, environmental organizations, state agencies, and utilities and ensured the validity of savings.

Commenter s noted that there is currently no end

- of

- measure life used in calculating energy savings toward the Arizona standard and believed it is appropriate to allow savings to persist,

as the likelihood of an efficiency measure reverting back to the pre

- efficiency condition at the end of its life is extremely small. Commenter s noted, f or example, if an incandescent light fixture is replaced with a compact florescent light (CFL), another CFL is likely to be installed at the end of that CFLs useful life

--- that, or another, more efficient light (such as an LED). Commenter s believed that if EPA's "measure life" approach carries forward to the final plan, it would further reduce the credit available for such EE measures.

Commenter s stated that EPA's choice of measure lifetime is too generic and is not appropriate. Commenter s believed that EPA's approach should defer to states to determine what is appropriate and that the Evaluation Working Group for Focus on Energy should provide further analysis and comment on this issue to the EPA.

Commenter s stated that EPA's assumptions on energy

- eff iciency measure lifetime need further refinement. C ommenter s noted that for example, EPA has made the assumption in the Technical Support Document: GHG Abatement Measures when determining Building Block 4 goals, that energy savings from energy efficiency m easures start to decline immediately after installing and continue to decline until reaching the end of their useful life. C ommenter s disagreed with this assumption. C ommenter s stated that many energy

- efficiency measures, such as lighting, provide stable e nergy savings over their lifetime and many measures are replaced by equal or higher efficiency measures when needed or after "burn out."346 C ommenter s stated that limiting a measure's lifetime to only ten years, as proposed in the CPP, will result in under counting actual MWh saved by many measures. C ommenter s noted that LED light bulbs will last 20 years or longer and the MWh saved in years 20 is the same as year 1. C ommenter s noted that EPA states that savings decline over years; thus the need to not count savings past year 10. C ommenter s noted that is true for some measures (e.g., air sealing doors), but saving from many measures do not decline over time and last longer than 10 years (e.g., LEDs).

C ommenter s stated that measure life is another important assumption regarding the sustainability of achievable savings. C ommenter s noted that it is uncertain whether the level of annual energy efficiency savings could be sustaine d after the expiration of the program, as the most cost

effective and impactful measures would have been utilized already, leaving only increasingly expensive incremental energy efficiency measures. C ommenter s stated that the cited studies vary significant ly in length: from as few as four years, to as many as 21 years. C ommenter s stated that the CPP assumes that dividing cumulative potential by the study length provides an adequate estimation for an average annual achievable potential that is sustainable ov er a much longer (13

- year) period (2017

- 2030). C ommenter s stated that however, there is a discrepancy in the longitudinal application of cross

- sectional studies.

C ommenter s stated that the CPP assumes an average life of 10 years for energy efficiency

measu res. C ommenter s stated that this average does not fully capture the unique distribution of the length of measures when analyzing regionally available energy efficiency measures. C ommenter s stated that the key assumptions when determining energy efficiency potential are "breadth of sectors and end uses considered, study period, discount rate, pattern of technology penetration, whether economically justified early replacement of technologies is allowed for, whether continued improvement in efficiency technolo gy is provided for," [GHG Abatement Measures (EPA June 2014) (EPA

- HQ

- OAR

- 2013

- 0602) pg. 5

- 22.] yet the EPA applies a broad average rather than determining individual measure life curves. C ommenter s noted that most of the source studies perform bottom

- up ap proaches and evaluate thousands of permutations of measures, building types, climate zones, market penetration factors, and measure lives to determine which energy efficiency technologies to include and exclude. C ommenter s stated that by approximating thou sands of measure lives using one average, the CPP does not capture measure life disparities and possibly underestimates the amount of energy efficiency savings that expire throughout the compliance period.

Commenter s stated that the proposed 10

- year ave rage lifetime for efficiency measures is appropriate. C ommenter s stated that the proposed rule assumes an average electricity efficiency measure lifetime across all sectors of 10 years. C ommenter s stated that this is a reasonable level and supported it.

C omment 28 : Load growth and demand growth c oncerns

. Response 28 : Commenter s stated that they did not believe that the EPA's assumption that EE will grow faster than energy demand is likely to be true. The EPA has determined not to include demand

- side energy efficiency (building block four) in the BSER of this final rule and therefore we do not need to address this comment. This determination is discussed in section s V.A and347 V.B of the final rule preamble of the CPP. Although the EPA has determined to not include demand side

- energy efficiency in the BSER in this final rule we are using 1.0% in our illustrative demand

- side energy efficiency plan scenario. See the RIA Chapter 3 and the Demand

- side Energy Efficiency TSD for CPP Final Rule for details on how the EPA addresses measure lives for this illustrative demand

- side energy efficiency plan scenario

. This illustrative plan scenario reflects a reasonable and feasibly level of DS

- EE, supported by the information and analysis provide in the TSD. The EPA believes the reductions in load growth reflected in the plan scenario are reasonable and feasible response to the CPP requirements and potential response of states to incorporate DS

- EE into their strategies.

The following are summaries of the specific pub lic comments under this comment:

C ommenters held issue with EPA's assumptions and analysis regarding load growth under Building Block 4.

C ommenters did not agree with EPA's assumption that energy efficiency gains would outpace electricity demand growth through the compliance period, as this assumption has the potential to create complexities with compliance. Commenters indicated that the implications of this assumption are complex and noted that if the EPA

- assumed energy efficiency growth rates cannot be attained, additional carbon reduction measures would be required, primarily through reduced fossil

- fired generation.

Commenter s stated if states a re unable to achieve the EPA target savings, additional CO2 reduction measures beyond BSER measures would be needed to meet the proposed rate limits

- primarily through further reductions in existing generation or expansion of natural gas and VERs. Comment er s stated the energy efficiency assumptions underpin the CPP proposal and present the following reliability issues: EPA appears to overestimate the amount of energy efficiency expected to reduce electricity demand over the compliance time frame and the re sults of overestimation have implications to electric transmission and generation infrastructure needs; substantial increases in energy efficiency programs exceed recent trends and projections, as several sources (e.g., NERC, EIA, EPRI, and various utiliti es) have published reports, analysis, and forecasts for energy efficiency that do not align with the CPP's assumed declining demand trend; the CPP assumption appears to underestimate costs and may underestimate the capital investments that would be require d by utilities to sustain energy efficiency performance through 2030; the offsetting requirements in more coal retirements, along with expansions in natural gas and VERs, in a constrained time period could potentially result in reliability or ERS constrain ts.

Commenter s believed that the percentage EPA used to calculate load growth is within reason; however, assuming that EE will grow faster than electricity demand beyond 2017 has very complex implications. Commenter s noted that if this EE growth cannot be sustained, more carbon reduction measures would be required under the Proposed Carbon Rule. Considering that Arizona is already required to discontinue coal generation under the Proposed Carbon Rule,

c ommenter s noted that Arizona would be required to s hut down existing NGCC to meet the carbon goal; however, due to the discrepancy between load growth and EE savings, Arizona would be shutting down old NGCC plants to meet carbon goals while building new NGCC to meet demand. Commenter s also noted that if Ar izona could not identify the discrepancy between348 load growth and EE growth at an early enough stage, grid reliability or CO2 emission goals could be compromised.

Commenter s did not believe that EPA's assumption that EE will grow faster than energy dema nd is likely to be true, given reports that question the Clean Power Plan's energy efficiency assumptions. Commenter s noted that as a result, other building blocks will have to be used to compensate for load growth.

Commenter s stated that EPA included p redictive load growth analysis in building block 4, but failed to properly account for the potential variation in population and load growth that may occur within a state, city or locality. Commenter s stated EPA does not address the situation that may b efall states in the case when a significant shift occurs unexpectedly. Commenter s noted that severe influxes in population can greatly differ from local, state, and regional perspectives, and spikes or downturns in population will impact the ability to me et the standards due to omission of appropriate growth analysis in the calculations. Commenter s noted that an aggregate regional growth rate does not accurately depict the probable and improbable fluctuations that may occur on a more granular level, such as the county or state level. Commenter s stated EPA should be aware that load forecasting is limited in its capability to accurately predict future consumption patterns and often requires adjustments to account for unexpected changes. Commenter s recommen ded the final rule should include a mechanism to allow states that undergo severe shifts in population or load growth affecting their ability to reach their goals to modify such goals. Where a significant population or load shift does affect a state in ach ieving its target, c ommenter s stated EPA should allow an alternative form of compliance, and

c ommenter s suggested a compliance method in the form of a fee reflecting the cost of energy efficiency measures available in that individual state.

Commenter s stated the Agency's assumption of an annual 1.5 percent EE savings rate does not take into account how such an assumption would impact load forecasting. Commenter s stated that as the NERC report notes, not only do electricity demand forecasts directly infl uence the required level of generation from existing and affected generating units under the proposed guidelines, they also affect the required amount of new construction of generating units that is needed to meet expected electricity demand and provide re liable power. (Initial Reliability Review at 16.) Commenter s stated EPA has not accounted for these effects in its BSER calculations.

Commenter s stated that there is nothing in the Clean Power Plan that acknowledges the reality of load growth in the r esidential, commercial or industrial sector in general, or in specific regions of the country. Commenter s stated that without accounting for load growth, the Clean Power Plan reveals a fundamental limitation of its structure, yet again revealing a substant ial disconnect with the reality of the United States economy and the operation and function of the electric industry.

Commenter s observed only minor differences in ultimate reductions between low, moderate, and high demand growth levels between a final rule without Building Block 4 and a final rule with that Building Block and also strict M&V measures. Commenter s believed that EPA could use its full fleshed

- out projection to account for energy efficiency in other parts of the rulemaking package.349 C ommenter s stated that the EPA used the EIA's AEO 2013 baseline forecast to estimate its BAU electricity sales forecast. C ommenter s stat ed that growth rates calculated by the National Energy Modeling System (NEMS) region were applied to state

- level 2012 retail sales from the EIA

- 861 survey to arrive at an annual BAU sales forecast. C ommenter s stated that these growth figures include the ne t effect of implicit forms of energy efficiency, as that information is not explicitly presented in AEO 2013 reference case. C ommenter s stated that because the EIA does not explicitly model energy efficiency as a forecast line item, the retail sales growth is skewed for the purposes of calculating the energy efficiency Building Block.

C ommenter s stated that the EIA presents some metrics to gauge energy efficiency in the AEO 2013 model results. C ommenter s stated that energy intensity, defined as energy use p er dollar of GDP, represents the aggregate effects of energy consumption trends and a rising national output. C ommenter s noted that electricity energy intensity, in particular, has been on a steady decline in both consumption per dollar of GDP and consumpt ion per capita. C ommenter s noted that this is due in large part to energy efficiency, but its contribution is difficult to isolate. C ommenter s stated that the EIA's AEO 2013 energy load growth projections include implicit forms of energy efficiency measure s, and the proposed CPP does not appear to account for these savings. C ommenter s stated that this effectively double counts the savings of some energy efficiency measures and results in state

- specific energy efficiency targets that are too high to be consi dered reasonably achievable.

C ommenter s stated that with potentially overstated expectations for energy efficiency savings, the EPA's demand forecast results in a decline in electricity use between 2020 and 2030. C ommenter s stated that while other major po wer market forecasters electricity sales compounded annual growth rates (CAGRs) for the period between 2020 and 2030 are strictly positive (AEO 2013: 0.7 percent, EPRI: (achievable potential) 0.4 percent, NERC average of assessment studies: 1.5 percent), t he EPA assumes a CAGR of

- 0.2 percent for the same time period. C ommenter s stated that between 2020 and 2030, the EPA assumes incremental year

over

- year reductions from energy efficiency to be almost 41 TWh nationally on average, outpacing year

- over

- year n ational electricity sales growth of 31.6 TWh, on average. C ommenter s stated that the main reason for this result is the EPA's assumption of states being able to sustain an annual incremental growth rate in energy efficiency savings of 1.5 percent once achi eved. C ommenter s noted that as mentioned above, this sustainability is not supported by any peer

reviewed or technical studies of energy efficiency potential.

C ommenter s stated that the EPA projection for energy efficiency growth at a 1.5 percent annual in crease is substantially greater compared to what NERC examined in its current and prior long

term reliability assessments (LTRAs). NERC collects energy efficiency program data that is embedded in the load forecast for each LTRA assessment area. C ommenter s stated that projected annual energy efficiency growth as a portion of Total Internal Demand since 2011 has ranged from only 0.12 to 0.15 percent.

Commenter s stated that a key component of the EPA's CPP is a projected decrease in electricity generation from the EIA business as usual (BAU) scenario. C ommenter s stated that EPA predicts an 11% generation reduction from BAU in 2030 resulting from successes in ener gy efficiency and conservation. C ommenter s stated that according to the EIA, net generation in the electric power sector has shown an increasing trend since 1949. C ommenter s stated that in recent years350 overall electricity generation has decreased, but this can primarily be attributed to negative economic factors, rather than improvements in energy efficiency or conservation. C ommenter s stated that despite historical evidence that electricity generation generally increases over a decade, the EPA projects a 1 .2% decrease from 2020 to 2030. C ommenter s stated that this sharply contrasts with the 7.8% increase in generation projected by the EIA over this time period. C ommenter s stated that while the CPP should have a positive impact on energy efficiency and conse rvation, an 11% reduction in electricity demand would be a capacious feat, particularly in light of the energy efficiency statement.

Commenter s addressed technical comments that raise questions about the data and methodology used by EPA in arriving at the emissions reduction requirements. Commenter s stated that electricity demand growth will vary by region of the country. C ommenter s stated that f or example, EIA's AEO

- 2013 projects that electricity demand in 2030, compared to 2012, will increase by 35 percent in the Southeastern Electric Reliability Council region (GA, AL, and parts of MS and FL), increase by 29 percent in the Western Electricity C oordinating Council

- California region (CA), decrease by 18 percent in the Midwest Reliability Council region (most of WI), and decrease by 10 percent in the Northeast Power Coordinating Council

- Long Island region (Long Island, NY). C ommenter s stated th at end

- use efficiency and renewable energy generation expansion is much easier to implement in a growth environment, but EPA made no adjustment for the impacts of varying state electricity demand growth rates when EPA set state

specific end

- use efficiency and renewable energy generation targets.

Commenter s stated that EPA's 1.5% incremental energy efficiency savings requirement for Pennsylvania improperly double

- counts efficiency savings.

C ommenter s stated that EPA's projected emission reductions under Building Block 4 reflect significant double

- counting of future savings from existing EE programs already accounted for under EPA's base load forecasts, derived from EIA's Annual Energy Outlook ("AEO") 2013 reference case. C ommenter s stated that this double

- counting has significant implications for Pennsylvania's ability to achieve EPA's proposed 1,052 lbs. CO2/MWh emission target. C ommenter s stated that this target contemplates cumulative energy efficiency savings of 11.69% in 2029, including savings genera ted both from new and already established programs. However,

c ommenter s stated that the AEO base case already assumed 136 terawatt hours (TWh) of energy savings in 2035, representing approximately 3% of projected baseline sales. Thus, c ommenter s noted that the 11.69% savings projected under Building Block 4 overstates Pennsylvania's savings potential by at least 3%, purely on the basis of this double

- counting error. C ommenter s stated that this, in turn, means that at least some portion of the emi ssion reductions assumed to be achievable through energy efficiency measures would actually have to be achieved through other more costly means not reflected in EPA's modeling. C ommenter s noted that the burdens and costs of these additional emission reduct ions would ultimately have to be borne by plants like Homer City that would be required to curtail power generation to an extent far beyond EPA's projections.

C ommenter s stated that customers subject to section 111 of the CAA should be excluded. C ommen ter s stated that certain industrial customers are also in industrial categories that are themselves subject to standards of performance under section 111 of the CAA, including steel, glass, paper, and chemical manufacturing, refineries, and other industrie s. For such customers,351 c ommenter s stated that requiring efficiency improvements under an electric utility standard is not justified, when additional requirements may be imposed as part of a future section 111 standard for their source category. C ommenter s noted that to the extent that any portion of the state goals is based on customer end use efficiency measures, the degree of manufacturing and industrial load that forms a part of the customer base must be considered, and appropriate adjustments made to ex clude all or at least the portion of such load that is subject to a separate section 111 standard.

Comment 29 : Electric technologies contribute to load growth.

Response 29 : Commenter s ’ asked the EPA to factor in vehicle electrification in their load growth projections. The EPA has determined not to include demand

- side energy efficiency (building block four) in the BSER of this final rule and therefore we do not need to address this comment. This determination is discussed in section s V.A and V.B of th e final rule preamble of the CPP. Although the EPA has determined to not include demand side

- energy efficiency in the BSER in this final rule we are using 1.0% in our illustrative demand

- side energy efficiency plan scenario. See the RIA Chapter 3 and the D emand

- side Energy Efficiency TSD for CPP Final Rule for details. This illustrative plan scenario reflects a reasonable and feasibly level of DS

- EE, supported by the information and analysis provide in the TSD.

The following are summaries of the specific p ublic comments under this comment:

C ommenters urged EPA to modify its targets to take other electronic technologies into account that may also contribute to load growth, such as electric vehicles.

Commenter s stated EPA should modify state targets to reflect the fact that beneficial electrification will almost certainly decrease economy wide CO2 emissions while increasing CO2 emissions, though not in a one to one fashion, from the power sector. Commenter s stated the rule does not account for the poten tial for additional load increases as a result of increasingly prevalent environmentally

- friendly electric technologies. Commenter s cited a 2009 EPRI PRISM analysis that forecasted use of electric technologies in industrial and commercial applications, re duction of 6.5 percent CO2 emissions, and replacement of 4.5 percent of direct fossil fuel use by 2030; this study also predicted reduction of 9.3 percent CO2 emissions by 2030. Commenter s cited a 2007 EPRI PRISM analysis that predicted plug

- in hybrid elec tric vehicles will account for 10 percent of new vehicles by 2017 and increase by 2 percent every year. (Commenter s stated the increase in electric vehicles will almost necessarily increase CO2 from the power sector, which is at odds with the Clean Power P lan, but that increase will be projected to be offset by the overall CO2 reduction economy

- wide.) By failing to credit states to support electric vehicles in the market, commenter s stated EPA is discouraging the production and implementation of electric t echnologies that could play a significant role in EPA's overarching goal of CO2 reduction.

Commenter s stated that if overall CO2 emissions are taken into account, and not just emissions at EGUs, electric vehicle use may represent a notable and overlook ed exception to this statement. Commenter s noted that according to EPA's website, electric vehicle use increases demand for352 electricity while reducing aggregate CO2 emissions. Commenter s w ere concerned that EPA may be penalizing Indiana's efforts to increa se the state's use of electric vehicles, which has immediate implications for the state as Indianapolis has put multiple programs in place to incentivize the installation of electric vehicle charging stations. Commenter s stated that EPA should avoid penali zing these investments, which are certainly in line with the Agency's goal of curtailing greenhouse gas emissions. Commenter s stated that it would be ironic if EPA asserted the authority to regulate energy use "beyond the fence

- line" in the name of reducin g emissions only to disregard the proposed rule's impact on emissions everywhere except at the EGU.

Commenter s urged EPA to consider the potential electric load growth that may result from increased utilization of electric vehicles. Commenter s noted tha t given that increased EV utilization will reduce GHG emissions overall, c ommenter s would urge the EPA to work with states to evaluate how to encourage this reductions through section 111(d) compliance plans. Commenter s also recommended that EPA consider a mechanism for periodic review and "reset" of the program to adjust for unanticipated events, such as increased electric load growth.

Commenter s noted that the expanded use of electric vehicles would lead to an increas e in demand for electricity generation and that if this is not anticipated in the conversion to a mass

based standard, such a standard could introduce an unanticipated cost on electric vehicles due to the increased cost of environmental compliance that com es with increased electricity demand. Commenter s stated that in the near term, when electric vehicle technology and the infrastructure that will be necessary to support its widespread adoption are still in development, the constraint on emissions in the el ectricity sector could pose a cost disadvantage that might hobble the emerging industry. Commenter s also noted that under either a rate

- based or a mass

- based system, due to the sector

- based nature of the Clean Power Plan, the emissions reductions that migh t be achieved in the transportation sector would not be accounted for as an advantage of electric vehicle use.

Commenter s stated that EPA neglected to consider the pressure that will be brought to bear on the electric generation industry by the increas e in availability and use of electric vehicles. Commenter s stated that these vehicles have the potential to dramatically reduce GHG production from the transportation sector, but the power to move the vehicles has to come from somewhere. Similarly, Comment er s noted that a shift in home heating energy sources away from traditional oil

- and gas

- fired central heating systems to geothermal heat pumps that use electricity to operate condensers will result in a net decrease in fossil fuel consumption with

an asso ciated increase in electricity consumption. Commenter s stated that if a state or region chooses to comply using the mass

- based option, and significant increases in demand occur from the influx of electric vehicles and/or heat pumps, that state should be ab le to credit the CO2 emissions avoided in the transportation and residential heating sectors against the additional CO2 emissions due to generation of the electric power needed for the vehicles and heat pumps. Commenter s believed that without such a mechan ism to account for these avoided emissions, the Proposed Rule may actually inhibit emission reductions in certain circumstances.

Commenter s stated that the increased use of electricity in other sectors (e.g., electric vehicles, port and off

- road vehicl e electrification) can produce many benefits, including reduced CO2 emissions from those sectors and at the same time, these activities increase the demand for electricity (and in turn, can increase CO2 emissions from regulated sources). Commenter s353 believe d, given that EPA acknowledges the importance of the role of electric vehicles in reducing emissions from the transportation sector in the future, the effects need to be considered in the Proposed Rule.

Commenter s noted that the electrification of the transportation sector could possibly be limited by suppressing growth in power as a result of the Proposed Rule. Commenter s believed a multi

sector approach for climate control regulations would solve this issue.

Comment 3 0 : Emission reduction calculation is fl awed

. Response 3 0 : The EPA disagrees with the commenter s ’ remarks that energy efficiency doesn’t reduce emissions from EGUs. Lowering energy demand on the grid avoids the need to generate electricity and hence the emissions associated with the avoided generation reduces the amount of emissions that would have been put into the air. The EPA has determined not to include demand

side energy efficiency (building block four) in the BSER of this final rule and therefore we do
not n eed to address this comment. This determination is discussed in section s V. A and V.B of the final rule preamble of the CPP.

The following are summaries of the specific public comments under this comment:

Commenter s stated EPA's method of equating end

- use energy efficiency directly to greenhouse gas emission reductions is flawed. Commenter s stated that in its analysis, EPA consistently makes general assumptions that end

- use reduction of kilowatt

- hour energy consumption leads directly to specific levels of greenhouse emissions reductions in the power sector. Commenter s stated the reality is that electrical end

- use efficiency does not necessarily lead to emissions reductions, and certainly does not lead to the emission reductions assumed by EPA in its ana lysis. Commenter s stated the problems of equating end

- use electrical energy efficiency to an emission reduction are evidenced by the open questions that even the EPA poses about how to rectify fundamental disconnects in the relationship, such as: what if the efficiency is gained in a home or business that received electricity generated from a nuclear power plant, or wind, hydroelectric or solar power; and what if the gains from efficiency improvements of a home or business (defined as more output per unit input) are used to increase output (heating or cooling for comfort) instead of to reduce input (electricity use). Commenter s stated that surely in neither case would greenhouse gas emissions be reduced even though consumption is reduced in the first

case a nd efficiency is improved in the second. Commenter s stated an analysis with such fundamental open questions as these is not complete, thus basing state emission goals on the analysis is arbitrary and capricious.

Comment 3 1 : Use of “adjusted gross savings”

. Response 3 1 : The EPA has determined not to include demand

- side energy efficiency (building block four) in the BSER of this final rule and therefore we do not need to address this comment. This determination is discussed in section s V.A and V.B of the final rule preamble of the CPP. Although the EPA has determined to not include demand side

- energy efficiency in the BSER in354 this final rule we are using 1.0% in our illustrative demand

- side energy efficiency plan scenario. See RIA Chapter 3 and the Demand

- side Energy Efficiency TSD for CPP Final Rule for details. See the preamble sections for discussion of requirements of and accounting for inclusion of DS

- EE in state strategies.

The following are summaries of the specific public comments under this comment:

Commenter s recommended that EPA direct states to report "savings beyond BAU", sometimes referred to as "adjusted gross savings" or "net savings lite". Commenter s stated that savings beyond BAU should include adjustments from impact evaluations such as verification of installations, adjusting for measure persistence and actual savings achieved per a billing analysis, and corrections to account for data quality cont rol.

Comment 3 2 : Suggested policies to enable procurement of EE in states
Response 3 2 : The EPA agrees with the commenter s ’ assessment that many states have adopted energy efficiency programs over time and there is an increase in program adoption for the last 30
years. However, since the EPA has determined not to include demand

- side energy efficiency (building block four) in the BSER of this final rule and therefore we do not need to address this comment. This determination is discussed in section s V.A and V.B of the final rule preamble of the CPP. The Demand

- Side EE TSD discusses the history of EE efforts in the U.S., increa sing program and policy adoption and associated savings, and the substantial remaining cost

- effective potential across the U.S.

The following are summaries of the specific public comments under this comment:

Commenter s stated that the expansion of energ y efficiency spending in recent years can be largely attributed to new and strengthened state policies that target the procurement of energy efficiency. Commenter s noted that these policies do not need to be mutually exclusive and can take on many forms in cluding:

1. Policies that provide a funding source for energy efficiency programs :

(i) Program funding for energy efficiency programs embedded in utility bills paid by customers and often referred to as system benefit charges ("SBCs"). SBCs exist in 14
states and were typically established more than a decade ago as part of larger electric industry restructuring processes.

2. Policies that require the consideration and assessment of meeting customers' needs through a broad range of resource options, including m eeting demand for electricity through energy efficiency resources:

(ii) Integrated resource planning requirements exist in 34 states (primarily in the West and Southeast) and in areas served by the Tennessee Valley Authority, whereby utilities are required to p lan for the long

- term needs of their customers by considering355 and assessing a broad range of resource options, including meeting demand for electricity through energy efficiency resources. (iii) Utilities in 28 states are required to regularly submit a demand

- si de management or multi

- year energy efficiency plan to their state regulator, proposing a specific portfolio of programs that meet cost

- effectiveness guidelines and other policy objectives, typically on a one

- to three

- year cycle.

3. Policies that mandate t he capture of energy efficiency savings:

(i) "Loading order" policies, requiring utilities to procure all cost

- effective conservation and energy efficiency resources

--- either as a stand

- alone requirement on distribution

- only utilities, or on vertically

- integ rated companies before adding new generation resources. Currently, six states

--- California, Connecticut, Massachusetts, Rhode Island, Vermont, and Washington

--- have these types of policies in place.7 (ii) Energy Efficiency Resource Standards ("EERS"), that is, policies adopted as a matter of policy, legislation or regulation that establish specific, long

- term targets for energy savings to be met through customer energy efficiency programs offered by utilities or independent program administrators, are curren tly in place in 24 states.

4. Ratemaking mechanisms and policies that overcome disincentives faced by utilities to pursue energy efficiency:

i. Policies that guarantee recovery of the costs of efficiency program expenditures and/or recovery of lost base

- reven ues in order to that neutralize a utility 's disincentive to invest in energy efficiency.

(b) Revenue decoupling, that is, a rate adjustment mechanism that a "decouples" (a) the utility's ability to recover the allowed revenues from (b) the actual volume of unit sales that occurs over time via a true

- up mechanism has become increasingly popular in recent years, with 16 states having electric decoupling programs in place, and 3 more with programs pending as of August 2013. (See Figure 2 below). (c) Performanc e incentives are financial incentives that reward utilities (and in some cases, non

- utility program administrators) for reaching or exceeding specified program goals.

Commenter s noted that currently, 30 states have a performance incentive in place or pe nding for electric utilities.

Comment 3 3 : State specific EE concerns

. Response 3 3 : Commenter s ’ provided details about how to make changes to their state specific Demand side Energy Efficiency calculations for BSER. The EPA has determined not to include demand

- side energy efficiency (building block four) in the BSER of this final rule and therefore we do not need to address th es e comment s . This determination is discussed in section s V.A and V.B of the final rule preamble of the CPP.356 Commenters urged the EPA to confine its BSER determination to actions that involve what they characterized as more “traditional” generation. While some stakeholders recognized demand

- side EE as being an integral part of the electricity system, with many of the characteristics of more traditional generating resources, other stakeholders did not. Though demand

- side EE shares many of the most salient characteristics of what some regard as more traditional generation, and is treated as functionally interchangeable with other forms of generation for planning and operational purposes, the broad range of comments on this topic illustrates how much the role of demand

- side resources is changing and how the opportunities for generating companies to use demand

- side resources varies more t han the other building blocks. For example, a broad range of types of generation owners including vertically integrated utilities, municipalities, cooperatives and independent power producers own or contract for renewable energy, but only a handful of inde pendent power producers are currently providing demand

- side resources like demand

- side EE. In view of this, since the BSER must serve as the foundation of the emission guidelines, the EPA has not included demand

- side EE as part of the final BSER determinat ion. Thus, neither the final guidelines’ BSER determination nor the emission performance rates for the two subcategories of affected EGUs take into account demand

- side EE.

The EPA has determined not to include demand

- side energy efficiency (building block four) in the BSER of this final rule and therefor e we do not need to address these comment s

. Although the EPA has determined to not include demand side

- energy efficiency in the BSER in this final rule we are using 1.0% in our illustrative demand

- side energ y efficiency plan scenario

. See the RIA Chapter 3 and the Demand

- side Energy Efficiency TSD for CPP Final Rule for details on how the EPA addresses measure lives for this illustrative demand

- side energy efficiency plan scenario

. This illustrative plan scenario reflects a reasonable and feasibly level of DS

- EE, supported by the information and analysis provide in the TSD.

The following are summaries of the specific public comments under this comment:

Commenter s believed that EPA's assumptions regardin g Arkansas energy

- efficiency potential are quite modest, compared to Arkansas's current portfolios and the experience of other states. Commenter s felt that this was in part due to apparent under

- reporting of EE achievements in Entergy's report to EIA

.
Comm enter s noted that the Arkansas PSC does not currently mandate or review EE programs by coops and while the Arkansas Electric Cooperative Corporation (AECC) asserted that they and their member

- owners have a rich history of demand

- side and EE programs and se rvices, AECC's list of its efforts is limited to distributing information and some audit programs (none of which are listed on its web site), which produce little or no savings without incentive, direct installation, and facilitation of retrofits. Commente r s stated that only one coop reports energy

efficiency savings to the EIA and that the coops can and should adopt the modern programs that the investor

- owned utilities have been ramping up over the last few years.

Commenter s also noted that the AECC failed to understand that EE savings increase the denominator in the rate

- based compliance formula and incorrectly asserted that "EE benefits prior to 2020 will not count toward meeting the Clean Power Plan goals"

. Commenter s noted that EPA did not intend that i ts energy

- efficiency scenario be interpreted as a maximum potential for energy

- efficiency savings.357 Commenter s provided a table that showed the annual and cumulative savings for the EPA assumptions, the current Arkansas targets with slow expansion to 1.5% annually, and the current Arkansas targets with more aggressive portfolio expansion to 2.15% annually. Commenter s noted that in modeling the cumulative savings, they adopted EPA's assumption that savings from each year's installations decay linearly over 2 0 years. Commenter s stated that even excluding (1)
any energy

- efficiency efforts by municipal utilities and (2) all coop savings through 2014, these cases result in cumulative savings about four times EPA's assumptions by 2020. Commenter s noted that in 202 0, the increased efficiency above EPA's assumptions would be equivalent to about 40

- 50 lb/MWh, or about 7% of EPA's target for Arkansas's reduction in emission from 2012 to 2020.

Commenter s stated that similar to its failure to develop its in

- state sola r potential, Alabama has yet to make progress toward realizing significant energy savings through cost

- effective energy efficiency and that Alabama's lack of progress in this area is unfortunate because there is no question that energy efficiency is the lo west cost option for reducing carbon emissions. Commenter s felt that the Clean Power Plan provides Alabama the necessary impetus to begin realizing significant energy savings as Alabama has nowhere to go but up. Commenter s noted that Alabama spent just $10.8 million on efficiency programs (0.14 percent of statewide utility revenues) in 2014 and only achieved 56,045 MWh (0.06 percent of retail sales) of net incremental savings in 2012. Commenter s stated that these paltry sav ings earned Alabama the poor rank of 39th on the 2014 State Energy Efficiency Scorecard published by the American Council for an Energy

- Efficient Economy (ACEEE).

Commenter s also noted that Alabama Power is not even keeping pace with its sister utilities, let alone with leading utilities nationwide. Commenter s noted that Georgia Power's eight certified programs are targeted to achieve 0.4 percent reductions in annual retail sales, more than 6 times Alabama's 2012 electric program savings and that Gulf Power Company's performance is even higher: in 2013, it achieved annual savings equal to 0.9 percent of retail sales.

Commenter s believed that Mississippi's experiences could be instructive for Alabama. Commenter s noted that Mississippi was ranked dead last (51st) in ACEEE's State Efficiency Scorecard and now it is considered a "state to watch." Commenter s asserted that the state began its upward trajectory with the Mississippi PSC's establishment, in 2010, of a new docket for the purpose of investigating the development and implementation of energy efficiency programs and standards. Commenter s noted that the PSC's order requiring utilities to file new efficiency programs within 6 months of July 2013 aimed to encourage the early implementation of EE
programs a nd provide experience on which Mississippi's utilities and regulators can build comprehensive portfolios of long

- term efficiency programs.

Commenter s concluded that Alabama already has the mechanisms in place for utility energy efficiency programs. Comment er s stated that Alabama Power can recover lost revenues by projecting losses and adjusting rates annually through a rate mechanism known as Rate RSE, which includes a cap on rate increases and automatic rate reductions when profits or expenses exceed autho rized ranges. Commenter s recommended that EPA modify its assumptions for Alabama in order to maximize the role the energy efficiency plays in the state's target

- setting.358 Commenter s noted that EPA has assumed that Arizona's EE Standards encompass the ent ire state when in reality there are a number of electric service entities throughout Arizona that do not fall under the commenter s ' purview and are not required to adhere to the EE rules. Commenter s stated that of the fifteen electric utilities regulated b y the commenter s , only nine are required to participate in the EE Standard; out of the nine electric companies required to participate in the EE Standard, only one is currently meeting the energy efficiency trajectory incorporated in the rule.

Commenter s stated that Arizona has one of the most aggressive energy efficiency standards in the county, requiring regulated utilities to increase the savings achieved through approved energy efficiency programs until the cumulative reduction reaches 22 percent by 2020. Commenter s noted that EPA recognizes Arizona as one of the states that achieved the "best practices level of performance" in energy efficiency, but due to the method by which EE is incorporated into the state goal calculation, TEP and UNSE will not r ealize any benefit from that early action. Commenter s noted that TEP, in complying with the Arizona standard, anticipates achieving its highest incremental energy savings well before 2020, as the most cost effective programs are implemented first. Commente r s anticipated that incremental annual energy savings will begin to diminish in 2020, the final year covered by Arizona's standard. Commenter s stated that it is unlikely, after having already achieved significant savings under Arizona's standard, that

c omm enter s would be able to continue achieving savings at such a high incremental rate.

Commenter s also believed that is it important for EPA to understand the specific legal construct of the Arizona standard as well as the procedures for how efficiency progra ms are conceived, approved, and implemented. Commenter s explained the process which a utility would need to go through in order to adopt an EE program in Arizona which involves researching programs, developing a list of possible programs, and submitting to the ACC for approval. Commenter s noted that if the list of programs ultimately approved by the ACC, and therefore, implemented by the utilities is less than would be required to meet the overall reduction goal, the utilities would need to ask for a waiver from the standard to still be in compliance.

Commenter s stated that EPA has made some unrealistic assumptions about Energy Efficiency (EE) for Arizona. Commenter s asserted that even with EE, load growth would be higher than EPA assumptions since Arizo na's "population has been forecasted to increase 38% to 45% between 2012 and 2030." C ommenter s quoted the Brattle White Paper and raised 3 main concerns: that EE measures are "hard coded" in the IPM Model; EPA is double counting the effects of the EE measu res since there are already EE assumptions in the baseline load forecast; and EPA should not assume that EE measures will be fully used during peak demand times. Commenter s also stated that EPRI and NERC have concerns about EPA's use of EE in the Reliabili ty and Cost Modeling Analysis and that NERC says EPA is overestimating the amount of EE and that NERC is concerned about the reliability of the RIA. Commenter s further stated that if Arizona did not meet the assumed EE targets, Arizona would be constrained by its CO 2 goals with regard to building resources to supply the power needed.

Commenter s stated that " Arizona's strong EE programs were projected to reduce demand by as much as the EPA assumes Building Block 4 will in 2020. EPA assumes that from 2020 to 2030 Arizona can continue high levels of annual reductions of 1.5% after its 2012 to 2020 program has harvested much of the low cost energy efficiency by its EERS program. If 1.5% each year359 from 2020 to 2030 were achievable, which is unlikely as explai ned further below, its cost would in all likelihood be well above what EPA assumes in its analysis." Commenter s cited an April 2014 EPRI study which estimates that states can eventually reach incremental annual energy savings in the range of 0.2% and 0.6% instead of EPA's estimate of 1.5%. Commenter s suggested that EPA's 1.5% growth rate for Arizona is not reasonable. Commenter s pointed out that EPA used California as an example but that is not reasonable because the analysis is based on one year (2012) not multiple years of EE savings and California has more incentive for EE projects due to high retail electricity rates. Commenter s stated that EPA does not differentiate EE costs by state. Commenter s also said that EPA's EE target overstates the achievable b ecause aggressive states have already done the cost

- effective 'low hanging fruit' EE projects. Commenter s said there are reliability and financial risks from overestimating the EE potential in Arizona. Commenter s talked about a Fossil Leverage Factor devel oped by EPRI which they used to estimate that if Arizona does not meet its Building Block 4 EE savings target for 2020, then 27,000 GWh of combined cycle generation would have to be replaced.

Commenter s stated support for the inclusion of energy efficie ncy as a Building Block, but noted that EPA's current proposal fails to reflect Georgia's full energy efficiency potential; relies on unreasonable cost assumptions; fails to account correctly for the emissions reduction benefits that cost

- effective efficie ncy measures provide; and inappropriately discounts credit for Georgia's efficiency measures based on its current status as a net importer of electricity.

Commenter s stated that there is no doubt that Georgia has yet to realize its potential for significa nt energy savings through cost

- effective energy efficiency, as Georgia ranks near the bottom of states in achieving electricity savings. Commenter s stated that according to the 2014 State Energy Scorecard developed by the American Council for an Energy

- Eff icient Economy (ACEEE), Georgia's current position is 35th, a drop of two positions from its 2013 ranking. Commenter s noted that Georgia's sole regulated utility, Georgia Power, is already achieving higher levels of energy savings than EPA assumes, and it can achieve greater savings faster than EPA projects. Commenter s noted that based on programs approved in 2013, Georgia Power will by 2017 achieve incremental savings of 0.4 percent and cumulative savings of 1.6 percent. Commenter s believed that if EPA wer e to correct its assumptions and include Georgia Power's actual projected savings in 2017, Georgia's starting point would be higher, meaning it could achieve the target rate of 1.5 percent annual savings earlier than EPA assumes.

Commenter s also noted that EPA's projections for Georgia are exceeded by independent assessments of Georgia's energy efficiency potential, including by Georgia Power itself. Commenter s cited several studies which supported setting a higher goal for Georgia: a 2005 state agency asse ssment of Georgia's energy efficiency potential found that by 2010 the state could achieve annual savings levels ranging from 2.3 to 8.7 percent, a 2007 assessment prepared for Georgia Power reached similar conclusions, finding potential reductions by 2010 ranging from 1.7 percent to 6.2 percent, a 2012 assessment from Georgia Power which shows hypothetical achievable energy savings ranging from about 6 percent to 15 percent of forecasted 2023 energy sales depending on the level of incentives paid to custom ers, and ACEEE's determination that Georgia could reduce electricity consumption by 24 percent below 2012 levels by 2030 by implementing four common efficiency practices (implementing an annual energy efficiency savings target of 1.5 percent, enacting nati onal model building codes, constructing combined heat and power systems, and adopting efficiency standards for products and equipment).360 Commenter s stated that EPA should take recent national trends into account which show showing that Georgia and other st ates can ramp up to significant savings sooner than EPA projects. Commenter s concluded that given these trends, and the comparatively low levels of energy efficiency currently being realized in Georgia, the potential to quickly ramp up energy savings acros s the state is enormous.

Commenter s stated that building block number four establishes a goal for demand

- side energy efficiency programs with a cumulative target for Kansas of 9%. Commenter s said the Kansas legislature passed House Bill 2482 in the 2014 session, and that the new law provides utilities the opportunity for cost recovery for demand side management programs. Commenter s said it establishes a voluntary program that is in the initial stages of implementation. Commenter s said it has no complianc e provisions that could be adapted into a state 111(d) plan. Commenter s said that transitioning from a voluntary program in its developmental stages to a regulatory program with hard targets to meet the interim goals contained in the proposal would be a gr eat challenge.

Commenter s stated that there is no requirement in Louisiana for municipal utilities to offer energy efficiency programs. Commenter s stated that while they support home energy audits and energy efficiency education, they do not yet have su fficient data available to comment specifically regarding energy efficiency potential within their service territory. Commenter s endorsed comments of others who have stated that the goals presented are overly aggressive and very likely to result in signifi cantly higher costs for the commenter s ' customers.

Commenter s stated that the current electric rate structure in Michigan is skewed to provide industrial customers favorable electric rates compared to residential customers and that their analysis indicates that to achieve potential energy efficiency savings for the industrial sector (where the most potential for savings exists) would disproportionately raise industrial electric rates and could impact the competitiveness of manufacturers in Michigan. Commenter s noted that key stakeholders responsible for shaping Michi gan's future energy policy recommend that 1 percent is the appropriate energy savings target for Michigan.

Commenter s stated that Michigan could achieve the reductions in Building Block 4 if: 1) the savings from all measures installed from 2012 to 2014, or (even better) from 2005 to 2014, are counted during the 2020 through 2029 compliance period; 2) the utility spending cap in the state statute is raised above two percent to allow funding for the capture of energy savings from cost

effective EE improvem ents that have higher upfront costs and/or longer payback periods. Commenter s noted that legislation may be necessary to increase the amount of EE undertaken by utilities, which could be a lengthy process.

Commenter s stated that Minnesota has undertake n early action measures for customer energy efficiency deployment that already delivered significant conservation and process efficiency improvement gains for Minnesota electricity consumers. Commenter s noted that Minnesota Power's analysis of energy effic iency and conservation improvement measures through 2005, as reported to the EIA 1605(b) voluntary reporting of greenhouse gas emissions program, show cumulative efficiency improvements of over seven percent relative to MP's annual electricity customer dem and. Commenter s w ere concerned that under the Clean Power Plan, EPA effectively nulls out the benefits from Minnesota Power's conservation and energy efficiency actions through 2012. Commenter s also stated that Minnesota utilities are now challenged by361 nee ding to sustain energy efficiency gains by implementing new measures from a depleting list of candidate projects so that expiring earlier measures can be replaced. Commenter s urged EPA to acknowledge Minnesota's early action in the conservation and energy efficiency improvement areas by designating Minnesota's ongoing program as sufficient for satisfying EPA's proposed CPP requirements.

Commenter s stated that even though EPA uses Minnesota as an example of the appropriateness of 1.5% as the savings goal, it ignores important exceptions in the Minnesota standard and the fact that Minnesota has not actually achieved that savings goal. Commenter s noted that in 2007, the state of Minnesota adopted an energy efficiency goal of 1.5% savings per year and the
sta te statute, Minn. Stat. 216B.241, provides that each municipal power agency, cooperative or utility is to plan and implement programs aimed at meeting at least 1.5% savings per year. Commenter s noted that although certain provisions the Next Generation En ergy Act which enacted the 1.5% annual conservation improvement program savings standard have been invalidated as unconstitutional, the provisions relating to this energy efficiency standard were not at issue in that litigation.

Commenter s noted that M issouri's EERS is voluntary, although the law creates a goal for investor

- owned utilities to capture " all cost

- effective energy efficiency savings ." Commenter s stated that this law is called the Missouri Energy Efficiency Investment Act (MEEIA), and its
pr imary purpose is to encourage investor

- owned utilities to invest in energy efficiency by allowing the Public Service Commission (PSC) to approve rates that compensate the utility for their investments in efficiency in a way that results in profits which ar e equal to or greater than the profits they would have received had they invested in new supply

- side power generation instead of efficiency. Commenter s stated the rule resulting from MEEIA sets out clear stair

- step targets for investor

- owned utilities, pro viding multi

- million dollar incentives if these targets come within 30% of being achieved during any given year.

Commenter s noted that Missouri has struggled to achieve maximum success in energy efficiency because although the MEEIA statute sets forth achi evable savings targets and extremely generous cost

- recovery mechanisms, the law lacks a clear mandate requiring utilities to achieve all cost

- effective energy efficiency. Commenter s stated that utilities have great leverage in negotiations before the Publi c Service Commission (PSC) regarding approval of their efficiency portfolios, as they can call upon the ultimate threat of ceasing efficiency programs entirely. Commenter s asserted that the MEEIA statute's savings targets are easily

- achievable in the timef rame provided; utilities simply need the extra incentive or motivation to make the investments and EPA can provide this extra pressure by treating MEEIA savings targets as achievable and non

- negotiable when setting its BSER for Building Block 4.

Commenter s believed that EPA overstates the potential for energy efficiency in Missouri.

Commenter s provided a table representing the annual EE load reductions in MEEIA Cycle 1 DSM programs covering the 3 year implementation period (2013

- 2015). Commenter s noted that the average annual percentage load reduction to be achieved is 0.7%, less than half of EPA's 1.5% assumed sustained value.362 Commenter s noted that Montana is far from being a leader among other states in terms of investment in energy efficienc y as, according to the 2013 scorecard from the American Council for an Energy Efficiency Economy (ACEEE), Montana ranks 31st in energy efficiency spending, programs and policies. Commenter s also noted that in the last three ACEEE scorecards, Montana has lo st ground on energy efficiency. Commenter s stated that since 2012, Montana has dropped from 25th to 31st among states for energy efficiency investments. Commenter s stated that this should not be rewarded by providing Montana with a weak target and instead EPA should base its rule on Montana's energy efficiency potential, not its failure to adopt adequate policies.

Commenter s stated that Montana's limited investments in energy efficiency mean there is plenty of cost effective energy efficiency available and achievable and noted that most of the state's energy efficiency gains have been achieved through limited utility programs.

Commenter s noted that NWE expects to save 6 average megawatts of energy each year for the next 10 years through energy efficiency, h owever, the Northwest Power Planning and Conservation Council's utility energy efficiency estimator predicts that NWE could do much better and achieve about 10 average megawatts per year.

Commenter s stated that Montana could reduce its electricity consumpt ion by at least 23% by adopting common sense policies to expand energy efficiency programs and measures and that EPA should establish a state target that will encourage the state to achieve its energy efficiency potential and decrease the cost of the rule while saving Montana consumers money.

Commenter s noted that the state of Nebraska currently employs a number of demand

- side energy efficiency measures, including residential building weatherization, efficiency improvements for agricultural systems and e quipment, and building energy codes; however, Nebraska does not yet have a qualifying evaluation, measurement, and verification program for demand

- side energy efficiency measures, a necessary component for receiving credit under the proposed Clean Power Pl an. Commenter s stated that implementing an evaluation, measurement, and verification program will require consultation, consideration, and collaboration with the Nebraska State Legislature, Executive Branch, various state agencies, utility governing boards , city councils, village boards, and other entities which will take considerable time and likely require legislative and policy action at several levels in order to meet EPA's requirements. Commenter s stated that the longer it takes to implement, the less flexibility the state will have to determine whether demand

- side energy efficiency measures are effective and meeting the intended objectives.

Commenter s stated that EPA's proposed rate is virtually impossible for Nebraska, which does not have a mandato ry EE program. Commenter s noted that the proposed 0.2% yearly interim increase is higher than the commenter s ' actual 0.13% yearly EE reduction by 50% in the first year, by triple in the second year, quadruple in the third year (and so on). Commenter s state d that even if the 1.5% annual increase could be attained, there is no evidence that a 1.5% level could be sustained over many years, let alone that EE reductions would increase to 10.4% (an 80

- fold increase above the commenter s ' actual EE reductions) by 2 029, as proposed.

Commenter s stated that Nevada's PUC is initiating a docket on decoupling electric utilities and, if approved (as expected), decoupling will increase the utility's need for more robust energy efficiency programs. Commenter s also noted that legislation for an Energy Efficiency Resource363 Standard (EERS) is also planned for the 2015 session; therefore there is vast potential for energy efficiency improvements in Nevada. Commenter s also noted that the Southwest Energy Efficiency Project publ ished a study two years ago on the potential for energy efficiency improvements in Nevada which showed that implementing best practices in energy efficiency could cut electricity use by 22% (and peak use by 21%) by 2020.

Commenter s stated that EPA's ra mp rate embedded in the design of this Building Block does not acknowledge the maturity of New York's well

- established energy efficiency programs. Commenter s estimated that New York has invested over $4.5 billion in energy efficiency investments since 1999 with an achieved cumulative annual energy savings of 9,272,000 MWh. Commenter s stated that experience in New York has shown that efficiency gains begin to slow once this level of investment has been achieved and EPA should allow New York a ramp rate to 20 30 that reflects its already mature efficiency program.

Commenter s noted that this Building Block assumes New York would reduce demand by 11.8%, or 18,105,870 MWh to receive credit for 16,847,624 MWh, in 2029 and thereafter through cumulative energy effic iency measures and while New York is presently increasing energy efficiency by about 1,200,000 MWh/year (assuming a ten year average), c ommenter s does not believe that this level of improvement can be sustained through 2029, and attempting to do so would b e prohibitively expensive. Commenter s noted that New York reportedly expected to spend just $145 per MWh

- saved through 2015, but in 2011 utility budgets were increased to an average $351 per MWh for the last four years of the program. Commenter s stated tha t EPA's assumption that New York can continue to spend this much money on energy efficiency and reach Building Block's 4 efficiency target by 2029 should be revised.

Commenter s urged EPA to acknowledge New York energy efficiency gains by revising the ramp rate required for further investment to 0.5% and crediting each MWh of energy efficiency towards meeting New York's goal regardless of its ratio of generation to sales.

Commenter s noted that critics often claim that energy efficiency is hard to achieve in states like North Carolina with relatively low electricity rates; however, c ommenter s stated that this claim is belied by the fact that several states with leading energy efficiency programs have electricity rates comparable to, or even lower than, rat es in North Carolina. Commenter s also noted that collectively, EPA's energy efficiency assumptions for North Carolina resulted in cumulative savings of 12,169,442 MWh of avoided generation in 2030 even when considering that, as a net electricity importing state, North Carolina would only receive credit for 86% of its energy efficiency investments. Commenter s stated that this is especially important because the principal arguments in favor of employing higher levels of efficiency center around the benefits o f avoiding supply

- side generation.

Commenter s stated that North Carolina is already on track to meet or beat the modest level of energy efficiency that EPA assumed in the CPP. Commenter s explained that a portion of the utilities' REPS obligation may be met with EE: up to 3.125% of retail sales can come from EE through 2020, and up to 5% can come from EE in 2021 and after. Commenter s noted that this is an annual percentage, not a cumulativ e percentage, and because EE/DSM resources are the lowest cost energy resources, North Carolina's electric suppliers are expected to maximize their use of these resources for REPS compliance.364 Commenter s also noted that North Carolina's major electric util ities have already made a serious commitment to aggressive energy efficiency goals. Commenter s detailed how, with the merger of Duke Energy and Progress Energy, DEC and DEP agreed to adopt an annual energy efficiency savings performance target of 1% of the prior year's retail electricity sales beginning in 2015 and a cumulative target of 7% of retail electricity sales over 2014

- 2018. Commenter s stated that DEC and DEP modeled a level of EE based on these goals and found that their "high EE" scenarios, utili ties would achieve a total load reduction of 11% and 9.1%, respectively, over the 2009

- 2029 period.

Commenter s concluded that efficiency savings achieved in leading states demonstrates the increasing achievability of energy efficiency and given recent tre nds in EE and the comparatively low levels of EE currently being realized in North Carolina, the potential to ramp up energy savings across the State is enormous, and North Carolina's utilities can and should achieve much higher levels of energy savings go ing forward.

Commenter s stated that their experience designing and implementing demand response and energy efficiency programs for over 30 years led them to conclude that EPA's target of 9.97% for Oklahoma is not reasonably attainable. Commenter s noted that they offer several programs their customers can opt into, including programs related to home energy efficiency, weatherization, and commercial lighting. Commenter s stated that all of this effort has allowed c ommenter s to project an increase in system

- wide energy and demand reductions of up to 548 MW and 1,130 GWh over the next ten years. Commenter s stated that if these projections are accurate, the proposed Building Block 4 goal of displacing 9.97 percent of sales by EE and DR in Oklahoma by 2030 is no t reasonably attainable, as the commenter s ' projected reductions amount to only 3.5 percent of the commenter s ' sales projected for 2024. Commenter s added that their experience has taught them that the tolerance of customers to EE programs can be low, as th ese programs do not always provide immediate benefits and are often declined in period of economic downturn. Commenter s w ere unsure how EPA's mandate will change consumer behavior to support its goal.

Commenter s highlighted multiple successes with energ y efficiency programs and policies within the state of South Carolina which lead to significant savings. Commenter s stated that, despite recent progress, the fact remains that savings in the state are well below what has been achieved elsewhere in the nati on as annual gains in other states are more than double to four times as great as South Carolina IOUs, and up to ten times greater than the savings achieved by South Carolina's state

- run utility, Santee Cooper, whose 2012 EE impacts were less than 0.20% of 2011 sales. Commenter s believed that achieving more EE is not only possible, but that EPA should recognize that ramping up South Carolina's energy efficiency performance up to nationally competitive levels could save customers billions of dollars compared to resource plans heavily weighted towards the supply side. Commenter s noted that the results of Duke Energy's modeling of Base Efficiency and High Efficiency resource portfolios, indicate that a doubling of savings to more than 1 % of retail sales in the High Efficiency case is expected to save customers at least $4.7 billion on an NPV basis. Commenter s stated that existing initiatives and efficiency stakeholders in the state put South Carolina in a strong position to continue to ramp up energy savings an d place efficiency as a keystone of South Carolina's compliance plan.365 Commenter s noted that an estimated 36 percent of all South Carolina's retail sales are to industrial consumers and stated that it is not reasonable to assume that the large increases in energy efficiency are available to this customer class. Commenter s stated that a chieving a 10 percent increase in energy efficiency savings in South Carolina is not a feasible goal.

Commenter s stated that under EPA's assumptions, Tennessee is expected to achieve annual incremental savings of 1.5 percent by 2023, and cumulative savi ngs of 10.79 percent by 2030. C ommenter s noted however that EPA assumed that states that are net importers of electricity will receive credit for only a portion of their energy efficiency investments. C ommenter s stated that as a net electricity importing s tate, Tennessee receives credit for 72 percent (its share of in

- state generation) of its energy efficiency investments. Therefore, c ommenter s stated that EPA reduced the level of avoided generation to reflect this assumption, resulting in a decrease from 5 ,980,298 MWh to 4,305,814 MWh. C ommenter s stated that modifications to this assumption should be made so that importing states receive full credit for the efficiency programs that they implement. C ommenter s stated that this is especially important because the principal arguments in favor of employing higher levels of efficiency center around the benefits of avoiding supply

- side generation. C ommenter s stated that applying the energy efficiency savings levels that Tennessee has already received through 2012 results in an emissions rate decrease from 1,271 lbs/MWh to 1,262 lbs/MWh, a reduction of 9 lbs/MWh.

Commenter s stated that EPA's assumptions that Tennessee will reach 1.5 percent annual incremental savings by 2023 through a 0.2 percent annual ramp rate are modest in comparison to actual policies that are in effect in the state. Commenter s noted that the state legislature called on the TVA in 2007 to pursue energy efficient means of producing power. Commenter s also noted that TVA began to expand its commitment to EE in 2010 when its Board of Directors adopted its "Vision 2020" to "become a leading provider of low

- cost, cleaner energy by 2020," and set three specific goals for fulfilling that vision: 1) lead th e nation in improved air quality, 2) lead the nation in increased nuclear production, and 3) lead the Southeast in increased energy efficiency. Commenter s detailed TVA's 2011 IRP which the Board of Directors accepted and allowed to be used as a guide in en ergy resource planning and selection, expanding the contribution of EE and demand

- side management by 3,600 to 5,100 MW by 2020

--- over ten times the level that EPA assumed in its application of Building Block 4 in Tennessee.

Commenter s also noted that in 2 011, the Chairman of the Senate Committee on Environment and Public Works requested that GAO examine TVA's plans, efforts, and financial condition to meet demand and operational goals. Commenter s stated that GAO issued a report in late 2011, ""Tennessee Va lley Authority: Full Consideration of Energy Efficiency and Better Capital Expenditures Planning Are Needed" which showed that, with respect to energy efficiency, "TVA's planning process may be ignoring opportunities to pursue a more cost

- effective path th at could make greater use of energy efficiency. . . . By not fully exploring and identifying energy efficiency resources in its 2010 Integrated Resource Planning process], TVA cannot be certain that its plans to meet future demand, largely by building new generating capacity, are the most cost effective." Commenter s noted that GAO recommended that TVA use information from its then pending EE potential study which revealed that TVA's achievable high potential in 2020 would result in over 15,000 GWh of saving s, or 9.8 percent savings over baseline to ensure that TVA's future resource planning process reflects the most cost

- effective mix of resources. Commenter s stated that this analysis included updated projections reflecting a lower cost of366 natural gas and as a result decreased this projection to just over 13,000 GWh of savings, or 8.6 percent savings over baseline; however, EPA's energy efficiency assumptions under the proposal would result in only 2,294 GWh of savings through 2020, significantly lower than b oth the 2011 and 2012 efficiency potential study results.

Commenter s also stated that other independent analysis reveals that Tennessee could achieve significantly higher cumulative energy savings than included in EPA's analysis, such as the ACEEE report t hat determine that Tennessee could reduce electricity consumption by 26 percent below 2012 levels by 2030 by implementing four common efficiency practices. Commenter s noted that recent trends and new targets in other states demonstrate the increasing achie vability of energy efficiency, as eleven states achieved energy savings of over 1 percent of retail sales in 2012. Commenter s felt that given these trends, and the comparatively low levels of energy efficiency currently being realized in Tennessee, the pot ential to ramp up energy savings across the State is enormous and TVA can and should achieve much higher levels of energy savings going forward.

Commenter s urged EPA to formulate the final rule to push TVA into a maximum reduction in coal and encourage a roll back of reliance on nuclear generated energy which c ommenter s believe can be done by maximizing EE and RE. Commenter s noted that Tennessee's per capita electricity consumption is higher than the national average, and twice that of California, and th at the state government has few and ineffective policies to encourage EE and RE.

Commenter s stated that Virginia's goals under the Clean Power Plan are modest in comparison to actual policies that are in effect in the state. Commenter s noted that Virgin ia adopted a modest voluntary goal of reducing electric energy consumption by 10 percent of 2006 sales by 2022

-- a reduction of 11,836 GWh. Commenter s stated that The State Corporation Commission conducted an evidentiary hearing where it determined that the 10 percent goal is realistic and achievable, and Dominion has called this goal "realistically accomplishable" and "...can be achieved even using a relatively conservative test for cost

- effectiveness." Yet, c ommenter s noted that EPA's energy efficiency ass umptions for Virginia would reach just 3,395 GWh of energy savings in 2022, less than one third of the modest 10 percent goal which indicates that EPA's target of 9% for Virginia is under

- representative of Virginia's true EE potential.

Commenter s also not ed that the level of DSM that Dominion and Appalachian Power projected in their respective Integrated Resource Plans filed with the State Corporation Commission in 2013 would produce higher levels of cumulative savings through 2022 than were included in EP A's assumptions.

Commenter s added that independent analysis also reveals that Virginia could achieve significantly higher cumulative energy savings than included in EPA's analysis. Commenter s cited a report by the American Council for an Energy Efficient E conomy (ACEEE) which determined that Virginia could reduce electricity consumption by 23 percent below 2012 levels by 2030 by implementing four common efficiency practices (implementing an annual energy efficiency savings target of 1.5 percent, enacting na tional model building codes, constructing combined heat and power systems, and adopting efficiency standards for products and equipment).367 Commenter s stated that their preliminary assessment of incremental energy efficiency programs in West Virginia sugg ests very little potential for energy savings in the residential and commercial sectors and that industrial users already are pursuing EE programs aggressively to reduce costs and increase profitability. Commenter s noted that EE programs that attracted a
t heoretical 100% participation rate by residential and commercial users, and achieved a 20% overall reduction of West Virginia's kWh energy use by 2030, would contribute only about 5% toward the state's 20% overall reduction target. Commenter s asserted that more realistic assumptions about participation rates (e.g., 50%) and overall kWh demand reduction (e.g., 10%) would suggest that energy efficiency might contribute only about 1% to West Virginia's 20% target.

Commenter s noted that EPA reports in Table 5

- 3 that Wisconsin's Energy Efficiency Resource Standard (EERS) was adopted in 2011 when in fact the Focus on Energy program was established in 1999 by Wisconsin Act 9 and began operating in July 2001 making Wisconsin's EER S one of the longest

- running in the nation. Commenter s urged EPA to correct this error in any future publications on this issue.

Commenter s noted the final proposed component requires Wyoming to increase its utilization of demand

- side energy efficiency, but Wyoming's industrial sector consumes nearly 60% of intrastate electricity which results in relatively flat demand throughout the day. Commenter s stated that there is little incentive for Wyoming residents or businesses to install energy efficiency tec hnologies because savings are modest; therefore the proposed standard cannot be reasonably achieved in Wyoming.

Commenter s believed that EPA's proposed level of EE underestimates the amount of energy efficiency that can be achieved in Texas because the EPA excluded a number of important additional opportunities for energy efficiency such as demand response, industrial energy efficiency, transmission and distribution, voltage optimization, and combined heat and power.

Commenter s noted that Texas law requ ires that all transmission and distribution service providers ("TDSPs") meet energy efficiency goals and that the law recently required that TDSP EE activities eliminate 30 percent of annual peak demand growth and is transitioning to require a 0.4 percent reduction in total peak demand. Commenter s stated that the TDSPs offer incentive programs to meet these goal and while it is difficult to precisely estimate the incremental energy savings from each EE program, the programs are estimated to have grown by be tween 400 GWh and 700 GWh per year since the law was established, representing nearly 5,000 GWh of total energy savings (relative to a current statewide base of around 300,000 GWh of total sales).

Commenter s also noted that studies on EE potential in Texa s suggested, however, that the state's caps on efficiency spending are a significant limiting factor, precluding additional cost

- effective energy efficiency. Commenter s stated that there are numerous achievable and cost

- effective

- yet untapped

- energy ef ficiency opportunities in Texas that could easily achieve greater efficiency savings. Commenter s provided an example of Austin Energy's experiences and success with implementing EE programs.

Commenter s noted that industrial customers are able to opt out c ompletely from Texas' current programs, creating a significant limitation on EE gains in the state. Commenter s stated that the368 PUC has further limited the pool of participants by taking a very expansive definition of industrial customer, allowing commercia l customers that are associated with an industrial production site to opt out of the program. Accordingly, c ommenter s believed that Texas has a greater potential for EE savings than the state's modest existing savings would suggest.

Commenter s stated th at generators within the ERCOT market are incentivized to operate as efficiently as possible because generators compete against each other to be "dispatched" to generate electricity. Commenter s noted that, wherever possible, they and other market participa nts look for and adopt efficiency measures to reduce the amount of fuel used to generate electricity. Commenter s stated that electric generating units in Texas have already made CO2 reductions from operational efficiencies where it is practicable and econo mically justified.

Commenter s believed that EPA underestimated Iowa's potential for cost

- effective, energy efficiency savings under Building Block 4 and encouraged EPA to strengthen the state's energy efficiency target under Building Block 4, and maximi ze Iowa's potential to reduce carbon emissions.

Commenter s noted that while Iowa is not among the states currently achieving a 1.5% savings on a statewide basis, Iowa's second

- largest utility, Interstate Power & Light/Alliant Energy, has achieved a 1.4% sa vings level in 2012 and a 1.5% savings level in 2013 and may achieve 1.5% again in 2014. Commenter s also noted that in Assessment of Energy and Capacity Savings Potential in Iowa , Cadmus Group found that Iowa has the technical potential between 2013 and 20 23 to save 8,446 GWh, of which 6,872 GWh is cost

- effective or economic potential. Commenter s stated that the technical potential would save 24% of base sales cumulatively, and the economic potential would save 19% of base sales cumulatively, translating to technical potential savings of over 2% annually and economic potential savings just under 2% annually.

Commenter s noted that the study (like EPA's analysis) did not include important sources of EE savings such as building codes, use of combined heat and power, etc. Commenter s stated that the significant amount of savings that these efficiency measures would provide, if included in the proposed rule, demonstrates that additional, cost effective energy efficiency measures exist that would allow Iowa to meet a more aggressive energy efficiency target than the currently proposed 1.5% annual savings by 2020. Commenter s enc ouraged EPA to strengthen Iowa's annual incremental savings rate to 2% and the pace of improvement to 0.25%.

Commenter s strongly believed that Missouri can exceed its 21% reduction target by the 2030 deadline. They cited two Missouri programs, the Mis souri Renewable Energy Standard and the Missouri Energy Efficiency Investment Act as examples of Missouri's commitment to Renewable Energy and Energy Efficiency.

Comment 3 4 : BB4/EE goals too high

. Response 3 4 : The EPA has determined not to include demand

- side energy efficiency (building block four) in the BSER of this final rule and therefore we do not need to address this comment. This determination is discussed in section s V.A and V.B of the final rule preamb le of the CPP. Although the EPA has determined to not include demand side

- energy efficiency in the BSER in369 this final rule we are using 1.0% in our illustrative demand

- side energy efficiency plan scenario

. See the RIA Chapter 3 and the Demand

- side Energy Efficiency TSD for CPP Final Rule for details on how the EPA addresses measure lives for this illustrative demand

- side energy efficiency plan scenario

. This illustrative plan scenario reflects a reasonable and feasibly level of DS

- EE, supported by the inf ormation and analysis provide in the TSD.

See Section VIII

. of the preamble for details on how EE will be included in state plans.

The following are summaries of the specific public comments under this comment:

Commenter s stated that EPA's application of Building Block 4 to the Navajo Nation should be changed and that the demand

- side energy efficiency goal of 9.15% is too high. Commenter s noted that in its analysis, EPA assumed that, absent Building Block 4, Navajo Nation electricity demand would grow at a 1.3% annual rate, consistent with the expected growth of its regional neighbors. Commenter s stated, however, that Navajo Nation electricity demand has been decreasing, at an average rate of 0.5% per year, due to the dire economic situation on the Navajo Nation. Commenter s supposed that demand

- side reductions required by EPA's Supplemental Proposed Rule would actually decrease availability of electricity to the Navajo people. Commenter s also noted that the two power systems on the Navajo Nation, NGS and FCPP, are used off of the reservation to serve the people of Arizona and for the CAP and that the power actually used by the Navajo Nation is primarily provided by NTUA and the majority of that electricity is hydro

- electric p ower. Commenter s concluded that reductions in demand required of the Navajo Nation therefore would not impact the CO2 emissions from the two coal

- fired power plants and that the application of Building Block 4 to the Navajo Nation will not result in CO2

em ission reductions.

Comment 3 5 : Apply BB4 in tribes/territories in the same manner as states
Response 3 5 : The EPA has determined not to include demand

- side energy efficiency (building block four) in the BSER of this final rule and therefore we do not need to address this comment. This determi nation is discussed in section s V.A and V.B of the fin al rule preamble of the CPP. Although the EPA has determined to not include demand side

- energy efficiency in the BSER in this final rule we are using 1.0% in our illustrative demand

- side energy efficiency plan scenario. See the RIA Chapter 3 and the Demand

- side Energy Efficiency TSD for CPP Final Rule for details on how the EPA addresses measure lives for this illustrative demand

- side energy efficiency plan scenario. This illustrative plan scenario reflects a reasonable and feasibly level of DS

- EE, supported by the information and analysis provide in the TSD.

The following are summaries of the specific public comments under this comment:

Commenter s agreed that EPA's goal of a 1.5 percent annual incremental increase in demand

- side energy efficiency each year of the compliance period is a feasible and effective approach to EE. Commenter s stated that because electricity cons umption on tribal lands is generally very low, Block 4 will require only small emission reductions at the affected EGUs. Commenter s noted that, under their formulation, the states in which the electricity that is consumed will have to include the electrici ty exported from Indian lands in their EE targets and as those neighboring370 states reduce their demand for electricity through EE measures in their CPP implementation plans, this will almost certainly reduce emissions from Four Corners and Navajo Generating Station, and help achieve the goals for the units on Indian Lands.

Commenter s stated that EPA should apply building block four to power plants in Indian Country and U.S. Territories in the same manner as it does with power plants in states. Commenter s noted that the evidence demonstrated in their December 1st comments assert that annual energy efficiency savings of up to two percent can be achieved, and that this can be achieved at a rate of 0.25 percent per year.

Comment 36: Commenters offered a number of questions and comments related to the data and methodology used by EPA in arriving at the emission reduction requirements implied by Building Block 4.

Response 3 6 : The EPA provides details responsive to the commenter s ’ technical quest ions in the technical support document. For the EPA’s response to this comment, see the Demand

- side Energy Efficiency TSD for CPP Final Rule

. The TSD provides the basis for the illustrative DS

EE plan scenario used as a basis for inclusion of EE in the pl an scenarios represented in the RIA. This illustrative plan scenario reflects a reasonable and feasibly level of DS

- EE, supported by the information and analysis provide in the TSD.

The following are summaries of the specific public comments under this com ment:

Commenter s asked the following questions:

1. What is the technical basis is for assuming that all states can replicate the incremental annual savings achieved by Arizona, Maine, and Vermont?

2. What is the technical basis for assuming that states can sustainably achieve incremental annual savings of 1.5% every year until 2030?

3. What studies did the EPA rely on to make this determination? What level of peer

- review did they undergo?

4. Why did the EPA's analysis not factor in the finite nature of EE opport unities?

5. What is the upper limit for EE? What does the performance/cost curve look like?

Commenter s asked the following questions:

1. What performance assumptions were used by the programs in the 11 states cited by EPA as having a 1.5 percent/year efficien cy improvement requirement, and are these methods consistent with the method EPA will require for compliance purposes regarding the ESPS?371 2. What compliance method will EPA prescribe or permit regarding the ESPS? How will this balance the desire to use existing state methodologies against the need for national uniformity, particularly if interstate trading is involved?

Comment 3 7 : There are sufficient cost

- effective opportunities to save energy to support EPA's best practices level of performance (1.5 % savings per/year) and EPA's alternative 2% savings per/year level.

Response 3 7 : The EPA has determined not to include demand

- side energy efficiency (building block four) in the BSER of this final rule and therefore we do not need to address further

comme nts supporting the removal or changes in the level of DS

- EE in BSER. This determination is discussed in section s V.A and V.B of the final rule preamble of the CPP. Even though demand

- side energy efficiency is not being included in the BSER in this final ru le and, thus, not included in the determination of emission performance rates, the final rule provides states the flexibility to use demand

- side energy efficiency measures in their state plans for compliance to meet the emission guidelines set forth in the final CPP, provided they meet the applicable requirements established in section VIII of the preamble for the CPP. The EPA recognizes that one of the major approaches available for achieving CO2 emission reductions from the electric power sector is demand

- side energy efficiency. The EPA continues to believe that significant emission reductions can be achieved by affected EGUs by the use of such measures cost effectively and that such measures are likely to represent an important component of state plans. A ccordingly, the EPA is including a level of DS

- EE as a component of our illustrative plan scenarios that are the basis for the analysis discussed in Chapter 3 of the RIA that supports the final CPP . The basis for and analysis of the illustrative DS

- EE plan scenario is provided in the DS

- EE TSD. This illustrative plan scenario reflects a reasonable and feasibly level of DS

- EE, supported by the information and analysis provide in the TSD.

The following are summaries of the specific public comments under this comment:

Commenters stated, in describing the opportunity for energy efficiency to reduce greenhouse gas emissions from power plants, EPA examines recent assessments of energy efficiency potential. Commenters said, energy efficiency potential studies a re, as EPA states, a common tool used by policymakers, utilities, and stakeholders to inform both energy savings goals and energy efficiency program development. Commenters said, most potential studies evaluate technical, economic, and " achievable potentia l ," but there remains significant variation in the analytic methods and assumptions used to estimate energy efficiency potential.

Commenters stated, one of the chief sources of variation is the analysis of achievable potential. Commenters said, as state d in a recent report:

" Although the achievable framework is useful from a practical standpoint, too often projections of achievable savings are seen as precise forecasts or even upper limits on what level of demand reduction can be attained through energy efficiency initiatives. Labeling a projection as "achievable" to distinguish it from more theoretical technical and economic projections may sometimes have the372 unintended consequence of making anything above the forecast seem "unachievable."

Commenters stated, some have attempted to directly measure achievable potential. Commenters said, the Hood River Conservation Project study, conducted in the early 1980s, found a 91% response rate for home energy assessments (out of roughly 3,500 eligible participant s) and an 85% participation rate for the subsequent implementation of conservation measures, when measures were free to participants. Commenters said, the Northwest Power Conservation Council uses this 85% participation rate in part to determine what fract ion of measures that pass its cost

- benefit test (economic potential) is achievable, along with commercial availability of products and limits on the annual ramp rate of measures.

Commenters stated, EPA's use of potential studies is well

- justified, but the economic and achievable potential reported in past studies likely understates the amount of energy efficiency that can be implemented as part of the Clean Power Plan. Commenters said, among other factors, the Clean Power Plan will alter the economics o f energy efficiency because under the Plan, energy efficiency will be used as a means of compliance with standards of performance for power plants.

Commenters stated, to further refine EPA's meta

- analysis of recent energy efficiency potential studies, t hey added some three new recent potential studies (from New York, Ohio, and the Pacific Northwest ), and substituted one to better reflect "maximum achievable potential" (California), recalculating average annual projected potential as a percentage of bas eline sales was shown in Table 7.1 (titled: “ NRDC Summary of Recent (2010

- 2014) Electric Energy Efficiency Potential Studies ”) , the average annual achievable potential as a percentage of baseline sales remains the same with these additions and changes: 1.5 % average annual economic potential remains at 2.4%.

Commenters stated, even these averages are likely conservative assessments of potential, because potential studies usually constrain the list of potential measures to only those already incorporated into programs, reduce the potential applicability of measures based on arbitrary realization factors, fail to consider systems integration or integrated design, assume static technological progress, and ignore the value of non

- energy benefits

.

Commenters stated, energy efficiency potential studies generally only examin e the potential impact of utility energy efficiency programs, which leaves out several energy efficiency opportunities. Commenters said, these opportunities, which would add to achievable potential if included, include:

• Transmission and distribution system investments that reduce utility losses or reduce the energy used by appliances and devices by optimizing voltage.

• Performance contracting or ESCO projects.

• Efficient combined heat and power systems.373 • State appliance and device efficiency standards, additiv e to the extent they allow a higher share of the market (potentially approximately 100%) to shift to the efficient option.

• State building codes, additive to the extent they allow a higher share of the new construction or retrofits (potentially 100%) to mee t minimum levels of efficiency.

• Increasing compliance with building codes, additive because potential studies assume that energy efficiency programs use the existing building code as the baseline from which savings are measured. Increasing the extent to wh ich buildings meet this code increases savings.

• State and local efforts, including financing or building benchmarking.

3.4.3 Impacts assessment

This section discusses the impacts assessment as it applies to demand

- side EE the following is a summary of comments under this section :

The EPA needs to be more transparent in their cost estimates, rationale and methodology for:

− LCSE, whether and how they used load shapes, escalation factors,

• The EPA underestimated costs (e.g., LCSE) and over stated potential (BB 4 is too stringent)

− We should be accounting for; recovery of lost revenue, rate payer increases, costs of transmission upgrades (See NERA Economic Consulting Study)

− Off

- bill (aka, participant) costs should be separate, not combined with program costs

− The lifetime of EE is overestimated

− The RIA costs use annualized costs instead of first year costs.

• The EPA overestimated costs by 50%

- 60% because:

− We didn’t factor integrative design principles, other approved EE filings show costs are lower than EPA’s.

• Coops, Muni’s and low income communities cannot afford to invest in EE at the BSER rate.

− The EPA didn’t account for the budgets that would need to be approved374 Commenters have raised a number of issues related in this subsection which are organized by

comm ents below. Responses are provided for these topics.

Comment 1: Need for clarification of cost effectiveness modeling data and assumptions
Response 1: For the EPA’s response to this comment, see the Demand

- side Energy Efficiency TSD for CPP Final Rule and the RIA, Chapter 3, supporting the final CPP. The topics raised by these commenters are addressed in those supporting materials including step

- by

- step description of the estimation of DS

- EE costs, the integration of DS

- EE savings into the power sector modeling, the conservativeness of DS

- EE savings level and costs as represented by the illustrative demand

- side energy efficiency plan scenario , the start date for DS

- EE efforts, the assumed load shape of DS

- EE savings, the cost escalation approach, and th e estimation of participant costs. The EPA agrees with the commenters that the DS

- EE driven energy savings lead to emission reductions at affected sources; for the RIA, such impacts are captured through power sector modeling as discussed in Chapter 3. This illustrative plan scenario reflects a reasonable and feasibly level of DS

- EE, supported by the information and analysis provide in the TSD.
The following are summaries of the specific public comments under this comment:

Commenters highlighted the need for clarification of the cost effectiveness modeling data and assumptions, including the LCSE calculations, cost benefit methodology, and the end use load shapes.

C ommenters commented about the lack of clarity in the EPA's cost analysis. Commenter s s tated that the EPA's cost analysis for end

- use efficiency measures is not transparent and that major uncertainties remain about how the metrics of cost and benefit are accounted for, given that each state conducts such analyses differently. C ommenter s adde d that costs and benefits for the same measure can differ by state, due to factors, such as local climate and energy use by sector. C ommenter s gave the example of increased building insulation, which would have different costs and impacts when installed in North Dakota vs. California. Commenter s remarked that the EPA's cost analysis is not transparent because it provides little information on the composition, elements, or methods of determining the LCSE. Commenter s requested that the Agency explain ho w energy efficiency costs were incorporated into their IPM modeling for the proposal, what costs associated with energy efficiency were used in their IPM modeling, how such energy efficiency costs were determined including the method used, the rationale fo r the method used, pertinent assumptions used (e.g., availability of energy efficiency is equal everywhere), why the costs used are believed to representative of energy efficiency costs across the nation, and how different modeling inputs on energy efficie ncy costs affect (or is expected to affect) modeling results. Commenter s also asked that the EPA explain if the expected lifetime of each energy efficiency measure has to be accounted for, or if some default program lifetime was assigned to all energy e fficiency programs. Commenter s commented that the estimated cost impacts to electricity consumers associated with energy efficiency enhancements should be more clearly presented and explained in the preamble of the proposed rule as well as the RIA. C omm enter s explained that, while the information is available in the RIA and in the GHG Abatements375 Measures Technical Support Document, the EPA does not make the tremendous cost impact to consumers readily available to the general public, the people most impac ted by this cost burden.

Commenter s stated that the methodology used to evaluate the cost and benefits associated with energy efficiency are unrealistic. Specifically, commenter s remarked that, if the projected levels of energy efficiency are deemed to be exogenously economic, they should also be included in the base case projection of electric demand, as these activities would occur even in the absence of the proposed rulemaking, and thus, should already be factored into the electric load forecast. However, according to c ommenter s , the EPA has not explained why neither the EPA nor the EIA have included these types of projections within the reference load forecast or what the EPA

m odels as the base case.

Commenter s raised questions about several assumptions used in the EPA's IPM model. Specifically, c ommenter s asked the following: Why did the EPA assume in Building Block 4 that states begin implementing energy efficiency measure s in 2017, when the compliance period does not begin until 2020 and many states may not have submitted plans by 2017; what was the technical basis for imposing Building Block 4 into the model exogenously; why did the EPA not model Building Block 4 as a var iable compliance method that states could implement more or less depending on cost; how can the EPA be sure the IPM results accurately reflect the technical and economic feasibility when it simply assumes that Building Block 4 is fully implemented; and how can reliability be realistically assessed absent Building Block 4 modeling that realistically examines whether other measures may be more cost

- effective or otherwise chosen by states.

Commenter s stated that it is difficult to evaluate the EPA's estima tes for LCSE for participants because the Agency did not specify the composition and relative contributions of end

- use measures towards the overall energy savings target. C ommenter s explained that each end

- use has a unique load shape, and specific technolo gies within an end

- use category may have distinct load shapes. C ommenter s added that load shapes can have a significant bearing on the costs of energy efficiency. Commenter s remarked that, for instance, energy savings distributed over nighttime hours, such as from residential lighting technologies, may not be as cost effective as energy savings distributed primarily over summer on

- peak hours, such as from energy

- efficient air conditioning. C ommenter s concluded that, therefore, the LCSE is difficult to estim ate without some assumptions of the underlying load shapes of energy savings.

C ommenters agreed that in evaluating the costs of demand

- side EE, EPA says to have included a cost escalation factor to account for the pace at which states can feasibly impr ove their levels of performance over time. However, c ommenter s asked EPA to explain what escalation factor was used and the assumptions underlying this factor. C ommenter s add ed that the assumptions EPA uses are not reasonably supported by the data cited.

C ommenter s asked for clarification on the data and assumption used for the proposal. C ommenter s said that "pricing and cost assumptions used in developing BB4 are not transparent. The low cost assumed for end

- use efficiency dictates the overall cost of t he regulations, since almost all of the emission reduction (compared to base case) is the result of replacing coal

- fired generation with end

- use efficiency (RIA, p. 3

- 27). How are consumer costs (e.g., the additional cost of the more efficient measure) fac tored into overall costs? Are appliances (heat pumps, refrigerators) assumed to be replaced at end of useful life or earlier? In376 the case of more efficient appliances, such as refrigerators, how is replacement verified in order to ensure that the older app liance does not continue operation? Did the 11 states used by EPA to establish the 1.5 percent benchmark use the same assumptions that EPA used in developing BB4?"

Commenter s discussed the assumptions/basis for converting energy efficiency savings to CO 2 emissions reductions.

Commenter s stated that EPA contends that there is a link between electrical energy efficiency and reductions in CO2 emissions. C ommenter s noted that the EPA's GHG Abatement document refers to projected average 2020 Emissions Intensity across the U.S. Power Systems of 1,127 lbs/MWh saved. C ommenter s noted that EPA describes this calculation as an average of the emissions reduced using IPM an d from its base case.

C ommenter s stated that EPRI research supports the assertion that the implementation of energy efficiency produced measurable, verifiable, and permanent emission reductions. C ommenter s stated that EPRI has developed an emissions calcu lator based on its environmental analyses using the US Regional Economy, Greenhouse Gas, and Energy Model (US

- REGEN). As part of this analysis, EPRI estimates marginal emissions impacts of changes in load as a function of the characteristic load shapes of individual end

- use measures. C ommenter s stated that EPRI and EPA models recognize that CO2 emission impacts depend upon the spatial and temporal effects of changes in the load. C ommenter s agreed that using a model that captures the timing of energy efficie ncy implementation in relation to the generation dispatch stack allows for an energy efficiency portfolio to be optimized for CO2 reduction.

C ommenter s stated that EPRI research supports the link between energy efficiency and CO2 intensity reduction and f inds that EPA's approach for determining CO2 intensity reductions of current energy efficiency measures is reasonable. However, c ommente rs noted that EPA's approach and method may not be appropriate for long term forecasting; it does not account for evolut ion of the generation fleet over time. C ommenter s noted that as the mix of generation in a given region changes, so does the average and marginal intensity of CO2 emissions, which will in

- turn impact the emissions reduction impact of specific types of ener gy efficiency interventions.

C ommenter s agreed with EPA that the link between energy efficiency and CO2 intensity reduction is present. C ommenter s stated however, in quantifying the link between energy savings and CO2 reductions, EPA would benefit from a modeling approach that considers the economic optimization of future generation fleet resources over time, as EPRI does. In addition,
commenter s urged EPA to consider both the spatial effects of regional variation in the electric power generation mix, and temporal effects of changes in electric system load shapes resulting from changes in energy efficiency, and their associated impacts on marginal CO2 emissions.

Comment 2: Need for guidance on EE programs to be considered and cost effectiveness methodologies and tests to evaluate those programs and determine compliance377 Response 2: In the final CPP, the EPA is not requiring the use or submittal of cost

- effectiveness evaluations for DS

- EE measures included in state plans . The final rule provides th e flexibility to use DS

- EE measures in their state plans to meet the emission guidelines set forth in the final CPP, provided they meet the applicable requirements established in the State Plans section of the preamble , section VIII, for the CPP.

The following are summaries of the specific public comments under this comment:

Commenters pointed out the need for guidance on EE programs to be considered, and cost

effectiveness methodologies and tests to evaluate those programs and to determine complian ce. The comments included recommending the use of RVF, TRC, and UCT tests and financial modeling.

Commenter s recommended that the EPA use the Resource Value Framework (RVF) for states that wish to test the 111(d) compliance programs for cost effectivene ss in order to encourage deeper energy savings opportunities. C ommenter s explained that RVF is a powerful tool used by public utility commissions to ensure that their cost

- effectiveness tests are balanced and transparent and account for public policy goals

.
Commenter s stated that EPA should adopt new strategies for determining the cost

- effectiveness of energy efficiency and carbon reductions and develop a new standard practice manual.

C ommenter s stated that current cost effectiveness tests, designed for power plants, often inaccurately penalize energy efficiency in homes, where consumers are spending their own money on a range of measures that primarily affect comfort, health and medical issues, or replace broken equipment, creating a range of non

- energy benefits that explain why customers are satisfied with projects that fail cost effectiveness tests which do not consider non

- energy benefits. C ommenter s stated that these tests are designed to determine the cost

- benefit of energy generation, not pollution reduction.

C ommenter s stated that the majority of ratepayer funded programs are usually required to pass a
cost

- effectiveness test (as noted in the draft regulation). C ommenter s noted that these tests are based on five tests originally developed in the 19 70s California Standards Practice Manual (SPM) (for a determination if new generation assets are cost effective and in the public interest). C ommenter s stated that despite updates, these tests are often implemented in ways that are biased against energy ef ficiency investments because they account for all the costs, but frequently ignore the many benefits of the improvements, including reduced energy use, reduced need for new generation, and pollution reduction.

C ommenter s stated that a new screening effort called the Resource Value Framework (RVF) developed by the Home Performance Coalition and numerous partners, including Efficiency First through the National Efficiency Screening Project (NESP) provides a powerful tool for public utility commissions to ensu re that their cost effectiveness tests are balanced, transparent, and account for public policy goals. C ommenter s stated that specifically, in "The Resource Value Framework: Reforming Energy Efficiency Cost

- Effectiveness Screening" the NESP advocates that in designing an energy efficiency screening test, each state should adhere to a guiding set of principles that have direct implications for the success of states using energy efficiency in their378 plans for 111(d) compliance, as these tests will help states to develop programs with the most
cost

- effective energy efficiency and best carbon reductions. C ommenter s stated that to best utilize the RVF as a compliance tool, states need a SPM that incorporates 111(d) policy and carbon reductions in its implementatio n. C ommenter s stated that the current SPMs across the country do not currently incorporate the RVF or the public policy elements that the RVF includes, thus this new policy tool needs to be developed.

C ommenter s encouraged EPA to recommend the use of the RVF to states that wish to test their 111(d) compliance programs for cost

- effectiveness in order to encourage deeper energy savings opportunities and carbon reductions, particularly in the residential sector. Furthermore,

c ommenter s recommended that EPA su pport the development of a Standard Practice Manual that provides direct guidance to the states on using the RVF to enhance their testing procedures and ensure they are getting the most carbon and energy savings out of their energy efficiency
programs.

Co mmenter s suggested that any energy efficiency program in a utility portfolio be evaluated using the Total Resource Cost (TRC) and Utility Cost Test (UCT) s to keep rates as low as possible. C ommenter s noted that his organization (TVA) uses these two tests to judge the merits of energy efficiency programs, with the criterion that the score from each test must be 1.0 or higher to ensure any program is cost effective for the utility and its rate payers.

Commenter s recommended that energy utilities consider financial modeling related to the costs associated with current energy efficiency program planning and the cost increases that will result to achieve the additional savings of 1.5 percent energy targ ets from 2019 to 2030. C ommenter s explained that such financial modeling will enable evaluation of budget increases and thus, the costs to customers associated with increasing energy efficiency targets to the required 1.5 percent.

Commenter s stated tha t electric cooperatives use three methodologies for evaluating the cost effectiveness of energy efficiency programs: total resource cost (TRC), rate impact measure (RIM), and participant cost test (PCT). C ommenter s explained that each method measures the

c ost effectiveness from a different perspective, giving the cooperatives a broad view of each energy efficiency program and portfolio. C ommenter s described each of the methodologies and pointed out that RIM is the method most often used by cooperatives beca use cooperatives are particularly mindful of any activity that will negatively impact the rates its members pay. Although not requested explicitly, it is assumed that c ommenter s would like the Agency to consider using the RIM to determine the cost effectiv eness of the proposed rule.

Commenter s noted that, like other states, Nevada has limited resources and must select programs that provide the most benefits for its retail customers, and uncertainty over the types of programs that can contribute toward e nergy efficiency may result in lost opportunities or delays in programs that provide significant cost savings to customers, as well as reduce energy consumption and emissions. C ommenter s concluded by requesting clarity from the EPA regarding what types of programs are acceptable under the energy efficiency Building Block.

Commenter s sa id that despite more recent updates to cost effectiveness tests they are often implemented in ways that are biased against deeper energy efficiency investments because the y379 do not account for all the costs, and frequently ignore many benefits. " A new screen effort developed by the Home Performance Coalition and numerous partners, called the Resource Valued Framework provides a powerful tool for public utility commissions to ensure that their cost effectiveness tests are balanced, transparent, and account for public policy goals ." C ommenter s urged EPA to recommend the use of the RVF in states that wish to test their 111D compliance programs for cost effectiveness in order to encourage deeper energy savings opportunities." C ommenter s went further to say that " home performance programs have many different designs as noted in the proposed rule. From deemed savings to model savings to measured savings, there are best practices tha t we urge EPA to include in its guidance to

states developing their implementation plans."

Commenter s stated that conservation efforts must be assessed in terms of their relative cost and the rate impact on other utility customers. C ommenter s explaine d that the implementation of

non

- cost

- effective utility energy efficiency measures will result in increased cross

- subsidization of utility DSM participants by non

- participants, and that the increased cross

- subsidization is both unnecessary and undesirable.

Commenter s commented that the use of an assumed level of incentives (i.e., 20 percent of estimated first participant costs) could produce distributional or subsidization effects between participants and non

- participants if the impacts are not limited by the avoided cost savings. C ommenter s explained that this is a consequence of the use of the Standard Practice Economic Tests for energy efficiency. C ommenter s stated that the total resource cost (TRC) test, used by the EPA and standard in the industry, is not affected by incentive levels, which are a transfer payment between constituent groups. C ommenter s cautioned that, if the use of the TRC in choosing and designing energy efficiency measures is not tempered with examination of appropriate incentive levels through th e use of ratepayer impact measures or participant cost tests, then uneconomic cross

- subsidies may result, depending upon the load shape of the energy efficiency implemented.

Comment 3: Criticism of EPA's cost effectiveness modeling (e.g., costs are undere stimated), not necessarily offering alternatives for data or methodologies
Response 3 : Several commenters recommend that building block four should not be included in the BSER or that the levels that were included in the proposal were not justified or app ropriate. In addition, commenters recommend changes in the estimates of DS

- EE costs associated with the building block four savings levels which also served as the basis for the illustrative demand

- side EE scenario included in the RIA supporting the propos ed CPP. The EPA has determined not to include demand

- side energy efficiency (building block four) in the BSER of this final rule and therefore we do not need to address further comments supporting the removal of DS

- EE from BSER. This determination is discu ssed in section s V.A and V.B of the final rule preamble of the CPP. Even though demand

- side energy efficiency is not being included in the BSER in this final rule and, thus, not included in the determination of emission performance rates, the final rule
pr ovides states the flexibility to use demand

- side energy efficiency measures in their state plans for compliance to meet the emission guidelines set forth in the final CPP, provided they meet the applicable requirements established in section VIII (State Pl ans) of the preamble for the CPP.380 Accordingly, the EPA is including a level of DS

- EE as a component of our illustrative plan scenario s that are the basis for the analysis discussed in Chapter 3 of the RIA that supports the final CPP. EPA is reducing the le vel of DS

- EE in the illustrative demand

- side energy efficiency plan scenario from the level represented in the proposed CPP, from 1.5% annual incremental savings down to 1.0% annual incremental savings. The EPA disagrees with commenters that recommend incr easing the DS

- EE costs presented in the CPP proposal. Based upon more up

- to

date and extensive data the EPA is slightly modifying our approach to DS

- EE costs from that used for the proposed CPP. The support for the DS

- EE costs supporting the final CPP is provided in the Demand

- side Energy Efficiency TSD for CPP Final Rule and is the basis for DS

EE costs represented in the RIA for the final CPP. This illustrative plan scenario reflects a reasonable and feasibly level of DS

- EE, supported by the information and analysis provide in the TSD.

The following are summaries of the specific public comments under this comment:

Commenters criticized EPA's cost

- effectiveness modeling (e.g., costs are underestimated), not necessarily offering alternatives for data or methodologies. Commenters questioned the assumption that electricity consumption will continue to grow, said that EPA double

- counted reductions in generation, that the LCSE calculations did not consider all cost elements of EE, that costs did not account f or historical EE expenditures, that cost were assumed fixed. They also said that EPA did not model EE as a resource in competition with other options, did not consider incentives, and criticized assumptions such as that expanded EE will result in savings t o participants.

Commenter s remarked that the conclusion by the EPA that the energy efficiency measures will be cost effective is belied by the fact that the IPM model projects that electricity consumption will continue to grow, even with the rule in p lace. C ommenter s added that if the energy efficiency measures truly were cost

- effective, it would not be necessary to "hard wire" them into the Agency's projections.

Commenter s remarked that the cost analysis for the proposed rule fails to appreciate th e magnitude of uncertainty underlying the scale of costs in implementing Building Block 4. C ommenter s explained that prior studies relied upon by the EPA did not consider the unprecedented growth in energy efficiency programs and savings, as anticipated un der the proposed rule, and thus, the costs of energy efficiency determined for Building Block 4 are likely to substantially understate the actual costs that would be incurred.

Commenter s stated that the EPA's analysis of end

- use efficiency failed to pr operly account for the upfront consumer costs of energy efficiency upgrades, and thus, results in a flawed analysis for target setting.

Commenter s remarked that economists have pointed out that the costs of energy efficiency programs often end up being higher than reported. C ommenter s explained that, in addition to direct program costs like subsidies, these programs impose substantial indirect costs, including design, advertising, and administration, and these indirect costs tend to be ignored or unders tated in energy

- efficiency evaluations, causing the overall cost effectiveness of these programs to be overstated.381 Commenter s commented that the Agency's cost analysis did not account for all cost elements associated with the implementation of energy e fficiency measures. C ommenter s stated that, specifically, the analysis did not include recovery of lost

- revenues: that portion of rates associated with fixed costs that are not avoided when energy use is reduced through energy efficiency programs. C ommente r s added that the EPA did not account for the costs of administrator incentives in the LCSE analysis, and because of these oversights, the resulting cost of compliance with the proposed rule could be significantly different than what the EPA proposed.

Com menter s commented that the EPA's analysis of Building Block 4 energy efficiency reductions double

- counts energy efficiency savings already accounted for in the base case, effectively resulting in a much more stringent standard. C ommenter s added that the proposed rule goes well beyond current Pennsylvania law and what the Agency's data support. Commenter s noted that relative to the base case, the EPA predicts that increasing levels of energy efficiency in Pennsylvania could reduce generation by approximat ely 12 percent, and such reductions are not supported by the state's historical energy efficiency performance or by other data on energy efficiency potential. C ommenter s explained that the shortfall between the EPA's energy efficiency targets and what Pennsylvania can actually achieve must necessarily be made up through further reductions from coal

- fired plants and puts even more pressure on states with significant coal

- f ired assets, like Pennsylvania, to either close down such facilities or make their continued operation uneconomical.

Commenter s remarked that the proposed rule is too dismissive of the significant increase over historical energy efficiency expenditures ma ndated under Building Block 4. C ommenter s noted that the EPA's own data show that energy efficiency expenditures can be expected to climb from historical levels between $1.8 and 5.9 billion dollars up to $21.8 billion dollars in 2030.

Commenter s stated that the energy efficiency cost estimates applied by the EPA are not conservative, as claimed, but rather significantly underestimate the costs of incremental energy efficiency. C ommenter s cited a study performed by NERA Economic Consulting that concluded that the best assessment of actual historical energy efficiency costs supported values roughly 60 percent above those assumed by the EPA. C ommenter s explained that this suggests that the energy efficiency volumes assumed by the EPA to be economically achi evable are significantly overstated, and, if not modified appropriately, it will mean that the compliance burden of meeting the currently proposed emissions rate goals will be shifted even more toward renewable generation, and that the cost of compliance w ill be significantly greater than the EPA has estimated.

Commenter s stated that, although the EPA has taken a conservative approach by applying program costs at the higher end of the range of reasonable values, the assumption that the ratio of particip ant costs to program costs will remain fixed at historical levels may understate participant costs, and therefore understate LCSE, and overstate energy efficiency potential.

Commenter s commented that, in the EPA's analysis with the IPM, energy efficiency is not adequately modeled as a resource in competition with other mitigation options. C ommenter s stated that, as a result, the estimated costs associated with energy efficiency measures could be underestimated.382 Commenter s stated that the assumption by the EPA that expanded energy efficiency will result in savings to participants is not valid. C ommenter s explained that, even if the EPA's assumptions regarding savings to the electric power generation sector from reduced generation are accurate, these cost savings do not automatically translate to savings to the electricity consumers.

Commenter s remarked that, although the EPA's estimates for LCSE, which range from $0.85 to $0.95/kWh, are lower than LCSE estimates determined by ACEEE, the ACEEE estimates do not include the costs for incentives. C ommenter s also stated that the LCSE estimates are s o tightly bound by the assumptions that any error or changes in the future may produce much higher costs and much less available efficiency. C ommenter s stated that, that, in turn, could mean that achieving a level of 1.5 percent incremental energy efficien cy will cost more than the EPA has assumed.

Commenter s commented that stable or declining demand for electricity does not necessarily translate into a proportionately reduced need for energy delivery infrastructure, as assumed by the EPA in its analysi s. C ommenter s stated that experience has proven this to be an indefensible assumption, and that investment in transmission has, in fact, begun to recover in the recent recessionary period, notwithstanding anemic demand for electric power. C ommenter s furthe r explained that transmission systems are actually in the process of being replaced and upgraded with new technologies because newly competitive power markets require more reliable transfer capacity, situational awareness, and higher quality power (i.e., f ewer interruptions). C ommenter s added that the significant increase in location

- constrained renewable energy resources that the EPA itself aims to promote frequently has no physical or economic access to markets; as a result, transmission systems will cont inue to be upgraded and expanded.

Commenter s explained that the goal of demand side management is to encourage the consumer to use less energy during peak hours, or to move the time of energy use to off

- peak times such as nighttime and weekends, but tha t peak demand management does not necessarily decrease total energy consumption. C ommenter s added that, even if demand side management programs are extremely successful, the load will still grow, albeit at a slower rate, due to expanding population and GDP , and that the EPA should not rely on this overly broad assumption to avoid considering transmission costs in the BSER.

C ommenters stated the proposed increases in energy efficiency will result significantly increase costs to ratepayers. Commenter s commented that the four building blocks of the proposed rule are all based on overly aggressive assumptions. C ommenter s explained that, even if the state of Georgia could increase demand

- side energy efficiency to 10 percent by 2030, it would create hardsh ips on the state's ratepayers. C ommenter s noted that a 2012 study evaluated similar aggressive targets, and concluded that such a program would cost $4 to 5 billion, based on achieving levels of demand

- side energy efficiency that have never been demonstrat ed on a sustained basis. Commenter s stated that the EPA did not address the dramatic increases in utility energy efficiency program budgets and customer expenditures that achieving the proposed aggressive increases in energy efficiency savings rates wil l require. C ommenter s explained that, under the proposed 1.5 percent annual incremental savings rate, states, utilities and customers must continually make additional, expansive investments just to keep up, and energy efficiency savings will not be achieve d unless current state

- and administrator

- run energy efficiency programs are both continued and expanded. C ommenter s noted that, as a practical matter, annual383 incremental state energy efficiency savings rates cannot be increased without supportive regulato ry frameworks and the energy efficiency program budgets they create, and that the EPA should work with the states to set achievable goals that reflect actual in

- state conditions.

Commenter s sa id that " it is impossible to determine the costs imposed by building block 4, given EPA's thin analysis of efficiency investments in the baseline. EPA should appreciate that a clear cost accounting is extremely necessary for this goal in particular. Efficiency investments are widely regarded as least

- cost emissions reduction achievements, but any failure to realize end use efficiency will force a state to compensate with other building blocks that require an expensive and time consuming planning, permitting, financing, and construction process."

Commenter s said that "EPA's cost analysis for end

- use efficiency measures are not transparent. Major uncertainties rest with how the metrics of cost and benefit are accounted, recognizing that each state conducts such analyses differently. Moreover, cost and benefits for the same measure can differ by state, due to factors such as local climate, and energy use by sector. For example, increased building insulation will have a different cost and impact when installed in North Dakota than in California."

Commenter s said t hat "while flexibility is provided by EPA to pick and choose between building blocks, the EE building block is the fundamental basis of EPA's claim about reducing customer bills 8% in 2030 as part of the CPP. If realistic measures and targets are used rath er than EPA's flawed analysis, EPA's claim of lower bills falls apart."

Commenter s noted that " lowering the demand for electricity will reduce utilization of EGUs, it is not logical to assume that this measure will result in a proportional decrease in CO2 emissions. Some of the electricity that would have otherwise been generated would certainly have been produced by "zero

- emitting" EGUs (e.g., nuclear) or via the combustion of "carbon neutral" fuels (e.g., biomass)." C ommenter s concluded by saying that "this means that the "real world" impacts of building block 4 are overstated by an amount roughly proportional to a state's nuclear and RE generation."

Commenter s said that " EPA numbers likely understate the costs and overstate the achievability

o f the energy efficiency gains that are possible in Texas. Further, the nature of utility energy efficiency programs is that the benefits are limited to a subset of consumers who actually qualify and participate in the programs, but the costs are socialized across all consumers, even those who cannot participate."

Commenter s said that " additionally, EPA has significantly underestimated the costs associated with implementing energy efficiency measures in rural areas, like Montana

- Dakota's service

areas ." C ommenter s present estimates of costs and cites the studies that developed them.

Commenter s states that "for Building Block #4, demand

- side energy efficiency programs, our goal for demand reduction was set to obtain our proportionate share of the goal for Georgia. Although netting a reduction in energy usage, the program costs were found to be great enough that rates would increase by $465 million to $1.4 billion, over the study period."

Commenter s said that "the calculation of avoided energy costs f or energy efficiency measures is unclear and appears to be over

- valued." "Most DSM measures do not contribute to capacity and384 should not be credited with capacity savings, so the above cost data should be considered extremely conservative.)"

Commenter s said that " EPA's proposal of a 10 percent reduction due to EE in Florida is unreasonable both in terms of proposed cost and achievability based on Florida's actual historic data. Setting an arbitrary goal without considering the technical potential or the cost

effectiveness of the programs to achieve the goal is contrary to Florida Statutes. Since EE can only be incentivized by utilities (not implemented by them) and the results EPA proposes are unlikely to occur, utilities effectively only have 3 building blocks to work with."

Commenter s said that " WREA encourages energy efficiency by our members. Most cooperatives have aggressive EE programs targeted specifically for the demographics of each cooperative. As a small very rural Cooperative WREA cannot have the same benefit as other Cooperatives. WREA believes EPA has overstated the value of EE in the Plan. Many of the low cost EE measures have been adopted in Colorado. Therefore, there is a diminishing return on investment for expanded measures."

Comme nter s stated that their direct experience with EE investments does not support the EPA's assumptions of the cost of implementing Building Block 4 nor does it suggest that the levels of reductions assigned to the state are achievable. C ommenter s stated t hat EE investment returns experienced do not result in the kind of reductions that EPA projects. C ommenter s stated that while EE is a significant and valuable investment and can be cost effective it is not without problems. C ommenter s stated that EE incent ive programs, such as rebate programs, generally fail to reach the most at risk populations impacted by rising electric costs. C ommenter s stated that this failure only compounds the economic disparity that results from policies that raise electric rates. C ommenter s stated that their experience in offsetting this problem has demonstrated that the cost to address the disparity is very high

- far higher than EPA's anticipated Building Block 4 projections.

Commenter s said that the EE targets will likely incr ease cost for rate

- payers.

Commenter s described how " North Carolina utilities are allowed to increase rates in order to offset the costs to implement EE programs required under our REPS rule. Large consumers of electricity were allowed to opt out of the EE rebate program because of the possibility of a rate increase. All major electricity consumers in North Carolina opted out because of the uncertainty of rate increases." Therefore, c ommenter s recommend that any cost study related to EE measures should i nclude an analysis of rate hikes for residential and commercial customers. In addition, any measures adopted by states to encourage voluntary participation of commercial/industrial customers in EE programs should address uncertainty in rates.

Commenter s sa id that " Even though customers use less electricity, which may mean that less fuel is used to produce power, the utility's infrastructure must remain intact. As the quantity of electricity sold diminishes or stays flat due to energy efficiency, the cost of the infrastructure needed to generate and deliver that energy rises with maintenance, improvements, labor costs and inflation." "The only way to support this diminishing rate of return on the infrastructure investment is to increase electricity rates." Because of the confined footprint of typical municipal utilities, aggressive energy efficiency programs can completely offset any growth in demand. As385 new transmission, distribution and generating resources replace existing resources, rates increase signi ficantly."

Commenter s said that " the Proposed Regulation's claim that overall customer bills will go down is contrary to experience implementing energy efficiency programs in Virginia. In fact, this claim could only be accurate if the costs of reducing CO2 emissions through energy efficiency programs are less than the variable operating costs (primarily dispatch costs) that would be avoided by the compliance action since compliance requires the displacement of existing generation." "The costs of energy efficiency programs of any appreciable scale are likely to exceed avoided variable operating costs. However, under the unlikely scenario that variable operating costs do exceed energy efficiency costs, there are two possible outcomes: 1) aggregate bills ar e lower and the resource provider receives reduced compensation, or 2) rates are adjusted and aggregate bills are increased. If aggregate bills are reduced without a corresponding price adjustment, the net cost of compliance is simply borne by the energy

e fficiency resource provider, it is not avoided. When prices are adjusted, aggregate bills are increased and net compliance costs are borne by consumers. In either of these two events, the cost of compliance is real, it is simply borne by different people a nd businesses."

Commenter s listed their efforts to achieve higher energy efficiency for themselves and their

consumers. Commenters then stated that by attacking the least cost options in advance of EPA's proposed Rule, they appear to have disadvantaged their community under the Rule relative to the state not only in securing credit for their past actions but also in removing the lowes t cost

effective options to meet EPA's expectations moving forward, as their lowest cost programs have already been utilized by eligible customers. C ommenter s read and understood EPA's assertion that its model is a national model and that EPA does not expe ct each utility to meet the scenario utilized for setting the goals but would caution EPA that when a utility or state cannot meet one or more expected BB rates, increased compliance in other areas becomes a mandate. Based

on c ommenter s’ analysis, neither they nor their state will be able to meet BB 1 reductions or BB 2 reductions requiring a significant overweight in BB 3 and 4. Yet, c ommenters ’ efforts to reach those in the greatest need of EE improvements also impair future capabilities. Commenters state d

m any of these projects involve capital expenditures that reap important rewards at the location but are not economic. Because capital to invest in EE projects is not inexhaustible, these expenditures, while an important component of the commenter's commu nity obligation, saps from their ability to make the more efficient expenditures that EPA envisions.

In addition, c ommenter s stated that they are a very small vertically integrated utility, having a very efficient transmission system to serve its load. C om menter s stated to ha ve a compact, multi path or looped transmission system that makes their system extremely efficient. C ommenter s repeated that they built a reliable, efficient transmission system that their customers paid for well in advance of this prop osed rule. The neighboring investor owned utilities are now trying to upgrade their transmission system and recovers costs from the markets which the
commenter s ' customers must cost share, but c ommenter s received no compensation from outside for their exis ting meshed transmission system. C ommenter s w ere gravely concerned that the Rule will drive additional, costly transmission projects that have high ROI for transmission providers within the markets, driving up costs for their consumers, with very little to no actual benefit. C ommenter s stated that as a small municipal utility principally serving their community, the transmission lines are very short distances, such that increasing efficiencies, even just another386 0 .09%, would be relatively impossible for c om menter s to achieve. The U.S. EPA's expected efficiency increase in transmission did not consider a small municipal utility with a small and networked transmission system in establishing the efficiency goal.

Comment 4 : Criticism of EPA's cost effectiveness modeling (e.g., costs are underestimated), offering alternatives for data or methodologies
Response 4: Commenters recommend changes in the estimates of DS

- EE costs associated with the building block four savings levels which also served as the basis for the illustrative EE scenario included in the RIA supporting the proposed CPP. The EPA has determined not to include demand

- side energy efficiency (building block four) in the BSER of this final rule. This determination is discussed in section s V.A and V.B of the final rule preamble of the CPP. Even though demand

- side energy efficiency is not being included in the BSER in this final rule and, thus, not included in the determination of emission performance rates, the final rule provides states the flexibility to use demand

- side energy efficiency measures in their state plans for compliance to meet the emission g uidelines set forth in the final CPP, provided they meet the applicable requirements established in section VIII of the preamble for the CPP. Accordingly, the EPA is including a level of DS

- EE as a component of our illustrative plan scenario that is the ba sis for the analysis discussed in Chapter 3 of the RIA that supports the final CPP. The EPA is reducing the level of DS

- EE in the illustrative demand

- side energy efficiency plan scenario relative to the level represented in the proposed CPP, from 1.5% annu al incremental savings down to 1.0% annual incremental savings. The EPA disagrees with commenters that recommend increasing the DS

- EE costs presented in the CPP proposal for reasons including: the use of annualized rather than first

- year costs to estimate incremental cost impacts of the CPP, assumptions of DS

- EE embedded in the reference case scenario, the treatment of DS

- EE costs as a component of changes in electricity rates, approach to treatment of DS

- EE measure lives, declining availability of DS

- EE op portunities over time, the representation of EM&V costs, changes in levels of program costs relative to participant costs as savings levels increase, and the impact of reduced recovery of fixed costs under the CPP illustrative demand

- side energy efficiency plan scenario . The EPA’s response to these comments is provided throughout the Greenhouse Gas Abatement Measures TSD

– Demand

- Side EE

– which supports the final CPP. Based on more up

- to

- date and extensive data addressing first

- year costs of saved energy

, DS

- EE measure lives, and cost factors, the EPA is re vising our approach to DS

- EE cost estimation for the final CPP. The revised approach is fully presented in the Demand

- side Energy Efficiency TSD for CPP Final Rule

. This illustrative plan scenario reflect s a reasonable and feasibly level of DS

- EE, supported by the information and analysis provide in the TSD.

Absolute levels of DS

- EE costs represented in the illustrative demand

- side energy efficiency plan scenario supporting the final CPP impact analysis ar e reduced due to the reduced level of incremental savings that each state is assumed to reach as compared to the proposed CPP.

The following are summaries of the specific public comments under this comment:

Commenters criticized EPA's cost

- effectiveness modeling (e.g., costs are underestimated), offering alternatives for data or methodologies. For example, pointing out that RIA underestimates EE costs by reporting annualized costs instead of first

- year costs, that off

- bill387 costs needed to be included, th at the inclusion of EE only in the policy cases artificially skews program costs, and that the life for the EE measures was overestimated.

Commenter s commented that the EPA's cost analysis is flawed because it reports only annualized costs between 2017 and 2030. As a result, the analysis excludes costs that are deferred to years beyond this timeframe. C ommenter s pointed out that these deferred costs

am ount to almost $200 billion. In addition, the EPA did not account for costs after 2030, which is a major oversight. C ommenter s stated that the Agency must reevaluate its cost

- benefit analysis by considering the annual cost of energy efficiency measures thr ough the year 2050.

C ommenters commented that the costs of the proposed rule are greatly underestimated because the EPA based its RIA on annualized costs instead of first

- year costs. Commenter s stated that by misstating the timing of energy efficienc y, the Agency's analysis resulted in a substantial understatement of annual compliance costs in 2020, 2025, and 2030. C ommenter s explained that using annualized costs instead of the annual first

- year costs has the impact of pushing energy efficiency costs out into the future and makes the compliance costs for 2020, 2025, and 2030 that the EPA presents in the RIA appear lower than they actually would be. Commenter s commented that the total compliance costs using annual first

- year energy efficiency costs for 2020, 2025, and 2030, calculated entirely using the EPA's model inputs and outputs, would be $28 billion, $20 billion, and $10 billion, respectively, all of which are significantly higher than the compliance costs reported in the RIA. Commenter s explained that, for the purposes of calculating retail electricity rates, the EPA used first

- year energy efficiency costs, which was inconsistent with the Agency's use of annualized energy efficiency costs when presenting total compliance costs. C ommenter s added tha t this does not make sense because energy efficiency costs are incurred and paid for immediately; the spending is not spread out over time, nor is the recovery of the costs spread out. C ommenter s concluded that it is more appropriate to measure energy effi ciency costs using annual first

- year costs. Commenter s stated that energy efficiency programs are typically funded on the basis of O&M expenditures for utility program costs and out

- of

- pocket expense for participant costs. C ommenter s explained that, as energy efficiency utility program costs are typically expensed, a first

- year cost is the appropriate measure to evaluate the true cost, as this is the cost that directly impacts customer rates. Commenter s added that, participant costs are typically not fin anced, but rather represent a one

- time out

- of

- pocket expenditure, and even for programs that are financed, the term is likely to be significantly less than the 20

- year lifetime assumed by the EPA. C ommenter s stated that, by relying on annualized energy eff iciency costs, the cost of the CPP is dramatically understated in the early portions of the program, by more than $20 billion in 2020 and almost $15 billion in 2025. Commenter s explained that the use of annualized energy efficiency costs results in enormou s discounting of total energy efficiency costs given an assumed 20

- year energy efficiency measure life. C ommenter s remarked that proper actuarial treatment would result in significantly higher present value costs as first

- year costs would be discounted les s to the present year. C ommenter s concluded that, although the EPA has characterized utility program costs on a first

- year cost basis, the Agency needs to evaluate total program costs on a first

- year basis also to properly assess the costs and benefits of the proposed rule.

Commenter s stated that the cost analysis for the proposed rule failed to account for the significant off

- bill energy efficiency investments required by member

- consumers. C ommenter s explained that the EPA assumed that utility demand

- side energy efficiency programs account for388 one

- half of the costs to achieve its proposed energy efficiency targets, and the remaining one

half of costs are incurred directly from consumers through off

- bi ll program participation costs. C ommenter s added that these direct participation costs climb to more than $120 annually per cooperative member by 2028 and total more than $1,300 per cooperative member over the 2017 to 2030 period and represents a hidden co st of $28 billion.

Commenter s stated that the proposed rule does not require states to target any specific level of energy efficiency, nor is it within the EPA's authority to require a set level of efficiency. C ommenter s added, that the inclusion of en ergy efficiency measures in the policy cases artificially skews the costs of the program downward by assuming less generation is needed to meet electric demand and that avoided costs are greater than energy efficiency program costs. C ommenter s remarked that, as the EPA has reached a conclusion that the proposed levels of energy efficiency are economic under prevailing market conditions, energy efficiency measures must be included in both the base case and policy cases to ensure a proper, fair, and transparent assessment of costs that are directly attributable to this proposal.

C ommenter s commented that the EPA should have, but failed to, acknowledge the tremendous costs associated with future energy efficiency programs in its discussion of t he projected electricity bill impacts. Commenter s suggested that the $21.8 billion in first

- year costs to electricity consumers should be presented in the context of the electricity price and monthly bill impacts to electricity consumers, rather than co mbining with projected operating costs for electricity utilities, as the EPA has done for its net benefits claims. Commenter s remarked that the EPA's cost analysis is flawed because it does not account for the future impacts of existing energy efficienc y programs being implemented by several states, or the impacts of new energy efficiency programs, which will be implemented regardless of the proposed rule's implementation. As a result, the EPA's base case electricity costs are overstated, and the increme ntal costs of the CPP are substantially understated. C ommenter s cited a report by NERA (NERA Economic Consulting, Potential Energy Impacts of the EPA Proposed Clean Power Plan, (2014), Appendix C.) that supports this argument.

Commenter s remarked that the EPA has underestimated the LCSE. C ommenter s based his conclusion on an analysis by Allcott & Greenstone (Allcott, Hunt and Michael Greenstone. 2012. "Is There an Energy Efficiency Gap?" Journal of Economic Perspectives, 26(1): 3

- 28.2012) that recommend ed a levelized utility cost of end

- use energy efficiency of $0.053/kWh. Based on the same assumption used by the EPA, that utility and participant costs would be equal, c ommenter s estimated a total levelized cost of $0.106/kWh, which is significantly highe r than the EPA's estimate of $0.0651/kWh.

Commenter s commented that, although the EPA assumed a 20

- year life for efficiency improvements, a review of several studies of energy efficiency effectiveness points to a much shorter life for many efficiency i mprovements, especially those involving lighting or HVAC.

C ommenter s explained that the shorter measure life and the need for higher spending by electric cooperatives to promote adoption by residential and low

- income consumers appear likely to drive up LC SE significantly

.389 Commenter s commented that, regarding energy efficiency measure lifetime, the EPA should revise its methodology to assume a slower decline in savings over time and by adding a degree of persistence of savings after a measure "burn out. "

Commenter s stated that EPA fails to consider rate impacts and lost utility base revenues.

C ommenter s noted that pages 5

- 27 through 5

- 29 of the EPA's GHG Abatement Measures TSD discuss comparative cost statistics of EE resources to alternative electr icity resource options utilizing a levelized cost of energy ("LCOE") or levelized cost of saved energy ("LCSE") in the case of EE. Within this analysis, c ommenter s stated that the EPA finds that a review of studies examining only utility costs find an aver age LCSE in the range of 1 to 6 cents per kWh. C ommenter s noted that the EPA further references a recent review conducted by the American Council for an Energy Efficient Economy ("ACEEE") which examined studies across 20 states performed between 2009 and 2 012 which found the LCSE for electric energy efficiency programs in the range of 1.3 to 5.6 cents per kWh, with a mean value of 2.8 cents per kWh. However, c ommenter s stated that examining cost

- effectiveness of EE resources by only examining utility costs is fundamentally flawed

.

C ommenter s stated that unlike traditional supply resources, use of demand

- side resources affects a utility's financial position by reducing the utility's earnings through a reduction in sales. C ommenter s stated that a non

- trivial portion of a typical electric utility's costs arise from fixed costs not directly related to the production of electricity, but to the generation, transmission, and distribution infrastructure required to efficiently produce and transport electricity to end

- use customers. C ommenter s stated that these fixed costs therefore will not be reduced by increased efficiency of end

- use customers, and will still have to be recovered through other means without negatively affecting a utility' s financials. C ommenter s stated that this is sometimes referred to as the lost contributions to fixed costs, lost revenue recovery or lost margin recovery, and has been discussed exhaustively in technical literature, including within an EPA

- affiliated Nove mber 2007 white paper where it was noted that " few energy efficiency policy issues have generated as much debate as the issue of the impact of energy efficiency programs on utility margins."

C ommenter s expressed concern that the EPA is not valuing EE reso urces and their potential on a correct comparable basis to traditional resources. C ommenter s stated that recovery of utility lost margins resulting from EE require rate increases in the form of either (1) subsequent base rate cases, (2) lost revenue adjust ment mechanisms ("LRAMs"), or (3) decoupling mechanisms. C ommenter s stated that rate increases to customers are costs directly related to investment in EE and should be included when comparing resource potentials of EE to supply side alternatives. C ommente r s stated that other issues include the efficiency of demand

- side resources from free ridership and endogeneity issues. As noted by the EPA in its GHG Abatement Measures TSD,

c ommenter s noted that empirical analyses including these factors "present a wider range of estimates of cost of saved energy." C ommenter s stated that one study referenced in the GHG Abatement Measures TSD estimated the average utility cost of saved energy in the range of 5.1 to 14.6 cents per kWh. C ommenter s noted that Louisiana had th e third lowest residential electric rates in the country in August 2014 at 9.77 cent per kWh. C ommenter s stated that it is doubtful390 that extensive EE investments with an average utility cost of saved energy of 14.6 cents per kWh would be cost

- effective in low energy cost states such as Louisiana.

Commenter s stated that technical analysis fails to examine total rate and ratepayer impacts adequately. C ommenter s expressed concern that the EPA's analysis assesses EE potential on an inherently incorrect basis . For best practices, c ommenter s stated that the EPA determined that all states should be able to reach an annual incremental savings through EE equal to 1.5 percent of annual retail sales. C ommenter s stated that the finding of an EE potential goal based o n annual incremental savings assumes that savings through EE exists no matter how saturated the market may become. C ommenter s stated that the EPA incorrectly forces states to view EE as the proverbial "gift that keeps on giving," rather than a demand

- side resource comparable to traditional supply resources. C ommenter s stated that such a goal in terms of renewable energy would require states to increase each year their renewable energy generation, rather than achieve a particular amount of renewable generation capacity or energy, regardless of the need for such generati on. C ommenter s suggested a more appropriate and theoretically sound goal would be based on cumulative energy savings.

C ommenter s noted that like the RE component, the cost to ratepayers is not simply the cost of EE programs, but also the lost revenues incu rred. C ommenter s stated that assuming a mid

- range cost estimate of $106/MWh, EE program expenditures would total $538.9 million. C ommenter s stated that this, in addition to $122.3 million of lost revenues to utilities, results in a total Building Block 4 c ost of $661.2 million.

Commenter s stated that the estimates of price increases are conservative and do not even include the customer portion of energy efficiency costs of $2.2 billion per year by 2024 that EPA would mandate, nor the cost of additional t ransmission lines and ancillary services that would be needed to carry and support the large amount of new gas and renewable generation EPA would mandate (which could add up to $2 billion of costs per year). C ommenter s stated that if socialized across the entire market, these other system costs could effectively add more than 1 cent per kilowatt

- hour price increase to the estimates above.

C ommenter s stated that while flexibility is provided by the EPA to pick and choose between building blocks the EE bu ilding block appears fundamental to reinforcing the EPA's claim about reducing the customers' power bill by 2030 as part of the CPP. C ommenter s noted that if a state decides to veer off course from the EPA's feasible amount of EE, this claim falls apart.

C ommenter s stated that measurement and verification of EE programs is crucial to understanding the potential costs of Building Block #4. C ommenter s noted that large scale measurement and verification programs can add overhead to an EE program and can be du plicative if each party is implementing the same measure and independently running evaluation, measurement and verification programs.

C ommenter s stated that while EE can contribute to and be a significant part of CPP compliance, neither c ommenter s nor oth er utilities can force EE upon its customers. C ommenter s stated that regardless of how much time, effort and money are committed to EE, there is no way to know how effective it will be. C ommenter s stated that even in current EE programs it is difficult to measure energy savings and it is impossible to enforce energy savings targets from EE programs.391 C ommenter s noted that for G&Ts it is even more difficult because the EE goals are implemented by owner

- member cooperatives that own and operate the distribution system, not the G&Ts.

C ommenter s stated that these costs that their Owner

- Members will absorb are extraordinary and must be considered by EPA when setting 111(d) guidelines. C ommenter s stated that failure to do so is arbitrary and violates CAA 111 which requires consideration of economic costs.

Commenter s stated that the industry has tried to achieve significant consumer efficiencies for more than 40 years with marginal success. C omm enter s stated that to include significant impacts raises the question of who is responsible for short falls should targets in plans not be achieved

perhaps a direct result of consumer behavior. C ommenter s noted that EPA points to the reduced electric dema nd in recent years but our analysis points to the non

- recovery from the 2008 recession as more of a factor than efficiency. C ommenter s stated that efficiency gains are more likely to be in the range of 0.5

- 1% per annum on average as opposed to EPA's aggres sive 1.5% Even EPA own data would point to the lower figures.

Commenter s stated that EPA also seems to accept that these savings will come at nominal cost. C ommenter s noted that statement will not be true for the consumer, the power companies, or the
state s. C ommenter s stated that all efficiency requires investment by one or more of these entities

be it CFD light bulbs, meters or programs. C ommenter s noted that states will have to implement substantial and costly Energy Efficiency Measurement and Verificat ion programs which may entail acts of their legislature.

In addition, commenter s requests that EPA estimate the costs associated with meeting the specified EM

- V requirements for both EE and RE and include them in the BSER cost benefit analysis."

Commen ter s stated that four major factors will contribute to higher costs in that future time period than have been observed in the last two decades:

1. increasing saturation levels from programs in place for multiple decades,

2. increasing federal and state stan dards and local building codes which will effectively make each marginal kWh savings more and more costly to achieve;

3. diminishing opportunities for marginal kWh savings from new technologies and

4. increasing costs associated with new technologies. C ommenter s stated that these factors should be taken into consideration when forecasting costs, particularly, so far out into the future.

C ommenter s stated that to further illustrate this point, the references given in the GHG TSD point to additional growing "green field" states that have started programs. C ommenter s stated that these lower costs represent low hanging fruit that will be harvested during the first implementation cycle and are not representative of savings beyond 2020. C ommenter s noted that for example, after 2020, the baseline for most general service lamps is effectively the CFL. C ommenter s stated that LEDs will never realize the savings as CFLs did in the residential sector because EISA has effectively saturated lighting end us es with CFLs and because of the code392 change in 2020. C ommenter s stated that the incremental savings of LEDs compared to CFLs is a fraction of that for CFLs compared to incandescent lighting and at a significantly higher cost per kilowatt hour of savings. C ommenter s noted that while the EPA has included cost escalators of 20% to 40%, cost escalators alone do not explicitly account for each of these four factors.

C ommenter s stated that the EPA's analysis also makes assumptions for participant incremental

meas ure costs to arrive at total costs of energy efficiency programs. As stated in the GHG TSD:

"...while program costs are relatively known and consistently reported by the program administrator, participant costs require significant effort to estimate, and a re less consistently estimated and reported. The ratio between program and participant costs will vary significantly from one program to the next within a utility's portfolio."

C ommenter s stated that there are correlations between participant cost versus p rogram cost and overall levelized cost, and it is not apparent that these are accounted for by the EPA. C ommenter s noted for example, that a program with high costs will have a lower ratio of participant costs to programs costs, and conversely a program wi th low costs will have a higher ratio. C ommenter s stated that these factors introduce variation from state

- to

- state and to assume a 1:1 ratio for all states could cause significant over or under forecasts. C ommenter s stated that the in EPA's calculation of the contribution of demand side energy efficiency, the degradation assumption used in developing targets is based on 20 years, while measure life is based on 10 years which overstates the potential (see 5

- 36 GHG TSD). C ommenter s stated that contrary to EP A claims, this is not conservative (see GHG TSD 5

- 38) and results in higher values achievable than would be calculated if 10 year degradation was assumed in lieu of 20 years. C ommenter s suggested that the final rule's BSER should be recalculated using 10

- y ear degradation assumptions.

Commente rs said that " U.S. EPA's energy efficiency cost estimates of $0.09/KWh are much lower than Indiana's derived cost estimates. An independent study done by National Economic Research Associates (NERA) suggests that, based on a review of historical energy efficiency costs, a national levelized cost of $0.10/KWh is a more accurate assumption. Indiana's costs are even higher. Based on the Indiana utilities' 2015 DSM/EE plans, the costs to utilities range from $0.11 to $0.16/K Wh. However, the Indiana Office of Utility Consumer Counselor (OUCC) points out that costs to ratepayers are even higher, as Indiana's inclusion of lost margins and shareholder incentives more than doubled Indiana's DSM/EE costs to an average of $0.32/KWh. If these compliance costs are taken into account into 111(d), this could have an impact on the BSER analysis for this building block, as well as make this option less affordable for states to implement and, in turn, for consumers, who would bear the brunt of such an increase through an increase in utility rates. Indiana recommends that U.S. EPA consider all available costing information in order to provide stakeholders with more reliable cost estimates."393 Comment 5: Criticism of EPA's cost effectiveness mo deling

- it overestimates costs and does not consider all the benefits of EE

Response 5: Commenters recommend decreasing DS

- EE costs, improving the representation of benefits of DS

- EE, and increasing the levels of DS

- EE represented in building block four. T he EPA has determined not to include demand

- side energy efficiency (building block four) in the BSER of this final rule and therefore we do not need to address further comments supporting changes in the level of DS

- EE from BSER. This determination is discu ssed in section s V.A and V.B of the final rule preamble of the CPP. Even though demand

- side energy efficiency is not being included in the BSER in this final rule and, thus, not included in the determination of emission performance rates, the final rule provides states the flexibilit y to use demand

- side energy efficiency measures in their state plans for compliance to meet the emission guidelines set forth in the final CPP, provided they meet the applicable requirements established in section VIII of the preamble for the CPP. Accordin gly, the EPA is including a level of DS

- EE as a component of our illustrative plan scenario s that are the basis for the analysis discussed in Chapter 3 of the RIA that supports the final CPP. The EPA is reducing the level of DS

- EE in the illustrative deman d

- side energy efficiency plan scenario from the level represented in the proposed CPP, from 1.5% annual incremental savings down to 1.0% annual incremental savings. The EPA continues to recognize that a wide variety of demand

- side energy efficiency measure s can be cost

- effective strategies for reducing CO2 from affected EGUs. These measures are in widespread use across the country and can create multiple benefits beyond greenhouse gas mitigation including lower electric bills, positive investments and job c reation, and reduction of other air pollutants from power plants. The EPA also finds that a wide variety of demand

- side energy efficiency measures have been achieving significant energy savings for years with additional opportunity to achieve energy saving s in the future and to do so cost effectively. The EPA is modifying our approach to estimating DS

- EE cost s b ased upon more up

- to

- date and extensive data

. The support for the DS

- EE costs represented in the final CPP is provided in the Demand

- side Energy Eff iciency TSD for CPP Final Rule and is the basis for DS

- EE costs represented in the RIA for the final CPP. This illustrative plan scenario reflects a reasonable and feasibly level of DS

- EE, supported by the information and analysis provide in the TSD. The E PA believes that the most significant benefits from DS

- EE are captured by the impact analysis represented in the Demand

- side Energy Efficiency TSD for CPP Final Rule and the RIA (Chapter 3). Specifically, through the decreased electricity demand level repr esented in the CPP scenario in IPM, the power system cost impacts that are accounted for include: reductions in fuel supply costs, reductions in other variable costs of generation (variable O&M, etc.), avoided new generation, and wholesale price impacts.

T he following are summaries of the specific public comments under this comment:

Commenter s criticized EPA's cost effectiveness modeling

- it overestimates costs and does not consider all the benefits of EE. For example, c ommenters said that the assumption s were overly conservative, that EPA did not account for integrative design, that the program acquisition costs were overstated, and that the states have EE potential above the 1.5% goal.394 Commenter s said that "because EPA used unreasonably high and out of date cost assumptions for renewable energy and energy efficiency, EPA overstates the costs of compliance and underestimates the potential to make these reductions. Commenters stated a study by the Natural Resources Defense Council found that simply by u pdating the cost and performance parameters for renewable generation and energy efficiency to be consistent with today's technologies, compliance could be achieved at net savings of $1.8 billion in 2020 and $6.6 billion in 2030. Commenters stated t he same study did IPM modeling of a similar but more ambitious set of intensity

- based targets and found that the benefits in saved lives, reduced illness, and climate change avoided would be $28 to $63 billion, far exceeding the estimated costs. C ommenter s then c onclude d that by 2025, EPA should review and strengthen state reduction and renewable energy targets to ensure that the rule is updated with the latest cost

- effective opportunities for cutting CO2 emissions.

Commenter s remarked that the assumptions used by the EPA for energy efficiency in Building Block 4 are overly conservative. C ommenter s explained that his organization has been a deep practitioner of energy efficiency for decades, working mainly with the private sect or with buildings (which use three

- fourths of U.S. electricity), industry (one

- fourth), transportation, and the electricity industry itself. C ommenter s stated that the assumptions about the high cost, slow adoption, and limited life of efficiency measures are systematically far worse than what has been documented by LBNL, NAS, and ACEEE, and seem to be based on worst

- case data throughout.

Commenter s stated that the EPA's analysis did not account for integrative design in energy efficiency measures. C ommente r s referenced several studies that estimated levelized costs as being less than what the Agency had assumed in its analysis. C ommenter s explained that the estimated costs in some of those studies were conservative because they did not account for integrati ve design, which optimizes a building or factory as a whole system rather than its components in isolation. C ommente rs noted that integrative design can often make very large energy savings cost less than small ones, turning the normally assumed diminishin g returns into expanding returns. C ommenter s described examples of how integrative design was applied to specific buildings and the industrial sector, and, based on a 20

- year average measure life and a 3 percent social discount rate, resulted in a mean tec hnical cost of $6/MWh for roughly quadrupled electric end

- use efficiency by 2050. C ommenter s added that the far smaller quantities of electrical savings reflected in current efficiency programs would naturally be expected to cost less than this average and suggested that the overwhelming majority of utility efficiency programs are sub

- optimally designed and do yet not harness integrative design. C ommenter s stated that these results reinforce the great conservatism in the EPA's assumptions about energy effic iency resources, and that this conservatism will become more so because energy efficiency resources keep getting bigger and cheaper. C ommenter s concluded that, in addition to the emissions reductions estimates for Building Block 4, the EPA should assume mu ch greater emissions reductions for Building Block 3 because, since 2011, renewables have substantially outpaced the targets in both cost and deployment rate.

C ommenter s stated that the EPA overestimated costs of energy efficiency programs. Four of

c om menters stated that the estimated costs of $0.85 to 0.95/kWh are overstated and not consistent with state experience and the most recent data. Commenter s explained that the Agency based its costs on a 2009 study by ACEEE, but ACEEE updated and expand ed the report in 2014. The revised report indicates that program acquisition costs average $0.23/kWh, which is395 less than the average cost of $0.275/kWh that the Agency used in its analysis. C ommenters also cited the costs reported in the more recent ACE EE study. C ommenters stated that, in practice, energy efficiency costs are one

- third to one

- fourth of the cost that the EPA assumed. Commenter s added that cost assumptions that reflect the true cost of energy efficiency programs are vital if states a re to realize the full benefits of these resources, and, as a result, the EPA's cost assumptions should include the more realistic assessments that are being seen in the marketplace. Commenter s commented that the analysis by the EPA overestimated the co st of improving energy efficiency by using cost assumptions more than 60 percent above the costs observed in practice, including costs observed in the assessments cited by the EPA. C ommenter s suggested that the EPA use program cost numbers that more properly reflect reality in determining the potential for carbon reductions through energy efficiency. Commenter s stated that the Agency's estimates are very conservative, particularly since ene rgy efficiency is well recognized as a cost

effective (and in most cases the least

- cost) method to reduce greenhouse gases. Commenter s added that, in analyzing the benefits of energy efficiency as a compliance mechanism, a study by ICF estimated an incr emental value of additional energy efficiency of $0.012/kWh in 2030. C ommenter s pointed out that these trends and estimates do not support the EPA's high cost estimates of energy efficiency during the proposed compliance period. C ommenters referenced a recent draft study by LBNL that reported program administrator costs average $0.023/kWh saved. C ommenters added that costs to both the utility and the end users totaled $0.044/kWh saved, based on 2009 to 2013 data for programs run by 50 administrators in 1 9 states from that include every U.S. region. Commenters recommended that the EPA use the results of this study in its analysis for the final rule. Commenter s stated that the Agency's estimated costs are much too high, are not consistent with the Nor theast and Mid

- Atlantic states in their approved energy efficiency program filings, and could have a chilling effect on the inclusion of energy efficiency in compliance strategies. C ommenter s recommended that the EPA assume a LCSE in the range of $0.50 to $0.55/kWh for future ratepayer

- funded energy efficiency programs. C ommenters remarked that cost assumptions that reflect the true cost of energy efficiency programs are vital if states are to realize the full benefits of these resources, and therefore, the EPA's cost assumptions should include the more realistic assessments that are now being seen in the marketplace. Commenter s stated that a more realistic assessment of these costs, based on the long track record of energy efficiency programs that hav e been deployed over the last few decades, would significantly lower the overall compliance costs anticipated for the Clean Power Plan, and perhaps alter the overall balance of carbon pollution reduction measures that the EPA would consider cost

- effective in its BSER analysis. C ommenter s noted that the LBNL study found that, on a savings

- weighted basis, the average levelized program administrator cost of saved energy across the programs sampled was just $0.021/kWh. C ommenter s explained that, assuming
compar able participant costs, the total levelized cost would be $0.042/kWh, which is less than half of the Agency's estimated cost for 2020 ($0.085/kWh). C ommenter s added that, even taking into account the EPA's assumption that the costs of energy efficiency wil l escalate by 40 percent for states that exceed a savings rate of 1 percent per year, levelized cost based on the LBNL data would still be much lower than the EPA's estimate. C ommenter s recommended that recommend that the EPA adopt lower and more realistic cost estimates that better reflect the opportunities for
cost

- effective pollution reductions available under the proposed CPP.

Commenter s noted that the EPA projected that achievement of the target incremental savings rate will result in first

- year en ergy efficiency costs in 2025 of $21.8 billion. C ommenter s explained that LBNL has projected customer

- funded budgets for 2025, even under their high396 projection case, are expected to be only $12.2 billion. C ommenter s added that LBNL's medium case budget pro jections forecast budgets are $8.1 billion in 2025, indicating a shortfall of $13.7 billion when compared to the EPA's projected costs.

Commenter s stated that all regions of the country have economic and achievable EE potential in excess of the EPA's 1 .5 percent assumption. C ommenter s based this statement on an analysis by The Analysis Group (The Economic Potential of Energy Efficiency, A Resource Potentially Unlocked by the Clean Power Plan) that concluded that there is no geographic trend in achievabl e energy efficiency potential, with some regions hitting this value multiple times and across multiple study time periods. C ommenter s added that the average annual savings potential reported represents an annual level of efficiency savings that can be sustained at least over the time period studied.

Commenter s stated that the proposed energy efficiency target of 1.5 percent should b e increased. C ommenter s remarked that a focus on energy efficiency and conservation should be the priority of any plan to reduce the impacts of climate change and that the U.S. should maintain a balanced approach to energy development that includes land pr otection and pristine and natural places that are set aside for public use. C ommenter s explained that the EPA should, thus, encourage a faster rate of energy efficiency and renewable energy expansion within states, and review the assumptions about the comp liance cost of energy efficiency in the context of both rate

- based and

mass

- based options. C ommenter s noted that energy efficiency investments have been proven to be highly effective and must be a core component in the transition to a clean energy economy.

Commenter s said that " the Proposal ignores nearly half of the established energy efficiency market and its potential for reducing emissions. The methodology for calculating EE should be improved to include these options. A further limitation is that the Proposal assumes that states' EE achievement rates in 2017 will be the same as in 2012, another assumption that limits the EE potential presented in this building block."

Commenter s sa id that " the EPA's current Block 4 assumptions underestimate stat es' energy efficiency savings potential and overestimate of the costs of deploying efficiency as a compliance option. Evidence from many state and local programs show that states can do more to increase their energy efficiency at a lower cost than EPA's as sumptions suggest." C ommenter s provide d some data point on levelized cost from the ACEEE and LBLN studies.

Commenter s sa id that " In Block 4, EPA correctly recognizes that energy efficiency is the most cost effective method to reduce emissions, but it also undervalues the role that energy efficiency could play

- underestimating how much, and how quickly states can affordably deploy by overestimating costs and ignoring additional sources of efficiency beyond voluntary utility run programs."

Commenter s said " EPA's cost

- estimate for energy efficiency is unrealistically high and should be lowered. EPA estimates that energy efficiency will cost, on average, 4.5 cents/kWh (excluding participant costs). However, a thorough review of recent state experiences indicates a much lower cost. CUB recommends EPA lower its assumed cost to approximately 3.4 cents/kWh or below (excluding participant costs)." C ommenter s argued that this lower value will reflect true cost and accurately incentivize state compliance.397 Comme nter s conclude d that "EPA should also strengthen Building Block 4 by updating EPA's underlying cost data and cites the values proposed by ACEEE." EPA should update cost data to reflect current assumptions of energy efficiency costs, thus maximizing the Iowa's carbon reductions."

Commenter s said " the cost per MWh of saved energy of $85/MWh to $90/MWh ($2011) over the compliance period is very conservative, particularly since energy efficiency is well recognized as

a cost

- effective (and in most cases th e least

- cost) method to reduce greenhouse gases. In stark contrast to EPA's likely overestimated costs, the American Council for an Energy Efficient Economy ("ACEEE") found that the cost of saved energy for programs in Texas averaged $.026 per kWh in 2009

- 12

- more than 66% less than EPA's estimate.54 In light of the cost trends observed by ACEEE

- estimates EPA relies on elsewhere in the rule

- EPA's estimates are almost certainly too high." "The EPA compounded this error by failing to account for avoided generation costs associated with energy efficiency." C ommenter s provide d a table titled 2030 Texas Electric Sector Costs and Benefits of Compliance (millions 2011$) to support the argument.

Commenter s urge d "the EPA to explain why its estimates of the costs of energy efficiency (EE) are much higher than the estimates of other respected national sources, because the discrepancies between the estimates undermines the credibility of EE as a building lock in state CPP compliance plans."

Commenter s said that "they updated these assumptions and reevaluated the Clean Power Plan's proposed state targets. Our analysis found that the agency overstates the costs of compliance, the amount the power sector would pay to implement the Clean Power Plan as proposed, by $10 billion in 2020, this correction turns compliance costs into savings." C ommenter s further said that "by overstating the costs, the EPA missed an opportunity to make even deeper carbon reductions while keeping costs reasonable."

Commenter s also sa id that the " Updated Cost and Performance" runs demonstrate that EPA can strengthen state targets to achieve deeper emissions reductions at reasonable cost, and NRDC analyzed potential strengthening of state targets based primarily on the ideas put forth in E PA's October 28, 2014 Notice of Data Availability (NODA)." Commenters describe d some of the analyses developed and the available documentation, which include: proposal improvement recommendations, the analysis of a case in which only Pennsylvania and New M exico adopt rate targets as a way to provide additional information on the potential for environmental leakage between states, and sensitivity analyses on the compliance with targets.

Commenter s further said that "simply by making the cost and performance parameters for renewable generation and energy efficiency consistent with today's data, NRDC has found that compliance with EPA's proposed targets could be achieved at a savings of $1.8 billion (Option 1 State) to $4.3 billion (Option 1 Regional) by 2020. For 2030, the savings are even larger: $6.4 billion (Option 1 State) or $9.4 billion (Option 1 Regional). There is a $10 billion difference in 2020 and a $17 billion difference in 2030 between model runs using EPA's assumptions and the Updated Costs and Pe rformance assumptions. These substantial savings indicate that the398 standards could be strengthened and achieve significantly greater carbon reductions at a reasonable cost."

Commenter s said that " in addition to underestimating the full potential of effi ciency, the EPA dramatically overstates the costs of utility energy efficiency programs, the only end

- user efficiency measures it considers. The agency estimates that the levelized cost to program administrators and participants will be 8.5 cents per kWh s aved in 2020 and 9.0 cents in 2030. The best analyses suggest much lower numbers." C ommenter s cite d and describe d some of those analysis including ACEEE's.

Commenter s presented recommendations for improvement of the proposed rule that included "correc ting the economic analysis to use recent actual costs of energy efficiency programs plus moderate escalation rates. The current EPA economic analysis is overly conservative as it applies multiple escalation rates, resulting in average costs more than doubl e those reflected today (recent actual costs having averaged 2.8 cents per kWh savings as documented in a March 2014 ACEEE report."

Commenter s noted that " SACE's review of recent cost literature and review of cost recovery filings in state regulatory pr oceeding indicates that the cost assumptions the EPA used for energy efficiency compliance appear to be very conservative, and subsequently, quite high. SACE has three specific recommendations for EPA regarding its CSE calculations: (1) update its cost est imates based on the 2014 ACEEE report, resulting in a 2017 first year net cost of $230 per MWh and a 2017 levelized cost of 2.8 cents per kWh; (2) eliminate cost escalation for years when incremental energy savings are less than 2.5%; and (3) utilize the 1 1

- year measure life in the 2014 ACEEE report." C ommenter s cite d and describe d the sources of the proposed data including the ACEEE study and data from Southeastern utilities in Georgia, Tennessee and North Carolina.

Commenter s said that "in practice, energy efficiency costs are one

- third to one

- fourth of the cost that EPA assumed. For example, the Lawrence Berkeley National Laboratory found that the average levelized cost of energy saved from efficiency programs is 2.1 cents/kWh at a 6 pe rcent discount rate. ACEEE also performed a study of the cost of efficiency programs and found that, on average, the levelized cost is roughly 2.8 cents/kWh under a 5 percent discount rate and 2.5 cents/kWh under a 3 percent discount rate." "Cost assumptio ns that reflect the true cost of energy efficiency programs are vital if states are to realize the full benefits of these resources. As a result, EPA's cost assumptions should include the more realistic assessments that are being seen in the marketplace."

Commenter s said that " EPA greatly overestimated the cost of energy efficiency in its Clean Power Plan analysis. When EPA's inflated cost assumptions are corrected, the cost of compliance is far lower than EPA anticipates, resulting in greater net benefi ts to ratepayers. We encourage EPA to update its energy efficiency costs to reflect the real

- world, lower cost of energy efficiency." "The more realistic cost estimate presented in these comments is based on an in

- progress literature review of recent cost of saved energy ("COSE") estimates, standardized to use the same basic assumptions of discount rate, measure life time, and dollar year. Across 10 studies, program administrators, COSE values range from 2.5 to 5.6 cents per kWh of lifetime savings, with a median value of 3.1 cents per kWh and an average value of 3.3 cents per kWh."399 Commenter s stated that "while it is not an input to the derivation of Building Block 4 energy efficiency values, the EPA has made assumptions about the average cost of electri city savings as part of its analysis of the cost for complying with the proposed CO2 emissions reduction goals. In particular, the EPA has assumed a levelized cost of saved energy of $85

- 90 per MWh of savings in the 2020

- 2030 time period. We contend that t his cost range is much too high and inconsistent with experience regarding the cost of saved energy from utility energy efficiency programs." "Numerous studies show that achieving high levels of energy savings in the future will continue to be very cost ef fective, providing large net economic benefits for customers and businesses." C ommenter s cite d and describe d those studies and ends by saying that based on these trends and studies, we recommend that the EPA assume total levelized costs on the order of $50

- 55 per MWh saved (based on gross savings) for future utility energy efficiency programs. But in conducting cost

- benefit analysis for energy efficiency policies and programs, it is critical to recognize that energy efficiency programs and measures provide substantial non

- energy benefits as well as direct energy system benefits of avoided fuel purchases and avoided capital investment in energy supply. "

Commenter s said that "if electricity consumers were to deploy a combination of EE and RE technologies t hat either save or generate energy during the peak time of day, the overall effect will be to improve system load factor producing downward pressure on electric rates." "Therefore, instead of the old paradigm where a utility demonstrates a need for new cap acity in order to meet system peak, and does so with the costs rate

- based to all rate payers, I advocate for the utility to be rewarded by investing in technology on the demand

- side of the meter that increases system load factor. Utilities, should recover all costs associated with demand

- side spending with a sufficient additional Return on Equity (ROE) for improving the system load factor."

Commenter s said that the EPA assumes cost and performance estimates for energy efficiency measures and programs that do not reflect the latest data, resulting in unduly high cost assessments. Those estimates cover areas such as first

- year program costs, product life times, program costs over time, and levelized cost of saved energy (LCSE)." C ommenter s proceeded by providing specific recommendations for each of them.

Commenters said that costs do not rise with increased EE and even when low hanging fruit
measurement s have been already implemented.

C ommenters stated that they have found no evidence of a strong correlation between program acquisition costs or LCSE and the level of energy savings. Commenter s explained that his organization's research indicates that LCSE never exceeds $0.06/kWh, even when savings exceed 2 percent of retail electricity sales. C ommenter s cited data from a report by Molina (Molina, M. 2014. The Best Value for America's Energy Dol lar: A National Review of the Costs of Utility Energy Efficiency Programs. Washington, DC: American Council for an Energy

Efficient Economy.) to support this conclusion. Commenter s noted that a study of LCSE from 2005 to 2012 shows average utility costs were relatively flat during that period; as programs achieved deeper energy savings, utility costs were stable and remained within the range of $0.02 to $0.03/kWh. Commenter s added that, while some lower cost efficiency measures, such as CFLs, will lik ely play a much smaller role in achieving energy savings going forward, new technologies that are already viable such as LED lighting, smart thermostats, advance controls400 technology, heat pump clothes dryers, and others will increase savings potential at l ow cost. According to c ommenter s , based on the EPA's assumptions for participant costs, total program costs would average $0.05 to $0.06/kWh. C ommenter s added that, therefore, it is inappropriate for the Agency to conclude that costs would increase 120 to 140 percent over time. Commenter s stated that states in the Northeast, where energy efficiency programs are only among the most mature in the country, have ever

- increasing savings goals being set and realized. C ommenter s stated that thus, it has not been the case in the Northeast that once easier to achieve measures, such as residential lighting installations, are broadly deployed that program costs will significantly increase.

Commenter s commented that the evidence simply does not support the EPA' s assumption that states will experience increasing costs at energy savings levels below 1.5 percent per year. C ommenter s cited a study by The Analysis Group that found that the first

- year cost of saved energy declines as a state increases its savings leve l to 2.5 percent, and there were diminishing returns only after savings levels reached 2.5 percent. C ommenter s referenced another study by Synapse Energy Economics that also found that the unit cost of saved energy for a cross

- section of high

- performing ut ilities declined with increasing levels of savings, even at savings levels of 2 percent of annual sales. C ommenter s stated that the study concluded that the results likely reflected economies of scale and learning effects, and stated that, while there exis ts a possibility that unit costs might begin to increase at much higher levels of energy efficiency program savings, the evidence suggests that current program savings levels have not yet approached any such point. C ommenter s urged the EPA to revise its co st assumptions for energy efficiency to better reflect the results of the LBNL analysis and other credible studies that found little to no relationship between total energy savings and costs at levels of 1.5 percent per year or less. C ommenter s added that more realistic cost projections for energy efficiency would significantly reduce the overall anticipated cost of the Clean Power Plan, and indicate that increased levels of pollution reduction are cost

- effective to achieve.

Commenter s said that " one of the strongest findings of the empirical literature is to support the theoretical expectation that technological innovation will drive down the cost of improving energy efficiency and reducing greenhouse gas emissions. A comprehensive review of Technology Learning in the Energy Sector found that energy efficiency technologies are particularly sensitive to learning effects and policy. " C ommenter s also said that " experience curves, sometimes referred to as "learning curves," are a useful analytical construct for understanding the magnitude of these improvements. Analysts have long observed that products show a consistent pattern of cost reduction with increases in cumulative production volume."

Commenter s highlighted that " ACEEE's latest review actually compares CSE values to relative electricity savings thresholds (i.e. savings as a percentage of applicable retail electricity sales), finding only a weak correlation between the two values, which "casts doubt on the hypothesis that programs with higher ele ctricity savings levels are associated with higher CSE values." Some experts actually suggest that the increasing penetration of information technology may result in energy efficiency resources becoming progressively cheaper."

Commenter s stated moreove r, energy efficiency measures have already been implemented in various states more quickly and at lower cost than EPA has assumed they can be. Energy efficiency measures therefore have not only already been " adequately demonstrated " within the401 meaning of t he Clean Air Act, but have in fact been demonstrated to be more effective and less costly than EPA has assumed. Commenter s urged EPA to use the most realistic cost estimates and the most current data in issuing its final rule.

Commenter s stated the cos t of EE is under half the cost of building coal power plants. Commenter s stated a recent report presented to the NARUC by LBNL determined the average total cost of saved energy is only 4.4 cents per kilowatt hour vs U.S. EIA's estimate for the cost of conv entional coal for utilities, 9.5 cents per kilowatt hour, more than double the total cost of saved energy. Commenter s stated this means that EE and other smart uses of energy that can be controlled from the demand side can replace dirty coal at a fraction of the cost of building coal plants to generate electricity (and without polluting our air or exacerbating climate disruption).

Comment 6: CPP targets are difficult to achieve, cannot be maintained in the long term, and/or are difficult to verify and enfo rce
**.** Response 6: The EPA has determined not to include demand

- side energy efficiency (building block four) in the BSER of this final rule and therefore we do not need to address further comments supporting the removal or changes in the level of DS

- EE in BSER. This determination is discussed in section s V.A and V.B of the final rule preamble of the CPP. Even though demand

- side energy efficiency is not being included in the BSER in this final rule and, thus, not included in the determination of emission per formance rates, the final rule provides states the flexibility to use demand

- side energy efficiency measures in their state plans for compliance to meet the emission guidelines set forth in the final CPP, provided they meet the applicable requirements esta blished in section VIII of the preamble for the CPP. The EPA recognizes that one of the major approaches available for achieving CO2 emission reductions from the electric power sector is demand

- side energy efficiency. The EPA continues to believe that sign ificant emission reductions can be achieved by affected EGUs by the use of such measures cost effectively and that such measures are likely to represent an important component of state plans. Accordingly, the EPA is including a level of DS

- EE as a componen t of our illustrative plan scenario s that are the basis for the analysis discussed in Chapter 3 of the RIA that supports the final CPP. The EPA is reducing the level of DS

- EE in the illustrative de mand

- side energy efficiency plan scenario from the level re presented in the proposed CPP, from 1.5% annual incremental savings down to 1.0% annual incremental savings. For support for the representation of DS

- EE in the illustrative EE plan scenario, see th e Demand

- side Energy Efficiency TSD for CPP Final Rule

. Thi s illustrative plan scenario reflects a reasonable and feasibly level of DS

- EE, supported by the information and analysis provide in the TSD.

The following are summaries of the specific public comments under this comment:

Commenters said that CPP target s are difficult to achieve, cannot be maintained in the long term, and/or are difficult to verify and enforce.

C ommenters questioned the validity of the Agency's assumption that that annual energy efficiency savings can be maintained at a level of 1.5 percent. Commenter s commented that the Agency acknowledged that this level of savings has been achieved by only a few states, and no state has demonstrated that these rates can be sustained over several years. C ommenter s added402 that the Arizona Corporation Commission recently proposed to scale back their energy efficiency program because the costs were exceeding the benefits to consumers, noting that most of the most of the energy efficient upgrades were adopted in the ear ly years of the program. C ommenter s remarked that, in the state of Washington, certain utilities were allowed to set their own energy efficiency goal.

Commenter s explained that two cooperatives subject to the program were able to achieve their target savi ngs, but for both cooperatives, the percentage of actual energy efficiency savings decreased year

- on

- year. C ommenter s added that it is typical for most utilities to meet their goals in the early years, when there are low

- hanging fruit options, but, in each subsequent year, as these low

- cost options are exhausted, it becomes more expensive to implement additional programs and more difficult to find customers willing to participate to a greater extent and at a greater up

- front cost. Commenter s explained th at, to achieve 1.5 percent annual savings with a 50 percent incentive level, the state of Georgia would need a 9.83 percent net cumulative reduction in electricity demand by 2030. C ommente rs stated that the latest Georgia Power technical potential study fi led with the Georgia PSC in 2012, indicated that the cumulative theoretically achievable DSEE potential after 12 years (2012 to 2023) at a 50 percent incentive level was about 9 percent on a gross basis of retail sales. C ommenter s explained that, on a net basis, this equates to about 6 percent, which is well short of the EPA's proposed net target. C ommenter s added that the EPA portrays the cost of achieving similar levels for the entire state of Georgia as approximately equivalent to the results of a techni cal potential study for one utility in the state. Commente r s stated that proposed guideline assumption of 1.5 percent annual increase in incremental savings is ambitious, and that there are uncertainties that suggest the proposed annual increases in inc remental energy efficiency savings are not achievable as proposed. C ommenter s gave lighting as an example, where the baseline for energy savings will change since CFLs and LEDs will be replacing CFLs, not the less

- efficient incandescent bulbs, and therefor e, the program will not likely be able to provide the same level of savings as it has in the past.

Commenter s stated that the savings estimated by the Agency are unachievable and provided an example of high efficiency heat pump replacement to illustrate his point. C ommenter s explained that savings are the product of participation rate and percent savings, and that, if an energy efficiency measure consisted of replacing heat pumps with new models that are 30 percent more efficient, the overall reduction i n household consumption would be 10 percent. C ommenter s stated that, to achieve a saving of 1.5 percent, the utility would need an annual participation rate of 15 percent (0.1 x 0.15 = 0.015). C ommenter s added that, if heat pumps are replaced at the end of an average 15

- year lifetime, only 6.7 percent of the customer base would be in the market for an upgrade in any given year (1/15 = 0.067 = 6.7%). C ommenter s stated that the efficiency gains (percent savings) for many energy efficiency measures are even sm aller than for heat pumps, and, due to the high costs, participation rates for some measures may be even lower the 6.7 percent rate used in this example.

Commenter s stated that the proposed annual 1.5 percent reduction in capacity demand, culminating i n a 10 percent reduction for the state of Florida, is reasonable. C ommenter s first requested that the EPA clarify whether the 10 percent applies to avoided capacity or the percentage of annual sales. Commenter s then stated that Florida's historical demand

- side energy management (DSM) data supports the commenter s ' conclusion. C ommenter s explained that the403 Florida Energy Efficiency and Conservation Act (FEECA) declares the use of DSM programs to be critical and directs the Florida Public Service Commission to adopt goals and approve plans to implement DSM programs in Florida. C ommenter s stated that, since 1981, Florida consumers have paid more than $5.7 billion for DSM programs. Commenter s explained that Florida Statutes require that conservation goals be established at least every 5 years after a careful analysis of technical potential, cost

- effectiveness, and other factors. C ommenter s explained that, in the benchmark year of 2012, DSM pro grams achieved a reduction of 259.7 MW (0.45 percent of total capacity) at a cost of $388 million, or $1.49 million per MW of capacity need avoided by DSM. C ommenter s pointed out that the proposed rule's use of 10 percent DSM avoided capacity, which equals 5,745 MW for the 2012 benchmark year, will cost an estimated $8.6 billion each year and therefore is unreasonable both in terms of proposed cost and achievability based on Florida's actual historical data. C ommenter s added that setting an arbitrary goal w ithout considering the technical potential or the cost

- effectiveness of the programs to achieve the goal is contrary to Florida Statutes.

Commenter s said that "the gap between the agency's efficiency wish and technological reality has significant impli cations for the cost of the rule. Since most of the lowest cost efficiency measures are already being deployed, the next increment will be more expensive especially in states with the lowest retail power prices.

Commenter s described why the CPP's goals are unattainable based on increasing levelized cost for energy efficiency and provides a list of case studies showing the increases in LCEE. The list included locations in Indiana, Ohio, Florida, Kentucky, and Oregon.

Commenter s stated that "the propose d rule anticipates that Utilities would provide incentives to customers to purchase more efficient appliances, furnaces and air conditioners. However, The Utility has no authority to make customers invest in these or other energy improvements. To expect th at load can be reduced by 1.5% per year through this process is not realistic."

Commenter s sa id that " In addition, rebound effects of EE measures should be considered, particularly in conjunction with a mass based BSER scenario. More efficient use of en ergy results in (as stated in GHG TSD at 5

- 29) "[a]n improvement in energy efficiency would effectively reduce the cost of a service or production input, potentially boosting its demand or production output thus increasing energy use." This creates additio nal growth in demand and energy. Although good for the economy, this additional demand and energy usage makes a state goal more difficult to achieve."

Commenter s argued that EE cannot be an enforceable compliance measure. Regardless of how much time, ef fort and money are committed to EE, there is no way to know how effective it will be ." commenter s conclude d that the Proposed CPP includes unachievable EE goals which will undermine Hoosier Energy's ability to provide reliable electricity."

Commenter s said that "IOUs have actively developed EE programs under the incentives provided in North Carolina, and yet their history indicates that the EPA goals of a 1.5% annual incremental rate and a 10.3% annual cumulative rate by 2029 far exceed the past achiev ements of EE savings."404 Commenter s said that "while energy efficiency certainly has virtue as a goal, increasing savings in Montana will be difficult to achieve without significant cooperation from utilities and their regulatory authorities. The Montana PSC would need to dramatically increase the USB surcharge or rely on utilities to voluntarily increase contributions to make energy efficiency a significant component of the state's plan for meeting its Clean Power Rule emissions target." "Ultimately ratep ayers or taxpayers will pay to drive the sort of efficiency gains envisioned in the proposed rule. EPA has overlooked these costs in producing an unrealistic estimate of overall costs of the proposed rule. There is simply too much uncertainty about whether states can actually achieve significant increases in energy efficiency and whether such increases would be

cost

- effective."

Comment 7 : Aggressive EE implementation schedule could be cost prohibitive

. Response 7 : The EPA has determined not to include dem and

- side energy efficiency (building block four) in the BSER of this final rule. This determination is discussed in section s V.A and V.B of the final rule preamble of the CPP. Even though demand

- side energy efficiency is not being included in the BSER in t his final rule and, thus, not included in the determination of emission performance rates, the final rule provides states the flexibility to use demand

- side energy efficiency measures in their state plans for compliance to meet the emission guidelines set forth in the final CPP, provided they meet the applicable requirements established in section VIII of the preamble for the CPP. Accordingly, the EPA is including a level of DS

- EE as a component of our illustrative plan scenario s that are the basis for the analysis discussed in Chapter 3 of the RIA that supports the final CPP. The EPA is reducing the level of DS

- EE in the illustrative demand

- side energy efficiency plan scenario from the level represented in the proposed CPP, from 1.5% annual incremental savi ngs down to 1.0% annual incremental savings. In addition, the EPA is changing the start year for the DS

- EE savings and cost estimates from 2017 (proposed CPP) to 2020 in the final CPP. The support for the DS

- EE savings levels and costs supporting the final CPP is provided in the Demand

- side Energy Efficiency TSD for CPP Final Rule and is the basis for DS

- EE savings and costs represented in the RIA for the final CPP. This illustrative plan scenario reflects a reasonable and feasibly level of DS

- EE, supported by the information and analysis provide in the TSD. The EPA believes the implementation schedule for DS

- EE represented in the final rule is supported by extensive industry experience as detailed in the TSD and is reasonable.

The following are summaries of the specific public comments under this comment:

Commenters in this summary pointed out that aggressive EE implementation schedule could be cost prohibitive.

Commenter s stated that the Agency's aggressive schedule for implementing energy efficiency measures could be cost

- prohibitive. C ommenter s explained that the EPA's estimates of the costs for implementation of the proposed energy efficiency requirements show a substantial level of investments that would result in significant rate impacts on customers. C ommenter s added that simply inviting comments does not provide an adequate basis for reasonably estimating costs.405 Comment 8 : EE has a diminishing rate of retu rn
Response 8 : The EPA has determined not to include demand

- side energy efficiency (building block four) in the BSER of this final rule. This determination is discussed in section s V.A and V.B of the final rule preamble of the CPP. Even though demand

- side energy efficiency is not being included in the BSER in this final rule and, thus, not included in the determination of emission performance rates, the final rule provides states the flexibilit y to use demand

- side energy efficiency measures in their state plans for compliance to meet the emission guidelines set forth in the final CPP, provided they meet the applicable requirements established in section VIII of the preamble for the CPP. Accordin gly, the EPA is including a level of DS

- EE as a component of our illustrative EE scenario that is the basis for the analysis discussed in Chapter 3 of the RIA that supports the final CPP. The EPA is reducing the level of DS

- EE in the illustrative EE scenar io relative to the level represented in the proposed CPP, from 1.5% annual incremental savings down to 1.0% annual incremental savings. In addition, the EPA is changing the start year for the DS

- EE savings and cost estimates from 2017 (proposed CPP) to 202 0 in the final CPP. The support for the DS

- EE savings levels and costs supporting the final CPP is provided in the Demand

- side Energy Efficiency TSD for CPP Final Rule and is the basis for DS

- EE savings and costs represented in the RIA for the final CPP. T he EPA finds that the sustained achievement of these revised levels of savings is achievable and a reasonable basis for the illustrative EE plan scenario. This illustrative plan scenario reflects a reasonable and feasibly level of DS

- EE, supported by the i nformation and analysis provide in the TSD.

The following are summaries of the specific public comments under this comment:

Commenters said that EE has a diminishing rate of return

.
Commenter s stated that, in order to meet the energy efficiency stan dard of 1.5 percent savings per year, the costs of reducing energy consumption would be significantly greater than what the EPA has modeled. C ommenter s explained that, in terms of energy efficiency measure implementation, most utilities that have already " picked the lowest hanging fruit." C ommenter s added that appliance efficiency standards and building codes have been improving energy efficiency for decades. Commenter s explained that, in many cases, further increasing expenditures on efficiency improvement s on existing commercial, industrial, and residential structures could lead to a decreasing return on investment. C ommenter s listed several codes and standards that have significantly reduced energy consumption over the past few decades and stated that, eventually, appliances and other energy efficiency measures incorporated in codes will reach a maximum efficiency level due to constraints on the technology and other factors. C ommenter s concluded that the net effect is that there will be a diminishing return on investment for energy efficiency measures, and the 1.5 percent annual savings assumed for the proposed rule will not be achievable.

C ommenters stated that the cost of expanding energy efficiency programs in states with existing energy efficiency programs will be greater than the historic average program costs because states and utilities have already taken advantage of the most cost

- effective energy efficiency options. Commenter s explained that at least 27 states use a cost effectiveness test in deciding whether to implement an energy efficiency measure, and some potential energy efficiency programs may406 not be impleme nted because they do not pass state cost effectiveness tests. Commenter s added that, outside the Midwest and South, most states have established energy efficiency programs, and thus, have less cost

- effective energy efficiency measures available to them. C o mmenter s stated that, as a result, these states will have higher marginal costs in meeting their higher electricity savings targets, if the states can meet the targets at all. Commenter s commented that utilities that have had energy efficiency programs ongoing for years, or even decades, would experience increased costs for incremental energy efficiency savings because energy efficiency is prevalent in those states, and the potential for additional savings through energy efficiency is reduced. C ommenter s expressed reservations regarding the EPA's estimate that a 0.5 percent increase in energy efficiency will only require a 20 percent increase in energy efficiency spending. Commenter s cited two studies that supported this conclusion.

Commenter s stated t hat the analysis of cost impacts for the proposed rule arbitrarily relies on a single estimate of national average energy efficiency program costs, despite the fact that baseline energy efficiency levels vary widely from state to state. C ommenter s explaine d that the calculation of costs in this way has the effect of understating the significant costs of incremental energy efficiency savings, particularly in those states, like Pennsylvania, that have already made substantial investments in energy efficiency. C ommenter s explained that additional energy efficiency savings beyond those already achieved will typically be costlier and harder to come by in states that have already made substantial energy efficiency investments and that have already implemented less

- costly energy efficiency measures. C ommenter s commented that, by not considering these higher costs, the emissions reductions have not been adequately demonstrated to be cost effective.

Commenter s cited Missouri DSM potential studies to support the ar gument that "program costs as incremental energy savings shrink." Therefore, "the incremental cost of going from realistic to maximum achievable ("RAP" and "MAP") energy efficiency potential." C ommenter s provide d a f igure to illustrate this point.

Commenter s said that "as an established EE program develops, most of the no cost or low cost (low hanging fruit) is exhausted. The remaining EE savings, therefore, becomes more costly to acquire. These programs require more complex administration to add ress various levels of incentives, financing and tiered rebates. This increases the EE program administration costs and greatly increases the dollars spent relative to the energy saved." "Accordingly, the EPA proposal needs to recognize the difference betw een relatively new state EE programs and very mature EE programs and, likewise, allow states like New Jersey to demonstrate and include their baseline savings from past years as part of the goal. It is simply not equitable to view a new state EE program th e same as a state like New Jersey that has been advancing EE saving for over 30 years without an EPA mandate."

Commenter s state d that "the pool of achievable, cost effective DSM is finite (reference the 84.3 MW of DSM identified in the 2009 Plan, for e xample). As customers implement EE measures due to our programs, the pool of remaining opportunities for efficiency improvements shrinks, making it increasingly difficult to continue to achieve constant year

- over

- year savings goals of 6 MW."407 Commenter s went further to say that "because of the lack of additional cost

- effective programs, NorthWestern has not forecast increasing its annual DSM savings goal. In fact, because of the issues just discussed, we are concerned that achieving 6 MW per year of cost

- effective DSM savings into the future is unlikely. In any event, we expect the recent trend of decreasing program savings to continue, at least in the near term, absent stabilized or increased avoided costs and/or the appearance of a new cost

- effective en ergy efficiency technology or technologies." "In the broader context for the state of Montana, NorthWestern has no way of projecting the energy savings potential or pace of savings for large electric customers who are deemed "Choice customers". Additionall y, NorthWestern has no way of projecting the energy savings of the other regulated utilities or the rural electric co

- ops that serve large portions of the state. These two points are added because much of the remaining energy efficiency potential in Montan a is beyond NorthWestern Energy's scope or control."

Commenter s said that " most of the investments undertaken by our community far exceed EPA's expectations of EE's cost per avoided ton of CO2. Second, EE investments made in advance of the CPP are only counted for ten years while we conclude that some of these investments (like insulation), last far longer." C ommenter s provided examples and concluded by saying that "early investments in EE tend to start with the highest return, meaning that early actors are left with lower return investments."

Commenter s said that "states with ambitious existing energy efficiency programs tend to have a larger obligation than states where energy efficiency policies are less advanced. How these differences will impact co st

- effectiveness at the national level is an open question. One might expect there to be more low

- cost opportunities for saving energy in the inexperienced states where energy

- using equipment and buildings are presumably less efficient than in the more
exp erienced states. But it could also be the case that more experience with running energy efficiency programs results in learning by doing

- and greater future energy savings at a lower cost. Or both factors could be at play simultaneously with the ultimate answer depending on the balance between the two."

C ommenter s stated that the EPA target of 1.5 percent net savings by 2020 is very aggressive and potentially very costly to customers. C ommenter s stated that as the 'low hanging fruit' savings have already been captured, it will be more difficult to capture the same level of savings in a cost effective manner. As such, c ommenter s stated that achieving 1.5 percent net savings by 2022 is
very aggress ive and is concerned with the burden of cost placed onto customers if this level of EE is required.

Comment 9 : Need to consider state specific EE potential, electricity supply and demand and regulatory environment

. Response 9 : The EPA has determined not t o include demand

- side energy efficiency (building block four) in the BSER of this final rule and therefore we do not need to address further comments supporting the removal or levels of DS

- EE from BSER. This determination is discussed in section s V.A and V .B of the final rule preamble of the CPP. Even though demand

side energy efficiency is not being included in the BSER in this final rule and, thus, not included408 in the determination of emission performance rates, the final rule provides states the flexibil ity to use demand

- side energy efficiency measures in their state plans for compliance to meet the emission guidelines set forth in the final CPP, provided they meet the applicable requirements established in section VIII of the preamble for the CPP. Accord ingly, the EPA is including a level of DS

- EE as a component of our illustrative EE plan scenario that is the basis for the analysis discussed in Chapter 3 of the RIA that supports the final CPP. The EPA is reducing the level of DS

- EE in the illustrative EE scenario relative to the level represented in the proposed CPP, from 1.5% annual incremental savings down to 1.0% annual incremental savings. The EPA finds that these levels are achievable and a reasonable basis for the illustrative EE plan scenario in al l states even considering the unique characteristics that affect achievable EE potential in each state . This is addressed in the Demand

- side Energy Efficiency TSD for CPP Final Rule and is the basis for DS

- EE illustrative plan scenario represented in the R IA for the final CPP

. This illustrative plan scenario reflects a reasonable and feasibly level of DS

- EE, supported by the information and analysis provide in the TSD.

The following are summaries of the specific public comments under this comment :

Commenters pointed out a need to consider state specific EE potential, electricity supply and demand and regulatory environment.

Commenter s stated that South Carolina's actual energy efficiency potential is greater than the savings scenario used in B uilding Block 4. C ommenter s explained that South Carolina's average household electricity consumption is among the highest in the country, due in part to inefficient housing stock, and, as a result, the state's commercial and industrial energy users collec tively represent vast potential for gains in energy efficiency. C ommenter s noted that such gains would not only reduce demand for electricity and result in lower emissions from fossil

- based generating units, but would also mean bill savings for citizens an d businesses, and would stimulate economic growth via the efficiency segment of the housing and commercial building sectors in South Carolina. Commenter s also explained that, based on the assumptions used by the Agency to estimate energy efficiency savings , the efficiency potential for South Carolina equates to 10,205 GWh of cumulative energy savings by 2030. C ommenter s explained that, in fact, South Carolina's energy efficiency resource is far larger. C ommenter s stated that, in a 2009 analysis of energy ef ficiency potential in South Carolina prepared by ACEEE, the medium and high cases would produce twice the energy that the EPA has assumed to be available for Building Block 4 for South Carolina. C ommenter s concluded by stating that the EPA should recognize the enormous potential for efficiency gains in South Carolina to satisfy a significantly greater portion of the state's emissions reductions requirements than is indicated by the Building Block 4 savings figures used within the target

- setting.

Commenter s said that "the presumed fairness of applying goals deemed reasonable by 11 states to the 39 states which have not adopted such goals lacks support, particularly given the fundamental differences in energy generation, energy use, and electricity demand g rowth by state."

Commenter s further said that " given the difference in geography, temperature extremes, population demographics and the types of economic activity (manufacturing, farming, commercial, tourism, etc.) that are present in individual states acr oss the continental U.S., it409 seems unlikely that end

- use efficiency savings could be ramped up aggressively and then maintained at the 1.5 percent annual rate of improvement by all states."

Commenter s invited EPA to consider Louisiana's report on EE pot ential titled " Louisiana's 2030 Energy Efficiency Roadmap; Saving Energy, Lowering Bills, and Creating Jobs" , which
commenter s present as attachment.

Commenter s argue d that "EPA's assumptions about demand side reductions do not account for the unique competitive market and regulatory structure in Texas."

Commenter s said that "state targets under building block #4 are not differentiated based on the potential for associate d carbon reductions. Indeed, states with some of the highest building block #4 requirements, including Maine, California, and Connecticut, have some of the lowest historic CO2 emissions rates. In contrast, some high emitting states, including Wyoming and W est Virginia, have some of the lowest efficiency potentials. (This latter observation is not surprising as high emissions rates tend to be correlated with low electricity prices and thus weak economic incentives to encourage energy savings through investme nts in efficiency, setting aside environmental arguments for such investments). Across the 50 states there is a small negative correlation between efficiency potential and average CO2 emissions rates in 2012. This lack of correlation raises the question of whether a more targeted approach would improve both the effectiveness and cost

- effectiveness of this building block."

Comment 1 0 : Costs and impacts for low income areas, rural areas and cooperatives
Response 1 0 : The EPA has determined not to include dema nd

- side energy efficiency (building block four) in the BSER of this final rule and therefore we do not need to address further

comm ents supporting the removal or levels of DS

- EE from BSER. This determination is discussed in section s V.A and V.B of the final rule preamble of the CPP. Even though demand

side energy efficiency is not being included in the BSER in this final rule and, thus, not included in the determination of emission performance rates, the final rule provides states the flexibilit y to use demand

- side energy efficiency measures in their state plans for compliance to meet the emission guidelines set forth in the final CPP, provided they meet the applicable requirements established in section VIII of the preamble for the CPP. Accordin gly, the EPA is including a level of DS

- EE as a component of our illustrative EE plan scenario that is the basis for the analysis discussed in Chapter 3 of the RIA that supports the final CPP. The EPA is reducing the level of DS

- EE in the illustrative EE p lan scenario relative to the level represented in the proposed CPP, from 1.5% annual incremental savings down to 1.0% annual incremental sav ings. In addition, the first year of DS

- EE savings for the illustrative scenario has been moved back from 2017 (prop osed CPP) to 2020 in the final rule. The EPA finds that these levels are achievable and a reasonable basis for the illustrative EE plan scenario in all states and has estimated the associated costs. Based upon more up

- to

- date and extensive data the EPA is modifying our approach to estimating DS

- EE costs

. The support for the DS

- EE levels supporting the final CPP is provided in the Demand

- side Energy Efficiency TSD for CPP Final Rule and is the basis for DS

- EE costs represented in the RIA for the final CPP. T his illustrative plan scenario reflects a reasonable and feasibly level of DS

- EE, supported by the information and analysis provide in the TSD. The data and analysis supporting DS

- EE savings and associated costs is410 representative of all states and regions and, thus, includes significant levels of DS

- EE delivered to low income communities as well as rural areas and those served by cooperatively

- owned utilities . Further, because certain communities, including low

- income communities, are disproportionately aff ected by climate change related impacts, the EPA is seeking to ensure that states are actively engaging with communities and is, therefore, requiring states to provide, in their initial plan submittal, a summary of how they have been engaging with communit y stakeholders and how they intend to meaningfully engage with community stakeholders during the additional time (if an extension is granted) for development of the final plan. For the final plan submittal, states must have meaningful engagement with all m embers of the public, including affected communities, during the final plan development process, pursuant to the public participation requirements of the implementing regulations. See section VIII of final rule preamble for further discussion on these requ irements.

The following are summaries of the specific public comments under this comment:

Commenters talked about the costs and impacts for low income areas, rural areas and cooperatives.

Commenter s remarked that a report by LBNL cited extensively by the EPA highlights energy efficiency program constraints faced by program administrators serving a large share of residential and/or low

- income consumers. C ommente rs explained that, while the report does show a low weighted average administrator LCSE, it also shows median costs for residential programs more than twice the weighted average, and both average and median administrator costs for low

- income programs double to triple those of other types. C ommen ter s added that both residential and low

- income programs show a very wide interquartile range, meaning that there is great cost variability across these programs. C ommenter s stated that this suggests that most cooperatives will likely face administrative c osts higher than the average used by the Agency, which is based more on densely populated urban areas. Commente rs remarked that, in the case of low

- income consumers, even higher administrative costs will result, given the need to directly subsidize their l imited ability to afford the upfront costs necessary for energy efficiency improvements.

Commenter s commented that the Agency's LCSE is based on discount rates that are not appropriate for cooperatives. C ommenter s explained that, unlike large businesses, the average homeowner is less inclined or able to make the kind of cost minimizing decisions that many economic models are based upon. C ommenter s explained that even when consumers have the necessary information, t hese investments are often not attractive if the payback period exceeds how long a person intends to stay in a home, or when weighed against other types of investment. C ommenter s stated that, while the 3 percent and 7 percent rates used by the EPA are comm only used market discount rates that might reasonably be applied to electric cooperative administrative costs, there appears to be much higher private discount rates among residential consumers, and especially among low

- income households, that could conser vatively range between 15 percent and 25 percent. C ommenter s added that, assuming a 7 percent discount rate for the cooperative, this would give a blended discount rate for the administrator and the consumer of 11 to 16 percent.411 Commenter s remarked that e nergy efficiency programs typically are designed to split the costs evenly between program administrators and consumers. C ommenter s stated that, because distribution cooperatives are not

- for

- profit businesses owned by the consumers they serve, the distinct ion between what costs are borne by the cooperatives and by their member

- consumers is blurred. Commenter s added that, ultimately, any energy efficiency program costs are borne by

consumer

- owners through higher electric bills. C ommenter s explained that the unique business model of electric cooperatives is well suited to pursue cost

- effective energy efficiency programs, but the Agency's arbitrary targets offer no evidence that the additional costs will ultimately save cooperative consumers money. C ommenter s c oncluded that this is a significant cost for consumers, on top of other increased costs they will bear in the monthly electric bills driven by the proposed rulemaking.

C ommenters commented that it is more difficult for rural electric cooperatives to be ar the costs of the proposed rule. Commenter s stated that rural cooperatives are typically small, averaging fewer than 48 employees, and they serve vast rural territories that average 7 meters per mile. C ommenter s explained that the low density of these areas often means a lack of energy efficiency vendors and service providers, who tend to focus on more lucrative markets in more densely

- populated areas. C ommenter s added that over 62 percent of cooperative customers are residential, and cooperatives serv e 93 percent of the nation's persistent poverty counties, as well as other high

- poverty areas. Commenter s commented that, as a result, electric cooperatives face significant challenges in implementing energy efficiency programs that are likely to raise their costs significantly compared to other utility program administrators. C ommenter s added that, due to th eir small size, rural cooperatives often have too few consumers to recover the costs of implementing energy efficiency programs without burdening members. Commenter s stated that energy efficiency measures undertaken in the residential sector are conside rably less effective on a dollar

- per

- kWh

- reduction basis than those undertaken in the industrial and commercial sectors. C ommenter s noted that the proposed rule would apply the same energy efficiency potential across the residential, commercial, and indust rial sectors, even though industrial processes are already designed to maximize efficiency in order to maximize profits. Commenter s stated that Building Block 4 thus imposes greater burdens on rural electric cooperatives, which have disproportionately resi dential customer bases, than are imposed on municipal and investor

owned utilities, and the proposed energy efficiency targets would result in cooperatives incurring additional cost per member/ratepayer. C ommenter s further explained that rural cooperatives serve the poorest, most rural areas of the country where household electricity consumption tends to be higher due to the prevalence of houses that are larger and more exposed to the elements than urban housing and a disproportionate share of energy

- ineffi cient, manufactured housing. C ommenter s added that the challenges to successful energy efficiency programs are further exacerbated by the large size of rural cooperative service territories.

Commenter s stated that, because of the higher private discoun t rates associated with rural residential consumers, electric cooperatives would have to spend far more on education, promotion, and incentives to even attempt to achieve the 1.5 percent annual savings goal.

C ommenter s commented that consumers living i n economically disadvantaged areas cannot afford energy efficiency upgrades. Commenter s explained that some of the counties in the
commenters ’ service area have average household incomes that are less than half the national
average. C ommenter s explained that, in areas where incomes are low and unemployment levels412 are high, consumers must postpone making improvements that are not cost

- justified in the short

term, even if there would be a long

- term economic benefit. Commenter s explained that energy effi ciency improvements are expensive and often require significant capital investment, and that customers usually avoid such large expenditures until a precipitating event occurs, such as failure of their HVAC system. C ommenter s added that, with current econo mic conditions, this is extremely challenging, particularly in the state of Florida due to significant portions of Florida being economically disadvantaged. C ommenter s stated that, in the long

- term continued challenges are expected in motivating customers to pay premiums for energy efficiency improvements.

Commenter s remarked that it is more difficult for cooperatives to achieve the goal of 1.5 percent annual energy efficiency savings because electricity costs are much higher when compared to IOUs and m unicipal utilities. To illustrate their point, c ommenter s said that, in the state of Minnesota, the average cost per kWh saved for cooperatives is more than double the cost to other utilities in the State. C ommenter s added that the cooperatives also spent 6.95 percent of their gross operating revenue to achieve the reductions, which is almost twice the cost for other utilities.

Commenter s talk ed about impacts on rural populations. "Hoosier Energy is significantly disadvantaged by Building Block 4 of the proposed CPP. The proposed CPP anticipates a significant increase in EE that will translate into a reduced demand for electricity. However, the proposed CPP does not consider the real life situation of many members of the rural electric cooperatives and d oes not consider the impact Building Block 4 will likely have on reliability."

Commenter s said that "while EE is a significant and valuable investment and can be cost effective, it is not without problems. EE incentive programs, such as rebate programs, generally fail to reach the most at risk populations impacted by rising electric costs. This failure only compounds the economic disparity that results from policies that raise electric rates. CWLP's experience in offsetting this problem has demonstrated that the cost to address the disparity is very high, far higher than EPA's anticipated BB4 projections."

Commenter s stated that "as a relatively small, nonprofit energy cooperative, PowerSouth cannot justify expensive measures forced on its consumers t hat provide minimal benefit."

Commenter s said that "based on CPP comments filed through November 28, 2014 by the American Public Power Association (APPA) and National Rural Electric Cooperative Association (NRECA), it is not clear whether municipal util ities and rural cooperatives are fully considering the benefit or potential for energy efficiency in the CPP. In the Southeast, municipal and cooperative utilities are achieving savings higher, or comparable to savings reported by investor

- owned utilities in nearby territories." "As discussed in our joint EM&V comments with several organizations including ACEEE, NEEP, and NRDC, states with limited EE program and evaluation experience should be allowed to use deemed savings values borrowed from other

states or regions to quantify savings for measures/programs installed during 2016

- 2019." One area in which many municipal and cooperative utilities hold an advantage in achieving energy savings is the availability of public funding for financing energy efficienc y. In particular, the United States Department of Agriculture's grant and loan programs through the Rural Utility Service offer low

- cost opportunities for energy efficiency funding. Among these grant and loan413 programs are the Energy Efficiency and Conserva tion Loan Program (EECLP), the Rural Economic Development Loan and Grant Program, and the Rural Energy Savings Program.

Commenter s continued by saying that "another advantage municipals and cooperatives hold is not having a fiduciary obligation to shareho lders to grow profits. However, as noted in a 2014 ACEEE report, management compensation is often based on financial performance, and in some cases, "public utilities that are part of municipal and other government agencies are in fact profit centers whose surplus of revenues over expenses keeps taxes and other public exactions lower than they would be otherwise." While the nonprofit status of public power entities generally means that financial incentives for energy efficiency implementation are not needed , municipal and cooperatives still must ensure that service costs are being recovered through rates. In most cases, fixed costs are recovered in part through variable charges on customers' bills, so a reduction in sales can potentially result in unrecovere d costs. This issue, often referred to as "lost revenues," is a common concern among management of municipal and cooperative utilities considering energy efficiency initiatives. There are several methods to mitigate the impact of lost sales revenue on the recovery of fixed costs, including rate adjustments that reflect the increase of fixed costs across fewer kilowatt

- hours being sold (and purchased if it is a distributi on only utility)."

Commenter s said that "demand

- side measures will increase electrici ty rates, reducing access to affordable electricity on the Navajo Nation." "The American Council for an Energy Efficient Economy (ACEEE) scores electric efficiency programs based upon the percent of electricity revenues dedicated to electric efficiency pro gram budgets. The higher the percentage of total electricity revenues dedicated to energy efficiency (EE) programs, the higher the score on the ACEE scale. These scores show that the programs result in increased electric rates." "Although there are a numbe r of factors that determine the electric rate in a particular state, there is a general trend toward increasing residential electric rates with higher AEEE scores." "Increasing electric rates for the Navajo Nation by such amount will only reduce access to affordable electricity, which, in an area where energy use and income are already so low, seems unjust."

Commenter s urges USEPA to consider the effects of this proposal on those who contribute a much higher portion of their household income to have the basic necessities at home."

According to commenter s small towns will have difficulty meeting EE targets

.

Commenter s expressed concern that the retail electric customers in the commenter s ' town would have difficulty meeting new energy efficiency requirements that accelerate in stringency year by
year.

Comment 1 1 : Implementation budget implications of EE goals

Response 1 1 : The EPA has determined not to include demand

- side energy efficiency (building block four) in the BSER of this final rule and t herefore we do not need to address further comments supporting the removal or change in savings level of DS

- EE from BSER. This determination is discussed in section s V.A and V.B of the final rule preamble of the CPP. Even414 though demand

- side energy efficien cy is not being included in the BSER in this final rule and, thus, not included in the determination of emission performance rates, the final rule provides states the flexibility to use demand

- side energy efficiency measures in their state plans for compli ance to meet the emission guidelines set forth in the final CPP, provided they meet th e applicable requirements established in section VIII of the preamble for the CPP. Accordingly, the EPA is including a level of DS

- EE as a component of our illustrative E E plan scenario that is the basis for the analysis discussed in Chapter 3 of the RIA t hat supports the final CPP. EPA is reducing the level of DS

- EE in the illustrative plan scenario relative to the level represented in the proposed CPP, from 1.5% annual incremental savings down to 1.0% annual incremental savings. In addition, the EPA has moved the first y ear of DS

- EE savings for the illustrative EE plan scenario from 2017 (proposed CPP) to 2020 in the final CPP analysis. Based on more up

- to

date and exten sive data the EPA is modifying our approach to estimating DS

- EE costs

. The support for the DS

- EE costs supporting the final CPP is provided in the Demand

- side Energy Efficiency TSD for CPP Final Rule and is the basis for DS

- EE costs represented in the RIA for the final CPP. These changes lead to reductions in the levels of DS

- EE costs represented in the illustrative plan scenario. The EPA finds these to be reasonable levels and address this in the associated supporting materials referenced. The TSD analyzes the level and growth of EE program budgets under the EE plan scenario and compares the rate of growth with recent historic growth rates. The EPA finds that the EE budget growth rates represented in plan scenario are much lower than historic growth rates a nd, therefore, believes they are reasonable for the illustrative EE plan scenario.

The following are summaries of the specific public comments under this comment:

Commenters talked about the implementation budget implications of EE goals.

C ommenters stated that the EPA did not adequately explain how energy efficiency program costs would be funded or why it is reasonable to expect that future budgets and spending will be sufficient to achieve the proposed 1.5 percent annual incremental savings rate. C o mmenters stated that the EPA arbitrarily assumed that the necessary resources will be available, but that the EPA cannot ignore these costs or assume that the necessary budgets will materialize (on the utility side or the customer side) to support the prop osed savings rate because program budgets directly affect electricity rates for end

- use customers and depend on regulatory approval. Commenter s also commented that the EPA has not considered the interplay of state policies addressing cost concerns and a state's ability to increase its energy efficiency savings rate.

Commenter s commented that, based on a study by LBNL, energy efficiency budgets could exceed $12.2 billion by 2025. C ommenter s explained that this budget estimate is derived from the study' s "high" scenario and assumes that no new major policy developments (such as a national carbon policy) take place, and that, if such new policy changes occur, customer

- funded energy efficiency program spending and savings that exceed the values in the high case budget estimates. C ommenter s concluded that the EPA's Clean Power Plan represents the type of national carbon policy that could have an amplifying impact on national EE spending.

Commenter s stated that "for the majority of states, achieving such dramatic increases in EE savings rates will require correspondingly dramatic increases in utility EE program budgets and customer expenditures, which EPA does not address ". "Based on the current regulatory415 requirements, this cost is passed on to customers. " " As a practical matter, annual incremental state EE savings rates cannot be increased without supportive regulatory frameworks and the EE program budgets they create." C ommenter s present ed some estimates for The Texas Joint Utilities in support of the ar gument.

Commenter s said that "the EPA are problematic because they are based on very limited data, have uncertain funding and may require legislative action. State funding for energy efficiency programs is variable and uncertain. With the exception of t he weatherization program (which receives a portion of program funds from federal sources), all of the efficiency programs noted above run on state general funds as part of capital appropriations. There is not a secure or consistent source of funds for the se programs and appropriations have been highly variable year to year. Decreasing oil production and thus revenue to the state has created an uncertain fiscal situation. Future state funding for efficiency programs is not certain as revenues continue to de cline."

Comment 1 2 : EE could affect system reliability and line losses and compromise emission reduction goals

. Response 1 2 : The EPA has determined not to include demand

- side energy efficiency (building block four) in the BSER of this final rule and therefore we do not need to address further comments supporting the removal or change in savings level of DS

- EE from BSER. This determination is discussed in section s V.A and V.B of the final rule preamble of the CPP. Even though demand

- side energy efficie ncy is not being included in the BSER in this final rule and, thus, not included in the determination of emission performance rates, the final rule provides states the flexibility to use demand

- side energy efficiency measures in their state plans for compl iance to meet the emission guidelines set forth in the final CPP, provided they meet the applicable requirements established in section VIII of the preamble for the CPP. The EPA continues to recognize that a wide variety of demand

- side energy efficiency me asures can be
cost

- effective strategies for reducing CO2 from affected EGUs. These measures are in widespread use across the country and can create multiple benefits beyond greenhouse gas mitigation including lower electric bills, positive investments and job creation, and reduction of other air pollutants from power plants. The EPA recognizes that a wide variety of demand

- side energy efficiency measures have been achieving significant energy savings for years with additional opportunity to achieve energy s avings in the future and to do so cost effectively. Accordingly, the EPA is including a level of DS

- EE as a component of our illustrative EE plan scenario that is the basis for the analysis discussed in Chapter 3 of the RIA that supports the final CPP. The EPA is reducing the level of DS

- EE in the illustrative EE plan scenario relative to the level represented in the proposed CPP, from 1.5% annual incremental savings down to 1.0% annual incremental savings. In addition, the EPA has moved the first year of D S

- EE savings for the illustrative plan scenario from 2017 (proposed CPP) to 2020 in the final CPP analysis. Based
on more up

- to

- date and extensive data the EPA is modifying our approach to estimating DS

- EE
costs

. The support for the DS

- EE costs supporting the final CPP is provided in the Demand

- side Energy Efficiency TSD for CPP Final Rule and is the basis for DS

- EE costs represented in the RIA for the final CPP. These changes lead to reductions in the levels of DS

- EE and associated costs represented in the illustrative EE plan scenario. The EPA finds these to be reasonable levels416 and address this in the associated supporting materials referenced. The EPA disagrees that states and utilities will be unable to employ DS

- EE for compliance without adversely affe cting system reliability. The EPA believes that DS

- EE can be planned for, included in state plans or as a complimentary strategy , and savings levels realized, and that DS

- EE can therefore provide a significant benefit to system reliability.

The following a re summaries of the specific public comments under this comment:

Commenters said that EE could affect system reliability and line losses and compromise emission reduction goals.

Commenter s stated that implementing additional energy efficiency may re sult in system reliability concerns for Florida Power and Light (FPL). C ommenter s explained that FPL utilizes three reliability criteria: a 20 percent minimum total reserve margin; a maximum 0.1 day/year loss

- of

- load

- probability; and a 10 percent minimum generation

- only reserve margin (GRM). C ommenter s stated that implementing addition al energy efficiency could result in FPL not meeting its GRM reliability criterion, thus making FPL's utility system less reliable for its
customers. C ommenter s noted that there are instances in which there simply is no adequate or comparable replacement f or power than an actual, physical generating unit to meet the constant and instantaneous demands of customers for reliable power. C ommenter s added that the electric system is the platform for virtually every aspect of our lifestyle and our economy and cann ot be compromised.

Commenter s said that "If the projected energy efficiency growth cannot be attained, more carbon reduction measures would be required, primarily from reduced coal generation in most states. More low

- emitting or new NGCC/CT generating capacity (not regulated under the CPP) would need to be built. Construction of new replacement capacity, as well as related infrastructure, would take time to plan, permit, finance, and build. If these needs are not identified at an early enough stage, either grid reliability or state CO2 emission goals could be compromised."

Commenter s said that "CWLP's transmission personnel find it implausible that line losses can be reduced by 0 .09%. If anything, because the CPP is likely to drive so many retirements of existing coal plants for whic h the existing transmission grid was designed as to increase line loss." C ommenter s further suggested that "reduced demand cannot replace the fossil

- fuel generation that will retire due to this rule."

Commenter s stated that in its Regulatory Impact Ass essment, the EPA assumes that energy efficiency will grow faster than electricity demand, with total electricity demand shrinking beyond 2020. C ommenter s stated that the implications of this assumption are complex. C ommenter s said that if such energy effic iency growth cannot be attained, more carbon reduction measures would be required, primarily from reduced coal generation in most states. C ommenter s noted that more low

- emitting or new NGCC/CT generating capacity (not regulated under the CPP) would need to be built. C ommenter s stated that the construction of new replacement capacity, as well as related infrastructure, would take time to plan, permit, finance, and build. C ommenter s stated that if these needs are not identified at an early enough stage, eithe r grid reliability or state CO2 emission goals could be compromised.417 C ommenter s stated that by overestimating efficiency savings resulting in declining electricity retail sales, the results of the EPA's entire Regulatory Impact Assessment are concerning f rom a reliability perspective and have implications to electric transmission and generation infrastructure. C ommenter s noted that underlying electricity demand forecasts directly influence the required level of generation and hence, CO2 emissions from exis ting and affected generating units under the CPP. C ommenter s stated that they also affect the required new construction of generating units that are needed to meet expected electricity demand, which is projected to increase during the next 10 years.

Commenter s stated that neither they nor the EPA have the authority to require consumers to limit their electricity consumption short of rationing electricity or causing blackouts/brownouts. Therefore, they felt that it is contrary to law to hold individ ual source operators to a standard that requires consumer action for compliance.

Comment 1 3 : Impacts to the construction industry and housing availability

Response 1 3 : The EPA does not agree that compliance with the final rule will adversely impact housin g affordability or economic development. The EPA’s economic analysis indicates significant reductions in average electric bills as well as significant growth in DS

- EE

- related jobs under the illustrative plan scenarios. See the RIA for the EPA’s impacts an alysis of the final CPP and the DS

- EE TSD for details on the DS

- EE plan scenario reflected in the RIA’s illustrative plan scenarios

The following are summaries of the specific public comments under this comment:

Commenters in this summary talked about i mpacts to the construction industry and housing availability.

Commenter s sa id, "Residential construction is one of the most heavily regulated industries in America. The time and costs of compliance not only impact a business' ability to thrive and grow, they can also negatively affect housing affordability and stifle economic develo pment."

Comment 14 : Other rule benefits to be considered (e.g., indirect, non

- energy benefits)
Response 14 : The EPA has determined not to include demand

- side energy efficiency (building block four) in the BSER of this final rule and therefore we do not n eed to address further comments supporting changes in the level of DS

- EE from BSER. This determination is discussed in section s V.A and V.B of the final rule preamble of the CPP. Even though demand

- side energy efficiency is not being included in the BSER i n this final rule and, thus, not included in the determination of emission performance rates, t he final rule provides stat es the flexibility to use demand

- side energy efficiency measures in their state plans for compliance to meet the emission guidelines s et forth in the final CPP, provided they meet the applicable requirements establ ished in section VIII of the preamble for the CPP. Accordingly, the EPA is including a level of DS

- EE as a component of our illustrative plan scenario s that are the basis for the analysis discussed in418 Chapter 3 of the RIA that supports the final CPP. The EPA is reducing the level of DS

- EE in the illustrative plan scenario from the level represented in the proposed CPP, from 1.5% annual incremental savings down to 1.0% annual incremental savings. The EPA continues to recognize that a wide variety of demand

- side energy efficiency measures can be cost

- effective strategies for reducing CO2 from affected EGUs. These measures are in widespread use across the country and can create multiple benefits beyond greenhouse gas mitigation including lower electric bills, positive investments and job creation, and reduction of other air pollutants from power plants. The EPA also finds that a wide variety of demand

- side energy effic iency measures have been achieving significant energy savings for years with additional opportunity to achieve energy savings in the future and to do so cost effectively. The EPA believes that significant benefits from DS

- EE are captured by th e impact anal ysis represented in the Demand

- side Energy Efficiency TSD for CPP Final Rule and the RIA (Chapter 3). Specifically, through the decreased electricity demand level represented in the CPP scenario in IPM, the power system cost impacts that are accounted for include: reductions in fuel supply costs, reductions in other variable costs of generation (variable O&M, etc.), avoided new generation, and wholesale price impacts. The EPA recognizes that some of the non

- energy benefits identified by the commenters are n ot quantitatively accounted for in the RIA and, therefore, the benefits of the final CPP as presented in the RIA may be understated.

The following are summaries of the specific public comments under this comment:

Commenters described other rule benefits to be considered (e.g., indirect, non

- energy benefits).

C ommenters commented on the need to account for non

- energy benefits in the Agency's analysis. Commenter s noted that non

- energy benefits range from reduced maintenance costs and lower waste of b oth water and chemicals, to increased product yield and greater product quality. C ommenter s explained that these benefits are sufficiently large that they can diminish the payback period of the energy efficiency measures and can mitigate the health and env ironmental effects associated with the extraction, processing, and transportation of fossil fuels. C ommenter s added that energy efficiency resources are therefore, not only among the least

- cost options for reducing CO2 emissions, they impose no independent non

- air environmental impacts and actually reduce those impacts from other sources. Commenter s stated that a proceeding to examine non

- energy benefits was underway at the Massachusetts Department of Public Utilities (DPU) and could likely prove illustrative in understanding the range of non

- energy benefits related to environmental compliance. C omme nter s stated that his organization has also gathered an inventory of state benefit

- cost screening issues and practices, and made similar recommendations for how states can further recognize the expanded range of benefits from energy efficiency programs, in cluding higher productivity, increased occupant comfort and reduce water consumption. C ommenter s added that similar analysis has been conducted by the National Efficiency Screening Project and should also be considered.

3.4.4 Analysis considerations

This section discusses the analytical concerns regarding demand

- side EE programs including annual targets, need to consider updated data, net or gross output, and the rebound effect.419 Commenters have raised a number of issues related in this subsection which are organized by comments below. Responses are provided for these topics.

Comment 1: Multiple c ommenters: Net and Gross Output
Response 1: The EPA has determined not to include demand

- side energy efficiency (building block four) in the BSER of this final ru le and therefore we do not need to address this comment. This determination is discussed in section s V.A and V.B of the final rule preamble of the CPP. Although the EPA has determined to not include demand side

- energy efficiency in the BSER in this final rule we are using 1.0% in our illustrative demand

- side energy efficiency plan scenario. See the RIA Chapter 3 and the Demand

- side Energy Efficiency TSD for CPP Final Rule for details on the savings calculations used for the illustrative demand

- side energ y efficiency plan scenario. The DS

- EE plan scenario is implemented using net savings impacts. Accounting for DS

- EE in state plans is addressed in section VIII of the preamble . All Demand

Side EE measures used to adjust the CO2 rate must be measured in gro ss unless gross savings is unavailable. In those cases net savings can be used

. The following are summaries of the specific public comments under this comment:

C ommenters discussed the advantages and disadvantages of using net or gross output.

Commente r s stated that the EPA should allow the use of gross energy savings to measure and document energy efficiency program achievements.

C ommenter s stated that a common area of misunderstanding among states, utilities, environmental advocates, etc., is whether or not savings targets specified in Building Block 4 are net or gross. C ommenter s stated that net savings targets are commonly used by public u tility commissions to determine lost revenue adjustments for utilities operating DSM programs. C ommenter s stated that in order to determine the actual net to gross ratio, extensive EM&V, including surveys, must be performed to adjust for issues like spill over, free ridership, etc. However, c ommenter s stated that the ultimate goal of the CPP is to reduce carbon emissions from the electric power sector nationwide. Therefore, c ommenter s stated that using net targets is an added and unnecessary burden on state s. C ommenter s stated that gross savings is simpler to calculate and is a more appropriate methodology for both setting state goals and determining credit towards the realization of those goals. C ommenter s requested that EPA allow for gross savings to be ut ilized instead of net for quantifying the carbon reduction benefit of EE programs.

Commenter s stated that EPA should quantify "evaluated savings" and adjust EE targets if
necessary. C ommenter s stated that while EPA's proposal uses the term "net savings, " there is no common definition of "net" used across the United States.

Commenter s stated that the CPP's EE targets for Ohio do not use a gross savings reporting mechanism.

Commenter s stated that EPA should use gross, not net energy savings. C ommen ter s reported that gross energy savings to the state PUCs, which provides an approximation of the level of savings420 achieved, based on energy simulations, bill analysis, and in some cases, in situ metering studies. C ommenter s stated that EPA's Building Bloc k 4, however, is based on net savings. C ommenter s stated that under EPA's proposal, if a customer would have installed an energy efficiency measure anyway (also known as free

- ridership), it would not count towards compliance because the DSEE requirements a re based on "net" rather than "gross" savings. C ommenter s stated that if included in final guidelines, DSEE targets should be based on gross, not net, achievable savings. C ommenter s stated that basing the proposed rule on net savings makes it even more str ingent than it already appears, because utilities will need to achieve even greater gross savings to arrive at the assumed net savings.

C ommenter s noted that in the proposal, EPA states that it calculated state energy efficiency goals based on net savin gs. C ommenter s noted as EPA states:

"This incremental savings rate and all others discussed in this subsection represent net, rather than gross, energy savings. Gross savings are the changes in energy use (MWh) that result directly from actions taken by program participants, regardless of why they participated in the program. Net savings refer to the changes in energy use that are directly attributable to a particular energy factors."

C ommenter s stated that EPA did not specifically seek comment on this is sue, and the Conservation Groups do not disagree with EPA's use of net savings for purposes of target

setting. C ommenter s stated that compliance, however, is another issue. C ommenter s noted that in its State Considerations Technical Support Document, EPA s tates that a consideration for energy efficiency programs in state compliance plans "is whether reporting of energy savings should be specified on either gross or net basis, or both, to promote consistency in measuring the impact of energy efficiency measu res across state plans."

Additionally, c ommenter s recommended providing energy savings credits, as well as developing the Building Block 4 assumptions, based on gross energy savings rather than net energy savings. C ommenter s stated that this is justifie d on a number of counts including the fact that all energy savings generate CO2 emissions reductions. C ommenter s stated that using gross savings rather than net savings will simplify savings analysis for both utility and non

- utility programs, and remove th e possibility of states or utilities claiming dubious "spillover effects". C ommenter s stated that the difference between net and gross savings for electric utility efficiency programs as a whole is typically about 10

- 15%, so 1.5% net savings is equivalent to 1.65

- 1.7% gross savings. C ommenter s stated that the combination of shifting to gross savings and accounting for savings potential from non

- utility programs justifies moving to 2.2% savings per year as the key Building Block 4 assumption (this reflects a n additional 0.5% per year for non

- utility programs and 0.2% per year for moving from net to gross savings).

C ommenter s asked if EPA can provide additional information regarding the treatment of EE in the proposal with respect to the distinction between net and gross savings? C ommenter s stated that it appears that net savings was used for the proposal but gross savings (af ter adjustment for EM&V as appropriate) may be a better capture the full benefit of EE programs.421 Commenter s stated that they consider the EPA's proposed EE savings scenario generally reasonable, if the savings from EE programs are calculated on a gross basis and the baseline is properly defined and equitably applied across the utility sector.

C ommenters recommended that EPA base its savings estimates on either gross savings or adjusted gross savings, as opposed to net savings.

Commenter s believed that EE savings estimates should be based on "adjusted gross savings" rather than net or gross savings. Commenter s stated that adjusted gross savings measures EE savings beyond "business as usual" and is updated to include the most recent impact evaluations. Commenter s clarified that adjusted gross savings are EE savings resulting from actions taken by participants in an EE program, but not adjusted for spillover and free ridership effects and that adjustments are made for data errors, installatio n and persistence rates, and hours of use. Commenter s added that care should be taken in the use of adjusted gross savings that no double counting of EE savings across a state's different types of program activities takes place.

Commenter s stated that EPA should ensure that the EE measurement basis used in the target setting process matches the basis used for compliance and that there is no double counting of EE savings within a state's building block across different EE program activities or between st ates.

Commenter s disagreed with EPA's use of net savings for purpose of target

- setting. Commenter s noted the net savings establish whether a utility expenditure caused a consumer to adopt an energy efficiency technology or measure and as such, they are a useful metric for determining whether a utility should receive a performance incentive or lost revenue adjustment for its program. However, c ommenter s noted that this is a separate issue from whether a utility program has the effect of reducing carbon e missions for a state carbon reduction goal. Commenter s noted from that standpoint, any measure that actually reduces emissions by reducing the need for generation should count for compliance, regardless of whether the measure was installed by a free rider, or resulted from spillover or other factors. Accordingly, Commenter s believed that gross savings are the appropriate metric for compliance purposes, and EPA should so clarify in the final rule.

Comment 2 : Multiple c ommenters: Rebound Effect
Response 2 : C ommenter s ha ve asked the EPA to consider the rebound effect in the energy efficiency analysis for building block four. The EPA has determined not to include demand

- side energy efficiency (building block four) in the BSER of this final rule. This determin ation is discussed in section V.A and V.B of the final rule preamble of the CPP. Even though demand

side energy efficiency is not being included in the BSER in this final rule and, thus, not included in the determination of emission performance rates, the final rule provides states the flexibility to use demand

- side energy efficiency measur es in their state plans for compliance to meet the emission guidelines set forth in the final CPP, provided they meet the applicable requirements established in section V III. of the preamble for the CPP. Accordingly, the EPA is including a level of DS

- EE as a component of our illustrative plan scenario that is the basis for the analysis discussed in Chapter 3 of the RIA that supports the final CPP. T he E PA is reducing the level of DS

- EE in the illustrative demand

- side energy efficiency plan scenario from the level represented422 in the proposed CPP, from 1.5% annual incremental savings down to 1.0% annual incremental savings. The EPA disagrees with commenter s that there is en ough conclusive evidence at this time to include the rebound effect in our illustrative demand side energy efficiency plan scenario. the Demand

- side Energy Efficiency TSD for CPP Final Rule for details including a discussion of the rebound effect and relat ed economic literature.

The following are summaries of the specific public comments under this comment:

C ommenters discussed the issue of the rebound effect.

Commenter s stated that its demand

- side energy efficiency programs result in both direct and ind irect "rebound" effects.

Commenter s stated that there are behavioral obstacles to expanding EE programs. C ommenter s stated that EE programs that reduce electricity rates can create a perverse incentive to consume more electricity, thereby offsetting the potential electricity savings. C ommenter s stated that for example, 10 to 40 percent of efficiency improvements in water heaters is negated by increased water heater usage. Thus, c ommenter s stated that 20 to 60 percent of electricity savings from the EE program may be offset by the "rebound effect" of increased electricity consumption.

C ommenter s stated that EE programs that reduce electricity rates can create a perverse incentive
to cons ume more electricity, thereby offsetting the potential electricity savings. C ommenter s noted for example, 10 to 40 percent of efficiency improvements in water heaters is negated by increased water heater usage. Thus, c ommenter s stated that 20 to 60 percent of electricity savings from the EE program may be offset by the "rebound effect" of increased electricity consumption.

Comment 3 : Basis for value

. Response 3 : The EPA has determined not to include demand

- side energy efficiency (building block four) in the BSER of this final rule. This determination is discussed in section s V.A and V.B of the final rule preamble of the CPP. Accordingly, the EPA is including a level of DS

- EE as a component of our illustrative plan scenario that is the basis for the analysis discussed in Chapter 3 of the RIA that supports the final CPP. EPA is reducing t he level of DS

- EE in the illustrative demand

- side energy efficiency plan scenario from the level represented in the proposed CPP, from 1.5% annual incremental savings down to 1.0% annual incremental savings. For details on how values were determined and t he various steps, see the Demand

- side Energy Efficiency TSD for CPP Final Rule

. This illustrative plan scenario reflects a reasonable and feasibly level of DS

- EE, supported by the information and analysis provide in the TSD.

The following are summaries of the specific public comments under this comment:

Commenter s stated that the "2012 Total MWh" of 6,898,283 megawatt

- hours (MWh ) used in Step 5 does not match the statewide generation data reported in the EIA 923 forms nor the value reported in Table 4

- 1 of the Greenhouse Gas Abatement Measures Technical Support Document. C ommenter s stated that the value provided in those two docu ments is 6,946,419 MWh.423 C ommenter s stated that EPA should provide the basis for the 6,898,283 MWh value or use the 6,946,419 MWh value from the EIA 923 form.

C ommenter s stated that supporting data could not be found to allow for replication of the EPA cal culations used to determine the Alaska demand side energy efficiency assumptions for 2020 through 2029. C ommenter s stated that this supporting data should be clearly identified in the record so that the public has the opportunity to verify the EPA assumpti ons.

3.4.5 CHP/cogeneration

This section discusses the analytical concerns regarding demand

- side EE programs as they relate to CHP/cogeneration. Commenters asked for EPA to consider CHP as a part of the best system of emission reductions (BSER).

Commenters have raised a number of issues related in this subsection which are organized by comments below. Responses are provided for these topics.

Comment 1: CHP should be considered EE measure

. Response 1: One of the major approaches available for ac hi eving CO2 emission reductions from the utility power sector is demand

- side energy efficiency, including CHP. The EPA continues to believe that significant emission reductions can be achieved by the source category through use of such measures at reasonab le costs and that demand

- side energy efficiency and CHP will represent an i mportant compon ent of state plans. However, the EPA is excluding DS

- EE from BSER. See section s V.A and V.B of the final rule pr eamble of the CPP for the EPA’s response to this commen t. DS

- EE and CHP remains generally available for compliance. Demand

- side EE and CHP that are tied to a state plan and achieve quantified and verified MWh savings may be used to achieve the emission gui delines specified in the CPP Final rule, provided they meet the eligibility requirements for resources described in Section VIII of the final preamble of the final CPP.

The following are summaries of the specific public comments under this comment:

C ommenters commented that CHP should be considered as an energy efficiency measure in the BSER. Commenter s stated that installation of new industrial CHP systems will reduce the utilization of existing fossil fuel fired generation, and therefore, will reduce emis sions from affected EGUs. C ommenter s added that the EPA should clearly signal states that such new CHP can be considered an end

- use energy efficiency measure. Commenter s stated that the BSER should include energy efficiency that could be gained from con structing CHP and state

- specific estimates of the cost

- effective savings available should be added to Building Block 4. C ommenter s cited a recent report by ACEEE that found that 68 million MWh of energy could be saved in 2030 by installing CHP. C ommenter s noted these savings represent approximately 18 GW of avoided capacity and could cut carbon dioxide emissions and offset the need for about 36 power plants. C ommenter s noted that the EPA has already recognized the value of CHP as a424 proven cost

- effective tec hnology to reduce GHG emissions by incorporating CHP in its BACT guidance and its 111(b) rule and by issuing awards to various CHP ENERGY STAR projects in recognition of their emissions reductions. Commenter s stated that, because CHP is currently incorp orated, in whole or in part, into the energy efficiency program savings goals in most states in the Northeast, c ommenter s recommended that CHP be allowed as an eligible compliance method as proposed by the EPA, provided such credit reflects incremental CHP activity beyond that otherwise included in the baseline of policies and programs assumed as "in place" prior to 2017. Commenter s stated that his organization recommends that CHP be included as a viable option to reduce CO2 emissions, and state credit shou ld include energy savings from CHP projects. C ommenter s added that an analysis of CHP by investor

- owned utilities supports inclusion of CHP systems and provided the example of a study by Kansas City Power and Light that identified 60 candidate customers fo r CHP, including customers in the chemicals, food, healthcare, and industrial sectors.

C ommenter s stated that ASAP has estimated the energy savings potential state

- by

- state in 2025 and 2035 assuming that state standards on ten products are adopted in 2 017. C ommenter s stated that expanding the adoption of CHP systems through state incentive programs or other types of policies to stimulate greater CHP adoption is another opportunity for additional energy savings at the state level. C ommenter s stated that based on an analysis by ACEEE, they estimated that it would be feasible to expand CHP capacity by 1,500 MW per year nationwide during 2020

- 2030. Furthermore, C ommenter s stated that doing so would provide net electricity savings of around 0.15% per year for the nation as a whole. C ommenter s stated that this is a reasonable if not conservative assumption about incremental CHP potential.

Commenter s stated that the EPA should justify the exclusion of any effective and commercially viable technology, such as CHP, from consideration as a qualifying energy efficiency resource.

Comment 2 : EPA should consider regulating CO2 emissions from CHP

. Response 2 : C ommenter s ha ve asked the EPA to regulate non

- covered CHP sources. The EPA has determined that CHP sources that do not fall under the regulated source category under 111d will not be regulated under Section 111d of the CAA. States have flexibilities and those flexibilities, related to CHP are discussed in section VIII of the final preamble of the final rule

. The following are summaries of the specific public comments under this comment:

Commenter s commented that, while not currently regulated, the EPA may consider regulating CO2 emissions from non

- covered CHP sources because, in most cases, a facility installing CHP may increase onsite emissions while displacing a greater amount of emissions from t he electric system. C ommenter s explained that the onsite increase could trigger additional or more

- stringent regulation through other current or future rulemakings, and that this uncertainty could be a significant deterrent to facility owners considering n ew CHP. C ommenter s added that, if a facility anticipates future regulation, it may perceive a disincentive to participate in a Clean Power Plan emissions

- reduction program in the near term, leaving readily deployable emissions reductions on the table. To a ddress this issue, C ommenter s proposed that the EPA should allow a425 non

- covered CHP system to voluntarily place itself under current power plant regulation, either under section 111(b) (for new sources) or 111(d) (for existing sources). C ommenter s noted tha t, by placing the CHP system under regulation, direct emissions from the CHP system should be excluded from site emissions that may in the future be regulated by the Agency.

Comment 3 : CHP in EE Portfolio Measures

. Response 3 : The final rule provides states the flexibility to use demand

- side energy efficiency measures and CHP in their state plans for compliance to meet the emission guidelines set forth in the final CPP, provided they meet the applicable requirements established in section VIII of the preamble for the CPP. The EPA recognizes that one of the major approaches available for achieving CO2 emission reductions from the electric power sector is demand

- side energy efficiency and CHP. The EPA continues to believe that sign ificant emission reductions can be achieved by affected EGUs by the use of such measures cost effectively and that such measures are likely to represent an important component of state plans.

The following are summaries of the specific public comments unde r this comment:

Commenter s stated that over 20 states have energy efficiency resource standards (EERS) that require utilities to save a certain amount of energy every year. Most of these plans focus on "End Use" efficiency measures, but do not track end

- use requirements and instead track electricity or natural gas consumption. Seven states include other types of efficiency in their EERS, including some forms of CHP (specifically bottoming cycle or waste heat to power). C ommenter s concluded by saying the CHP can be encouraged as a component of a State Clean Power Plan because of these current examples of implementation.

3.4.6 Other

This section discusses additional concerns regarding demand

- side EE programs that do not fit into the other subsections of th is section 3.4, including prioritizing GHG reduction efforts, banking system and use of natural gas in EE programs.

Commenters have raised a number of issues related in this subsection which are organized by comments below. Responses are provided for these topics.

Comment 1 : Account for natural gas savings in EE programs

. Response 1 : C ommenter s asked the EPA to extend regulation to natural gas combustion as an energy efficiency measure. The final rule is only regulating affected EGUs subject to 111d. Please see section VIII of the preamble that describes the eligible EE measures that can be use d for compliance and non

- eligible measures

.426 The following are summaries of the specific public comments under this comment:

Commenter s urged the EPA to consider allowing states to account for natural gas savings in energy efficiency programs. They requ ested that EPA recognize the unintended consequences that could be associated with fuel

- switching, and the carbon that would not be captured and measured, as well as the inefficiencies in delivery of energy

- efficiency services that may come by excluding ef ficiency gains from gas and other heating fuels under the rules.

Commenter s stated that maximizing direct use of natural gas closest to the point of consumer application may be the single most effective way to help EPA meet its stated goals of cutting wasted energy, improving efficiency, and reducing pollution.

Commenter s stated that EPA should consider allowing states to account for natural gas, oil, and propane savings in energy efficiency programs.

Commenter s urged the EPA to recognize the u nintended consequences that could be associated with fuel switching and carbon that would not be captured and measured as well as the inefficiencies in delivery of energy efficiency services that may come by excluding efficiency gains from gas and other no n

- electric heating fuels under the rule. C ommenter s recognized that the language of section 111(d) has been interpreted to prohibit utilizing measures that do not have a direct impact on emissions from covered generating units, not allowing these "offsets" would prov i d e an additional incentive for buildings to move from electric heat to natural gas heat. C ommenters requested that EPA provide guidance to states that include residential energy savings programs in their implementation plans to encourage best

- practices for reducing unaccounted

- for carbon emissions that come from switching to natural gas, or oth er fuels, from electric energy.

Commenter s stated that natural gas water heaters are much more efficient than electric resistance heaters, they give a figure of 80% vs. 30% between the two, however there is no citation. C ommenter s urged the inclusion of fuel substitution at the end use to displace electric energy, especially in space and water heating.

Comment 2 : Grid reliability if EE goals not met

Response 2 : The final rule provides states the flexibility to use demand

- side en ergy efficiency measures and CHP in their state plans for compliance to meet the emission guidelines set forth in the final CPP, provided they meet the applicable requirements established in section VIII. of the preamble for the CPP. The EPA recognizes tha t one of the major approaches available for achieving CO2 emission reductions from the electric power sector is demand

- side energy efficiency and CHP. The EPA continues to believe that significant emission reductions can be achieved by affected EGUs by the use of such measures cost effectively and that such measures are likely to represent an important component of state plans. The final rule also has provisions that will maintain reliability in the system, such as reliability safety valve provisions and

c oordination with the Regional Transmission Organization, Independent Service Organization or Grid operator.427 The following are summaries of the specific public comments under this comment:

Commenter s worried that if the EE goals proposed in building block 4 are not met, then reliability to the grid will be put into jeopardy. This is because additional carbon reduction measures would be required, likely in the form of reduced coal generation. C ommenter s stated that curtailing the use of coal

- fired units without supplementing the power grid with additional generation introduces the likelihood of a gap between meeting the CPP's CO2 goals and having sufficient energy available to meet member needs.

Comment 6: Commenters expressed concern that Building Block #4 could be implemented de facto by setting annual mass

- based CO2 emission limits for EGUs. Commenters asked, "What happens when the owner/operator of an EGU subject to an annual CO2 mass emission lim it realizes that the EGU is about to exceed that limit? Faced with the option of continuing to provide electricity to its customers or exceeding its permitted limit, would the EGU owner/operator be forced to curtail or cease providing electricity to one or more of its customers in order to avoid a knowing violation of the Clean Air Act?" Commenters believed it is inappropriate for a federal agency to willingly place an obligation on any business that forces them to choose which requirement to violate.

Res ponse 6: For the reasons explained in section V of the preamble the Agency is not including BB4 in the BSER. EPA has provided states with significant flexibility in designing their programs to ensure that sources will be able to comply with the state pla n while ensuring reliability concerns are addressed.