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CHAPTER 13. UTILITY IMPACT ANALYSIS 

TABLE OF CONTENTS 

13.1 INTRODUCTION ......................................................................................................... 13-1 

13.2 METHODOLOGY ........................................................................................................ 13-2 

13.3 RESULTS ...................................................................................................................... 13-2 

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CHAPTER 13. UTILITY IMPACT ANALYSIS 

13.1 INTRODUCTION 

The U.S. Department of Energy (DOE) will analyze specific effects of its proposed 

standard levels on the electric and natural gas utility industry as part of the notice of proposed 

rulemaking analyses, using a variant of the U.S. DOE/Energy Information Administration 

(EIA)’s National Energy Modeling System (NEMS). The NEMS is a large, multi-sectoral, 

partial equilibrium model of the U.S. energy sector. EIA uses NEMS to produce the Annual 

Energy Outlook (AEO).1

 NEMS produces a widely recognized baseline energy forecast for the 

United States, and this energy forecast is available in the public domain. DOE will use a variant 

known as NEMS-BT to provide key inputs to the analysis.a

 

The utility impact analysis will consist of a comparison between model results for the 

base case and for policy cases in which proposed standards are in place. The use of NEMS-BT 

for the utility analysis offers several advantages. As the official DOE energy forecasting model, 

NEMS relies on a set of assumptions that are transparent and have received wide exposure and 

commentary. NEMS-BT allows an estimate of the interactions between the various energy 

supply and demand sectors and the economy as a whole. The utility impact analysis will report 

the changes in installed capacity and generation, by fuel type, that result for each trial standard 

level, as well as changes in electricity and natural gas sales to the residential and commercial 

sectors. 

DOE will conduct the utility impact analysis as a policy deviation from the 2008 version 

of the AEO (AEO2008), applying the same basic set of assumptions. For example, the operating 

characteristics (e.g., energy conversion efficiency, emissions rates) of future electricity 

generating plants are as specified in the AEO2008 reference case, as are the prospects for natural 

gas supply. DOE also will explore deviations from some of the reference case assumptions, to 

represent alternative futures. Two alternative scenarios use the high and low economic growth 

cases of AEO2008. (The reference case corresponds to medium growth.) The high economic 

growth case assumes higher projected growth rates for population, labor force, and labor 

productivity, resulting in lower predicted inflation and interest rates relative to the reference case 

and higher overall aggregate economic growth. The opposite is true for the low growth case. 

Starting in 2015, the high growth case predicts growth in per capita gross domestic product of 

2.9 percent per year, compared with 2.4 percent per year in the reference case and 1.8 percent per 

year in the low growth case. As part of varying supply-side growth determinants in these cases, 

a For more information on NEMS, please refer to the U.S. Department of Energy, Energy Information 

Administration documentation. A useful summary is National Energy Modeling System: An Overview 2000, 

DOE/EIA-0581(2000), March 2000. See http://tonto.eia.doe.gov/bookshelf/SearchResults.asp?title=modeling. EIA 

approves use of the name NEMS to describe only an official version of the model without any modification to code 

or data. Because this analysis entails some minor code modifications and the model is run under various policy 

scenarios that are variations on EIA assumptions, DOE refers to the model by the name NEMS-BT (BT is DOE’s 

Building Technologies Program, under whose aegis this work has been performed). 

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AEO 2008 also varies the forecasted energy prices for all three economic growth cases. 

Different economic growth scenarios will affect the rate of growth of energy demand. 

13.2 METHODOLOGY 

The electric utility impact analysis will consist of NEMS-BT forecasts for generation, 

installed capacity, sales, and prices. NEMS provides reference case load shapes for several end 

uses. The model uses predicted growth in demand for each end use to build up a projection of 

the total electric system load growth for each region, which it uses in turn to predict the 

necessary additions to capacity. NEMS-BT accounts for the implementation of efficiency 

standards by decrementing the appropriate reference case load shape. DOE will determine the 

size of the decrement using data for the per-unit energy savings developed in the life-cycle cost 

and payback period analysis (see preliminary Techical Support Document (TSD) chapter 8) and 

the forecast of shipments developed for the national impact analysis (see preliminary TSD 

chapter 9). 

The predicted reduction in capacity additions is sensitive to the peak load impacts of the 

standard. DOE will investigate the need to adjust the hourly load profiles that include this end 

use in NEMS-BT. 

 

 Since the AEO2008 version of NEMS forecasts only to the year 2030, DOE must 

extrapolate results to 2045. DOE conducts an extrapolation to 2045 to be consistent with the 

analysis period being used by DOE in the national impact analysis. It will not be feasible to 

extend the forecast period of NEMS-BT for the purposes of this analysis, nor does EIA have an 

approved method for extrapolation of many outputs beyond 2030. While it might seem 

reasonable in general to make simple linear extrapolations of results, in practice this is not 

advisable because outputs could be contradictory. For example, changes in the fuel mix implied 

by extrapolations of those outputs could be inconsistent with the extrapolation of marginal 

emissions factors. An analysis of various trends sufficiently detailed to guarantee consistency is 

beyond the scope of this work and, in any case, would involve a great deal of uncertainty. 

Therefore, for all extrapolations beyond 2030, DOE intends to use simple replications of year 

2030 results; in this way results are guaranteed to be consistent. As with the AEO reference case 

in general, the implicit assumption is that the regulatory environment does not deviate from the 

current known situation during the extrapolation period. Only changes that have been announced 

with date-certain introduction are included in NEMS-BT. 

13.3 RESULTS 

Results of the analysis will include changes in residential, commercial, and industrial 

electricity sales, and installed capacity and generation by fuel type for each trial standard level, 

in five-year increments extrapolated to the year 2045. 

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DOE will also use NEMS-BT to estimate the size of the impact that energy conservation 

standards may have on electricity and energy prices in general. DOE will examine general 

energy price impacts by evaluating forecasts with different levels of electricity demand to 

determine if there are utility sector costs that are not reflected in consumer electricity prices. 

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REFERENCES 

1

 U.S. Department of Energy-Energy Information Administration. Annual Energy Outlook 

2008 with Projections to 2030, June, 2008. Washington, DC. DOE/EIA-0383(2008). 

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