🔒Debate over heat pumps: Emera’s proposal before PUC faces opposition

Emera Maine, the Bangor-based electricity transmission and distribution utility serving 154,000 customers in eastern and northern Maine, is pushing high-efficiency heat pumps as a viable alternative to oil heat — saying they would greatly reduce annual heating costs for thousands of homeowners and small businesses, cut greenhouse gas emissions and pump more money into the state's economy.

“Shifting heating load from oil to electric heat pumps reduces energy consumption by greater than 50%,” the company states in its April 10 filing with the Maine Public Utilities Commission. Emera argued that a heat pump reduces carbon emissions by approximately 80%, decreases reliance on foreign oil and promotes U.S. energy security and provides another heating source “for rural customers that do not, and are unlikely, to have access to natural gas infrastructure.”

Under its proposal, Emera Maine would provide heat pumps designed specifically for cold climates to eligible customers with no upfront charge — thereby removing the cost barrier for customers in Aroostook, Hancock, Piscataquis, Washington and Penobscot counties who may be unable or reluctant to invest in an oil heat alternative. Emera would own the heat pumps and would hire outside contractors to install and service them; in turn, it would charge participating customers a separate “heat pump service and equipment rate” on top of an electric bill that would include a discounted rate for the electricity used to power one or more heat pumps. Customers wanting to purchase their heat pump(s) at a later time can do so, but would be charged a price based on the unit's depreciated value.

Even with the monthly equipment rate and higher electricity usage factored in, the company estimates that participating customers would save, on average, between $400 and $600 a year on their heating costs.

“We have a target goal of 50,000 heat pumps being installed over the next 10 to 15 years in our service area,” says Gerry Chasse, vice chairman of Emera Maine's board of directors, who recently turned over the reins as president and COO to Alan Richardson in order to take on the new role of leading the utility's initiatives to implement smart grid technologies as well as advance the “electrification” of transportation and heating.

Opponents say Emera's plan is 'unfair'

Two trade groups — the Maine Energy Marketers Association and the Plumbing, Heating, Cooling Contractors Association of Maine — have been granted intervenor status by the PUC and already have voiced opposition to Emera Maine's plan. In their initial filings, both parties characterized the proposal as unfair competition that will “substantially and directly” impact the business interests of heating fuel companies selling oil, propane, biofuels and wood pellets as well as private contractors who sell and service heat pumps.

“Emera will compete with MEMA members using unfair advantages stemming from its status as the utility and its existing relationship with customers,” attorney David Herzer of the Portland law firm Norman, Hanson & DeTroy writes in his May 11 petition seeking intervenor status for the trade group that includes 130 heating oil and propane companies. Herzer, who uses similar language in writing the PHCC petition, states Emera's “free financing” and “special rate for heat pumps” gives the utility “an unfair, direct competitive advantage over non-utility providers.” He also challenges Emera's envisioned customer benefits as being “insubstantial in some instances, and largely illusory, in others.”

The PUC also granted intervenor status to the Office of the Public Advocate; Natural Resources Council of Maine; Efficiency Maine Trust, James C. LaBrecque, owner of Flexware Control Technology, a Bangor company that manufactures temperature control devices for residential and commercial environments; and Troy Williams, a Bangor-based heat pump installer.

In a June 1 procedural order, PUC's hearing examiner Leslie Raber highlights an issue central to Emera Maine's case — namely, whether the heat pump rate program is a “pilot program” or a “core utility service” under Maine statutes that would be subject to PUC's oversight.

Chasse's rebuttal

Chasse says “it's a bit disingenuous” for MEMA (formerly known as the Maine Oil Dealers Association) to challenge Emera's heat pump initiative, since one of its leading members, Dead River Co., offers its own discount on top of the state rebate as an incentive for customers thinking of heat pumps as an option for both heating and air conditioning.

Similarly, he says, Emera Maine uses contractors certified by Efficiency Maine to install its heat pumps, a group numbering more than 400 and growing. “The vast majority of installers are very supportive of the program,” he says, adding that the unit price for the installed heat pumps is set by the market, not by Emera.

Finally, he says the utility's plan is an effort to build on lessons learned in what he describes as the company's “very successful” pilot program in the winter of 2012-13, which enrolled 1,000 customers of Bangor Hydro and Maine Public Service (which merged in January 2014 to become Emera Maine), and included on-bill financing, a $600 rebate on the purchase of a heat pump and a reduced electric rate during the heating season.

“We demonstrated the technology would work in Maine's cold climate,” he says.

Credence for that assertion is provided by EMI Consulting, a Seattle-based firm providing energy industry research and analysis to utility companies and other clients nationwide, which evaluated Emera Maine's heat pump pilot program. Its final report, issued in November, is based on almost 500 online interviews with pilot program participants, analyses of participants' historical electrical billing and fuel oil usage data, and in-depth interviews with selected program participants as well as heat pump distributors and installers.

Among its findings:

 • Participants achieved an average savings of $622 a year, based on a 2013 average fuel oil cost of $3.90/ gallon (compared to a statewide average of $2.79/gallon reported this February).

 • The range of savings varied significantly, with participants who relied heavily on their heat pumps to displace oil saving as much as $1,939 for the heating season, while those who used the heat pumps more like a space heater achieved minimal savings of about $300.

 • 85% of the pilot's participants said they were “very satisfied” with both the heat pump and the program; 78% said they were “very satisfied” with the savings they achieved by using the heat pump.

 • The average participant reduced their household's CO2 emissions by 4,212 pounds per year, equivalent to driving 4,549 fewer miles per year.

 • Among the general population, awareness and knowledge about heat pumps increase from 19% to 35% over the year.

In the company's internal analysis of the pilot program, Chasse says it became clear the customers who invested in heat pumps tended to be older and in higher-income brackets, while lower-income customers simply couldn't afford the roughly $3,500-per-unit cost, even with the available rebate and the understanding that they'd see a significant savings in their heating costs.

“We wanted to target the lower-income demographic,” he says of the utility's new proposal to encourage widespread adoption of heat pumps by removing the cost barrier and helping customers to install heat pumps in their homes with no upfront cost. “We wanted to make it easy for them to get into the program and also achieve a considerable amount of savings in their heating costs.”

In its filing, Emera Maine estimates that heat pump electricity usage costs (based on March 2015 rates) in the former Maine Public district were equivalent to heating with oil at $0.95/gallon to $1.36/gallon, depending on the efficiency of the oil system. For the former Bangor Hydro district, which has higher electricity rates, it says the cost to heat with a heat pump is equivalent to heating with oil at $1.12/gallon to $2.54/gallon.

Chasse says Emera Maine's proposal explicitly meets the 2013 Omnibus Energy Bill's goal of improving the state's economy by helping residents lower their energy costs while also helping to reduce Maine's nation-leading 70% of households heating with oil. Citing a June 2013 report by La Capra Associates that was prepared for the Governor's Energy Office, he says the average Maine household using oil spends roughly $3,000 annually on oil heat, resulting in a total annual statewide cost of more than $1.2 billion.

“With approximately 80% of the money spent on fossil fuel leaving the state's economy, that amounts to $1.03 billion leaving the state of Maine each year,” he says in his written testimony for the PUC. “That places money for heating as Maine's single largest export … and it represents one third of our entire annual budget.”

If half, or even a third, of that statewide cost could be saved by switching to heat pumps, he says, it would represent a tremendous boost to the state's economy. For the utility, it also adds revenues from greater usage of electricity that will help stabilize Emera Maine's transmission and distribution rates, which otherwise are likely to rise due to the demographics of eastern and northern Maine.

“This is an important rate management tool that will help us deal with flat loads and shrinking populations,” he says.

Chasse says the utility hopes to gain approval from the PUC in time to launch the program this fall.

“It's just another tool,” he says. “Certainly, people have opportunities to find their own financing and purchase the heat pump themselves. Our program would be completely voluntary.”

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