$80 million, few rules: Louisiana’s energy efficiency ‘slush fund’ – WWNO

Energy Efficiency Upgrades in Louisiana’s Public Entities Program

Introduction and Background

In Louisiana, the Iberia Parish School District received an unprecedented offer of no-strings-attached funding for energy efficiency upgrades. Harry Lopez, the district’s maintenance manager, initially expressed skepticism, as such free funding programs for public buildings are virtually nonexistent nationwide, except in Louisiana.

Upon confirmation of the program’s legitimacy, the district proceeded to install energy-saving LED lighting in over a dozen schools, with a total investment of $2 million. This funding is sourced from Louisiana’s residential and commercial electric customers via monthly power bills, demonstrating a community-funded approach to sustainable development.

Program Structure and Funding

The funding originates from the Louisiana Public Service Commission’s (PSC) “public entities” program, managed by the five commission members across their respective districts. The program is financed by half of the energy efficiency fees collected from ratepayers of the state’s largest utilities, with the other half allocated to utility-run efficiency initiatives.

• Each commissioner controls an annual budget between $2.2 million and $3.8 million.
• Since 2017, approximately $80 million has been awarded, primarily for lighting and HVAC upgrades in schools, municipalities, and parks.

This initiative aligns with several Sustainable Development Goals (SDGs), notably:

1. SDG 7: Affordable and Clean Energy – by promoting energy efficiency and reducing consumption.
2. SDG 11: Sustainable Cities and Communities – by upgrading public infrastructure.
3. SDG 13: Climate Action – through reduced fossil fuel emissions.

Program Governance and Criticisms

While the program aims to cost-effectively reduce energy consumption, concerns have been raised regarding its governance:

• Lack of competitive bidding and transparency in project selection.
• Minimal independent audits and oversight.
• Potential for patronage and inefficient allocation of funds.

Commissioners hold divergent views:

• Republican Commissioner Eric Skrmetta defends the program as beneficial and proper.
• Democratic Commissioner Davante Lewis criticizes it as a “slush fund” lacking checks and balances.

Recent Developments and Program Challenges

Rejection of Independent Statewide Program

In April, the PSC voted 3-2 along partisan lines to terminate a proposed statewide energy efficiency program that would have been run by an independent third party. The decision was justified by concerns over administrative costs, despite evidence that the existing commissioners’ program incurs significantly higher costs per kilowatt-hour saved.

This decision highlights challenges in balancing cost-efficiency and governance in public programs, impacting the achievement of SDG 12 (Responsible Consumption and Production).

Equity and Impact Concerns

Consumer advocates emphasize that the current program does not adequately serve low-income households, despite Louisiana having some of the highest household electricity consumption rates in the U.S. Notably:

• One in five households in some regions struggle to afford power bills.
• Industrial users, consuming nearly half of the state’s electricity, can opt out of contributing to the program.

This raises issues related to SDG 1: No Poverty and SDG 10: Reduced Inequalities, underscoring the need for inclusive energy policies.

Documentation and Compliance Issues

Unlike utility-run programs that comply with extensive PSC rules and documentation requirements, the commissioners’ program operates under minimal regulations and inconsistent record-keeping. Key points include:

• Only three pages of rules govern the program.
• Annual reporting by recipients is required but rarely enforced.
• Project evaluation and verification are primarily conducted by commissioners and their staff, with limited technical expertise.

The lack of rigorous oversight challenges the program’s alignment with SDG 16: Peace, Justice and Strong Institutions, which advocates for transparent and accountable governance.

Program Implementation and Effectiveness

Cost and Project Viability

Concerns have been raised about the fairness of pricing and the cost-effectiveness of projects:

• Absence of formal requests for proposals (RFPs) limits competitive pricing.
• Some projects have payback periods exceeding 10 years, with a few extending over a century, undermining economic sustainability.
• Commissioners acknowledge that certain projects, such as lighting for infrequently used facilities, prioritize community benefit over cost savings.

This situation impacts SDG 8: Decent Work and Economic Growth and SDG 9: Industry, Innovation and Infrastructure, emphasizing the need for efficient resource use.

Program Origins and Political Dynamics

The program was established unexpectedly in 2017 without public discussion. Initial funding allocations were delayed, and political changes have influenced its administration. Despite criticisms, commissioners highlight positive outcomes and community benefits.

Transparency and Accountability Concerns

Lack of Public Awareness and Potential Conflicts of Interest

The program is not publicly advertised and relies on contractors to inform potential recipients. Investigations revealed:

• Instances of business relationships between commissioners and contractors raising conflict of interest concerns.
• Campaign contributions from contractors to commissioners, suggesting potential patronage.
• Limited transparency in project selection, risking exclusion of entities without political connections.

These issues challenge the principles of SDG 16 and call for enhanced ethical standards in public programs.

Bidding Practices and Oversight

Most projects are awarded without competitive bidding, except in one district. Utilities funding the projects have expressed concerns about inflated costs and inaccurate invoices but have not publicly addressed the issues.

Commissioners have expressed openness to reforms aimed at improving checks and balances, which would support better governance and program effectiveness.

Conclusion and Recommendations

1. Enhance transparency and accountability mechanisms within the public entities program to align with SDG 16.
2. Implement competitive bidding processes to ensure cost-effectiveness and fairness, supporting SDG 8 and SDG 9.
3. Expand program outreach to include low-income households and underserved communities, advancing SDG 1 and SDG 10.
4. Strengthen documentation, evaluation, and independent audits to improve program integrity and support SDG 12.
5. Consider revisiting the rejected independent statewide program to balance administrative costs with improved governance and impact.

Louisiana’s public entities energy efficiency program presents an innovative model for community-funded sustainability initiatives but requires significant reforms to fully realize its potential in advancing the Sustainable Development Goals.

1. Sustainable Development Goals (SDGs) Addressed or Connected

1. SDG 7: Affordable and Clean Energy
   • The article discusses energy efficiency upgrades in public buildings, including schools, which relates to ensuring access to affordable, reliable, sustainable, and modern energy.
2. SDG 11: Sustainable Cities and Communities
   • Energy efficiency projects in municipalities, parks, and public buildings contribute to making cities and human settlements inclusive, safe, resilient, and sustainable.
3. SDG 12: Responsible Consumption and Production
   • The focus on energy efficiency and reducing energy consumption aligns with sustainable consumption and production patterns.
4. SDG 13: Climate Action
   • Reducing energy consumption through efficiency upgrades helps lower fossil fuel emissions, contributing to climate change mitigation.
5. SDG 16: Peace, Justice, and Strong Institutions
   • The article highlights governance issues such as lack of transparency, accountability, and potential patronage in the energy efficiency program, relating to building effective, accountable, and inclusive institutions.
6. SDG 1: No Poverty
   • Concerns about low-income households struggling to pay electricity bills and the program not directly helping those most in need relate to poverty alleviation.

2. Specific Targets Under the Identified SDGs

1. SDG 7: Affordable and Clean Energy
   • Target 7.3: By 2030, double the global rate of improvement in energy efficiency.
2. SDG 11: Sustainable Cities and Communities
   • Target 11.6: Reduce the adverse per capita environmental impact of cities, including by paying special attention to air quality and municipal and other waste management.
3. SDG 12: Responsible Consumption and Production
   • Target 12.2: By 2030, achieve the sustainable management and efficient use of natural resources.
4. SDG 13: Climate Action
   • Target 13.2: Integrate climate change measures into national policies, strategies, and planning.
5. SDG 16: Peace, Justice, and Strong Institutions
   • Target 16.6: Develop effective, accountable, and transparent institutions at all levels.
   • Target 16.7: Ensure responsive, inclusive, participatory, and representative decision-making at all levels.
6. SDG 1: No Poverty
   • Target 1.4: Ensure that all men and women, particularly the poor and vulnerable, have equal rights to economic resources, including access to basic services.

3. Indicators Mentioned or Implied to Measure Progress

1. Energy Savings and Efficiency Indicators
   • Cost per kilowatt hour (kWh) of energy saved (e.g., 5 cents per kWh saved in the commissioners’ program vs. 2.8 cents per kWh in the proposed third-party program).
   • Number of energy efficiency projects completed (e.g., more than a dozen schools upgraded, about 515 projects approved).
   • Energy consumption reduction in public buildings (implied through lighting and HVAC upgrades).
   • Payback period for energy efficiency investments (e.g., some projects taking over 10 years or even centuries to pay off).
2. Governance and Transparency Indicators
   • Existence and adherence to rules and regulations (e.g., PSC rules requiring evaluation, verification, and reporting).
   • Transparency of selection and bidding processes (implied lack of competitive bidding and opaque selection).
   • Administrative costs as a percentage of program budget (e.g., 1-2% claimed vs. 30-35% found).
   • Number and quality of audits and independent evaluations (not conducted or missing).
   • Campaign donations and potential conflicts of interest (implied through donations from contractors to commissioners).
3. Social Impact Indicators
   • Electricity affordability for low-income households (implied through discussion of households unable to pay bills).
   • Distribution of program benefits among communities and public entities (implied concerns about patronage and unequal access).

4. Table of SDGs, Targets, and Indicators

SDGs	Targets	Indicators
SDG 7: Affordable and Clean Energy	7.3: Double the global rate of improvement in energy efficiency by 2030.	Cost per kWh of energy saved (5 cents vs. 2.8 cents) Number of energy efficiency projects completed Energy consumption reduction in public buildings Payback period for investments
SDG 11: Sustainable Cities and Communities	11.6: Reduce adverse environmental impact of cities.	Energy efficiency upgrades in municipal buildings and public spaces Reduction in energy consumption and emissions
SDG 12: Responsible Consumption and Production	12.2: Achieve sustainable management and efficient use of natural resources by 2030.	Energy consumption reduction metrics Cost-effectiveness of energy efficiency projects
SDG 13: Climate Action	13.2: Integrate climate change measures into policies and planning.	Reduction in fossil fuel emissions through energy efficiency Implementation of energy-saving projects in public entities
SDG 16: Peace, Justice, and Strong Institutions	16.6: Develop effective, accountable, and transparent institutions. 16.7: Ensure inclusive, participatory decision-making.	Existence and enforcement of program rules and audits Transparency of project selection and bidding Administrative cost ratios Campaign finance and conflict of interest disclosures
SDG 1: No Poverty	1.4: Ensure equal access to economic resources and basic services.	Electricity affordability for low-income households Equitable distribution of program benefits

Source: wwno.org