I meant last week to note the extremely promising fact that Dems are talking about using the stimulus to funnel substantial money to states for energy efficiency projects—and tying that money to utility decoupling. Rep. Earl Blumenauer (D-Ore.), in comments to the Northwest Energy Coalition earlier this month, said this is how it should work:
If some states choose not to enact such [decoupling] standards by the end of 2009, he added, "The money will go to states that do."
Oh noes! Mandates!
As a crypto-socialist naturally I would love to see the heavy hand of the federal government used to force a positive change like this, and it’s great that utility regulations are back in the public conversation, but now more than ever it’s important to note that there’s decoupling and there’s decoupling. The details matter a great deal.
To wildly understate things, I’m not an expert on utilities. (Few people can truly claim to understand the intricacies of U.S. utility regs, including most of the regulators and the regulated.) But common sense can get us a ways.
The point of decoupling is to change the disastrous state of affairs that most U.S. utilities make more money the more power they sell. That presents a glaring incentive not to implement efficiency initiatives, which are, after all, meant to reduce power use. It biases utilities toward increasing supply.
How should that state of affairs change? Here’s where things get tricky. One common way is to implement a common rate for all ratepayers based on fixed utility costs. That way utility revenue won’t fall when ratepayers use less electricity. That’s the kind of decoupling described in the NYT blog piece:
Under a decoupling scheme, customers pay for electricity more or less like they pay for their cable bill: a pre-determined rate every month, even if they never turn on the television. If overall revenues fall below a utility’s fixed costs, the rate is adjusted accordingly across the entire customer base—though some states are establishing rate caps, to protect consumers. The overall result, however, is that a utility’s revenues are no longer tied directly to the amount of energy it sells.
Maybe I’m missing something, but this seems like a horrible solution. For one thing, while it removes utilities’ incentive to push power consumption up, it gives them no incentive to push power consumption down. And utilities are among the few large institutions capable of developing and implementing efficiency programs on a wide scale. It squanders a potentially powerful ally.
To boot, it removes ratepayers’ (already meager) incentive to conserve! Why should ratepayers seek to trim their own power use if they play a flat rate every month no matter what? Why wouldn’t this bias them toward using more power?
A final thing to note is that utilities will be indifferent to power use because it will pose no risk to them. Their revenues stay steady regardless. All the risks—from storms, heat waves, cold waves, grid accidents or attacks—will be bourne by ratepayers. Progressive economic policy should shield low-income and middle class families from risk, of which they already have plenty. (All this is explained much better in this post from Sean, from which most of this is ripped off.)
What’s a better way to decouple? That’s not entirely easy to answer, particularly given the reigning regulatory model. Utilities are profit-making entities shielded almost entirely from risk by the government (read: the public). That’s a fish on a bicycle, not a recipe for innovation. Either utilities should get out of the profits game entirely, via nationalization, or be thrown into it in earnest, via real privatization (with competition on the supply and demand side alike).
Decoupling inside the current regulatory paradigm amounts to telling the fish to pedal faster.
Comments
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Karen Street Posted 4:36 am
16 Dec 2008
For example, I as a consumer pay about 12 cent/kWh. People/companies with higher use might pay as much as 2 - 4 times that rate. This isn't due to the decoupling so much as other decisions, eg, high use of renewables and natural gas.
The local utilities have to provide enough electricity, and they make more money if they find ways to reduce electricity use in a cost effective manner. So they are motivated to pay attention to various cost effective measures, and subsidize many. For a while, possibly still, CFLs sold locally for $1 - $1.50 in the 60 - 100 W equivalent sizes. Landlords also get big incentives to buy energy efficient appliances for their units.
PGE also has major educational outreach, see http://www.pge.com/pec/classes/
How do we shield low income people from risk? For one, increasing earned income--it encourages people to make the right decisions while giving them money to cover increased costs. I'd also like to see people donating CFLs to food pantries to cover their own GHG emissions, as people going to those have homes, and often can't afford the more expensive bulbs. The local one distributed more than 100 bulbs for us. And it would be cool if the teens working with low income people did more than give them bulbs and low water flow shower spigots, but helped with insulation as well. Do people know other methods?
On the claims of CA, how our per capita electricity use did not increase once decoupling began even as it did nationwide. Certainly, this is partially the truth, as houses add more and more gizmos and appliances and this computer I'm writing on. Some of it also comes from people moving in large quantities to states where air conditioning is normal.
In CA, the utilities are not shielded from their decisions. Sometimes the rules seem arbitrary--if they lose money because they locked into a the price of natural gas and it goes down, or if they lose money because they don't lock in, they are penalized.
Karen Street
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wesrolley Posted 4:45 am
16 Dec 2008
You might find a way to change energy production via utility regulation, but you will never sell the public on affecting usage in a similar manner when all the leverage you have is to raise the cost.
For the detials on how to do this, I look at both Architecture 2030's work on building codes and the solutions advocated by the Rocky Mountain Institute.
Wes Rolley
CoChair - EcoAction Committee
Green Party US
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Jon Rynn Posted 6:41 am
16 Dec 2008
That's a direct efficiency gain, with no worries about whether a for-profit company can be tempted into doing the right thing. For-profits just aren't good at not doing something -- governments are good when the market fails (and yeah, sure, let's nationalize or municipalize utilities, or at the very least, long-distance transmission).
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Colin Wright Posted 7:43 am
16 Dec 2008
That said, I think these companies could transform themselves into renewable energy generating entities. That should be the growth industry of the future, where the profits are to be made and where private capital could be useful.
But I think the Feds will have to step in, and set the parameters of the green energy revolution. If for-profit utilities fail, the Feds should step in, buy them up and turn them over to the local municipalities. (Who would want to pay their electric bills to the US Gov't?) Then the Feds should buy and fix up the Grid to share power across regions. (Who knew electricity could be a glue that holds the country together?)
Then the Feds will have to help the renewable energy markets ramp up with private-public partnerships and loan guarantees. (I could even see the mandate of the Boneville Power Administration being extended to providing cheap geothermal power.)
Interesting times, as the proverb goes...
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anotherID Posted 9:37 am
16 Dec 2008
The decoupling, public goods charge shareholder incentive mechanism is pretty much totally broken.
California's investor owned utilities run circles around the PUC and play 3 card monty with ratepayers funds.
Scale is the problem and reducing scale is the sustainable solution.
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Sam Wells Posted 11:26 am
16 Dec 2008
It was worthy to note that many utilities have scaled back on aggressive expansion plans and frankly, most state and federal laws don't encourage utilities to sell less power, or transmit it more efficiently. Then I consider that the California Model for decoupling will raise rates, force me to consume less, and not pay me anything for improving my energy efficiency. Wow.
Perhaps the best idea is to buy out all the utilities and nationalize them, which is a goal I think many have wanted from the beginning. A lot of people would love to "decouple" the utilities from their electric power stations and transmission lines. But then I think, gee, when did the government ever run a business right?
Onward through the fog
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Bob Wallace Posted 12:17 pm
16 Dec 2008
Look back at what Karen wrote. She got it mostly right. Except that CFLs for us CA citizens now cost $0.50 thanks to our utility companies.
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Bob Wallace Posted 12:20 pm
16 Dec 2008
I was thinking about our total bill leveled for lifestyle....
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Karen Street Posted 12:47 pm
16 Dec 2008
Re CA and above average electricity use???? see http://apps1.eere.energy.gov/states/residential.cfm/state ...
Per capita residential in CA in 2005 was 2,379 kWh, while US per capita was 4,594 kWh. Some of this is due to the use of electricity for heating in parts of the country, some of this is due to the lack of weather here (though we've been having some weather this week), some to the high rates, and some to the utility decoupling so that CFLs cost about the same as incandescent bulbs and PGE will give us money to get rid of our old refrigerators and we get rebates for efficient appliances and heating systems. If we buy an efficient washing machine, both the water company and the utility give rebates.
Karen Street
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Pangolin Posted 1:10 pm
16 Dec 2008
I experienced this first hand in California when, working for a property management company, I found I was forced to turn down free improvements to the lighting on several of my properties because I couldn't fund the staff time to do supervise installations. Also tenants weren't willing to stay home from work and lose income while we worked on the lights. I won't even discuss the hassles of working with business clients.
I hate to say it but to really get the efficiency improvements we need a bit of arm twisting may be required.
Put the Carbon Back
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KenG Posted 10:57 pm
16 Dec 2008
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joeschmutzler Posted 12:36 am
17 Dec 2008
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amazingdrx Posted 1:32 am
17 Dec 2008
It should be based on a per kwh saved or renewably generated... standard, so much per kwh for your solar kwhs for instance. Wisconsin electric pays customers 23 cents per kwh for their solar power, that way it can be included in calculating the financial details of a solar installation.
If utilities payed the going retail rate, around 11 cents per kwh here, for customer generated power and government added a subsidy of say 11 cents per kwh, it would provide an incentive that depends on actual power generation.
The regulatory change needed would be to require utilities to buy renewable energy from consumers, to go one step beyond net metering. Conservation payments would only be based on billing records, the utility would not have to be involved in the money end.
http://amazngdrx.blogharbor.com/blog John Schneider, Northern Wisconsin
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Gar Lipow Posted 2:44 am
17 Dec 2008
http://dairy.ifas.ufl.edu/files/dbap/Albert_de_Vries_-_Pr ...
So under 4.2 billion kWh a year from Dairy cows. Not going to do research for number of other animals, but suppose we could triple that. You still end up with electricity equal about half a percent of all electricity currently produced in the U.S. lest than 1/10th% of the 45 billion kWh used just in data centers annually in the U.S. About less than 2/100ths of total energy consumption. Maybe you can triple that to around half a percent of total energy consumption, though I doubt it. And those are using California numbers. A lot of animals are raised in colder climates less favorable for methane production.
But methane digestion of manure is one of many silver bbs. It is not where a large percentage of our power will ever come from.
Maybe we could add meat cattle, and sheep and goats. (I've already counted swine and poultry.) But the sustainable way to raise meat ruminants is not in lots or even pastures where gathering manure is practical. It is green grazing on rangeland, managing that grazing in such a way that soils are built rather than erode.
Add plant matter. Now you are getting into signficant biomass. But there are really only three large scale sources of sustainable biomass: Urban waste, straw, and forest waste. I won't do the arithmetic now. But when you take into consideration the importance of conserving soils, the potential for waste reduction in urban environments, what is really sustainable to take away from forests, and energy costs for gathering all this, the most you could sustainably end up with is 11 quads, and that requires unrealistic consumption. I thin 7 quads is probably the highest realistic number, with 3 quads being possible though maybe requiring urealistically pessmistic assumpitions. Take the 7 quad figure. Assuming we can afford to continue to burn 5 quads of fossil fuels, that gives us 12 quads of combined biofuel and fossil. Even with greatly increased industrial efficiency in use of chemicals, a lot of that will have to used as chemical feedstock, Maybe we can reduce chemical feedstocks to 3 quads, which would leave 9 quads for use in vehicles and producing backup electricity. Or maybe we won't be able to reduce chemical feedstock needs below 5 quads, which would leave us 7 quads for electricity and vehicle use combined. This why I always say that if we want to reduce ghg emisisons to a sustainable level, we are going to have to substitute electricity for most of the things we currently use fuel to do. At some point, but not this week, I'll do a post on where I came up with my numbers on minimum, likely and maximum U.S. biomass.
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Bob Wallace Posted 3:13 am
17 Dec 2008
I sort of think if we were to move all those beasties into feedlots and bring the food to them we might burn off more fuel in our harvesters and trucks than we'd gain by boiling the poop.
We should be making use of concentrated poop when we have it available. But we need to remember that it takes energy to bring the stuff together in lots of cases.
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Jon Rynn Posted 3:49 am
17 Dec 2008
Amazin', that feed-in description was very clear!
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