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Trends

Home Energy Magazine Online January/February 1997

TRENDS

Budgets, Deregulation, and Big Scissors

These days, energy efficiency seems less an engineering problem than a political one. Conservation professionals have learned a lot about how to save energy, but will the governments, utilities, and public utility commisions help out? The answer to this policy question is being affected from coast to coast by the federal budget and the states' moves toward competitive electric retail markets.

Efficiency Escapes the Chopping Block

The U.S. federal budget for efficiency and renewables has been increased by 3% for fiscal year 1997, a big relief following the 50% cuts the programs took in 1996. One program that got more money was building technology, which received a $19 million funding increase. New money will go toward industrialized housing, heat pumps, oil heat research, urban heat islands, and superwindows. The Building America program also got more funding. This public/private partnership is building efficient demonstration homes all across the United States.

In the U.S. Department of Energy (DOE) budget, $270 million was granted to solar and renewable energy research, $29 million to wind energy, and $55 million to biofuels. The wind energy program had been given almost no money at all in earlier drafts of the budget. The solar budget was cut by under 2% after having been cut 29% in 1996. Nuclear power was granted $223 million, and fossil fuel research received almost $400 million. DOE's biggest budget, however, is still not energy at all: nuclear weapons activities were given $3.91 billion, one of the few budget lines that Congress increased above the Clinton administration's request.

The Environmental Protection Agency's residential indoor air quality programs were reduced, although grants for radon mitigation were approved at $8 million.

The new budget ends last year's moratorium on appliance and lighting standards, which held up federal rulemaking. Now that the moratorium is lifted, DOE hopes to issue new rules increasing efficiency of refrigerators and freezers; room air conditioners; and kitchen ranges and ovens. Once issued, any new rules will still take three years to go into effect.

California DSM: Spared or Speared?

California has finally passed legislation comprehensively restructuring the electric utility industry. From January 1998 to December 2001, the state will be in a transition period, with three industries where today there is one. Generating companies will compete to produce cheaper power, a publicly regulated non-profit agency will transmit and distribute the power to homes, and the much-shrunken electric utilities will actually market and bill for electricity. Both municipal and private utilities will start seeing competition for customers, as utilities come in from outside their areas.

Advocates of demand-side management (DSM) programs, energy efficiency, and renewables were involved in forging this new structure, but they certainly did not get everything they wished for. During the transition, low-income programs and other programs will be funded by charges that all ratepayers will pay. Low-income programs will be funded at 1996 levels or above. Another category slated to receive public interest funds is research, development, and demonstration. What the law calls "cost-effective energy efficiency and conservation programs" will also be given grants from this statewide fund.

DSM and other efficiency projects are supposed to continue until the end of the transition period, with funding from this public interest money. Once the transition period is over, according to James Boothe, economic advisor to Commissioner Daniel William Fessler of the California Public Utilities Commission, the commission hopes that "supply and demand mechanisms will take over."

Renewables got mixed results from the legislation. One benefit that renewable energy producers received was a rule that any customer who wished to buy from a renewable source could get in line first. For example, agricultural users might not be scheduled for competitive retail marketing until 2000. But a farm that wants wind power can start buying it directly as of 1998.

Also, customers buying renewables may not have to pay the stranded asset costs. However, according to Nancy Rader, a consultant for the American Wind Energy Association, actual funding for renewables is "likely to be insufficient to maintain the state's existing level of renewables if gas prices stay low as expected." The law also eliminated any possibility of surcharges to support renewables past March 2002.

Statewide, load factors are relatively low compared to states with more extreme climates, and there is currently excess generating capacity. In this environment, utilities have no need to encourage conservation. This may drive some conservation programs, such as two-tiered rates, into extinction. Two-tiered electricity rates are currently common in California--a "baseline" number of kWh are priced lower than usage above the baseline. When companies must compete on cost, they are unlikely to continue charging extra for high use.

Live Free (Market) or Die

Meanwhile, New Hampshire has undertaken a far more free-market restructuring experiment. There, 31 companies have registered as electricity suppliers, selling power to a pilot group of several thousand homes. Since New Hampshire does not have deep traditions of DSM, renewable generation, or low-income support, there has been little effort to bring these programs into the restructured market. According to Ed Holt and Associates, a consulting firm in Harpswell, Maine, as many as 15 of the 31 registered suppliers are currently marketing electricity to New Hampshire consumers, and not one is promoting a DSM program. However, six of them are promoting themselves with some manner of environmental marketing.

One company simply has "environmental responsibility" on a checklist of reasons to buy power from them. But three companies are being specific about what sort of generators they are willing, or unwilling, to buy power from. For example, Working Assets, the company known for its advocacy-oriented long-distance phone service and mutual fund, is offering Green Power. This product is electricity that is only purchased from generators not using coal, Hydro Quebec dams, or nuclear power. While Laura Scher, CEO of Working Assets, admits that the portfolio is still short on renewables, she maintains that they aim to offer electricity bought entirely from renewable sources.

Three of the companies offering residential electricity are advertising energy efficiency items, such as a booklet of efficiency tips, a free compact fluorescent lamp, an energy-efficient showerhead, or a do-it-yourself home audit kit. Some others are offering energy efficiency services such as home energy audits, but they are charging extra for them.

The Shot Heard 'Round the Grid

Competition is also moving along elsewhere in New England. Massachusetts Electric is starting a pilot program in January, opening its entire market to qualified companies. Companies wishing to offer electricity in the pilot have qualified under three categories: price, green, and other.

Four "green" suppliers were selected after their environmental claims were substantiated. These companies are offering a variety of environmental promises bundled with their electricity. These include $30 in conservation products, a donation to the American Lung Association, permanent retirement of emission credits for sulphur dioxide, and the use of community-based photovoltaic systems.

--Steven Bodzin

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