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Illinois Gas Ruling Crimps Efficiency Economic Benefits
February 15, 2008
Is it a conflict of interest for utilities to be trusted to administer energy efficiency programs?
That's a question that consumers will increasingly be asked by others or themselves as energy prices increase, supplies get tighter, and efficiency and conservation programs proliferate. One person who is asking that question out loud is Tom Hartman, PE, an expert HVAC and controls designer who is passionate about energy, the environment, and the engineering profession. At several symposia that I’ve participated in with him, Hartman would express concerns that energy/power utilities could become the proverbial foxes in the henhouse of energy efficiency. His point is that they should not unilaterally be entrusted with control of energy efficiency programs when it’s their business model to sell energy.
Hartman has self-published a white paper on energy, engineering, and the environment that is worth reading and commenting on, both of which he invites on the homepage of The Hartman Company at www.hartmanco.com. The white paper diplomatically addresses electric utilities in a spirit of working with them such that reductions can occur while utilities maintain a profitable business:
“A dialog with utilities and regulating agencies is essential to move any large scale energy efficiency initiative forward. Utilities’ fundamental source of revenue is electric sales, and since large scale efficiency initiatives will reduce that near term revenue stream, it is crucial that the utility industry and regulators be engaged as a part of developing such building performance standards program so that its goals are not undermined as utilities work to maintain revenue. This potential loss of near term revenue must be addressed but there are policy approaches that can significantly mitigate this loss.”
Tom’s white paper is prescient, as illuminated by a recent decision by the Illinois Commerce Commission (ICC). The ICC just approved a rate increase to Peoples Gas that enables them to charge consumers for gas they don’t use. As reported in the Chicago Tribune, (Feb. 5, 2008, “Gas rate battle heats up”): “The Commission ruled that Peoples Gas and North Shore Gas “can change the way they calculate monthly bills as part of the first rate hike in 13 years…. Under the proposal, consumers would be charged a new set fee on expected, rather than actual, usage, giving the utilities a more predictable revenue stream.”
According to Peoples Energy, what they are trying to do is decouple consumption from delivery, thus guaranteeing revenue to cover their fixed costs for infrastructure, i.e. putting in new gas lines and maintaining old ones. This new approach was approved as a “pilot program,” with the ICC promising to regularly examine the new revenues to ensure they comply with the law.
Opposing the measure were state attorney general’s office, City of Chicago, Citizens Utility Board, and Commission’s own professional staff. An appeal is in the works.
Personally, I think utilities are entitled to reasonable rate hikes – this is their first in 13 years, which is hard for me to imagine. And decoupling may not be a bad idea, provided the delivery fees and structures used to calculate them are fair and closely monitored. Americans have proven to be derelict about wanting to pay for infrastructure maintenance (I-35 bridge collapse, etc.). However, it would be a disaster is for commercial and residential consumers to lose the economic incentive to invest in energy efficiency measures.
The ruling and the decoupling program are more complicated than I summarize above, so readers should read the articles below to get a full picture. It is worth noting that Ameren Corp, which is a gas utility, serving southern Illinois, already has a similar proposal for its gas customer.
Here are a couple of links to the story from different angles, the first being the most informative.
www.chicagotribune.com/news/chi-tue_gas_0205feb05,0,6753513.story
www.chicagotribune.com/business/chi-wed_gasfeb06,0,512792.story
www.chicagotribune.com/business/chi-mxacomed0213feb13,0,4843872.story
By the way, if you are wondering what the Illinois Commerce Commission is, here’s what their Web said, “The Illinois Commerce Commission has five members, one of whom is designated as Chairman by the Governor. Each Commissioner is appointed by the Governor and confirmed by the Illinois State Senate for a five-year term. Under Illinois law, no more than three Commissioners may belong to the same political party. “
The Commission’s Web site can be found at www.icc.illinois.gov.
Posted by Michael Ivanovich on February 15, 2008 | Comments (3)
