Efficiency programs cut again

E TUESDAY, JULY 6, 2004
The Atlanta Journal-Constitution
Business

Efficiency programs cut again

Ga. Power plan needs PSC vote

By MARGARET NEWKIRK
mnewklrk@ajc.com

When Georgia Power recently began making plans for meeting the state's future power needs, the company did what state regulators and law require.

It weighed its stock-in-trade — selling ever-expanding amounts of power — against the more environmentally friendly idea of encouraging customers to use less of it.

Then it chose the former, to no one's surprise.

After examining more than 500 conservation programs, the company presented the state Public Service Commission with a 20-year plan that included none of them.

If approved by the PSC this week, that "integrated resource plan" would leave Georgia with no energy efficiency programs for the ninth year in a row.

Environmentalists are angry. In a series of PSC hearings that wrapped up last week, they said energy efficiency is good public policy, given the mounting costs of reducing power-plant smog and the industry's staggering appetite for scarce water.

The absence of energy efficiency programs is no accident.

In 1995, Georgia Power asked the PSC to let it drop a three-year energy efficiency program it said had proven to be a white elephant, costing far more than it delivered in energy savings. The PSC agreed, and also granted the company's request that any future programs be submitted to a hard-nosed cost benefit test.

Since then, Georgia Power, by using that test, has been meeting state require
ments that it .consider conservation as a way to meet demand.

But energy efficiency programs have consistently
flunked, allowing Georgia
Power to avoid resuming any energy efficiency programs.

Georgia Power says the test protects ratepayers.

Conservation advocates say the test is rigged, and is allowing the state's power companies to flout the intent of state law.

The intent of energy efficiency programs is to

➤ Please see PLAN, E5

Plan: Georgia Power outline leaves out efficiency programs

➤ Continued from E1
encourage customers to buy products that use less power.

In hearings that began in May and ended last week, advocates reeled off a list of such products: better light bulbs, energy-efficient home construction, reflective roofing and the purchase of appliances marketed under the U.S. EPA-backed EnergyStar designation.

Advocates say customers need incentives to buy those products, because Georgia power prices are too low to encourage that investment on their own.

Even a better light bulb costs more: At $3 a pop, energy-efficient bulbs cost six times the 50-cent cost of standard bulbs.

According to figures developed by Richard Spellman, a consultant for the Southern Alliance for Clean Energy, or SACE, the bulbs earn their keep, but slowly. The efficient bulb uses one-fourth of the energy and lasts 10 times as long as a standard bulb. By the end of a single bulb's lifetime, its buyer will have come out $36 ahead.

Advocates say incentives would develop a market for efficiency equipment here and eventually lower prices.

Critics say that market is doing fine by itself.

They say it's hard to even find non-efficient versions of at least one appliance, the dishwasher.

Advocates say incentives are needed for most energy-saving products.

Natural enemies

Georgia Power promotes its commitment to conservation.

But the company's business interest and energy efficiency programs are natural enemies, since the programs cut into Georgia Power's sales.

The utility loses money when its customers use less power, The exception is when they cut peak power — the amount of energy they use on the hottest afternoon of the year. Peak power is far more expensive to produce than any other power, because its only at those high-demand periods that the company dispatches energy from its most expensive plants.

Georgia Power uses a stark comparison in painting its now-defunct early 1990s energy-efficiency program as wasteful.

Georgia Power says the program costs $90 million to reduce demand by only 40 megawatts — enough to power 10,000 homes or 40 Super Wal-Marts.

By comparison, the utility's Power Credit program, begun in 2001, saved the same number of megawatts at a cost of just $5 million, the company says.

Power Credit rewards consumers who allow their air conditioners to cycle off on the hottest days, affecting demand only at its peak. It does nothing to save energy — or reduce Georgia Power's revenues — the rest of the year.

The earlier program's lopsided cost-per-megawatt figure was a key reason the state PSC allowed Georgia Power to end it and begin using the conservation-killing cost-benefit test nine years ago.

SACE, though, says the utility hasn't produced detailed accounting to back up its cost claims and that the megawatt savings figures are "just silly," as Spellman said.

And they say the cost figures weren't the real reason the earlier program was scrapped.

Similar programs died around the country then, as the monopoly utility industry geared up for deregulation and competition.

Monopoly utilities lobbied fiercely to be relieved of regulator-required public benefit obligations that detracted from the bottom line. National spending on energy efficiency dropped nearly in half.

Georgia's utilities were part of that trend. In most areas of the country, including Georgia, the threat of competition that prompted the trend never showed up.

The test now used to weigh energy-efficiency programs was part of the national effort to cut back on such programs, according to a PSC consultant.

Most states don't now use it, although Georgia Power and SACE disagree on how many do.

Efficiency advocates recognized its danger even nine years ago. SACE's Spellman told the PSC then that if adopted the test, "these programs are dead as a doornail."

The test weighs different energy resources based on how much they might increase electric rates.

Almost by their nature, efficiency programs put upward pressure on rates.

They cost money. They generate no revenue for the power company. And if successful, they actually reduce the company's sales revenues, leaving the power company to push for higher rates to make up for the revenue lost.

The test punishes potential energy-efficiency programs for the energy they would save, which is the major reason they can't pass.

SACE wants the PSC to consider efficiency programs' ability to save participating customers money on their bills, instead of their potential to push up rates for those who don't take part.

In testimony, SACE's Spellman said an aggressive energy-efficiency program in Georgia could save ratepayers $1.4 billion over the next 13 years. Georgia Power ridiculed the figure, saying it was based on wildly unrealistic assumptions about how many people would participate.

Georgia Power presented the company's own estimate of those potential savings last week: $300 million.

The company says that figure should be enough to encourage customers to invest in energy efficiency, without launching programs that would require non-participating customers to pick up any of the cost.

PSC wte upcoming

The state PSC will vote Thursday on Georgia Power's long-term plan.

A number of proposals for ending the efficiency impasse are afloat.

Georgia Power and the PSC staff are pushing for no change to the cost-benefit test, beefed up a low-income weatherization assistance, and incentives for poor people who want to buy programmable thermostats, as well as energy efficiency promotions.

SACE is pushing for an idea floated by Commissioner Robert Baker that would create a new rate class for customers who purchased certain energy efficient equipment or homes and cut down on administrative expense.

Commissioners Angela Speir and David Burgess appear to be leaning toward change. Burgess said state law and the test now being used to comply with it are at odds with each other.

"I feel like we're spinning our wheels. We have this statute, and it is what it is. It's a nice statute," he said.

The job of doing what that state law intends, he said, is not getting done.