Tuesday, August 12, 2003

Energy efficiency crucial to Vermont's future

Is energy efficiency in trouble in Vermont? The question itself seems crazy when one looks at the record.
Energy efficiency programs funded by Vermonters overcome barriers to sound energy decisions. Customers get information and financial assistance they would not otherwise get to induce more efficient investments than they might otherwise make.
Ignoring the considerable air-quality benefits of reducing wasted energy use, energy efficiency investments have saved Vermonters lots of money. It is obvious how program participants save. They buy less energy, and after the initial cost is covered, the rest of the savings are gravy.
Everyone else benefits too. Consider VELCO's power line proposal -- Vermont would need it years earlier to serve faster growth but for the efficiency investments of the 1990s. (The Public Service Board will consider whether even more intense energy efficiency can further delay the project.) In the meantime we all avoid its costs and the costs of other growth-driven investments. And the power our utilities don't have to buy -- we save that cost too. At a cost per saved kilowatt-hour of 2.6 cents, this is much cheaper than average power costs of 4 or 5 cents.
For an investment that represents less than 2.5 percent of your electric bill, you are getting a return that keeps rates lower and more stable than they otherwise would be.
Yet energy efficiency may be a target. The current state administration has made a point of suggesting that the state's policy on energy efficiency should be reconsidered, notably when the Department of Public Service replaced its planning director. It is always prudent to reassess strategy and the new administration should have the people it wants. What are the new priorities?
Will the state focus on the ways utilities spend our money on distribution investments?
Like efficiency, these investments are important to long-run quality of service. Unlike efficiency, distribution makes up 30-40 percent of the electric bill. Assessing whether consumers are getting full value from this huge slice of our monthly payments seems to offer another and potentially greater source of savings.
During the period when I was Public Service Department commissioner, I was concerned about electric rates and bills, as well as the risk of higher power costs. Analysis justified double or triple spending for efficiency. We did not go that far out of concern for rates, a detail apparently overlooked now.
Vermont spending for efficiency could be increased to manage risk, however, and still be in line with what other states spend. Everyone would like to see rates be closer to the national average. Successful regulation will eventually get us there over time. Gimmicks and false economies won't do. As long as the Hydro-Quebec contract is in place, progress on rates will be hard.
The new administration will tote up the numbers and discover that meaningful progress on rates will only occur when the state engages the public as it develops Vermont's long term energy plan -- where will our energy come from in 2015 and 2025?
In the meantime, energy efficiency investments in reasonable measure, as contemplated by the Legislature in numerous statutes, are a very sound way to position Vermont for the time when we can take bold steps to lower rates and bills. The policy should be nurtured and improved, not scapegoated.
Richard Sedano was commissioner of the Vermont Department of Public Service from 1991-2001