Hedging programs promise protection against energy-market price spikes, and they can be important to the regulatory goal of sustainable, lowest long-term service cost. But how much price...
It requires a truly acrobatic stretch of the imagination to reach the same conclusions as Pennsylvania Commissioner John Hanger in his article, "Electric Reliability: How PJM Tripped on Gas-Fired Power Plants" (May l, 1995). The truth is that the natural gas system performed efficiently and reliably in January 1994, exactly as planned. The operators of the power plants in question purchased interruptible gas-transportation contracts to keep their fuel costs low. Such capacity is seldom available during extremely cold weather, which is why interruptible capacity costs less. Had the plant operators purchased firm-service contracts, the gas would have been there.
Despite its title, the article's statistics clearly demonstrate that the rolling brownouts were caused by the unavailability of coal-fired power plants:
s 40 percent of the PJM grid's coal capacity (em nearly 12,000 MW (em was unavailable at the time of the winter peak.
s Only 1,150 MW of interruptible, gas-only capacity was unavailable (em less than 10 percent of the unavailable coal capacity.
Instead of raising questions about the wintertime reliability of gas-fired electric generation, Commissioner Hanger has actually, provided evidence of the pitfalls of an overreliance on coal.
Michael Baly III
President & CEO
American Gas Association
Make DSM Pay
Eric Hirst's and Stan Hadley's article, "Must DSM Programs Increase Rates?," (June 15, 1995) clearly points out the competitive conundrum our industry faces as it tries to meld energy engineering with social engineering. I believe it is the industry's genuine desire to make all customers more energy efficient. But the penalty for my neighbor's decision not to take advantage of energy-efficiency programs should not be an increase in rates. The decision not to participate is as valid in the utility business as it is in other facets of consumer life.
In a world of competition,
demand-side management (DSM) must be a profit center in its own right, with customers that benefit from an energy-efficiency measure paying the full cost of that measure. At the residential level, a host of products sold for profit allow participants to benefit without burdening nonparticipants. The profit motive is also at the heart of the energy service company (ESCo) industry that is now adapting to a world without rebates. ESCos are paid by customers who see real savings in a "total" sense not envisioned by the limited electric reduction programs of today.
The profit-center model would eliminate the huge portion of the DSM bill that involves monitoring and evaluation. In addition, profits earned on product (and service) sales would offset much of the cost.
SmartEnergy Services Inc.
Let's Get Real
I am writing to correct a misleading impression created by Stephen Puican's article, "DSM and the Transition to a
Competitive Industry" (June 15, 1995). His test will identify DSM options that defer the need for new capacity, but only if the deferring utility is vertically integrated, has an exclusive right to provide all generation services to customers, and knows its customers will remain captive for the next 30 years. Even if one believes