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Mailbag

Fortnightly Magazine - March 1 1997

"takes two to tango" in a friendly merger.

PART TWO:

Mark Krebs, LaClede Gas Co.:

1. Electric Demand Growth. Mr. Rosenstock argues that GRI's projection of a 1.31-percent growth rate for natural gas is essentially the same as EPRI's 1.65-percent projection for electrical consumption, in that each contradicts economic goals of IRP and DSM. He did not mention, however, that the increased consumption of natural gas occurs primarily through centralized power plants. GRI's projections show natural gas consumption remaining essentially stagnant or declining for the residential, commercial and industrial sectors. If anything, GRI's projections confirm EPRI's "manifest destiny."

2. Fuel-Cycle Analysis. I based my analysis of fuel-cycle efficiency on values for Texas (lignite) adjusted for seasonal and time-of-day sensitivities of a particular end use (em that being engines versus motors used for commercial air-conditioning and agricultural irrigation purposes. Such uses occur predominately in the summertime, when peak electrical losses in transmission and distribution can double base losses. The message? Not to prove the invariable fuel-cycle efficiency of any particular end-use technology, but to illustrate that calculating and comparing fuel-cycle analyses is not "rocket science." Indeed, "actual highway mileage may vary." Either sector (em gas or electricity (em could improve its environmental competitiveness.

3. Choice of Resource. Mr. Rosenstock appears to try to make a case for generation resources that significantly reduce or eliminate emissions. I hope that occurs. However, such widespread alternatives are unlikely to emerge without improved accounting of environmental externalities.

4. Avoided Costs. Today's avoided costs are tomorrow's stranded investments. Up to the present, the over-building of electric generation capacity has depressed legitimate energy conservation programs and cogeneration markets while burdening ratepayers. In the future, this over-building will stifle legitimate competitive alternatives on both sides.

Mr. Rosenstock asserts that real numbers would eliminate large disparities between avoided cost of electric generation and gas utility operations. To respond, I ask: What has any natural gas utility ever built that even remotely approaches the cost of one nuclear power plant? And as for a lack of dates, my figures 2 and 3 were based upon a GRI funded study in 1993 that was properly footnoted.

5. Thermal Energy Storage. If the "before-and-after" comparison did not clearly distinguish between retrofits and new construction, I am willing to take the blame.

In terms of the ratchet effects, Mr. Rosenstock's assessment is insightful but misguided. Basically, TES systems often "crash." Consequently, if stand-by chillers come on line to maintain air-conditioning requirements, subsequent ratchet clauses may be invoked. On account of these tendencies, some electric utilities have dismantled their TES programs. (In a recent general rate case for San Diego Gas & Electric Co., TES was deemed not cost effective in markets other than new construction in the high-rise office sector.)

6. Program Dollars. The DOE's "energy efficiency" programs are staffed largely by "electrocentric" personnel. They are also plagued by a lax definition of energy efficiency, resistance to source efficiency, and a historical avoidance of California Standard Practice guidelines, which provide valuable insight and guidance for determining the differences between conservation and load building:

"Categorizing programs