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Avalanche Economics

Alaskan crisis demonstrates pocketbook power.

Fortnightly Magazine - September 2008

the utility industry a potent lesson. It would dispel the myth once and for all that people can’t or won’t change their energy consumption patterns. A New York Times article speculated, “[T]he electricity challenge, and the conservation it prompted, might spur new economic creativity for a city recommitted to energy efficiency.”

However, such speculation seemed premature, and quite possibly naïve. Juneau residents who brushed their teeth in the dark and air-dried their clothes weren’t motivated by an urge to save the planet. They were motivated by the prospect of outrageous electric bills. If the Juneau experiment taught anything, it taught the power of economic self-interest. It said nothing about environmentalism, or the power of green guilt.

To AEL&P’s astonishment, however, two months after rates went back to 11 cents, Juneau’s daily power consumption remains about 10 percent below normal. It seems many Juneau residents got into the habit of taking quick showers.

Demand Destruction

When AEL&P called upon its customers to conserve electricity, the company expected some of that conservation would be permanent. “There was a run on compact fluorescent light bulbs in town,” Willis says. “Those bulbs will stay in place, and we’ve lost that demand.”

AEL&P expected that apart from such physical changes, most of the behavioral changes would be temporary. People would resume baking cookies when electric rates went back down, and everyone would put away their flashlights and candles and switch their lights back on. As it turned out, however, the crisis changed many customers’ behaviors and attitudes about the way they use electricity.

“Yesterday a man told me that since the power crisis, he’s more aware of parasitic and phantom loads,” Willis says. “He unplugs his TV and computer when he turns them off. He also said he’s more aware of turning out a light when he leaves a room. Some of the habits we developed during that six-week crisis seem to be sticking.”

Some of the apparent “habits” Juneau developed during its crisis might not be behavioral, however. Businesses throughout Juneau disconnected about half of their light bulbs during the crisis, and some simply haven’t gotten around to connecting them again—in part because daylight hours last very long during summers in Juneau, about 18 hours a day in June and July. That seems likely to change with the onset of winter and its equally interminable nights.

“When it gets really dark here in a few months, the lighting load will come back,” Willis says. “We’ll see some reductions, but I don’t think we’ll have 10 percent permanent conservation. It will be more like 2 or 3 percent.”

For AEL&P, that demand reduction translates into lost sales—probably about 5 percent for the year, according to Willis. That, combined with increased operating costs and bad-debt expense incurred during the emergency, has had a significant effect on AEL&P’s finances. “We’ve tightened our belts a bit around here,” Willis says.

Thus utilities can take another lesson from the Juneau experiment: Be careful what you ask your customers to do. They just might do it.