FERC’s new rule on compensation for demand resources tips the market balance toward negawatts. Arguably the commission’s economic analysis is flawed, and the rule represents a covert policy...
2008 Regulators Forum: Putting Efficiency First
New rate structures prioritize conservation, but will customers buy it?
efficiency and demand in their list of concerns, but now they go way up to the top of the list.
[Duke Energy CEO James] Rogers talks about conservation being the fifth fuel. I think it should be the first fuel. It’s something we all can do. Americans use about twice the amount of electricity that the U.K. uses, and up to 10 times what people in some parts of the rest of the world use. We have a lot of areas where we can conserve.
Pfannenstiel (Calif.): Efficient use of resources has become somewhat more urgent for us all with climate change considerations. We know from virtually all the work that’s been done that efficiency is the cheapest way of reducing greenhouse gas (GHG) emissions. We’re all seeking ways of using our resources more efficiently. The ability to get more from demand response (DR) has eluded us for three decades now, but with the convergence of political will driven by a lot of forces, including global warming and the technology opportunities, this may be the moment we are actually poised to do something about it.
Morgan (D.C.) : The convergence of advanced metering and information technologies means we can do things we couldn’t do before, or we can do them cheaper. Combined with the effect of climate change, it’s even more urgent than it’s been in the past.
Ervin (N.C.): It seems to me that [increasing the efficiency of the electric system and optimizing conservation] isn’t necessarily the regulator’s role. I think it’s an outgrowth of a role, at least in the traditionally regulated world, to ensure that customer demand was met at the least cost.
For a good while the cost of supply-side resources has been relatively low. Commodity prices for coal and gas have been relatively low. In recent years a couple of things have changed this equation pretty substantially. First, at least in the Southeast, we’ve seen continued demand growth, which has caused us for the first time in 20 to 25 years to look at adding new baseload resources. Second, the cost of virtually everything used to generate power has gone up. Most people believe that energy efficiency in particular has become a good bit more cost effective than it might have been a number of years ago. So the reason there’s been greater emphasis on energy efficiency is simply because we’ve seen these changes in the overall industry landscape.
Smitherman (Texas): It isn’t that different in Texas, because our TDUs, our transmission and distribution utilities, are still completely regulated. That’s where our legislature has decided to realize our energy efficiency objectives. We got started significantly a couple of years ago at the direction of the legislature to require our wires and poles companies to achieve a 10 percent reduction in the increase in demand through energy efficiency, and we’ve been monitoring, directing and auditing that program. In the last legislative session—and I have to give a lot of credit to the community of energy efficiency aficionados in our state who said 10 percent isn’t enough, we need