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The Efficiency Mandate: Stimulating Energy Efficiency

NARUC decries conditions on states for federal grants.

Fortnightly Magazine - April 2009

increased efficiency and energy savings across the country. States are leading the way for renewable resources, and we’ve been helping shepherd new smart-grid technologies. And we’ve done all of this by focusing on how these steps will impact consumers.

State procedures can be lengthy and at times contentious, but they give all parties their seat at the table. Everyone is heard, all opinions are considered, and at the end of the day, a balanced decision is rendered.

So as I said, while the exact provisions in the stimulus bill may be “less bad” than earlier inceptions, it potentially could disrupt the independent regulatory decision making that has guided this country for more than 100 years.

In terms of the smart-grid section, we are pleased, again, to see any amount of money going toward smart-grid development. A question I keep being asked is, “is this enough money?” The answer is no, but it’s only intended to be seed money to stimulate smart-grid development.

While we have to be careful with how we proceed with the smart grid, the approximately $4.5 billion in the stimulus bill gives us a good starting point that we hope will bring some demonstration and pilot projects to fruition.

 

Fortnightly: The Stimulus Bill ties federal grants for energy-efficiency purposes to promises states must make about their ratemaking policies. What do you think about that aspect of the legislation?

Butler: We’re very disappointed by this provision. Regulatory operations are meant to be independent and free of outside interference. No matter how strictly the bill is interpreted, it seems clear that Congress intends for state governors to obtain “necessary assurances” that their regulators will seek to implement the energy-efficiency provisions.

We don’t know what this is intended to accomplish. For starters, commissions are set up to be quasi-judicial. Hearings and rate cases are essentially conducted in a courtroom setting, with witnesses, evidence, testimony, cross examination, etc . Because of this framework, state commissioners, in effect, act like judges and must weigh all the evidence when deciding on a certain case.

Therefore, it’s legally problematic to have a state commission give “assurances” that they will act a certain way in a given case. This is like qualifying the release of federal judicial grants to states based on governors having to receive assurances that their judges will find 80 percent of all those accused guilty.

 

Fortnightly: The original version of the Stimulus Bill in Section 7006 required utility rate decoupling. The final version doesn’t mention decoupling specifically, but requires state policy ensuring utility financial incentives are aligned with helping customers use energy more efficiently. What’s your perspective on that language?

Butler: The language seems vague in terms of what kind of efficiency programs would qualify for the funds.

I really don’t know if this will result in removing disincentives to efficiency. I don’t mean to duck the question, but I really just don’t know. For one, states are not immune from the economic plight we’re in, so we do want the money to get out to as many states as possible.