A Consuming Passion

Deck: 

Ratepayer advocate Michael Shames has been fighting utilities for a quarter century.

Fortnightly Magazine - October 2007

Calling himself the “world’s greatest consumer,” utility watchdog Michael Shames loves to tell the story of how in 1981, as a law student in San Diego, he turned a daring scheme into one of the country’s most successful-ever utility ratepayer advocacy groups. (See his online books at www.worldsgreatestconsumer.com.)

It seems he had read an obscure law-review article, explaining that when utilities sent out their monthly bills to customers, they often paid standard postage without making use of all of the allotted “space” (the postal weight allowance) in their billing envelopes.

So why not take that news straight to the California Public Utilities Commission (CPUC)? Once there, he asked the CPUC for permission to create a nonprofit consumer group to keep tabs on California utilities. The money would come, in part, by forcing the utilities to make available all that “extra space” in their monthly billing envelopes, by stuffing them with notices to solicit contributions from customers to help fund the new watchdog group.

And so the law student Shames had started on his life’s work, helping in 1981 to create the Utility Consumers’ Action Network (UCAN), where he has served as executive director since 1985. That may make Shames one of, if not the longest-serving ratepayer advocates in the country.

Fortnightly: What led you to become a consumer advocate in the energy field?

Shames: I had always found that utility issues involved a fascinating confluence of policy issues, changing technologies, and complexities that required someone with specialized knowledge to represent the general public.

Activism has been a lifelong interest … from grade school onward. And being somewhat of an early adopting geek, I found energy issues to be of particular interest.

I often brag that I am bilingual, possessing a passing command of the English language along with a mastery of utility-speak.

Fortnightly: What was the first issue, case, or project that you worked on at UCAN?

Shames: One of my more high-profile cases involved a proposed takeover of San Diego Gas & Electric Co. (SDG&E) by Southern California Edison in the 1990-1991 time frame. At the time, insiders viewed the “merger” as a done deal. Yet, it ultimately failed.

I was a key player in the “defense” of San Diego against the Edison takeover effort. And one of the key lessons I took away from the experience was the importance of developing coalitions. When I take on a utility (or regulatory) practice, I usually lay the foundation for that effort by developing a broad-based coalition of diverse interests. To do so, you must be viewed as a credible and forthcoming resource by coalition members. I make a major effort to be as accurate and transparent as I can, so that current or potential future coalition members are confident that they are getting a straight, thoughtful, and expert viewpoint when they are dealing with me.

Fortnightly: Back in the mid-1990s, did you get involved in the California “Blue Book” project and the other early discussions about a “vision” of electric utility competition?

Shames: Yes, I was very deeply involved in that process. I was (and remain) very skeptical about the alleged benefits from retail competition in the electric services industry.

I believed then (and now) that the real competition to utilities will come from disruptive technologies in distributed energy generation and demand-side developments.

Fortnightly: When you say “disruptive technologies in distributed energy generation and demand-side developments,” do you mean that, just as telephone competition went nowhere before caller ID and cell phones, so too we won’t see electric competition succeed until it makes a difference in people’s lives?

Shames: Actually, I’d submit that real competition didn’t develop in the telecom arena until wireless and Internet-based telephony became marginally competitive. The Internet is closer to the disruptive technology that I have in mind, and the emergence of Voice over IP (VOIP) is more of a threat than any other that the ILECs (incumbent telephone companies) have faced. Similarly, we won’t see meaningful competition until customers begin generating their own kilowatts or negawatts. The new paradigm of customer-based energy initiatives is far more threatening to utilities than ESPs (energy service providers) offering various flavors of centralized generation.

Fortnightly: Do you see any other new technologies out there that could jumpstart electric competition?

Shames: Well, advanced metering is certainly an important factor in the equation. It may well be an essential condition precedent. I wish I could point to one “ready-for-prime-time” technology, but I can’t. But I can tell you that LED lighting and the recently announced electrode-free lighting, as in a story in The Economist, are poised to be significant developments.

I’m also closely tracking the commercial development of stationary fuel-cell generation. Each of these are notable developments in almost frenetic energy technology markets. Almost a day doesn’t pass when I don’t learn of some new, promising development in consumption or generation technologies. Indeed, it’s a very exciting and confusing time to be in energy.

Fortnightly: What issue or cause at UCAN are you most proud of? Were there any issues that, in retrospect, you now feel that the consumer advocates got wrong initially?

Shames: Oddly enough, I’m actually more proud of the work I’ve done in the privacy arena (which we started in 1995, before anyone thought that privacy was much of an issue) and telecom than in energy. But on the energy front, I think my greatest contribution so far has been to recognize the importance of the distribution system and the need to upgrade that network.

Until we instill some intelligence into the local distribution system, we will never be able to fully incorporate nor incent the benefits of the emerging energy technologies. I pushed SDG&E into incorporating interactivity and home area network functionality into its Advanced Meter Initiative and plan to continue to fight for investment in the distribution grid, as opposed to transmission or centralized generation.

Fortnightly: Are renewable mandates compatible with competitive power markets?

Shames: The renewable mandates are a vexing objective. There are few in the policy world who support the notion of promoting renewable, decentralized power more than I. Yet, I have never been a fan of the mandates, as I don’t believe that the technologies are ready for prime time. So California will be paying a premium for wind, geothermal, and biogen whereas we should be applying that hefty premium to solar, fuel-cells, and other hydrogen-based generation technologies.

I wish we also were applying a portion of that premium to demand-side technologies, such as LED lighting or other energy-reduction technologies. I have long been an advocate of the Lovins doctrine (see “People in Power,” June 2007, p. 12) that negawatts are the cleanest form of energy available to the United States. California, for all of its commitment to demand-side investment, really has just touched the surface of demand-side potential.

Fortnightly: In your job as a consumer advocate, how do you balance the goal of low rates versus the seemingly huge costs of developing renewables and controlling carbon emissions? Have you begun to warn consumers of future rate increases?

Shames: I would argue that a responsible consumer advocate is neither compulsively parsimonious nor a knee-jerk naysayer. Rather, the advocate god that I worship requires that one have a vision to advocate for as well as against.

So when it comes to renewables or carbon emissions, I try to focus more on the need for regulators to promote distributed generation and emerging technologies. And if those investments require increases in rates, I try to find areas where rates can be decreased.

In the 21st century, regulators should be expecting and demanding higher rates of productivity of utility management—at least comparable to private industry. So I believe that some of the upward pressure on rates can be balanced by more realistic regulatory expectations on the part of utility management.