Energy Savings and the Public Trust
AV's Intern Team | April 16, 2013 | No Comments
By Molly Moore
Our society owes a huge debt to electricity — it’s often easier to recount the aspects of our lives that are connected to an outlet than not. But instead of controlling our energy use, we’ve let our addiction to electrons take over.
Outdated appliances and leaky homes lead to high heating and cooling bills for those who can least afford to pay them, while clean water and air, our most fundamental needs, are often considered tradeoffs that can be exchanged for more juice.
Using electricity wisely is particularly vital in Appalachia, a region that has historically borne the environmental and economic burdens of our national appetite for cheap energy. The region’s poverty, among the worst in the nation, ironically contributes to its wasteful energy consumption.
Investing in repairs to make old, drafty buildings more efficient requires upfront capital. Even though this is eventually repaid through lowered energy bills, the initial cost can be a hardship for many of the residents who could benefit most.
Although energy conservation is a natural fit for Appalachia, which prides itself on its resourcefulness, most regional states rank in the bottom half of the country in terms of energy efficiency. The region’s patchwork of power providers offer a window into the differing motivations for wise electricity use.
Energy efficiency makes sense for consumers, but it’s not that simple for utilities that rely on sales to fatten their bottom lines. Unlike government-owned power providers or member-owned electric cooperatives, the 800-pound gorillas of the Southeast’s energy markets — investor-owned utilities such as Dominion and Duke Energy — are not obligated to act in the public interest.
The roots of this system stretch to the early 20th century, when some states began to allow monopolies to take over electricity generation instead of requiring that utilities compete for customers. Most southeastern states took this approach, putting their faith in the ability of politicians and regulators to prevent monopolies from abusing their power.
None of these monopolies impact as many ratepayers as Duke Energy. Following its merger with Progress Energy last year, the Duke-Progress hybrid, which operates in six states, became the country’s largest electric utility.
For investor-owned utilities, profits are not solely determined by the sheer volume of kilowatt-hours sold, but are shaped by what rates the utility can charge consumers. These rates are based on Duke’s investments. When it invests in big projects — such as a $24 billion nuclear power plant — it usually earns a rate of return greater than 10 percent.
In North Carolina, where Duke and Progress control 95 percent of the market, the N.C. Utilities Commission is supposed to, among other responsibilities, “provide just and reasonable rates and charges for public utility service and promote conservation of energy.” When seeking a rate increase, Duke needs to prove to the commission that there is sufficient need to warrant investing ratepayer money in building new power plants.
Flat and declining electricity use puts a wrench in that argument, says Pete MacDowell, program director for the clean energy advocacy group N.C. Waste Awareness and Reduction Network. He says that to boost demand, “the game plan has been to entice as many energy hogs into the state as possible.” Duke has actively recruited server farms for companies including Google, Apple, Facebook and Disney to the state, enticing the Fortune 500 outfits with low electricity rates subsidized by the utility’s other customers.
In February, Duke presented a 20-year plan, forecasting growing demand and proposing a corresponding increase in new electricity generation, which would be equivalent to building roughly seven nuclear power plants by 2032. According to N.C. WARN, Duke would likely have to double customer rates between 2009 and 2019 to finance the new capacity. Meanwhile, renewable energy and energy efficiency would each account for just 2.2 percent of the company’s power portfolio by 2032.
The American Council for an Energy-Efficient Economy recommends that utilities strive to reduce their overall electricity sales by 1.5 percent each year, a benchmark that has been adopted by more than ten states. In contrast, Duke is currently reducing its use by a rate of 0.7 percent — less than half of the suggested goal, but still the best pace in the Southeast.
MacDowell is concerned that changes in the state legislature might make it more difficult for the N.C. Utilities Commission to do its job. North Carolina’s new governor, Pat McCrory, was a Duke employee for 28 years. Since taking office, Gov. McCrory’s political appointees include three cabinet members, two members of the state’s environmental agency, and the head of the utilities commission, all of whom are also former Duke employees. This spring, a bill passed the N.C. Senate that would remove the utilities commission’s staff and allow the governor to pick their replacements.
The Southeast is not only home to America’s largest private utility, it’s also the birthplace of the largest government-owned power provider, the Tennessee Valley Authority. As a federal entity, TVA is not beholden to shareholders and has more leeway to meet demand through conservation.
In an interview last spring, Bob Balzar, a vice president at TVA, called energy efficiency “the cheapest resource we can acquire,” and noted that it costs the utility just two cents per kilowatt hour to deliver its energy efficiency programs. On top of the environmental benefits, he said, utilities that offer opportunities for customers to save electricity find higher customer satisfaction.
In 2010, TVA announced a goal of achieving 3.5 percent of its electricity sales through energy savings by 2015. So far, however, that benchmark is out of reach. For the past two years the power provider has reduced its energy consumption by just one-third of one percent of its total sales, says Jimmy Green, energy policy manager at the nonprofit advocacy group Southern Alliance for Clean Energy.
“They’ve got a long way [to go], but I like to determine that there’s a lot of potential there,” he says. “They’re working on it.”
As with any government organization, politics also play a role. TVA’s board of directors are appointed by the White House and confirmed by the Senate. In 2010, Marilyn Brown, who is widely recognized for her expertise in energy efficiency, was appointed to fill a two-year vacancy on the board. When President Obama nominated her to resume the position in 2012, her selection was blocked by Tennessee’s two senators. The White House selected her once more in early 2013, and the nomination is pending.
Much of rural Appalachia receives power generated by massive entities such as TVA, Appalachian Electric Power, Dominion and Duke, but delivered by smaller, member-owned electric cooperatives. In some cases, these cooperatives also join together to produce power independent of the Southeast’s energy giants.
With investor-owned utilities, there are layers of competing interests between the average customer and the electricity provider. But by their very nature, member-owned electric cooperatives have a strong incentive to use energy efficiently, since lower bills benefit each member individually and reduce the cooperative’s need to invest in new generation. According to the National Rural Electric Cooperative Association, 96 percent of co-ops nationwide offer an efficiency program, and 73 percent plan on significantly expanding their programs in the next two years.
Though these cooperatives are relatively small players on the national energy scene, they are participating fully in one of the electrical sector’s most universal trends. Even states such as Oklahoma, which ranked 47th in energy efficiency in 2011, are promoting conservation. The state climbed to 39th in just a year and recently passed a mandate to improve state buildings’ energy use by 20 percent.
In Appalachia and the Southeast, historically cheap energy prices created an electrical landscape where convenience trumped resourcefulness, and private utilities had a healthy profit margin to fuel perpetual stock gains. Today, however, residents, small businesses and municipal governments no longer seem content to pay extra for a wasteful system that harms neighbors, backyards and wilderness areas. The game has changed.
When it comes to energy efficiency, the question is not “if” but “when.”
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