The Obama economic recovery plan makes a bold investment in the modernization of our electricity infrastructure, in order to transform an often-overwhelmed patchwork of balkanized regional networks into a national “smart grid” based on Internet-like technology. Without a smart grid, the goal of independence from fossil fuels is impossible to reach. Repower America, Al Gore’s campaign to have America use 100% renewable electricity in ten years, explains that a national smart grid “will save money, increase reliability and protect consumers from outages, and make possible a clean electricity system.”

Building a smart grid requires both new technology and regulatory policy. In addition to a $20 billion investment in smart grid deployment, the recovery plan offers $2 billion in grants to promote a subtle but key shift in electric utility regulatory policy:

Policies that ensure that a utility’s recovery of prudent fixed costs of service is timely and independent of its retail sales, without in the process shifting prudent costs from variable to fixed charges.

Translating for normal people, electric utilities traditionally make higher profits when they sell more electricity to consumers. The key problem is that this discourages utilities from promoting conservation and efficiency — instead, the more wasteful their consumers are, the better. So demand goes up, utilities build new, expensive, and polluting power plants, and still costs rise. Utility shareholders’ interests are pitted against the rest of society.

Therefore, several states have implemented policies that decouple profitability (“recovery of prudent fixed costs of service”) from demand (“retail sales”), by using public funds and rate adjustments to guarantee an expected annual profit for the utility company and to subsidize investment in energy efficiency.

Obama’s economic recovery package contains $2 billion in state-level block grants that will be released “only if the governor of the recipient State notifies the Secretary of Energy that the governor will seek, to the extent of his or her authority, to ensure” that decoupling and energy efficiency incentive programs will occur.

Because our electrical infrastructure is a vital public resource, the profits of utility executives and shareholders must not be put above the public good. As Public Citizen warns, decoupling for unregulated utilities can lead to “windfall profits for the industry.” The California electricity debacle exposed the great failure of the experiment of utility deregulation, and the recovery package does not go far enough to bring utilities back under control.

As President Obama, Secretary of Energy Steven Chu, and legislators like Sen. Jeff Bingaman (D-NM) recognize, our entire nation needs to move to a low-carbon economy as rapidly as possible. That means modernizing our grid through both new technology and new regulatory policy. The economic recovery plan includes crucial language to allow that to happen.

Full decoupling language in the House-passed economic recovery package (HR 1): Read more

Given how many progressive political cartoons I publish, I thought it only fair to show one of the regressive ones, too. After all, just because people block the kind of fuel economy standards that would have forced Detroit to build more of the cars that people actually want, reduced our dependence on oil, and cut climate-destroying emissions, doesn’t mean they don’t have a sense of humor.

Yes, wanting to cut oil use, emissions, and consumer fuel bills is no different than wanting to have 50 steering wheels per car. Our President is so dumb!

I guess this is what people in Birmingham, Alabama think is funny. Yes, Birmingham. It is so sad it is funny, no?

A few more thoughts upon reflecting on this cartoon while taking my daughter to the park.

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[It may seem a tad late to be running Bill's 3-part critique of the stimulus (Part 1 here). But the proposals below that didn't make the stimulus are exactly the kind that should be included in the mother of all energy bills that will be developed and enacted later this year.]

The best part of the economic stimulus package moving through Congress is that it calls for a significant down payment on a new energy economy. One of its weaknesses is that it doesn’t give the American people a clear and exciting vision for what that new economy can do.

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