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Wow! Waxman puts utility decoupling in the stimulus

By Joe Romm

"Wow! Waxman puts utility decoupling in the stimulus"

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The single most important policy change needed to promote broad-based, California-style energy efficiency is to “decouple” utility profits from sales, to allow utilities to profit from energy efficiency (see “How does California do it?” and “Why we never need to build another polluting power plant“).

Utilities are the most effective delivery channels for making homes, commercial buildings, and industry more energy-efficient, but the vast majority operate under a regulatory regime that penalizes utilities for promoting efficiency. Indeed, those regulations actually motivate utilities to encourage their customers to overuse electricity, because not only do they make more profits then, but if demand rises enough, they can get the Public Utility Commission (PUC) to approve a new power plant and higher rates — and thus more profits.

I have been assuming that Democrats would wait until the mother of all energy bills later this year to make their big push toward decoupling. But it turns out that Dems have decided to make it one of the conditions for the multi-billion-dollar energy efficiency block grants in the stimulus (see “Details of Obama’s green stimulus plan released“).

That is an outstanding idea. E&E Daily (subs. req’d) has the details:

States that accept federal energy efficiency grants from the economic stimulus package will have to ensure utilities recover the revenue lost when consumers use less energy, thanks to an amendment the House Energy and Commerce Committee approved yesterday.

The controversial “decoupling” provision was offered as a part of Chairman Henry Waxman’s (D-Calif.) substitute amendment during the committee markup of the House Democrats’ $825 billion economic stimulus bill that includes billions of dollars for energy efficiency, smart grid technology and renewable energy.

The House is scheduled to vote on the stimulus bill Wednesday, according to the office of Majority Leader Steny Hoyer (D-Md.)….

“We do appreciate the opportunity to have some debate on this,” said ranking member Joe Barton (R-Texas.) “I respect the right of a new president to have his or her agenda but … it is truly an insult to this committee and I would say to the committee system, that we didn’t have a few weeks to get a hearing on this,” he said.

The constrained time limit squeezed the amount of amendments members could offer, so Barton offered only an amendment that would have gutted the “decoupling” measure. “This is probably the most important consumer protection amendment in this markup,” Barton said. “I think the last thing we want to do, is to do all these great energy efficiency ideas in the bill … and not have their cost go down,” he said.

Rep. John Shimkus (R-Ill.) said the best way for people to adopt energy efficiency measures is for them see their costs go down. “This is the first time I have heard Democrats trust an electric utility in my 12 years,” he added.

But supporters say “decoupling” allows utilities to promote energy efficiency and still maintain a viable business structure as they would no longer rely on revenue made from how much electricity or gas they sell.

“Decoupling … has been the single most important policy to reduce usage of electricity in America,” said Rep. Jay Inslee (D-Wash.). California adopted decoupling and has successfully maintained a level electricity consumption for the past 20 years, he said.

[I'm sure he said level electricity consumption per capita for the past 30 years.]

Inslee explained that while the rates may stay at a higher level, the ratepayers’ overall bill would likely decrease as efficiency measures considerably cut their energy consumption. “Once we free utilities … to sell energy efficiency you know what they do? They sell energy efficiency services,” Inslee said. Efficiency programs — usually implemented through the utilities — also creates thousands of jobs including energy audits, changing doors, insulation and other efficiency upgrades, Inslee said.

The Alliance to Save Energy, the American Gas Association, the Edison Electric Institute and the Natural Resources Defense Council all endorsed the provision, Waxman noted. Democrats tried to put a similar measure requiring decoupling in the 2007 energy bill, but it was eventually watered down to only require state regulators to consider adopting decoupling policies — most of which have not yet done so.

In addition, states that receive the additional energy grants given in the stimulus would also be required to adopt recent and more stringent residential and commercial building energy codes and should prioritize grants toward existing energy efficiency and renewable energy programs — this last provision adopted as an additional amendment offered by Inslee and passed by voice vote.

Outside of the state energy grant programs, Waxman’s substitute amendment would require smart grid demonstration projects to be public knowledge and raise the federal matching grants to 50 percent; allows the energy secretary to encourage states to give priority of Weatherization Assistance funding to the “most cost-effective” efficiency activities; and mandates the assumptions for the required renewable electricity transmission study be made public. An amendment by Rep. Fred Upton (R-Mich.), adopted by voice vote, would also make the energy secretary study to what extent legal challenges are delaying the construction of transmission necessary for renewable energy.

Kudos to Waxman for the decoupling provision.

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14 Responses to Wow! Waxman puts utility decoupling in the stimulus

  1. Fantastic!

    That it comes in the first week of an Obama administration simply blows my mind.

    It’s morning in America.

    As a Canadian, living in a country run by a man who thinks that Kyoto was a socialist plot, I know that we’re going to be screwed unless we replace this administration with one that can keep up with 44.

    What do you want to bet… that number is about to become coveted in minor sports among the children of progressives. :-)

  2. Way to go, Waxman! Henry is on some kind of winning streak and not a moment too soon. Sounds like poor old Joe Barton just got himself Waxed by the Waxman. Maybe Congressman Barton should have a little bipartisan pity party with Congressman John Dingell.

    I am loving the one-two punch of Waxman in the House and Boxer in the Senate. Two truly committed and very intelligent environmentalists who have been sounding the reality alarm for the past 8 years now only to talk to the hand of the Bush/Cheney regime.

    Makes me proud to be a California. I bet lots of folks didn’t even know we experience the joys of “decoupling” here in the Golden State…

    Now where’s our waiver on those auto emissions standards? We’ve got more than a dozen other states who also “get it” ready to follow our lead. What’s the hold up?

    According to the NY Times looks like we’ll have to wait a few more months:

    http://greeninc.blogs.nytimes.com/2009/01/23/california-lobbies-for-emissions-waiver/

  3. ClaudeB says:

    Richard Levangie said:

    As a Canadian, living in a country run by a man who thinks that Kyoto was a socialist plot, I know that we’re going to be screwed unless we replace this administration with one that can keep up with 44.

    Problem is, the alternative to the wingnuts currently in charge has fallen in love with the Alberta tar sands. He even has the arrogance of thinking the US will just buy Canada’s dirty oil.

  4. Claude:

    You’re absolutely right… I was shocked by Ingatieff’s statements about the Tar Sands when I read them last weekend. It put me in a funk for days. (It was sent to me by a critic of the web site I’m running)

    He thinks it can be cleaned up. It can’t.

    Right now, I’m putting my hope in one simple fact; that as former professor at Harvard with a PhD and a Rhodes Scholarship to guide him, Ignatieff won’t dismiss the science. So we have to give him a crash course.

    But I don’t think we have a snowball’s chance of changing Harper’s mind.

  5. Will Koroluk says:

    Richard: Yup. changing some people’s minds is like trying to persuade a mosquito not to seek warm blood. It ain’t gonna happen.

    My hope is that the sheer force of Obama’s personality, will, and dedication to constructive change is going to drag Canada along in his wake. Harper, of course, will say all the right things publicly, but he’ll be dragged along, kicking and screaming privately. Tough times for him and for all those who can’t see beyond their vision of the tar sands as some kind of economic salvation.

  6. Wes Rolley says:

    For all you Canadians, there is some hope if the young people involved in the British Columbia Youth Parliament are listened to.

    THEREFORE, BE IT RESOLVED THAT

    * 1 The 80th British Columbia Youth Parliament opposes the development of the Alberta Tar Sands and calls for a halt to both existing and future Tar Sands projects.

    Wes Rolley: CoChair, EcoActon Committee Green Party US

  7. ClaudeB says:

    Wes,

    I wish it was so simple. Student parliaments are nice but they get almost no coverage and don’t really mean anything. Look, we know how it’s going to be solved ultimately: Alberta will have to shape up, or they won’t be able to sell their tar sands in the US; that’s the only thing people like Harper will listen to. The bottom line is money, plain and simple.

    To get back on the subject, I don’t really understand the mechanics of decoupling. The marginal cost of adding a MWh clean generation capacity is probably greater than the marginal cost of a MWh of energy savings, so it makes good sense to finance programs to stabilize demand. On the other hand, decoupling doesn’t give electric companies an incentive to mothball their coal-burning plants and replace the dirty plants by solar or windfarms, because in their minds, there is no profit in building at 8-10 cents a kWh when you can have the same kWh for 5 with coal.

  8. Russ says:

    That Ignatieff gambit sounds all too familiar.

    “Never pit one region of the country against the other when you develop economic policy.” – This kind of thing is almost invariably the words of a scoudrel who is championing one privileged region of the country against all the others.

    If there remained any doubt: “all questions of energy policy are a question of national unity.” Where spoken on behalf of the tar sands industry, this rhetoric and the feudal concept underlying it are out-and-out fascistic.

    I heard that somebody recently published a book claiming that there’s a veritable tar-sands coup d’etat going on in Canada. I’ve been meaning to look into that, which is why I find Ignatieff’s ideology on this telling.

    As for decoupling (to get on topic), it’s great to finally see some federal progress on this. And I love that Waxman at least wants to give the enemy a taste of its own medicine and try to use time as a weapon, the way the republicans have so successfully so many times.

    I know if I was the incoming president right now, given what mandate I have and the psychological state of the people, how ready for real change so many people seem to be, I’d want to see if “shock and awe” can work in the opposite direction.

    Alas, they seem on the whole more interested in “continuity” and appeasement….

  9. @Will, Russ, Claude, Wes…

    One Blue Marble is just a brand-new site, so I don’t know if we can have an impact, but we’ve got good writers and a graphic designer (my niece) who’s an art director in New York, so we might start making waves.

    We’re launching four or five campaigns in the first half of 2009, and one of them is going right after the Alberta Tar Sands. I thought about being diplomatic, and trying to work with conservatives who believe in protecting the planet, but in the end, I’ve decided to go for the jugular — especially after Canada won the dubious Colossal Fossil Award at the climate summit in Poznan.

    With Obama coming to Canada soon, and the Alberta Tar Sands on the agenda, the timing could be perfect.

    But I’m curious about the opinions of Climate Progress readers… because I learn so much here, and so many climate warriors are among your number. Like Bill McKibben’s call for civil disobedience, I feel the time for civility is over. It’s time to be tough, brutal, honest.

    Thoughts… Comments?

  10. Claude…

    Decoupling is just a first step. The next will be to change the balance sheet to make renewables more appealing than coal. If Obama and Waxman follow the California model, then there will be renewable targets to meet, a price on carbon, and so on… So that coal-fired power loses its financial advantage.

    The power of energy efficiency — no pun intended — to change the system is impressive. Demand reduction will allow the utilities to meet foreseeable future growth at a per kWh price that is below that of coal, and it will greatly slow the need for new coal plants. But I don’t expect that utilities will go quietly, even if it makes sense… There will be a big fight.

    And I do believe that Obama and Waxman have caught them flat-footed. I write a and edit a tiny (non-technical) newsletter on energy efficiency and demand reduction, and I didn’t see this coming so soon…

    I did a happy dance around the office!

  11. john says:

    Joe:

    Decoupling is a good — but flawed policy. The utility still has the ability to set the price of efficiency, and in many areas, it makes efficiency cost more than it should. (the $9 CFLs, for example — less than the cost of new power, so it could be sold as an efficiency measure by utilities at that price).

    New England ISO’s forward capacity market not only decouples, it allows non-utility efficiency aggregators to compete for capacity, thus keeping the price lower, and creating a powerful incentive to maximize the amount of efficiency bid into a market.

    We don’t have time for good but flawed policies. Pick up any journal, and the following sentence is likely to appear “Scientists are finding that xxxx is happening 10 times faster than climate models projected …”

    You’ve documented the urgency better than anyone. We need to optimize our policy response — pretty good policies won’t cut it.

  12. John Mashey says:

    maybe it would be worth people’s time to hear what the CEO of PacificGas & Electricity has to say about efficiency, decoupling, etc.

    Peter Darbee @ UN, Feb 2008.

    I have heard him talk, he’s passionate about this, it shows up in people who work for him, and in PG&E demand response programs.

    CA may not go far enough, but Darbee is pretty credible.

  13. john says:

    I’ve heard Darbee, too, and I think PG&E — in fact all the CA utilities — are doing efficiency as well as any utilities in the country.

    But I have three concerns with making standard decoupling a federal requirement. First, utilities operate under constraints that prevent them from capturing efficiency measures that a better policy framework would capture, and capture at a lower cost.

    Second, I don’t believe we can get to the kind of reductions we need with those constraints in place. As long as utilities are the only players in the game, we’ll get less efficiency at a higher cost than if non-utility aggregators were allowed to compete for capacity.

    Yeah, standard decoupling is one of the best policies we have in place — but if best in class isn’t good enough, then we’re going to have to go up a grade or two to get what we need.

    What do you do when the best you got isn’t good enough? You come up with something better — if we continue to use the existing policy tool box to come up with solutions, it will be kind of like trying to jump the Grand Canyon in 10 foot increments.

    Why don’t I just shut up and celebrate the progress we’re making? “Cause we’re not going to get a lot of bites at this apple. Once we’ve passed decoupling, it’ll be decades before we get another chance to revisit the regulatory and policy framework governing utilities — I doubt we’ll do it in either an energy bill or a climate bill.

  14. Let’s require every listing of For Sale property to include it’s last-12-month & 3-month utility in the listing. See how quickly people and commercial building owners cut their utility bills!! See how quickly prospective buyers take into account their likely energy expenses — and seek the lowest!!