CUB Fights for Fair Efficiency Benefits
Posted on August 6, 2014 by Amelia Lamb
Tags, Consumers and Utility Customers, Utility Regulation
When it comes to energy investments, CUB’s motto is that the cheapest kilowatt hour is the one you don’t have to buy in the first place. Energy efficiency makes such savings possible, and CUB is always looking for ways to maximize efficiency and its benefit for you the customer. For example, in PGE’s current general rate case, we have demonstrated significant discrepancies between what residential and industrial customers are paying to support energy efficiency. The current balance is extremely unfair to residential ratepayers, and CUB is working hard to change this.
Governor Kitzhaber’s 10-year energy plan, released in December 2012, challenged Oregon to meet all of its electric load growth through 2022 by increasing investment in energy efficiency and conservation. Oregon is actually in a good position to meet that goal; we have already reduced average electric usage by 15% and there are many opportunities to increase efficiency throughout the grid. In addition, while the utility’s costs to support energy efficiency programs may be charged to customers, the cost to the utility of saving a kilowatt hour through efficiency is less than half the cost of generating that same power though power plants.
Currently, industrial customers are only paying about 2.5% of their bills toward efficiency. This is because Oregon currently has a cap in place for the percentage of efficiency investments that can be charged to industrial customers. These payments from the industrial sector are not enough to cover the costs of PGE, which spends about 5% of its revenue on efficiency. The rest of the costs have to be made up by residential customers, who don’t have the luxury of a spending cap to keep their costs down. Consequently, roughly 5.8% of the bills being paid by PGE’s residential customers are being allocated to pay off efficiency investments. That’s more than twice the rate being charged to industrial customers!
According to CUB’s analysis, the benefits of efficiency are distributed in such a way that small customers are subsidizing industrial customers by paying a disproportionate amount of their bills into efficiency programs. This is unacceptable; it is unfair to residents and small businesses. It also limits Oregon’s capacity to take full advantage of our cheapest resource. Because PGE’s industrial customers have already hit their spending cap under the current rules, as of 2015 or 2016 PGE will not be able to acquire cost-effective energy efficiency without charging residential customers an even higher percentage than they are already paying.
Industrial customers such as Intel are happy with the current arrangement because it saves them a great deal of money. But CUB is making a strong case for the Public Utility Commission to match PGE’s payment structure with a fairer distribution of benefits among all customers. We believe that if the PUC continues to allow small commercial and residential customers to fund most of PGE’s efficiency investments, then those customers (you, me and mom-and-pop businesses) should also get the benefits of those investments. Because energy efficiency is the cheapest investment, allocating the benefits to the customers who fund energy efficiency would decrease residential rates by over 3%, while industrial rates, which would no longer reflect that cheap energy efficiency, would increase by as much as 14%. CUB has submitted testimony on this case and we are now waiting for PGE’s response. The PUC is set to reach a decision by the end of 2014.
There is another option for treating residential customers fairly: simply remove the industrial efficiency cap and charge industrial customers at an appropriate level given the benefits they are already receiving. Under this structure, industrial rates would increase by roughly 2.5%, while residential rates would decrease by less than 0.5%. This approach would certainly have a less severe impact on the industrial sector. Such a decision would have to be made by the Oregon Legislature. CUB is watching to see how PGE’s rate case plays out, and if the PUC decides not to mandate fair play, our policy team will take the fight to the legislature. No matter what happens, we will keep you informed. Stay tuned to our blog for updates on CUB’s push to make PGE’s efficiency pricing fair for everyone!
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04/14/17 | 0 Comments | CUB Fights for Fair Efficiency Benefits