NW Natural Claims Customers are Making Homes Too Efficient!?

In previous posts, we have discussed NW Natural’s proposal to raise the monthly customer charge to $29/month.

Last week was CUB’s chance to respond to NW Natural’s proposal. In examining the company’s request, we concluded that the purpose of NW Natural’s proposal seems to be to encourage customers to spend less on conservation. By increasing the portion of your bill that is a monthly fixed charge unaffected by your usage, NW Natural is reducing your incentive to conserve natural gas.

The policy of the Oregon PUC for more than a decade is to limit the monthly charge to the cost of the meter, meter reading, and billing. Other costs, such as the costs of the pipes that deliver the gas and the cost of the gas itself, are recovered in volumetric charges (a ratio of dollars to therms).

According to NW Natural, this policy needs to change, because it is causing customers to spend too much on energy efficiency:

Unfortunately, volumetric rates produce the opposite result of conservation. Volumetric rates encourage the wasteful use of resources to reduce gas use and discourage efficient uses of natural gas. Full cost-based Customer Charges promote efficient use of all resources related to gas consumption and, thus, result in optimal conservation.

Read this statement carefully. What the company is saying is that that we are wasting resources spending them on efficiency because we are achieving conservation above the optimal level.

For NW Natural, the optimal level of conservation is linked to the short-term marginal cost of natural gas, which is at an historic low—the company is paying very low prices for the product it sells to customers, and if customers conserve their natural gas usage, NW Natural sees less profit from its investment.

Of course, a big problem with this is that gas won’t be priced at historically low levels forever. Historically, natural gas prices have followed a boom and bust cycle. Back in the 1980s and 1990s the Oregon PUC allowed energy efficiency investments follow the same boom and bust cycle as short-term energy markets. When prices charged to customers were high, utilities increased them even more to support energy efficiency programs. When prices charged to customers were low, utilities lowered them even more by cutting energy efficiency programs. When the Western energy crisis hit in 2001, Oregon regretted all the cuts that had been made to conservation programs due to short-term prices. The efficiency programs that had been cut would have saved Oregon household tens of millions of dollars.

Since that time, the PUC and utilities have recognized that energy efficiency investments should be tied to the long-term cost of energy. Weatherizing a house is a long-term measure. It will not just save energy at today’s prices, but it will save energy in a decade at whatever prices exist at that time. Energy efficiency has proven to be our cheapest and cleanest source of energy. It is not something we do in the short term to respond to today’s market, but it is something we invest in over the long term to keep our bills down.

CUB filed testimony that countered the NW Natural proposal. CUB quoted Oregon Governor John Kitzhaber who spoke at the Future of Energy Conference this year in Portland. In his keynote Governor Kitzhaber said:

We know what other regions have yet to learn:

That the cleanest form of energy is the energy we don’t use and that there is tremendous economic potential in significantly scaling up investment in energy efficiency and conservation;

That the real potential of our extraordinary natural assets lies not in their exploitation, but in their restoration; and

That the global market is hungry for technologies, products and services that get things done more efficiently and at a lower cost—the keys to a clean economy.

The utilities should take note.

For more on this case, read the Oregonian’s article on NW Natural’s request to the Oregon Public Utility Commission.

Your membership in CUB—starting at just $5!—is what keeps the fight going. Become a CUB member today!

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