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Energy Conservation Update

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Conservation Improvement Program image

The March 9 edition of Session Weekly from Minnesota House of Representatives includes a short piece on Representative Kalin's H.F. 1221 on energy conservation. I recently wrote a post about the decoupling portion of this bill.

The bill has been approved by the House Energy Finance and Policy Division. Its next stop is the House Finance Committee.

The bill represents an expansion of the state's current conservation improvement program, which directs utilities to invest money in programs and initiatives that encourage energy conservation among their customers.

Kalin called the 1.5 percent goal both "aggressive" and "doable." Representatives of utility companies, however, said they would have a tough time meeting it, and that it might result in higher gas and electric prices.

Mike Bash, chief financial officer of Connexus Energy, said it didn't make sense to put the onus for energy conservation on the utility companies when customers are responsible for gas and electric demand.

"We're not at our customers' shoulders when they're at Best Buy buying that new plasma TV. We're not at their shoulder when they're at the hardware store deciding which light bulb to buy. We're not there with their builder at their new home deciding what appliances to put in," Bash said, adding that his company will have to raise its rates anywhere from 6 percent to 10 percent if the bill passes.

Sheldon Strom, executive director of the Center for Energy and the Environment, disputed the notion that the bill would increase energy prices, arguing that having to build new power plants to meet energy demands would be much more expensive than conservation.

In the same pattern of testimony from the Renewable Energy Standard, utilities largely said that 1.5% is too big a conservation goal. Some suggested they thought they could meet 1% but even that would be stretch.

When discussing why utilities are required to do the conservation (in response to Bash's question above), someone noted that energy companies are trusted by consumers and are therefore posed to offer the best programs to reduce demand. From a philosophical point of view, I wholly agree that customers should be the targets and not the energy companies themselves, but I think this plan is more practical.

That being said, one utility testifier made the salient point that they may offer a customer hundreds of dollars in rebates for efficient appliances, only to see them purchase a bigger TV or something else that will nullify the conservation. It left me thinking that education has to be the ultimate answer.

When discussing potential costs, testifiers for the utility companies stressed that this could raise rates and that there is no linear relationship between conservation and money spent. Thus, conserving 2% may cost more than twice as much as conserving 1%.

While that makes intuitive sense (CFLs are cheap, but only take you so far) some of the testimony seemed over the top. Some of the testifiers used cost estimates extrapolated from what they are currently achieving. However, their current requirement is a spending requirement - not an efficiency requirement. Thus, there undoubtedly ways for the utilities to be more efficient with their conservation dollars.

The worst moment came when one of the utility testifiers showed what other states are doing and insinuated that Hawaii's incredibly stringent conservation requirements are responsible for their sky-high $.22/kWhr cost. As one Representative pointed out, this is a meaningless comparison because Hawaii has to pay exorbitant energy costs due to its isolated location.

I thought the best moment came when some of the more conservative members of the committee were complaining that this bill goes too far. Another member noted that the Leg has been moving increasingly toward performance standards in all aspects of policy and that this is nothing more than a step in that direction.