Ridiculous rate rhetoric

This blog was written by John D. Wilson, former Deputy Director for Regulatory Policy at the Southern Alliance for Clean Energy.

Guest Blog | March 23, 2010 | Energy Efficiency, Utilities

“Energy efficiency will be the single most important source of energy available to the world’s economies in the years to come.” Rex Tillerson, Chief Executive Officer and Chairman of ExxonMobil Corporation.

When someone like Rex Tillerson gives a strong endorsement to energy efficiency, it is clear that there is a wide consensus that energy efficiency is a large and cost-effective energy resource. He made the comment in a report published by IHS Cambridge Energy Research Associates.

The report, Energy Vision 2010: Towards a More Energy Efficient World, says that energy efficiency represents a critically important “energy source.” Of all options available to meet growing demand, efficiency can quickly contribute the most energy “supply” while reducing costs and greenhouse gas emissions and increasing energy security, the report finds.

Another example demonstrating the wide acceptance of the value of energy efficiency: South Carolina Senator Lindsey Graham agrees “that consuming less power will help keep energy bills down and simultaneously extend the life of our domestic energy resources.”

In spite of the bipartisan, broad based consensus about energy efficiency, Florida’s electric utilities are at it again, ratcheting up the rhetoric about cost with unbelievable claims about the cost of energy efficiency. Recently, Progress Energy Florida attorney John Burnett claimed that his company would have to charge a typical residential customer $17.41 per month to support energy efficiency.

The Progress Energy estimate is ridiculous. This figure translates into a per capita expense of $83.57 per year (assuming 2.5 people per household), which is almost three times what is currently spent in California. Will Florida really leapfrog past California to be the nation’s #1 spender on energy efficiency? No.

First the facts: The Consortium for Energy Efficiency estimated that Florida spent an average of $6.91 per capita on energy efficiency in 2008, as well as $8.91 per capita on load management. For comparison, a leading state with lower electricity rates is Iowa. Iowa spent an average of $14.04 per capita on energy efficiency and $13.23 on load management in 2008, achieving about three times the energy savings as Florida achieved.

Last December, the Florida Public Service Commission set energy savings goals for Florida’s utilities that will roughly double energy efficiency program impacts in Florida on average. Due to the roundabout path that the Commission took in setting Progress Energy’s goal, it will have to increase its program impacts by four to five times.

Even if Progress Energy increases spending by a factor of five to meet the new goals, annual spending would increase from about $7 to about $35, less than half of the amount that the attorney for Progress Energy Florida claimed.

And what will the impact be? The “typical” residential customer described by John Burnett has an annual electric bill of around $1,500. If that customer achieves the average savings of 8.5%, the customer would save around $125 a year. After taking into account the contribution of $35 per year to support the energy efficiency program, that customer is about $90 better off each year with the energy efficiency program than without it in this simple analysis.

The CERA report recognizes the power of this $90 benefit that could be repeated for each and every resident of Florida … and so on: “Energy efficiency has moved to the top of the global political and business agenda.”

Yet in Florida, Progress Energy would have a rollback of energy efficiency at the top of its business agenda, and perhaps at the top of its legislators’ political agenda. Admittedly, the $90 benefit calculation above is simplistic and there are other factors to consider in understanding the finances of energy efficiency. We could engage in a thoughtful discussion about how to structure goals and program budgets in a way that ensures a fair and cost-effective outcome for the entire customer base.

However, when Progress Energy opens the conversation about energy efficiency with an incendiary claim that customers will be paying more than $17 per month per household (or $84 annually on a per capita basis), then there simply cannot be a thoughtful discussion. It is simply ridiculous rhetoric.

Postscript (fact check):

Mr. Burnett also estimated Progress Energy’s energy efficiency expenses as $3 per customer, per month. A review of documents filed by Progress Energy indicates that the conservation (energy savings) expenses on residential programs are about $1 per month, and the load management (peak energy curtailment) expenses on residential programs are about $1.60 per month. The $3 is a slight overstatement, but considering that the vast majority of the increased goals are conservation (energy savings) programs, then Mr. Burnett is claiming that to meet the Florida Public Service Commission goals, the company will increase its conservation spending from $1 to over $15 per month, per customer. Again: Ridiculous.


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