By John Finnigan

Source: Chris Chan Flickr

Energy efficiency is a proven value. In Ohio alone, energy efficiency programs have saved people a total of $1 billion since 2009. What’s more is that these savings far outweigh the costs to implement Ohio’s energy efficiency programs, which amount to less than half of the total savings. Yet Ohio utilities, particularly FirstEnergy, and large industrial companies want to kill it. Why? Because they lose when customers use energy efficiency programs.

One would think that the billions in customer energy savings would easily trump the utilities’ and large industrial companies’ efforts to kill energy efficiency. But we live in challenging times. The utilities and large industrial companies are spending big money on this issue, and they might win the day unless we can convince our elected leaders to save energy efficiency.

Since 2009, Ohio law has required utilities to meet energy efficiency goals by offering  energy savings programs, which have proven to be wildly successful.  A recent study from Ohio Advanced Energy reviewed all Ohio utility energy efficiency programs since they began in 2009. The study found that these programs have saved customers $1 billion to date and will save a total of $4.1 billion through existing programs. Much greater savings will be available if utilities continue to introduce new programs.

These energy savings are happening not just in Ohio, but all over the country. A March 2014 study by the Lawrence Berkeley National Laboratory reviewed 1,700 energy efficiency programs in 31 states over a three-year period (including 170 Ohio programs). The researchers found that the average cost for procuring the energy efficiency savings was 2.1¢ per kilowatt-hour – five times less expensive than the 10.13¢ per kilowatt-hour customers pay for electricity. The programs cost $5.2 billion and will save 353,585 gigawatt hours of electricity, valued at over $25 billion, as illustrated below:

Source: Lawrence Berkeley National Laboratory, The Program Administrator Cost of Saved Energy for Utility Customer-Funded Energy Efficiency Programs, page 20 (March 2014).

Utilities and large industrial companies have a strong motive to kill these programs, just as horse and buggy makers might have wished to kill the automobile. Utilities make money by selling more electricity, so when customers use energy efficiency programs to lower their electricity bills, the utilities lose revenue. Large industrial companies can afford to hire full-time engineers to design custom-tailored energy savings programs, so they don’t want to pay for the utility programs. These large companies have a powerful competitive advantage over smaller companies, who can’t afford this and rely on utility energy efficiency programs to save money.

The utilities and large industrial companies are throwing big money at this issue and working in several states across the U.S. with well-funded corporate interests, such as the Koch Brothers, the Heritage Foundation, and the American Legislative Exchange Council to overthrow these energy efficiency programs. They won in one state, when Indiana repealed its energy efficiency goals in March, and a similar bill, SB 310, which would freeze any additional energy efficiency mandates after 2014, is being debated in the Ohio state legislature right now.

The irony is that when Ohio utilities file their annual energy efficiency reports with the Ohio Public Utilities Commission, they wax eloquently about energy efficiency’s benefits. AEP said its 2015-2019 energy efficiency plan will save customers “approximately $1.5 billion and create over 4,000 new jobs.” DP&L said that “[f]rom 2009 through 2012, DP&L’s residential and business programs helped customers save 659,605 megawatt hours of energy, or enough energy to power 54,967 homes for a year.” And FirstEnergy reported that its customers save two dollars for every one dollar the company spends on energy efficiency programs.

If the utilities were acting in their customers’ interests, they would issue public statements of support for the current energy efficiency goals. But the utilities are simply acting in their own self-interest and so they are working behind the scenes to kill energy efficiency.

Hopefully common sense will prevail in Ohio and energy efficiency will remain intact.  But this is too important an issue to take for granted. Tell your elected leaders today that you want to save energy efficiency – so you can continue saving money on your electricity bill.

By John Finnigan

Indiana State Capitol, Source: David Schwen

At the end of March, the Indiana legislature passed a bill repealing the state’s energy efficiency standard, becoming the first state in the nation to roll back its energy savings goals. Governor Mike Pence could have signed the bill into law or he could have vetoed it. He did neither; instead, the bill became law because he took no action within the prescribed time period. His statement as to why he allowed the bill to become law left us scratching our heads.

Here’s what he said:

“I could not sign this bill because it does away with a worthwhile energy efficiency program developed by the prior administration. I could not veto this bill because doing so would increase the cost of utilities for Hoosier ratepayers and make Indiana less competitive by denying relief to large electricity consumers, including our state’s manufacturing base.”

Governor Pence admits that energy efficiency saves money on ratepayers’ electricity bills. He’s right, according to a March 2014 study by the Lawrence Berkeley National Laboratory, which reviewed 1,700 energy efficiency programs in 31 states over a three-year period and revealed that the average cost for procuring the energy efficiency savings was 2.1¢ per kilowatt-hour – five times less expensive than the 10.13¢ per kilowatt-hour customers pay for electricity.

Governor Pence’s disregard for energy efficiency is part of a larger trend in the Midwest to roll back clean energy standards. Ohio is the latest battleground, where S.B. 310, which would freeze Ohio’s energy efficiency and renewable energy standards at 2014 levels, is currently being considered by Ohio legislators. These bills and other similar bills around the country are backed by the Heritage Foundation and the American Legislative Exchange Council, front groups and model bill factories for many corporate interests including oil, gas, and coal.

So why, exactly, did Governor Pence allow this bill repealing the energy efficiency standard to become law? Maybe he was listening to large industrial companies, who often oppose energy efficiency standards because they have engineers on staff who can design their own energy efficiency programs. As a result, these large companies don’t need to rely on energy efficiency programs managed by the electric utilities. But repealing the law hurts residential customers and small businesses which do not have the luxury of employing their own engineers to develop personally-tailored energy efficiency programs. If small businesses are the biggest job creators in our economy, does it make sense to take away the energy efficiency programs which allow them to save money on their electricity bills?

One thing we know for certain is that energy efficiency makes good sense. But Governor Pence’s failure to veto the bill – not so much.  As Dante said when describing the nine circles of hell in The Inferno,"[t]he hottest places in hell are reserved for those who, in time of great moral crisis, maintain their neutrality."

By John Finnigan

Source: American Insurance Association Flickr

Cheryl Roberto, Associate Vice President and leader of EDF’s Clean Energy Program, recently testified before the Ohio Senate Public Utilities Committee against S.B. 310, which would freeze Ohio’s energy efficiency and renewable energy standards at current levels. Sen. William Seitz, the Committee Chair, described her testimony as “passionate,” “very persuasive” and “thought provoking.”

Roberto described how the electric grid has changed. The old model, in effect for the past hundred years, relies on one-way power flows from large, centralized utility power plants, with limited customer service options and limited information available to customers on their energy usage. The new model involves two-way power flows between the utility and customers who own small, on-site solar, wind, and combined heat and power units. Customers receive detailed, real-time energy usage and price information.

New energy and communications technologies offer many more options for providing electricity service to customers. In states without retail electric competition, utilities can use renewable energy and energy efficiency to serve customers, and the regulators can develop innovative rate plans which incentivize utilities for doing so. Roberto cited the example of MidAmerican Energy Company in Iowa, which serves 30% of its customers’ energy needs with wind power and has made massive investments in energy efficiency programs.

This is more challenging in states with retail electric competition, like Ohio. Without clean energy laws, utilities may not be able to recover their costs for energy efficiency and renewable energy. Roberto explained that these companies should sell their generating plants to avoid the inherent conflicts between their generating business versus their energy delivery business. The energy delivery companies would then function as “procurement officers” to obtain the optimal balance of resources for their customers, including renewable energy and energy efficiency.

Roberto informed the Senators of a March 2014 study by the Lawrence Berkeley National Laboratory, which reviewed 1,700 energy efficiency programs in 31 states over a three-year period. The researchers found that the average cost for procuring the energy efficiency savings was 2.1¢ per kilowatt-hour – five times less expensive than the 10.13¢ per kilowatt-hour customers pay for electricity.

Ohio’s clean energy standards have only been in effect for five years and have been highly successful to date. Roberto urged the Senators not to curb these programs, which have flourished in a short time frame.

Roberto and her EDF team are doing everything they can to save Ohio’s clean energy standards.  But we can’t do it without you.  We urge you to contact Governor Kasich and your state representatives directly via EDF’s action alert to let them know where you stand on this important issue. Join the majority who support clean energy by adding your name and telling the Governor, state senators and state representatives to put Ohioan’s health, economy, and environment first. Don’t let Ohio lose out on these crucial clean energy standards.

By John Finnigan

Source: Edison International

Two seemingly unrelated announcements drew much attention in the electric utility industry recently. First, the Edison Electric Institute (EEI) (the trade group for the U.S. electric utility industry) and the National Resources Defense Council (NRDC) jointly recommended changing how utilities should be regulated. Second, Duke Energy announced it will sell 13 Midwest merchant power plants. These announcements are actually related because they both result from the same dramatic changes affecting the electric utility industry. As Bob Dylan aptly noted, “the times they are a-changin’.” Regulators and other stakeholders must be prepared to address these changes.

Under the traditional business model, electricity usage grew steadily. Utilities built ever-larger plants to serve this growing load. The bigger plants were more efficient than existing plants, so the unit cost for electricity steadily declined. Utilities benefited by steadily increasing their revenues. Customers benefited from declining unit costs. For utility customers, it was like paying a lower price per gallon of gasoline every time you filled your tank.

But this traditional model is crumbling, due to several factors:

• Load growth has declined, due to a slowing economy and greater use of renewable energy and energy efficiency.
• Utilities are no longer able to obtain economies of scale by building ever-larger plants.
• New regulations have resulted in higher costs for coal and nuclear plants.
• Plentiful supplies of shale gas have caused natural gas prices to decline.
• Utilities face high costs for grid modernization.

How did these changing conditions lead to the two recent announcements by EEI/NRDC and Duke Energy?

Market forces are changing the economics for legacy power plants

Duke plans to sell its 13 merchant power plants because of “the challenging competitive market in the Midwest.” These plants operate in the PJM wholesale market, one of the largest regional transmission organizations in the nation, where the average daily power price declined from $71.43 per megawatt-hour in 2008 to $37.50 per megawatt-hour in 2013. Additionally, these plants have a net book value of $3.5 billion (after calculating for depreciation), but their market value is only $1.5-2.5 billion.

Other companies with Midwest power plants are facing the same competitive pressures. Edison Mission Company, owner of four Illinois coal plants, filed for bankruptcy in December 2012 due to falling wholesale power prices and high costs for plant upgrades. Ameren sold its five Illinois coal plants and Dominion announced plans to close its Kewaunee, Wisconsin nuclear power plant in 2013. Exelon recently announced that it is considering shutting down its unprofitable nuclear plants, and will make its decision by the end of 2014. These plants have been unprofitable because of the changing industry conditions described above.

These changing conditions are forcing utilities to re-think their traditional business model, and this was the reason for the EEI/NRDC announcement. The EEI/NRDC plan follows earlier whitepapers on changing the utility business model by Rocky Mountain Institute, the Regulatory Assistance Project and the American Council for an Energy-Efficient Economy, and recommends several changes for regulating utilities, including:

• Requiring owners of distributed generation (on-site power generation, such as rooftop solar panels) to pay the full costs the utility incurs for serving these customers;
• Giving utilities performance incentives for adopting more clean energy resources; and
• Ending the current link between utility revenues and the volume of energy sold.

These changes are intended to eliminate the utility’s current disincentives to save energy, and to incentivize them to deploy more clean energy while remaining financially sound. Regulators and stakeholders should prepare to address these changes.

How can they get it right?

A key factor for getting the utility business model right is correctly setting the rules for pricing distributed generation. Today many utilities use net metering to pay rooftop solar owners for the excess electricity the solar panels produce. The net metering rate is typically set at the full price the utility charges for electricity, or at the utility’s wholesale cost of electricity. Yet neither measure fully reflects the costs and benefits that rooftop solar provides to the electricity grid, so utilities are attempting to change the price in recent net metering cases in California, Arizona and Colorado.

Minnesota’s approach to pricing distributed generation is also noteworthy. A 2013 Minnesota law requires the Department of Commerce to establish a methodology for establishing the value of a solar tariff, as an alternative to net metering. The tariff would allow the utility to recover its full costs for supporting solar customers and would fully compensate solar owners for the value produced by solar distributed generation. The Minnesota Department of Commerce submitted its value of solar methodology to the public utilities commission for approval on January 31, 2014.

Regulators and stakeholders should also consider the option of incentive regulation to compensate utilities for supporting distributed generation.  The United Kingdom has established an innovative new regulatory paradigm known as “RIIO” (Revenue = Incentives + Innovation + Outputs), which uses performance-based regulation to promote further deployment of clean energy. But some state public utility commissions in the U.S. currently may not have authority to approve performance-based rates and therefore may need legislation granting such authority.

Considering these issues will help regulators and stakeholders address the changing utility business model in their jurisdictions. Bob Dylan was right that, “the times, they are a-changin’.’” And the answer to a new utility business model is “blowin’ in the wind (and sun)” of distributed generation – meaning that the new model depends, in large part, on setting the correct pricing for distributed generation.

By John Finnigan

Ben Franklin famously said, “If you fail to plan, you’re planning to fail.”  This saying certainly holds true for smart grid deployment plans, which can cost utilities several hundred million dollars.  Given these high stakes, good planning is essential.

Many utilities have installed smart grids.  Currently, 25% of U.S. electricity customers have smart meters, a key component of the smart grid.  Some early deployments were rocky, but utilities have learned their lessons.  Utilities have incorporated these lessons learned in the planning process for more recent smart grid deployments.  A well-thought-out smart grid deployment plan should address the following topics:

• Strategic purpose: What are the objectives for deploying a smart grid?  What are the guiding principles which will govern the project?
• Road map: The plan should provide a step-by-step overview for each phase of the deployment plan, in chronological order.
• Technologies: Describe the technologies selected by the utility and explain how these technologies will function together as a unified system.
• Implementation: Explain how the utility will manage the project and coordinate the activities of the different departments involved in the deployment.
• Customer impacts: How will customers be affected by the smart grid deployment? What changes will they see in the electricity service they receive, including the meters, meter data, billing, collection, connection/disconnection of service, and customer service?
• New services: What new products and services, including new rate plans, will the utility provide after the smart meters are installed?
• Customer education: How will the utility educate customers about the smart grid plan? What channels with the utility use to communicate with customers and how often will these communications occur?
• Cybersecurity and data privacy: How will the utility keep the customers’ usage information secure? How can customers provide information to other providers of energy products and services? What types of information will be available to these third parties?

A utility preparing for a smart grid deployment should follow the standards developed by the Smart Grid Interoperability Panel (SGIP).  The SGIP is a public-private partnership formed in 2009 by the National Institute of Standards and Technology.  The SGIP’s mission is to develop industry standards to ensure that all the equipment and systems used in a smart grid deployment will work effectively together.

Performance metrics are essential to ensuring a successful smart grid deployment

A smart grid deployment plan might look good on paper, but how do we ensure that the plan is implemented properly?  One word: measurement.  Tom DeMarco, a management guru, said, “You can’t control what you can’t measure.”  The plan must contain metrics to define how success will be measured.

When a utility develops a smart grid plan, the utility must demonstrate that the benefits exceed the costs.  When the deployment plan is approved, the utility receives permission to begin incurring costs and recovering these costs from its customers.  The customers may be required to start paying for the smart grid equipment before the benefits from the smart grid deployment are fully realized.  Having clear, objective performance metrics will protect the utility’s customers by holding the utility accountable for delivering all the benefits promised.

Good examples of thoughtful, well-developed smart grid deployment plans are those filed by Commonwealth Edison (ComEd) and Ameren for their Illinois customers in October 2012.  These plans are noteworthy for their detailed performance metrics, which EDF had a hand in developing.  These smart grid deployments are now in progress and so far, so good.

The test will be found in the plans’ performance metrics, which will provide clear evidence of how well ComEd and Ameren deliver on their promises.  State utility commissioners reviewing upcoming smart grid projects in their jurisdictions should think about requiring these same types of detailed performance metrics for the smart grid deployment plans under consideration.

By John Finnigan

This commentary originally appeared on EDF Voices blog.

Rooftop solar owners in Arizona will pay higher costs for utility service under a new decision by state regulators, but the increase was much lower than the amount sought by Arizona Public Service, the state’s largest utility company. Both sides claimed victory. The case is part of a growing trend of more states reviewing these charges.

What is net metering?

The case involves a practice known as “net metering” where the utility pays rooftop solar owners for the excess energy the rooftop solar panels send back to the grid. Most states allow net metering.  In many states, the utility company pays rooftop solar owners the full price the utility charges for power it delivers to customers. Utility companies claim this price is higher than their actual cost to produce electricity. The rooftop solar industry claims that raising costs would crush a new industry that provides cheap, clean energy and fails to recognize the benefits provided by rooftop solar.

Regulators must find the right balance between utilities and the rooftop solar industry by allowing utilities the opportunity to recover all their costs while ensuring that rooftop solar owners receive full credit for the benefits they provide to the electric distribution system.

The Arizona Public Service case

Michael Mazengarb /flickr

The case was widely followed because rooftop solar has grown rapidly in Arizona in recent years. Arizona Public Service started the dispute earlier this year by requesting approval to raise its monthly charge to rooftop solar owners by an average charge of $50 per month. The regulators approved an average charge of roughly $5 per month.

Arizona Public Service claimed victory because the regulators acknowledged the utility’s higher cost for serving rooftop solar customers. The rooftop solar industry claimed victory because the new charge will be much lower than the amount the utility company had requested.

The ruling is only a temporary fix because regulators will re-examine the issue in a few years, when Arizona Public Service files its next case to raise overall rates. Many other states are reviewing their net metering charges.

What the ruling means for everyone else

State regulators will need to examine the full range of benefits provided by rooftop solar. These benefits include cleaner air emissions, lower delivery costs and providing power during hot afternoons, when electricity from other power plants can entail more harmful air emissions and be more costly. As more states study this issue, states will recognize and measure these new types of benefits provided by rooftop solar and utility companies will reflect these benefits in their payments to rooftop solar owners. At the same time, utilities will be permitted to re-design their rates such that rooftop solar owners pay the full cost the utility incurs for serving them.

This strikes the right balance for ensuring a vibrant future for the rooftop solar industry while ensuring that utility companies are not required to serve rooftop solar customers below the utilities’ cost. This is exactly the type of market-based solution for clean energy policies that EDF supports.

By John Finnigan

Ohio’s clean energy standards have helped jumpstart an industry that is spurring economic development, creating jobs, boosting energy independence and cutting the state’s carbon footprint.  Recently, these standards have come under attack and EDF’s own Cheryl Roberto, Associate Vice President of Smart Power, stepped up to defend them by testifying before the Ohio Senate Public Utilities Commission on Senate Bill 58 (S.B. 58).  As a former Ohio Public Utility Commissioner herself, Roberto made it clear that S.B. 58 would destroy Ohio’s clean energy standards and unjustly enrich the state’s electric utilities.

Ohio adopted clean energy standards in 2008, and is one of 29 states with a renewable energy standard and one of 25 states with an energy efficiency standard.  Based on these standards, Ohio will acquire 12.5% of its power by renewable energy and will reduce its energy use by 22% by 2025.  The renewable energy standard has already added 466 mw of wind energy in the state, enough to power 466,000 homes, and Ohio is now ranked fourth in the nation for wind energy jobs, with over 5,000 direct and indirect jobs supported by the industry.

Credit: Julia Collins

The American Legislative Exchange Council (ALEC), a group of conservative state legislators, is leading a nationwide effort to repeal state clean energy standards, including S.B. 58 in Ohio.  ALEC has previously supported controversial “stand your ground” laws as well as laws classifying environmental civil disobedience as terrorism.  To date, ALEC has failed to repeal clean energy standards in any state. 

S.B. 58 would eliminate the requirement for electric utilities to buy one-half of their renewable power from new Ohio projects, instead allowing them to buy the power from existing Canadian hydro projects.  The bill caps energy efficiency spending at 2013 levels and provides new definitions of energy efficiency unrelated to actual energy savings.  The bill also gives utilities a handout by paying them exorbitant sums (over $220 million during the first three years alone) to adopt energy efficiency programs already required by law.

EDF urged the Ohio legislature to eliminate the provisions of S.B. 58 that would dramatically weaken Ohio’s clean energy standards and give electric utilities a windfall.  Instead, we advocated for a pragmatic, market-based approach that would continue the evolution of Ohio’s competitive retail electricity market, and recommended that Ohio’s electric distribution utilities should:

• Eliminate their  remaining power plant monopolies by fully separating the utilities from their affiliated companies that own Ohio fossil fuel power plants;
• Open up utility billing systems to allow customers to pay for new energy products from the savings on their monthly electricity bills; and
• Adopt new electricity rate structures that would incentivize utilities to efficiently deliver new and innovative energy services.

Through Roberto’s testimony, EDF charted a reasoned and balanced approach for Ohio’s retail electricity market and clean energy future.  We hope Ohio’s lawmakers will heed her recommendations so Ohioans can continue to enjoy the benefits of new, clean energy technologies, reasonable electricity rates and a healthy environment.

By John Finnigan

In the 1983 thriller War Games, Matthew Broderick plays a teen-age computer geek who unknowingly signs onto a Pentagon computer while hacking into a toy company’s new computer game. Thinking that he’s simply playing a game called Global Thermonuclear Warfare, Broderick launches the game and nearly starts a nuclear war.  The North American Electric Reliability Council (NERC) will hold its own war game next month with a simulated attack on the U.S. power grid.

The drill, called GridEx II, will take place on November 13-14 of this year. The participants will include 65 utilities and eight regional transmission organizations, representing most of the nation’s electricity customers.  The drill will test how well the electric utility industry and the grid itself respond to physical and cyber attacks.

A NERC Critical Infrastructure Protection Committee (CIPC) working group will begin the drill by sending participants a series of simulated physical and cyber attacks, climaxing in a national security emergency.  Participants will then respond and interact with each other, just as they would in a real emergency.  The simulation will last 36 hours, and the CIPC working group will evaluate the participants’ responses and provide feedback on how their actions impact the ongoing scenario.  After the drill, the working group will analyze the results and prepare a report on lessons learned.

The drill is timely.  Our nation’s power grid is under constant cyber attack, according to a survey of electric utilities by U.S. House Representatives Henry Waxman and (now Senator) Edward Markey. James Clapper, the Director of National Intelligence, described cyber attacks as a soft war that is already underway and a dire global threat in his April 2013 World Threat Assessment of the US Intelligence Community.  The Department of Homeland Security investigated over 200 serious cyber attacks against critical facilities during the first half of 2013, and more than half of these targeted the grid.

Adequate Investment

The U.S. has developed a number of cyber security protections for the grid, but we must do more.  Our country needs to make adequate investments in cyber security.  With the huge budget deficits that the U.S. has incurred in recent years, the proper level of government spending is often at issue.  Given the devastating consequences of a cyber attack on the grid, this is one area where we can’t afford to cut corners.  Our leaders must ensure that federal budget cuts do not impair the Department of Energy’s and the Department of Homeland Security’s means to protect our nation’s critical energy infrastructure from cyber attacks.

Broader FERC Authority

We also need legislation granting the Federal Energy Regulatory Commission (FERC) broader authority to protect against cyber attacks.   FERC is charged with protecting the grid against cyber attacks, but it doesn’t have the legal authority it needs to do so.  FERC has pleaded with Congress to fix this oversight.

The Federal Power Act grants FERC authority over the bulk power system, but most of the smart grid equipment that creates vulnerabilities is installed on local distribution systems beyond its jurisdiction.  As a result, the National Institute of Standards and Technology (NIST) has put together a three-volume set of smart grid cyber security standards – but these standards are voluntary.  FERC is working with the National Association of Regulatory Utility Commissioners to monitor whether utilities are following these voluntary standards, but this is not enough.  The threat of grid cyber attacks is too real, and the potential consequences too dire.  The NIST standards should be mandatory and FERC’s authority should extend to critical distribution infrastructure that puts the bulk power system at risk.

Any new legislation should empower FERC to act proactively.  FERC should have the means to take timely actions to counter clear and present dangers as they arise.  Unfortunately, NERC’s process for adopting cyber standards is slow and unwieldy.  Because FERC’s present jurisdiction is passive in nature, it can only approve standards developed by NERC.  Congress should expand FERC’s authority to act in case of emergency.

Coordinated Enforcement

The appropriate boundary between federal and state control over electricity service has been disputed for over a century, since Thomas Edison’s day.  And, until recently, the manner of providing electric service had not changed much since Edison’s era.  The smart grid is beginning to modernize our energy infrastructure by marrying the Internet to the electric grid.  Just as the Internet is a matter of interstate commerce, so are critical smart grid facilities that could disrupt the bulk power system.  We can ease jurisdictional tensions by following an existing model that uses a federal-state partnership to enforce federal standards – interstate pipeline safety.

Interstate pipeline safety standards are established by the Pipeline and Hazardous Materials Safety Administration (PHMSA), a branch of the Department of Transportation.  Although the PHMSA sets the standards, any state can assume responsibility for enforcing them within their borders.  The state simply needs to follow the federal standards at a minimum and apply the same enforcement penalties.  While not perfect, this federal-state partnership has generally succeeded in ensuring pipeline safety in a cost-effective manner.

Information Sharing

We also need legislation to enable better practices for sharing information about cyber threats.  At the moment, we have two venues where the government and utilities voluntarily share this information:

• the Department of Homeland Security National Cybersecurity and Communications Integration Center (NCCIC); and
• the NERC Electricity Sector – Information Sharing and Analysis Center (ES-ISAC).

Perhaps a better approach would be to establish a new, independent organization to act as a single clearinghouse for cyber security threats.  Today, government agencies share alerts and notifications about impending cyber threats.  But the information often fails to provide sufficient detail for the private sector to take action.

Government employees should be allowed to share sensitive details as necessary, to protect against a cyber attack.  As a matter of security, the utility personnel who receive this information should be screened for the appropriate level of national security clearance.  If electric utilities are required to share confidential information, it should not be disclosed beyond these groups.  Many of these concerns are addressed in the Cyber Intelligence Sharing and Protection Act of 2013. The House passed this bill on April 18, 2013 by a 288-127 vote.  The Senate should pass this bill too.

Electric Utility Commitment

Finally, utilities should commit to following cyber security best practices, rather than doing the bare minimum.  NERC publishes voluntary cyber security recommendations, but only 20% of electric utilities follow these recommendations. Utilities seek to provide safe, adequate and reliable service in a cost-effective manner.  They should add cyber security to this credo.  To facilitate this, state utility commissions should allow timely recovery of cyber security costs.

Hopefully, NERC’s war game simulation will have a happy ending like the 1983 film.  If we don’t do more to strengthen our vulnerable grid’s cyber security, we could be writing our own screenplay for a disaster movie.

By John Finnigan

A new documentary about smart meters opens on September 5th called Take Back Your Power.  The film suggests that smart meters cause illness.  According to an August 12 USA Today story, the film’s director was inspired by a friend who became seriously ill after a smart meter was installed at his home.  Naturally, this type of personal experience might shape one’s view on smart meters, but correlation is not causation.

Electric utilities have installed over 38 million smart meters across the country and there “has never been a documented injury or health problem associated with such meters.”  According to the Federal Communication Commission (FCC), “no scientific evidence establishes a causal link between wireless device use and cancer or other illnesses.”

Smart meters send information to utilities by using radio frequencies (RFs) such as those currently used by televisions, radios, baby monitors, cell phones and wifi routers.  RF signals have permeated our atmosphere for as long as we’ve had televisions and radios.

We use these devices every day, and many of them create much higher levels of RF exposure than smart meters.  The exposure level depends on the strength of the RF signal emitted by the device, the duration of the RF signal and—importantly— the distance from the source.  Cell phones emit up to several thousand times more RF signals than smart meters.  Smart meters also transmit intermittently and briefly during the day, while we talk on cell phones for long periods.  Finally, smart meters are located outside the home, while cell phones are often used close to one’s head.

These factors result in a dramatic difference in RF exposure from smart meters compared to cell phones.  So, whether or not future studies find that RFs cause health impacts (because current studies do not; see these reports by: Lawrence Berkley National Laboratory and Electric Power Research Industry), smart meters make up a very small part of a person’s daily exposure.

Smart meters are an integral part of a smarter utility system that makes better use of distributed, clean energy, manages energy demand more intelligently and gives customers – for the first time ever – an active role in using, choosing and controlling the energy they need to power their homes and businesses.  Smart meters are an important ingredient in designing a clean, less polluting, low-carbon energy system.

EDF has a long history of working at the intersection where the environment meets human health, and our internal experts have taken a very hard look  at the available research on RFs.  However, we support utilities taking a proactive consumer-oriented approach to smart grid installations, including allowing individuals who oppose the installation of smart meters in their homes to be able to opt out.  The opt out option not only allows people to control whether or not they receive a smart meter, but it also allows everyone else – customers and utilities included – to reap the vast array of economic, environmental and health benefits from modernizing our antiquated, wasteful and polluting energy infrastructure.

Given the significant environmental and health-related benefits that could result from a more efficient, resilient grid by way of more locally-generated clean energy and fewer fossil-fuel power plants, EDF believes that case for smart meters is much stronger than the case against them.  The following states investigated the issue in connection with their smart grid deployments and reached the same conclusion: Arizona, California, Connecticut, Hawaii, Maine, Michigan, Wyoming and most recently Texas.

For more information on this topic, please see the Smart Grid Consumer Collaborative’s video Separating the facts from the Fiction about Smart Meters.

By John Finnigan

If Ben Franklin lived today, he might say that nothing is certain but death, taxes and cyber-attacks.  Cyber-attacks occur when individuals or groups hack into another group’s computer information systems to steal, alter or damage key infrastructure.  Our nation’s electric grid is under constant attack according to a survey of electric utilities by U.S. House Representatives Henry Waxman and (now) Senator Edward Markey.  The grid was the greatest engineering achievement of the 20th Century, but cybersecurity was equally unknown to those grid engineers as it was to Ben Franklin.  We need to do more to protect our energy infrastructure.

The U.S. has finally called out China for repeated and pervasive cyber-attacks.  Mandiant, a cybersecurity firm, released an alarming report in February 2013 regarding the ongoing cyber-attacks by the Chinese army.  James Clapper, the Director of National Intelligence, described cyber-attacks as a soft war already underway and a dire global threat in his April 2013 World Threat Assessment to the U.S. House Permanent Select Committee on Intelligence.  In May of this year, for the first time, the Pentagon’s annual report to Congress on the Chinese military openly accused China’s military of repeated cyber-attacks on the U.S. government and defense contractors.

Cyber-attacks are underway not only by China, but also by Iran, Russia, Al-Queda, organized crime, industrial spies, ex-utility employees and rogue hackers.  The U.S. Department of Homeland Security investigated over 200 serious cyber-attacks against critical infrastructure during the first half of 2013.  The electric grid was targeted in over half of these attacks.  At the recent Black Hat security conference in Las Vegas, Cyrill Brunschwiler of Compass Security explained how the smart grid’s wireless network can be easily exploited to steal electricity and to cause massive blackouts.  Though innovation and new clean energy technologies are key to modernizing our antiquated energy system, the electric grid is more vulnerable to cyber-attacks with increased use of smartphones, tablets, mobile apps and electric vehicles to connect with our home electronic devices.  A July 2012 report by the Government Accountability Office (GAO) outlines the various threats to the electric grid.

Have any of these grid cyber-attacks succeeded?  Some experts blame cyber-attacks for the Northeast blackout of 2003 and a massive 2008 Florida blackout.  The Central Intelligence Agency (CIA) has reported that cyber-attacks against the electric grid have caused blackouts in several cities around the world.

Here are the key highlights of our country’s efforts to protect the U.S. electric grid:

• In 2002, the nuclear industry adopted cybersecurity standards; the Nuclear Regulatory Commission expanded these standards in 2009 with cybersecurity regulations for nuclear facilities.

• The Energy Policy Act of 2005 authorized the Federal Energy Regulatory Commission (FERC) to approve mandatory cybersecurity reliability standards for the grid.  FERC selected the North American Electric Reliability Corporation (NERC) to develop these standards.

• In 2006, NERC developed mandatory reliability standards for the grid.

• In 2007, FERC approved NERC’s Critical Infrastructure Protection (CIP) cybersecurity reliability standards.

• The Energy Independence and Security Act of 2007 authorized the National Institute of Standards (NIST) to develop technical standards for interoperability of smart grid equipment and software, including cybersecurity standards.  In 2009, NIST formed the Smart Grid Interoperability Panel (SGIP), a public-private partnership, to develop these standards.  In turn, SGIP formed the Cyber Security Working Group (CSWG).

• In 2010, NIST issued its initial cybersecurity standards for smart grid equipment and software, developed by the CSWG.

• In 2010, FERC issued Order 743, directing NERC to revise its reliability standards to cover all electric facilities necessary to operate an interconnected grid.

• In 2011, FERC clarified the reliability standards regarding actions utilities can take to keep the grid running during electric emergency conditions.

• In 2012, FERC approved NERC’s revised reliability standards for the electric grid.  In January 2013, NERC asked FERC to approve further revisions and FERC is reviewing these new revisions.

Source: InSerbia

• In February 2013, President Obama issued Executive Order 13636, which directs NIST to develop a Cybersecurity Framework with standards for the protection of critical infrastructure facilities, including the electric grid.

• In April 2013, the SGIP was formally established as an independent organization, known as SGIP 2.0, Inc.  The organization will continue to function as a public-private partnership, and will be funded by industry and NIST.  Cybersecurity standards will be developed by the Smart Grid Cybersecurity Committee of SGIP 2.0.  This committee is developing a user’s guide for the NIST cybersecurity standards.

• In July 2013, NIST released a preliminary version of its Cybersecurity Framework.

Here’s what our country still needs to do to protect the U.S. electric grid:

• Our leaders must ensure that federal budget cuts do not impair the Department of Homeland Security’s capability to protect our nation’s critical infrastructure.

• Our leaders must develop a clear, overarching cybersecurity strategy, governance methods and cybersecurity response procedures, as the GAO recently recommended.

• FERC and electric utilities must implement the GAO’s recommendations, detailed in its July 2012 report Cybersecurity: Challenges in Securing the Electric Grid.

• NIST must finish developing its Cybersecurity Framework and utilities must implement the standards.  NIST is scheduled to release the Cybersecurity Framework for public comment in October 2013, and to finalize the standards by February 2014.

• Electric utilities should comply with NERC’s voluntary cybersecurity recommendations.  Currently only 20% of electric utilities follow these recommendations.

• The public and private parties responsible for protecting our critical infrastructure facilities must adopt GAO’s recent recommendations for implementing better communication protocols.

• The Department of Homeland Security and the Federal Communications Commission must develop performance standards for cybersecurity measures for the communications network and the internet in a timely manner, as recommended by a recent GAO report.

• The Department of Homeland Security must implement the GAO’s recent recommendations regarding the Regional Resiliency Assessment Program.

• The Senate should pass the Cyber Intelligence Sharing and Protection Act of 2013, which better enables the government and companies to quickly share vital information needed to respond to a cyber-attack.  The electric utility industry provided input for this bill and is a strong supporter.  The bill passed the House on April 18, 2013 by a 288-127 vote.

As the U.S. improves its preparedness, we must strike the appropriate balance between security and privacy.  Preparation and privacy rights can co-exist and are not mutually exclusive.  This has been brought into critical focus by Edward Snowden’s release of top-secret National Security Administration surveillance practices.

We can and must improve the cybersecurity of our critical electric infrastructure.  As Ben Franklin also said: “By failing to prepare, you are preparing to fail.”  Let’s prepare to succeed in protecting the electric grid with effective cybersecurity measures.

By John Finnigan

Source: Costco

The electric utility industry faces the risk of declining revenues as more customers install solar panels on their homes and businesses.  Solar power currently supplies 2% of the country’s electricity needs, and is projected to grow to 16% by 2020. In 2013, solar panel prices for commercial installations fell 15.6%, from $4.64/watt to $3.92/watt.  To protect their revenues, some utilities are raising electricity costs for solar panel owners – but with mixed results.  Credit ratings agencies are also expressing concern.  Is there real cause for alarm or are these companies crying wolf?  Judging by one customer segment – big-box retailers – the threat is real.

The Solar Energy Industries Association (SEIA) ranks U.S. companies based on their solar energy capacity, and the top five companies on the list are big-box retailers:

• Walmart tops SEIA’s list with 65,000 kW of solar power, which is enough to supply the annual energy needs of over 10,000 homes.  They recently installed ten new solar rooftop systems in Maryland, totaling more than 13,000 panels.  Walmart is the largest retailer in the U.S. and in the world by revenue, with 4,423 U.S. stores and over 10,000 stores worldwide. Walmart and EDF have been working together since 2004 to reduce the Walmart’s environmental footprint.  With more than 200 solar installations across the country, Walmart plans to have 1,000 solar installations by 2020.  Walmart’s goal is to eventually supply 100% of its energy needs with renewable energy.

• Costco ranks second on the list with 38,900 kW of solar power.  Costco is the fifth largest U.S. retailer and seventh largest in the world, with 425 stores in the U.S.  Costco has installed solar panels in approximately 60 stores, with an average size of 500 kW per store.  Solar power supplies about 22% of each store’s energy needs.

• In third place on SEIA’s list is Kohl’s, with 36,474 kW of solar power.  Kohl’s is the 20th largest retailer in the U.S. and the 44th largest retailer in the world, with 1,127 U.S. stores.  Kohl’s has solar panels installed at 139 of its stores, and will have solar panels at 200 stores by 2015.

• IKEA is fourth with 21,495 kW of solar power.  IKEA only has 38 U.S. stores, but its buildings can accommodate larger solar installations.  By 2020, the company plans to meet 100% of its energy needs with renewable energy.

• Macy’s ranks fifth on SEIA’s list with 16,163 kW of solar power.  Macy’s is the 16th largest retailer in the U.S. and the 36th largest retailer in the world, with 840 stores.  The company is increasing its solar installations by 25-35%.

The SEIA top 20 list also includes:

• Staples, #8 / 10,776 kW of solar power / 1,583 U.S. stores;
• Walgreens, #10 / 8,163 kW of solar power / 7,651 U.S. stores;
• Bed, Bath and Beyond, #11 / 7,543 kW of solar power / 1,143 U.S. stores; and
• Toys “R” Us, #12 / 5.676 kW of solar power / 871 U.S. stores.

As a whole, the top 20 big-box retailers have over 18,000 U.S. stores, representing enormous potential for solar power growth.  These retailers are only part of a larger group of commercial customers, which in total make up about one- third of U.S. electric utility sales.  But other commercial customers are turning to solar too.  The National Renewable Energy Laboratory reports that 40% of the nation’s 86,000 supermarkets are located in areas with grid parity (the cost of power from solar panels is equal to the cost of buying power from the utility).  Commercial customers are also making impressive strides in reducing their energy usage through energy efficiency.

What does this mean for electric utilities?  We can expect to see the following changes to the electric utility business model going forward:

• Utilities will need to address the operational challenges of higher levels of solar power on their electric grids;
• Utilities will seek to limit the number of customers eligible for net metering plans, where the customer is paid for the excess energy supplied by their solar panels;
• Utilities will seek to reduce payments received for solar energy produced by net metering customers, who currently receive the full retail rate for their excess energy in many  states;
• Utilities will seek to implement new, fixed charges for customers who install solar panels on their property;
• Utilities will start new businesses providing solar installation services for customers;
• Utilities will seek approval to own solar power installations located on their customer properties; and
• Regulators and utilities will consider adopting performance-based electricity rate plans. These plans would charge for electricity on the basis of service and performance, rather than the volume of energy sold to customers.

Source: Costco

These changes present a host of legal and regulatory challenges.  As a guiding principle, utilities must have an opportunity to earn a fair return in exchange for keeping the lights on.  Similarly, electricity rates for solar panel owners should fairly reflect the full costs of serving these customers, as well as the full benefits that solar power provides to the electric utility.  These changes will be disruptive for electric utilities, but will allow customers to choose affordable clean energy and new technologies.  We’ll all benefit from cleaner energy and a reliable electric grid.

By John Finnigan

Source: ENR New York

The Wall Street Journal recently reported that electricity prices in West Texas skyrocketed over 20% this year.  West Texas is home to the Permian basin, one of the world’s largest oilfields, and energy producers use hydraulic fracturing, or “fracking,” here to unlock vast new oil and gas supplies.  The increased drilling, oil refining and natural gas processing uses large amounts of electricity.

Cheaper electricity supplies are available, but cannot be delivered to West Texas due to transmission bottlenecks, or “congestion.”  The only power that can be delivered is from older coal plants.  This leads to transmission “congestion” charges (i.e., higher energy supply costs caused by the transmission bottlenecks), which commercial and industrial consumers must pay as a surcharge on their monthly electricity bills.  Using these older coal plants leads to more pollution as well because these plants burn fuel less efficiently and have higher levels of toxic air emissions.

The typical solution is to build new transmission lines to access cheaper electricity supplies.  But a better and cheaper approach is to pay consumers for voluntarily reducing their electricity usage when energy supplies are tight.  Known as “demand response,” this solution:

• creates a new market where consumers can respond to wholesale electricity price signals by deciding whether to use higher-priced energy or to be paid for voluntarily reducing their usage;
• defers investment in new fossil fuel power plants and costly transmission upgrades;
• lowers electricity prices for all consumers, not just those who are paid for voluntarily reducing their usage; and
• keeps our air cleaner and preserves our scarce water supplies by running older, dirtier coal plants less often.

“Everything is bigger in Texas,” but not demand response.  Although it has more potential demand response than any other state, Texas has actually implemented only a small amount of demand response – which is used to avert rolling blackouts during electric emergency conditions.  Other regions of the country use demand response to much greater advantage.  Voluntary demand response programs in PJM, the electricity market in the northeast, have paid consumers nearly $2 billion in demand reduction revenues since 2007.

Demand response would lower electricity prices not only for West Texas but throughout the state.  Electricity prices are a function of supply and demand.  Texas tries to maintain adequate electricity supplies through an “energy-only” wholesale market, which procures electricity supplies in real-time with no long-term planning.  Texas is the only region in the U.S. using this method.  Other regions ensure adequate electricity supplies by using either administrative mandates or an energy market combined with a “capacity market” (a market-based approach using long-term planning).

Texas has inadequate electricity supplies (the “energy crunch”) to meet projected electricity demand plus a healthy safety margin.  Texans learned this lesson the hard way when consumers experienced rolling blackouts during a cold snap in February 2011 and the extreme heat and drought in July and August 2011.  The Electricity Reliability Council of Texas (ERCOT), which runs the Texas wholesale electricity market, hired The Brattle Group to study how to ensure adequate electricity supplies.  Brattle advised ERCOT that energy supplies could be increased by, among other things, re-designing the market to enable much higher levels of demand response.  This could be done by implementing a capacity market, such as the forward capacity market used in PJM or the new and innovative “flexible capacity” market under consideration in California.

ERCOT can relieve high West Texas energy prices and assure adequate electricity supplies for the state as a whole by enabling much higher levels of demand response.   Let’s bring the Lone Star State a new market-based solution where Texans, as a whole, can earn billions of dollars in payments for voluntarily managing their electricity use.  As part of the bargain, we’ll also get adequate electricity supplies, lower electricity prices, cleaner air and better water management.

By John Finnigan

Maryland Governor Martin O’Malley continues to lead the way on climate and clean energy policy.  On Thursday, he unveiled Maryland’s new Greenhouse Gas Emissions Reduction Act (GGRA) Plan.  Gov. O’Malley’s plan raises the targets for renewable energy, energy efficiency and peak energy demand reduction, while re-affirming Maryland’s membership in the Northeast Regional Greenhouse Gas Initiative (RGGI).  The plan adds new climate programs relating to transportation and forestry, and a new aspirational goal to make Maryland a zero-waste state.

Maryland is particularly vulnerable to climate change with 3,000 miles of shoreline along scenic Chesapeake Bay.  The state ranks 42nd in total area, but 10th in coastline area.  Gov. O’Malley has addressed climate change since his early days in office.  In 2007, he established the Maryland Climate Change Commission to address the causes and effects of climate change in Maryland and develop an action plan.  The Maryland Climate Action Plan (Plan) was issued in August 2008, and Gov. O’Malley has labored diligently to implement the plan since that time.

The new Plan  calls for increasing the renewable energy portfolio standard from 20% to 25% by 2022, as well as the energy efficiency and peak demand reduction targets (with the new, higher targets to be announced at a later date).  Like a true leader, Gov. O’Malley aims high and is unafraid to be different.  His call to raise these clean energy standards comes at a time when some states have been unsuccessfully pressured by the fossil-fuel industry to consider lowering their clean energy standards.

In addition to the 2008 Climate Action Plan and the new GGRA Plan, Gov. O’Malley’s key accomplishments include:

• (2008) Amendment to the Maryland Renewable Energy Portfolio Standard doubled the existing standard to require that 20% of Maryland's energy be created by renewable resources by 2022, including 2% from solar energy;

• (2008) EmPOWER Maryland Act set an energy efficiency target and peak demand reduction target of 15% by 2015;

Source: CBS Baltimore

• (2008) Maryland Strategic Energy Investment Program was created using revenues from the Northeast RGGI to offset ratepayers’ electricity bills and invest in energy efficiency programs;

• (2009) Maryland Greenhouse Gas Emissions Reduction Act requires Maryland to cut greenhouse gas emissions 25% below 2006 levels by 2020; and

• (2013) Maryland Offshore Wind Energy Act of 2013 created a fund to build 200 megawatts of wind energy, which Gov. O’Malley intends to use to construct one of the nation’s first offshore wind energy farms off the coast of Ocean City.

EDF applauds Gov. O’Malley for his leadership on progressive and effective climate and clean energy policy.  Maryland is showing how states can take meaningful steps to reduce greenhouse gas emissions despite the lack of a comprehensive federal climate and clean energy strategy.  Gov. O’Malley is balancing environmental protection with economic growth – Maryland’s unemployment rate is below the national average and the U.S. Chamber of Commerce has named Maryland the number one state in the country for innovation and entrepreneurship the past two years.  Gov. O’Malley is acting true to the Maryland state motto of “manly deeds,” and we hope that other elected officials will take note.

By John Finnigan

Like the tide washing upon the shore, new technologies are gradually eroding electric utility revenues.  These new products enable consumers to use cleaner energy and use it more efficiently.  Electric utilities worry this trend will ravage their industry just as wireless technology convulsed the telecommunications industry.  The utility industry urges its members to stem the tide by, among other things, increasing consumers’ net metering costs.

Net metering makes small-scale renewable energy, such as rooftop solar panels, more affordable by crediting the “distributed generation” owners for the excess energy they produce.  The electric meter measures how much electricity flows back to the grid from the distributed generation unit.  A corresponding credit is applied to the consumer’s monthly energy bill.  The Energy Policy Act of 2005 requires public utilities to offer net metering to all consumers upon request.

Why the new focus on net metering?  The cost for rooftop solar panels has fallen 80% since 2008, including 20% in 2012 alone.  Installed rooftop solar energy has increased by 900% between 2000 and 2011.  As consumers install more rooftop solar panels and net meter them, utility revenues will decrease.

Net metering policies vary from state-to-state, including the amount of the payback for excess energy.  The most favorable policy for distributed generation owners is an excess energy credit equal to the full retail energy rate consumers pay for energy, i.e. the amount consumers are charged for using energy.  Most states use this measure.  However, utilities claim this prevents them from recovering their full costs and overpays distributed generation owners, unfairly shifting costs to other consumers.  Utilities say the credit should be equal to the utilities’ wholesale energy cost at the time of day when excess energy flows back to the grid.

Despite attempts by utilities to change net metering policies, state regulators are keeping these policies intact.  Earlier this month, the Idaho Public Utilities Commission rejected Idaho Power’s request to pay less than the full retail rate and to impose higher charges on net metering consumers.  Last month, the Louisiana Public Service Commission rejected similar requests by Louisiana utilities.  More recently, Arizona Public Service Company raised the issue in a new filing.

Source: Vote Solar

As a general rule, paying the full retail rate is sound policy because rooftop solar capacity, or maximum electric output, only accounts for 0.2% of total capacity in the U.S.  This will encourage consumers to install more renewable energy.  Utilities will gain valuable experience on how distributed generation functions under local conditions, and how to integrate renewable energy into their electric grids.

The utility of the future, after distributed generation has achieved greater scale, will pay net metering customers for the full costs and benefits of the consumers’ renewable energy systems.  A recent report lists the costs and benefits regulators should consider when setting net metering payments.[i]  The costs include: inability to recover the utility’s existing costs under existing rate structures; interconnection costs; administrative and operational costs; and infrastructure costs to support distributed generation.  The monetary benefits include: lower power delivery costs; lower power supply costs; lower system peak costs; and fuel flexibility benefits.  The non-monetary benefits include:  reduced toxic emissions and greenhouse gases; improved reliability; and local job creation.

After distributed generation reaches greater scale, this approach will accomplish several worthy objectives.  Distributed generation developers and owners will receive the fair value for distributed generation.  Distributed generation owners will be paid for the benefits provided by their units, which are currently overlooked.  Utilities will have a better opportunity to recover their costs and remain financially viable.  The utility’s cost of service will be fairly apportioned between consumers who own distributed generation and those who do not.  With better information on distributed generation performance, new benefits will be recognized.  These new benefits will increase the value of distributed generation and lower the cost of service for all utility consumers.  This is how net metering and rooftop solar should function for the utility of the future.

By John Finnigan

Most states have long-term renewable energy and energy efficiency targets.  Ohio’s energy efficiency resource standard saves over 700,000 kilowatt-hours of energy annually, more than the energy generated by a new fossil fuel power plant.  Ohio’s energy efficiency law is under attack, even though Ohio’s targets are right in the middle compared to other states’ targets.

Source: Clean Energy Ohio

Ironically, the consumers who pay for energy efficiency are not leading this attack.  Rather, the attack comes from certain electric utilities and the advocacy groups they support: the American Legislative Exchange Council and the Heartland Institute.  The utilities claim to be protecting consumers from the costs of the energy efficiency programs, but they really want to protect their own electricity sales.

One argument raised against energy efficiency programs is that they cost too much.  Energy programs, however, must pass a cost/benefit test.  The programs will be offered only if the value of energy savings exceeds the program costs.  In many cases, the energy savings are two or three times greater than the program costs.

Another argument is that all consumers pay for the programs, but only those who use the programs benefit.  A few large Ohio industrial companies have raised this argument.  But these companies develop their own energy efficiency programs, so they don’t pay for utility-sponsored energy efficiency programs. 

Recent filings by the Ohio Consumers’ Counsel (representing Ohio’s residential consumers), the Ohio Manufacturers’ Association (representing over 1,300 Ohio manufacturing companies) and the Council of Smaller Enterprises (representing 14,000 small businesses in northeast Ohio) reject this argument.  Their members who participate in energy efficiency programs benefit directly by using less energy.  Even those members who don’t use energy efficiency programs benefit through lower wholesale energy costs and by delaying the need for costly transmission and distribution system upgrades.

The Ohio Manufacturers’ Association notes that , through 2020, Ohio’s energy efficiency standards should yield $5.6 billion in savings, more than double the $2.7 billion program cost.  The program will create up to 54,000 new jobs during this period.  If “the customer is always right,” lawmakers will take heed and keep Ohio’s energy efficiency standards intact.