How to encourage GRU to be energy efficient
Paula Stahmer and Dian Deevey
There was good news and bad news from City Hall last month.
The good news is that the city commissioners have an interest in a program of energy efficiency, conservation and related measures to help customers use less electricity. If the city pursues such a course faithfully, this could delay the need for a new generator, or reduce the size of any we eventually have to build.
The bad news is that the City hasn't faced up to the real reason our utility has never been interested in effective conservation and is likely to resist approaches that have made many other utilities, including Florida Power and Light, and Gulf Power, national leaders in the field.
GRU management, like most utility management, is reluctant to invest in conservation programs because that would reduce the kilowatt-hours the utility sells. Under current policies, selling kilowatt-hours is the only way the utility can obtain income. When summers are cool (or service is knocked out by hurricanes) sales are low, and GRU's income drops. But when summers are hot, and electricity bills high, the utility receives more money than it needs to operate for the year. The excess is stowed away in the slush funds used when revenues are low.
Like many other utilities, GRU promotes the sale of kilowatt-hours to make sure that it has the money to tide it over times when clement weather or other factors reduce electricity use.
Tying utility income to kilowatt-hours sold results in a fundamental conflict between the interests of ratepayers and the utility. Ratepayers want to reduce their monthly bills. Increasingly, ratepayers also want to protect the environment and avoid the excessive consumption of energy that accelerates global warming and diminishes resources. Utility managers, on the other hand, need to promote kWh sales to pay their bills and generate profit for their owners.
The result is a powerful disincentive to effective conservation programs. Until this disincentive is eliminated by a change in policy, GRU will not be able to come up with a truly aggressive program of "maximum" energy efficiency and conservation that the City Commission claims it wants. Unfortunately, until this problem is solved, GRU will remain at odds with the interests of the ratepayers who own the utility. Thus far, policy makers have been unwilling to acknowledge and solve this fundamental problem.
There is a solution to this problem. It is currently receiving great attention from utility experts and utility commissions in many states. The solution consists simply in cutting the tie between utility income and total kWh sales by eliminating fixed rates, and tying the income of the utility to its real needs for money. The technical term for the solution is "revenue decoupling."
Under revenue decoupling, a utility like GRU decides in advance how much revenue it needs to meet all its costs and to supply the annual transfer to the City treasury. During the subsequent year, revenue is closely monitored and the rate per kWh is adjusted periodically to make sure the pre-set revenue target is met. In years when revenue collections exceed the target, the excess revenue is returned to ratepayers through small downward adjustments in rates. In years when clement weather or other factors reduce needs for electricity, the rate per kWh is adjusted slightly upward just enough to make sure the revenue target is met.
Under revenue decoupling, the utility no longer has any incentive to promote sales, because it cannot keep any income that exceeds its pre-set target. Conservation programs are no longer a threat, because the utility will always receive the money it needs to operate as well as the money it must transfer to the City government. It is free to adopt all conservation measures that reduce the need for electricity. In doing so, the utility can provide electricity more cheaply than building new generators to supply unrestrained consumption.
Revenue decoupling has been adopted in many investor-owned gas and electric utilities. A major, nationwide effort to promote energy efficiency in gas and electric utilities will be widely publicized beginning in August. Known as the Energy Efficiency Action Plan, this EPA/DOE sponsored program has identified revenue decoupling as the preferred way to eliminate the barriers that now prevent sensible energy saving actions in utilities all over the country.
GRU predicts that local electricity needs will increase rapidly and exceed its existing generating capacity in about 5 or 6 years. But consultants and local activists have pointed out that implementing an aggressive conservation program can delay the need to build any new capacity by up to 10 years.
An aggressive program would include increasing the efficiency of appliances, homes, and businesses, and shifting the demand for electricity away from times when generating capacity is strained (hot summer afternoons and evenings) to times when the utility has excess capacity (late night and early morning). In addition to rebates to ratepayers and builders who invest in efficiency improvements, these programs could include rate structures that encourage using electricity at night when there is spare capacity, along with smart meters that make conservation and load shifting easy. The City Commission has asked the utility to come up with this aggressive program, but until the strong disincentives felt by the utility are removed, the outlook is not good.
The Gainesville community needs to urge and support commissioners in exploring alternatives to the present modus operandi.
Dian Deevey is a member of the Alachua County Environmental Advisory Committee. Paula Stahmer is Co-chair of the Suwannee-St. Johns Chapter of the Florida Sierra Club.
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