Tuesday, June 30, 2015

Utilities, Regulators, and Us

Thinking about El Paso Electric, it helps to step back and contemplate the situation of electrical utilities generally.

These utilities are granted a monopoly on a valuable commodity, they're regulated by the states. Most function under somewhat backward laws that enable them to profit only by buying or building things, which often pressures them to solve problems in otherwise unnecessarily inefficient and (for us) expensive ways.

Facing environmental concerns and new alternative forms of energy, the utility companies will soon enter their death spiral. [Industry term, not mine.] Costs of solar panels have declined 75% decline in just the past six years. Most states have “net metering” laws letting solar-powered households sell excess electricity back to the grid at retail prices. Arguably, utilities are selling saddles and surreys just when horseless carriages are getting reliable.

Even if you doubt that all the poisons we're putting in our atmosphere and water will really hurt anything, why would you want to stick with gas-fired electricity plants in any numbers once solar is a lot cheaper – not only cleaner, safer, and more natural?

Currently, utilities vary widely in their reactions to our changing circumstances. Many, of course, choose to attack solar power as an enemy and try to delay progress through TV ads, backward laws, and immense investments in electing friendly faces to the regulatory commissions. Arizona's power companies tend to exemplify this approach.

By contrast, Vermont's Green Mountain Power listens to its customers and recognizes that they want to do what's environmentally sound if it won't cost them a bunch more money. GMP now offers “energy makeovers” (more insulation, new ways of heating home and water, L.E.D. light bulbs, and a small solar array) that are financed through the homeowners' rapidly falling utility bills. Vermonters are radically reducing their energy footprint not necessarily because they're worried about climate change, but to save money.

We need to recognize that times change and technologies develop. There was a time the public gave railroads everything they wanted, because the country needed railroads. Decades later, that wouldn't have made sense. Similarly, decades ago we needed utilities to build a dependable electrical system, and the best technology was gas-fired plants. Now we need (and can develop) systems that are more energy efficient and more economic.

In New York, a reform effort sparked by Hurricane Sandy led to the appointment of an energy czar who developed a program of incentives called Reforming the Energy Vision (REV). Where Con Ed had initially planned to build a billion-dollar substation to meet growing electrical demand in Brooklyn, the utility instead will encourage installation of solar panels and new storage batteries, and will pay customers to limit usage during peak hours. That'll save many millions of dollars. Although REV is an unproven work-in-progress, New York is at least asking the right questions.

There are two keys: technology and regulatory vision. As technology improvements help us move from “Can we get the homeowner to invest some money to help the environment” to “Can we educate the homeowner on how to save money and help the environment,” we also need our regulators to deal fairly but firmly with electric utilities. In part, that means developing programs that eliminate the strong financial incentive for utilities to trick us into approving an expensive new gas-fired generating plant we'll be stuck paying for over the next half-century. The rules should encourage and reward best practices by both the utility and the homeowner or business.

Unfortunately, New Mexico's current governor ain't likely to be in the market for sensible and creative ways to get constituents the best possible value from their electric utilities.

[This column appeared in the Las Cruces Sun-News this morning, Sunday, 5 July and will appear later today on KRWG-TV's website.]

[Two or three points stand out: that the electric utilities are on the wrong side of history; that too many of the utilities feel that they're in a battle to the death against renewable energy sources; but that much of the blame for our current situation lies with legislators and regulators, who've too often proved lazy, corrupt, and/or unimaginative and who've supported or allowed a system that encourages utilities to make wrong decisions.
I discussed that last point adequately in the column above and two weeks ago.  (Page down through the posts on the eagle and the Pope or click here to see the column from two weeks ago.) 
But the wrong-side-of-history issue is worth contemplating.  Reminiscent of the owner of a town's biggest livery stable manipulating the vote against putting in a paved highway that would encourage cars, expediting the obsolescence of the horse.
There isn't any perfect analogy.  Railways could use their political power (and their bought-and-paid-for senators and representatives) to slow down any governmental encouragement of horseless carriages; but trains and cars didn't have to use the same track.  In most fields, monopolies are forbidden.  Utilities appear uniquely positioned to hamper our society's freedom of movement toward a better future.  At minimum they can and will charge us tolls in the millions or billions of dollars.  Saddle-makers who foresaw the future couldn't sabotage development of the automobile nearly so well, nor could chautauquas prevent the spread of radios, mass magazines throttle development of television sets,  or the local iceman commit us to a 50-year contract for ice just as magazines began advertising refrigerators (or ice-boxes).  Nor could typewriter manufacturers or slide-rule makers stop the spread of computers.
But utilities, given a sleepy public and substandard regulators, could do a lot to make us pay through the nose for what we don't need, and keep doing so long after it's clear to everyone we don't need it.
And: a sleepy or indifferent public largely guarantees substandard regulators, because the utilities always keep their eyes on the ball.]

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