Jolted into efficiency: We all must do our part

December 22,2009

Our View


By Bev Gard & James Merritt

Whether you believe in the need to reduce greenhouse gases or not, one painful truth is inescapable: Virtually every recent proposal to reform our nation's energy policy will mean sharply higher electric rates for Indiana.

That's the bad news.

The good news is that Indiana's major electric utilities have been ordered to reduce electricity consumption by 2 percent through energy efficiency programs. We believe these are among the most effective and cost-efficient ways to deal with our energy problems.

Energy efficiency isn't a silver bullet. But a coordinated, statewide energy efficiency effort is a significant and realistic step in the right direction and we applaud the Daniels administration for taking it. To be successful, however, everyone must take part.

How will we use less energy? Largely through "demand-side management,'' which is utility industry shorthand for programs that encourage everyone to use less electricity.

You may already be familiar with some programs, such as those that offer incentives to use energy-saving light bulbs and Energy Star appliances. These programs are effective, but they aren't enough. To meet the administration's 10-year goal, we'll likely have to address the "price signals" of electricity and consumers' ability to manage energy costs.

What if utilities offered time-of-day pricing through the use of a "smart meter" able to monitor and control the usage of individual appliances in your home and relay real-time price information? We consumers would quickly discover that using electricity at times of peak demand is an expensive proposition. We'd also discover that the old refrigerator in the garage is a costly energy hog, and that big screen plasma TV in the living room is no bargain to operate either. We might be motivated to change our consuming habits.

When we use less, utilities have to produce less, which means lower electric bills and fewer air emissions.

Energy efficiency involves up-front costs to produce long-term savings. Installing millions of smart meters in Indiana would be expensive, and while they would likely save consumers money in the long-run, utilities would have to recover the installation costs up front in the form of higher rates.

Second, everyone must change habits, especially electric utilities. For decades, utilities have operated under a business model that rewarded them for selling more power. We'll now want to reward them for encouraging lower usage. And, if we change the way we regulate them, we must ensure that we don't encourage utilities to reduce consumption at the expense of economic development.

Consumers will have to change our ways, too. The more we're willing to reduce consumption, the better we'll be able to manage our monthly bill. That may be especially true for businesses such as manufacturers that may find enormous energy savings by operating late at night, when electricity is generally cheap.

According to the Rand Corporation, the utility industry nationally could save between $50 billion and $100 billion over the next two decades if demand response programs become the norm. That not only translates into better prices for consumers, but it also would diminish stresses on power plants, along with the subsequent emissions.

A concerted effort to increase the state's level of energy efficiency may take some getting used to, but we believe the effort is well worth it.


Gard, R-Greenfield, is chairman of the Indiana Senate Energy and Environmental Affairs Committee. Merritt, R-Indianapolis, is chairman of the Utilities and Technology Committee.

This article reprinted from http://www.indystar.com/article/20091222/OPINION01/912220312/1002/OPINION/Jolted-into-efficiency-We-all-must-do-our-part

and brought to you by the Indiana Renewable Energy Association.

Editor's note: Here are the ordering paragraphs from the Commission Order:

IT IS THEREFORE ORDERED BY THE INDIANA UTILITY REGULATORY
COMMISSION that:

1. The Commission hereby establishes an overall annual energy savings goal of 2% to be achieved by jurisdictional electric utilities in the State of Indiana within 10 years, with interim savings goals established in this Order to be achieved in years one through nine.

2. The Commission hereby establishes initial DSM Core Programs that shall be offered by jurisdictional electric utilities throughout the State of Indiana. The Core Programs shall be overseen and coordinated by an Independent Third Party Administrator in a manner consistent with the findings set forth in this Order.

3. The Commission hereby requires the formation of a DSM Coordination Committee comprised of the entities described in this Order. An initial objective of the DSM Coordination Committee shall be the issuance of two requests for proposals ("RFPs"). The first RFP shall be issued for the selection of an Independent Third Party Administrator to oversee and coordinate the Core Programs established in this Order. The second RFP shall be issued for the selection and utilization of an evaluation administrator(s) to undertake Evaluation, Measurement & Verification of DSM program offerings.

4. The Commission hereby finds that in order to ensure that the objectives of this Order are being fully satisfied, compliance filings shall be submitted as ordered in this proceeding to provide a means for Commission review of the following matters: (i) the proposed organizational and operational structure of the DSM Coordination Committee; (ii) the three-year DSM Plans and the annual supplemental updates; (iii) the proposed RFPs required by this Order; and, (iv) any additional compliance filings required under this Order. For this purpose, the Commission hereby establishes an Implementation Subdocket in this proceeding under Cause No. 42693 S-1.

5. The Commission finds that with respect to issues other than compliance with the terms of this Order, that will be overseen by the Commission in the Implementation Subdocket, this proceeding is hereby concluded.

6. This Order shall be effective on and after the date of its approval.

ATTERHOLT, GOLC, LANDIS AND ZIEGNER CONCUR; HARDY ABSENT:
APPROVED: DEC 0 9 2009

Click here to request a copy of the order.