This is my final post about expert testimony filed in the WV PSC’s Harrison power plant case. This post is about simple common sense.
It makes sense that before you look around to buy anything, you first make an assessment of what you need. If you can reduce what you need to buy, you will spend less. Common sense.
Go back and look at any of the expert testimony in the Harrison power plant case, particularly testimony by Cathy Kunkel and Jeffrey Loiter. You will see extensive discussion, along with examples from all over the US, about how investing in the reduction of electricity use before building or buying new electric power plants is a less expensive and more reliable way of keeping electric rates low.
Here in WV, the cost of coal-fired electricity from FirstEnergy and AEP, has risen steadily for the last ten years, along with WV electric rates. Because coal-fired electricity was relatively cheap 20 or 30 years ago, WV political leaders and regulators have reflexively supported our Ohio-based power companies’ claims that building or buying more power plants was the best way to meet new electricity needs.
As a result, few people in WV government know anything about the rapid strides the rest of the US has been making in using investment in energy efficiency and demand management to reduce electricity demand and the need for more power plants.
Many states, as Ms. Kunkel and Mr. Loiter both point out, have a hierarchy of electricity solutions that requires demand management come first, before regulators can consider building new power plants. And guess what? It works.
Don’t believe these experts?
Look at the most recent WV Energy Plan, issued by the WV Division of Energy just this year.
A primary benefit of EE for utilities and ratepayers is the avoidance of capacity-related costs. A long-term, sustained reduction in aggregate system capacity requirements is achieved when efficiency gains are made. Increases in power rates from utilities are often attributed to large investments in capital expenditures which are made to keep pace with the increasing levels of energy demand. If an increase in the demand for energy is decelerated through EE initiatives, utilities will purchase and build less power generating infrastructure. The reduction in capacity investment translates from lower fixed costs for utilities to fewer price increases for consumers over the long-run.
Effective EE programs can also contribute to a deceleration in peak demand as well due to the decrease in overall demand. As less energy is consumed overall, utilities no longer need to utilize their least cost-effective sources of power generation such as older plants which are primarily employed to account for periods of peak load. The increased reliance on newer, more efficient facilities leads to lower marginal costs of production for utilities over the short-run. This factor along with smaller consumption levels inherent with energy efficient technologies and practices can lead to a decrease in utility customers’ bills over the short-term as well.
Read Ms. Kunkel’s and Mr. Loiter’s testimony, and you will learn how states across the US are using demand management investments to avoid exactly the power plant cost trap that FirstEnergy has set for WV with the Harrison power plant transfer.
For years, WV’s Ohio-based power companies have been claiming that WV rate payers won’t take advantage of energy efficiency investments because WV electric rates are so low. Late last week, FirstEnergy lawyer Chris Callas filed discovery questions on Ms. Kunkel asking why she had used the effectiveness of energy efficiency programs in the Pacific Northwest in a case about WV. Really? Are FirstEnergy’s lawyers that clueless?
Washington state has lower electric rates than WV, largely because of the availability of hydroelectric power there. Yet, as Ms. Kunkel points out:
In the Pacific Northwest, where electric rates are among the lowest in the country, energy efficiency has met approximately half of load growth since 1980 and can cost-effectively meet 85% of expected electricity demand growth over the next 20 years. Efficiency gains are expected to come from the residential sector (primarily lighting, appliances, water heating, and consumer electronics), commercial sector (primarily lighting and HVAC), and industrial sector (primarily efficient pumps, fans, compressed air, lighting, and material handling systems, as well as industry-specific process improvements).
So, Mr. Callas, I wonder why Ms. Kunkel would compare the Pacific Northwest, an area with even lower electric rates than WV. Could it be that she was trying to make the point that states with very low electric rates have made great strides in reducing demand before they look around for new power plants, despite WV power company claims that this is impossible?
Could it be that investing in energy efficiency before buying expensive power plants is just common sense?