Utilities will ask psc for permission to gut energy-saving goals electricity demand

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The stakes are high. For the utilities, there’s the prospect of big, guaranteed returns on investments in new plants. Those returns would come from the pockets of utility customers. They, according to economist Shawn LeMond, "are going to get hosed."

Customers know that if they use less electricity, their power bills go down. If collectively they use a lot less electricity, utilities won’t have to build as many new power plants. If utilities don’t build new plants, consumers don’t have to pay for them.

For a long time, they — and their customers — flourished under that model. Efficient power generation required expensive plants, generally coal and more recently natural gas and nuclear. Governments would give the utility a monopoly service area in return for regulated rates. This served everyone over the decades, because power demand grew along with the population and the economy. Utilities could count on making money by building more power plants and selling more power.

More than ever, consumers and companies squeeze every penny. Example: Tampa-based First Housing Development Corp. of Florida installed an air-conditioning monitoring system, highly efficient LED lighting and a 150 kilowatt solar array. It expects to cut its electric bill from $36,000 a year to $6,000.

"Customer growth has slowed in recent years," said Cherie Jacobs, spokeswoman for Tampa Electric, which cites lagging demand for delaying construction of a gas plant one year until 2020. "Customer usage has dropped, and that’s for two reasons: One is the economy has caused customers to use electricity more wisely, and two, appliances are more energy efficient."

"The financial risks created by disruptive challenges include declining utility revenues, increasing costs, and lower profitability, particularly over the long-term," according to a report written for the Edison Electric Institute, which represents all U.S. investor-owned utilities.

Utilities argue that with historically low natural gas prices, it is cheaper to generate electricity than to subsidize efforts to save it. The Tampa Bay Times asked all three utilities for evidence to support their position. The utilities said they do not have that type of comparison.

The utilities point out that conservation is not free. Duke and Tampa Electric customers pay for the "free” energy checks the utilities offer, the costs built into their bills. The same goes for rebates on energy efficient appliances and air conditioners and insulation.

"… it means that 100 percent of customers are subject to governmental requirements to install higher-efficiency end-uses, rather than just those that a utility could induce through one of its … programs," stated FPL executive Thomas Koch, in written testimony to state regulators.

The utilities also emphasize that while demand has been flat lately, they predict it will rise dramatically over the next decade. Duke, which forecasts a 25 percent increase, plans to build $1.7 billion in new plants. FPL hopes to build an $18 billion nuclear plant.

Kushler, a senior fellow with the American Council for an Energy-Efficient Economy, said efficiency programs are cheap. Based on what’s happened in 20 other states, he said, such programs cost 2.8 cents to save a kilowatt hour, compared to a new natural gas plant that will cost 7 to 8 cents to generate a kilowatt hour.

"FPL does not use misleading ‘cents-per-kwh’ calculations for comparing generation and (conservation) resources because they are essentially meaningless — and, quite frankly, irresponsible — to try to use as a metric for deciding which resource option is best for a utility’s system," FPL’s Daly told the Times. "Neither the PSC nor any other Florida utility makes resource decisions based on this metric.”

If Florida could duplicate Vermont’s level of savings, according to a Times analysis, customers could save big bucks. Take, for instance, a $1.5 billion natural gas plant Duke wants to build. For the same money, Vermont-like energy savings programs could conserve about the same amount of power.

Utility rates will go up whether the $1.5 billion gets spent on a new plant or on energy conservation. But using less power and not paying the $9 billion fuel charge would mean a lower electric bill, said Jim Lazar, an economist and senior adviser for the Regulatory Assistance Project, which advises regulators and policymakers.

Today, Florida utilities are required to have a 20 percent reserve. Much of the rest of the nation sets the figure at 15 percent. The difference is enough electricity to power as many as a million homes. Customers have to pay for that extra capacity and utilities profit from it.

"This 20 percent reserve margin has been reviewed, accepted, and approved by the commission each year in the (10-year site plan) process, as well as in various need proceedings for new generating plants," said Nicole LeBeau, a Duke spokeswoman. "At a high level, these include an acknowledgement that Florida … must have sufficient reliability to stand alone."

In a filing with the PSC, the Sierra Club said the commissioners erred in denying the public the right to testify at Monday’s hearing. "Floridians want clean energy solutions like energy efficiency and will see real benefits when companies like Duke Energy improve their energy savings," the Sierra Club said.

In another filing, the Sierra Club defines the hearing as "… the commission’s best chance to manage the growing costs and risks in Florida’s electric system. Saving energy through energy efficiency is the fastest, cheapest, and safest way to meet Florida’s electricity demand, and there is still great untapped energy savings potential in Florida."