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Archive for Sunday, July 11, 2010

Utility rates likely to rise with energy efficiency plans

State commission to review companies’ proposals

July 11, 2010

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Along with the price of using energy, utility bills across the state could soon include the cost of conserving it.

In the past few months, public utilities have come before the Kansas Corporation Commission with energy efficiency plans. These plans will ultimately be paid for by an increase in the rates charged to customers.

“Consumers need to be aware that this is happening, that there are costs and there are regulatory questions,” said Dave Springe, the consumer counsel for the Citizens’ Utility Ratepayer Board.

Traditionally, Kansas has ranked among the bottom tier of states in its efforts for conserving energy, according to a scorecard published by the American Council for Energy-Efficient Economy.

Dorothy Barnett, director of energy and transmission for the nonprofit the Climate and Energy Project, views the utilities’ proposals as a promising sign.

“We know energy efficiency costs at least half as much as any new generation,” she said. “Energy efficiency is really our first fuel.”

In her 2007 State of the State Address, then-Kansas Gov. Kathleen Sebelius asked energy producers to take on efforts to reduce energy consumption. In response, the KCC requested that investor-owned utilities come forward with energy efficiency plans.

Energy resource

KCC sees energy efficiency as an energy resource, similar to coal or wind, that is needed to meet existing and future energy demands, KCC communications director Cara Sloan-Ramos said.

“They have determined that reducing or postponing the need for construction of big generation plants or reserving the capacity of natural gas are goals that will benefit all utility customers,” Sloan-Ramos said.

Springe agrees that energy efficiency programs make sense for electric companies, where reduction in energy use allows utilities to avoid having to build expensive power plants to meet the peak demand that occurs during hot summer days. In those cases, even those who don’t participate directly in energy-saving programs would pay less by not having to contribute to the cost of a new power plant.

However, he doesn’t see an equal benefit for natural gas utilities, where only those who access the programs benefit, he said.

Last week, the KCC had a public meeting in Lawrence to gather input on Black Hills Energy’s energy efficiency plan.

It’s the first comprehensive plan to come before the commission. As Black Hills seeks approval from the KCC, Sloan-Ramos speculates that other utilities are waiting to see what gets passed before submitting their own plans.

Springe, who spoke out against the Black Hills plan, saying it was far too expensive and offered unwarranted incentives for the utility, worried that the KCC’s request for individual plans will produce a piecemeal approach to energy efficiency throughout the state.

“If you are going to make energy efficiency a priority, you need to offer it to everyone and it should not be based on where you happen to live,” he said.

He would prefer to see an independent state agency that oversees all energy efficiency programs.

‘Tailor the program’

While different models of energy efficiency programs are popping up throughout the country, Gina Penzig, manager of consumer services for Westar Energy, said it makes a lot of sense for the utility companies to be the ones offering the programs.

“We already have a relationship with our customer and we are in a good position to know what they are looking for because of those relationships. So we can pretty easily tailor the program to reach those needs,” Penzig said.

Third party providers of energy efficiency programs have been successful, such as a statewide agency established in Vermont, Barnett said. But those programs also come with a substantial bump in the cost of energy.

While Barnett said that it would be nice for everyone in the state to have access to the same program, the majority of Kansas customers are served by either KCP&L or Westar. Both of the electric companies has energy efficiency programs in the works.

The trick is providing an incentive for utilities and their investors to offer energy efficiency programs, which cut into how much of their product is consumed. And, finding out what incentives utility companies will get is exactly why the Black Hills case in front of the KCC holds so much interest.

“If a utility can show it has delayed the need for building expensive new generation at a cost lower than the new generation, we all win. The rates stay lower, pollution is reduced and consumers save money for today and tomorrow,” Barnett said. “We think it is important that shareholders are rewarded for their prudence. And we hope that is the direction they will head.”

Comments

Bill Griffith 3 years, 9 months ago

Agree that 30 million isn't a huge amount but it is 30 million more then before.

I invite you to research the efficacy of gas turbines used with wind for yourself.

Utilities are already protected from market forces. I have sat in their meeting rooms and observed what 10% annual return for decades does for a bottom line. The profit isn't high on these investments compared to new power plants-but there is profit. I think many utilities are wanting to begin getting credit for carbon-reducing work and get ahead of the regulatory curve-even if they don''t make as much ROI.

Feel free to send me a message if you want to bounce other thoughts on this kind of stuff around.

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George Lippencott 3 years, 9 months ago

Thank you. Since I don’t know who you are, I cannot determine the validity of your perspective on the future. That said you do know a lot. $30M will go about as far as my backyard to work the need. Capital - capital - capital.

My Grandma comment is all speculation - my worst-case scenario 1. We move to dynamic rates 2. We put the highest kilowatt on the residential customer 3. Grandmas house is old and she lacks the money to do enough EE as fast as the rates change 4. Grandma cooks or loses her home.

I would love to retire coal plants or find a way to "clean coal". I did not know about the gas turbines. Nuclear works too.

I do not loathe the utilities. They do what they do well. I loathe the idea of

  1. Moving them into a new line of business sole source
  2. Protecting them from market forces
  3. Paying high profit when risk has been significantly reduced.
  4. Dissembling

I have an interest in keeping them healthy but I have no obligation to make their leaders wealthy nee wealthier.

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George Lippencott 3 years, 9 months ago

OK, what you are talking about is money from the feds for EE that Energy Kansas is distributing for the state. I.e.: the capital comes from the feds. That is a long way from the Black Hills proposal. I really do not expect the feds to expand this program much and they may end up cutting it. It is aimed at low-income families. How do we deal with everybody else? I remember a version of this program from the collaborative. In that version, rates were increased significantly to create a large pool of capital that was dispensed by the utilities. Is that your plan? Do you work for Energy Kansas?

Can you really demonstrate that for most Kansans moving their own capital through the utility actually saves them any money they would not save doing their own EE? I accept that some money needs to be raised from the ratepayers to support a continued investment for low income Kansans. When we do that we need to be careful that the pace of investment (rate increases) does not increase rates to the point that we experience a revolt by rate payers.

The rate increases all of this will yield when added to rate increases already in works for renewable energy will swamp the average family. By the by, avoidance of new generating capacity may be a bit specious as we are creating new capacity with wind energy. It looks to me like the challenge will be how to manage power with such an uncertain source – coal plants on standby to cut in when the wind dies – or we just cook you in your homes – or we buy expensive energy over the system from Duke Power?

Your point on third party is correct. My point remains conflict of interest. Incentivizing a third party to encourage EE does not conflict with generating power. Incentivizing the actual provider of power to not produce power can yield perverse incentives where in order to gain income the utility is turning off the power to grand-ma. There is a better way.

Have you ever though of Energy Kansas managing a third party contractor for EE for the masses where the individual spends his/her own money - as they will have to if they are not poor. Maybe arrangements can be made with the banks for special loans. The same incentive to rate payers to make the investment can be offered. The utilities just do not provide capital. Payment for all of that (except capital for private investment) comes from the ratepayers.

The approach Kansas has taken to spending federal money does not need to be generalized to the expenditure of private funds. It can be built upon to make a better, generalized system that is not government centered.

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George Lippencott 3 years, 9 months ago

belexus73 (anonymous) replies…

So basically you are arguing for a program where the utility loans me money and charges all the rate payers for the cost of that money and uses the reduction in the price of energy to pay back the loan? Where does the capital come from? Since the cost of all this is going to drive up the rates the homeowner is going to end up paying more to service the loan but avoiding costs they might have had if they did not invest.

How do we manage the determination of who gets to use the program? Does the utility determine? How much debt can they incur (how fast does it go)? Who pays for default. What cut of the savings does the utility get because we use less energy? The latter is what I am bothered about. Note a third party could do that too but we would not have to pay them for the energy we do not use? The utility will in a sense be competing with banks? Maybe banks should offer the program?

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bobberboy 3 years, 9 months ago

jeeezzzzzzzzzzzzz, I've already seen a 25% increase this year !!!!!!!!!!!!!!!!!

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kansasmutt 3 years, 9 months ago

Why dont we just give our checks to the state and they can hand out water and bread like the good old days.We can all live in state owned tents and take train rides to ? We can all shave our heads and be nice and thin, no smoking, drinking or mingeling. Sounds like the overall plan as i see it.Owh and we get free healthcare and funeral coverage in the 6 per hole deal in the state owned cemetary. Now that is the ideal world our leaders see in the next generation. Who wants to join in ? My name is on the list.

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Richard Heckler 3 years, 9 months ago

Brown outs in Kansas are very unlikely. This might work in Los Angeles or New York City.

Actually who needs smart meters?

How about smart users.

How about using less on our own?

A Westar rep once explained that Kansas does NOT need more power just cleaner power.

Also he said if ratepayers would learn to control their use all would work out great.

WE should not need expensive meters,corporations or government to make us change our ways. WE just need to do it.

My best guess is that the corporate producers are wanting to increase rates in the event customers decide to think frugal. In their mind they might be losing money. In real terms it is more like they will not be raking in as much as before however not actually losing money.

What may be the most fiscally responsible is to cut CEO wages,BOD wages,other executive wages, reduce share holder dividends and DUMP GOLDEN PARACHUTES rather than living beyond company means. This is a new concept.

INSTEAD of making ratepayers always pay more and more and more to keep up with yester years laissez faire business practices.

Wind Power is developed cheaper therefore cost less yet pays back quickly. Hydro power the same.

Bear in mind TAXPAERS today are responsible for insuring and construction of coal and nuke power. How many times do WE TAXPAYERS want to pay? aka getting duped.

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Centerville 3 years, 9 months ago

And, it would be interesting to find out why the LJW goes to David Springe for an opinion. He cashed in his credibility with the Westar scam.

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Centerville 3 years, 9 months ago

Welcome to Green Energy: quit complaining about the cost - it fuels our delusions.

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Flap Doodle 3 years, 9 months ago

Remember, merrill says that brownouts are an excellent way to enforce energy conservation.

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Number_1_Grandma 3 years, 9 months ago

Everybody ought to install wind generators/solar panels on their homes and say p*ss on westar and Black Hills! Get off their Capps program too as they bill the public utilities side for the private side repair program costs. De-regulation has created this monster that continues to swallow up the little people. Kansas Corporation Commission is little help as the utility companies know that they ask for twice as much as they need, knowing the KCC will only give them half! Totally worthless and BS....

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kubacker 3 years, 9 months ago

You will recall Lawrence and the local electric company recently got a $XXmillion grant of Obama stimulus money to go around Lawrence hooking up smart thermostats and smart meters.

I checked into it recently and was told directly that they are going around trying to convince property owners (particularly apartment project owners) to allow the installation of special thermostats (radio controlled I guess) through which the electric company admits it intends to cycle your air conditioning unit on and off every 15 minutes.

it won't matter what temperature you set your thermostat at because the electric company will have ultimate control and will, without asking your permission, cycle your air conditioner on and off every 15 minutes anytime it determines the demand for electricity is high.

Whatever average temperature that generates in your house/apartment then that's what you get. If your landlord has used crappy or hardly any insulation in your apartment/house and that on/off cycling ends up generating a room temperature of 85 degrees then you get to try to sleep in an 85 degree bedroom, because the property owner agreed to the installation of that thermostat.

Same way in the daytime - crappy insulation and/or the air conditioner doesn't work well and the whole house goes to 90+ degrees in the on/off cycling process, then that's what you get because the owner supposedly knew what kind of insulation the property had and agreed to the installation of that thermostat.

I didn't dig into it far enough to find out what is the specific financial incentive for a property owner to do this but I know damn well it must be a pretty sweet one, because there isn't any incentive (unless your an eco-nut) for a property owner to submit his family or his renters to this BS without some money coming his way - particularly big apartment project owners.

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lawrencenerd 3 years, 9 months ago

Why bother putting in smart meters or whatever. They already seem to have a good plan that needs no extra infrastructure. Charge more money for less energy. People will use less because they can't afford it, therefore saving energy. Problem solved, all you need to do is screw the consumer.

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George Lippencott 3 years, 9 months ago

Thank you LJW. It is important that our citizens understand that our for profit utilities are not spending their own money but are "taxing" us to provide their services. We provide the actual capital to make the EE improvements.

Yes, they will sell less energy. Isn't that what a market is all about? Sales go down you lose revenue. Yes, particularly with the capital-intensive power utilities we will benefit from not spending our money to build more infrastructure. In effect, we will borrow less from the utilities shareholders so why should we pay them more?

If the utilities do not want to be good citizens then we should use a third party as proposed by our legislatively established advocates. It will cost no more, avoids conflict of interest, and more uniformly implements EE programs. The money comes from the same source as it does for the utilities - us. The argument that the utilities know us better is specious. When was the last time that a KCPL, Westar or Black Hills representative called you to see how you were doing. The information they have on usage can be made available to the third party.

That said there are real initiatives to be undertaken by the utilities (this is not an all or nothing issue). Where metering can help with power management - we should pay them for that and make sure that it is done equitable so we do not hurt people who can not make the adjustment or already have. Incentivizing a utility to reduce usage means somebody will cut your power or charge you a lot more and no social consideration will be there. Shift workers, the very old, the very young (and mothers) the infirmed, police, fire and many others are home during peak power usage periods. They should not be held to the same standards as those who are at work and will not fully experience the projected higher costs of usage during those periods. Remember this is an implementation of public policy and public policy should determine the process not a for profit company. Yes there must be conservation but within reason.

This is a complex issue and the public should have an opportunity for real input, as it will affect them significantly.

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lawrenceguy40 3 years, 9 months ago

It is time for the people to resist this global warming lie. All along, common sense could tell you that the green movement is just a grab for control of YOUR life by the liberals. This is a classic case. Want to use your A/C, you have to plead with al gore and his buddies for permission.

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devobrun 3 years, 9 months ago

Coal-fired power plants must be built to supply peak demand. With smart meters, peak can be limited by not allowing too many demand machines ,like ovens, clothes dryers, ac, etc, to be on at the same time.

This allows utilities to invest in smart meters instead of more generation capacity.

They refer to a green mentality and ask for subsidies, raised rates and other revenue generators instead of building more generation capacity and charging for "green" solutions. Either way, energy is provided and the utilities get their money.

Oh.....and wind and solar become less attractive because they do not replace generators. Thus, generation is operated closer to the margin of its capability. But alternative energy sources will make it more difficult to manage the grid. So rate increases will ensue

Again, the utilities win by getting bigger. They diversify into non-coal solutions (which cost more) and they still build coal solutions.

You pay more for a product you like less.

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jafs 3 years, 9 months ago

Actually, according to Black Hills' own proposal, costs would definitely, not probably, go up for all customers to pay for this program and guarantee profits for them.

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Zachary Stoltenberg 3 years, 9 months ago

His is just an excuse to nail their customers with additional fees and extra charges under the guise of "peak" usage and "efficiency". Mark my words. Smart meters = tripple your energy bills. Soon no one will be able to buy here, shop here, or live here. We'll be just like California, at least they have beaches and nice weather...

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