But The Idea Is To Cut Power Use, Isn’t It?

California’s giant Pacific Gas and Electric has a major program providing energy audits for its customers, and recently retained an outside firm to study the results.  While quite a few customers did reduce their energy usage after the audits, it turned out a larger number increased demand.

The report, dated December 2018, noted 19 percent of PG&E electricity customers reduced usage but 27 percent of them increased it following the audit.  On the natural gas side, 25 percent reduced usage and 31 percent increased.  

Dominion Energy Virginia is proposing a very similar program for its customers, as one of eleven new demand management programs pending before the State Corporation Commission.  The $226 million Dominion proposes to charge its customers over five years to pay for them is just a down payment on the $870 million in such spending over ten years which the General Assembly ordered in last year’s Ratepayer Bill Transformation Act.

We customers pay for these programs with (you guessed it) stand-alone riders on our electric bills, Riders C1A and C2A. Approval of these new programs as requested, plus some higher cost recovery sought for existing programs, would add 61 cents per month to that mythical 1,000-kilowatt hour residential customer bill.  That’s your price for encouraging your neighbor or a neighboring business to buy an LED bulb, tune up the old heat pump, put some film on the windows, buy a smart thermostat and get that energy audit.

Along with paying for those activities, however, the $226 million also includes $9.5 million in utility profit, $6.6 million in overhead charges, and $97 million in compensation to the utility for the electricity it expects to not sell.  The program costs themselves are only half the total bill to customers.

Dominion cited the PG&E home audit program in its application, so the SCC staff sought out the recent report on its effectiveness, finding and including two of the report’s key pages in its 200-page analysis of the proposed eleven programs.  PG&E claimed a 1.5 percent net decrease in demand among participants, but the staff noted that 80 percent of PG&E electricity customers saw no change or used more power and challenged Dominion’s claim the audits will do much better in Virginia.

That was just one of the several programs challenged by the staff.   A proposed appliance recycling program, where a Dominion-approved contractor picks up inefficient appliances and provides a $20 stipend to the person discarding them, is intended to reach 45,000 customers over the five years.  But the SCC staff notes Dominion did an earlier version of this, reaching fewer than 15,000 customers in three years while offering a larger cash incentive.

“Staff believes that reductions in expected participation will likely result in lowering of the benefits in the cost/benefit tests substantially enough that the proposed Phase VII Residential Appliance Recycling Program may not pass either the TRC (Total Resource Cost) or Utility Cost Tests,” wrote David Dalton, director of the Division of Public Utility Regulation.

Another program offers cash incentives to buy new energy-efficient appliances, through approved Dominion contractors, called the Residential Efficient Products Marketplace.  The SCC staff noted it is heavily reliant on persuading people to get rid of incandescent light bulbs, which by the way become illegal next January 1 anyway.  When compact fluorescent bulbs become the new baseline, all those cost-benefit calculations with incandescent bulbs as the baseline are shot to pieces.

Staff also noted that of the 35 activities or products included in the program, 16 of them (new light bulbs, shower heads, pipe insulation, etc.) have incentive payments that cost more than the improvement, for example a $7.50 payment to install a $2 LED bulb.  (And then, as noted, a payment to the utility for profit and the electricity not burned.)

One key objection that runs through the whole staff report is doubt about participation levels, based on lower than projected participation in the programs Dominion has already been conducting since 2012.  Projected participation is key to the projected drop in energy demand and those cost/benefit analyses the utility must pass to get these programs approved.

The environmental groups following the case endorse all eleven proposals, of course, but one of their witnesses makes the excellent point that this whole process should be coordinated with the effort to build the proposed “smart” distribution grid. That will make real time pricing, immediate customer feedback and system-wide demand management possible.

There are a couple of additional key issues facing the Commission, which is taking public comments on the case through March 13.

Previous state-mandated demand management programs have included at least some of the large general service customers, who had to jump through various hoops to be exempted from having to share the cost.  The 2018 legislation exempted all larger customers, but there is disagreement over whether that applies only to these new eleven programs or also applies to the existing programs still underway.  If those big customers are now excluded from responsibility older programs, the costs for everybody else will go up.

Then there is the money the utility proposes to collect for the electricity it doesn’t sell, “lost” revenues.  The Virginia Energy Efficiency Council complains in its written testimony it “does not support the inclusion of lost revenue in the spending cap.  First, as a threshold issue, lost revenues are not program costs,” and the new statute only allows program costs.

Its witness Rachel Gold cited a national study finding among other utilities collecting lost revenue, “At the low end of the range, dollars collected for lost revenue were equivalent to only about 1% of electricity efficiency program costs in a given year, but most were clustered between 15 and 35% of program expenditures, with very few examples above 50%.”

What is the figure in Dominion’s proposal?  Apparently, about 43 percent.  If the pattern holds, could almost half of the $870 million in demand management spending ordered by the General Assembly simply be payment for electricity unsold, another $400 million in revenue to a utility already known to be making and hoarding excess profits?  Or will hundreds of millions from ratepayers for lost revenue be layered on top of $870 million in program costs as it piles up over ten years?

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26 responses to “But The Idea Is To Cut Power Use, Isn’t It?

  1. Just to make clear – electricity use has gone DOWN since 2010 even as we built more and more data centers!

    and if we produced a chart that shows electricity consumption versus price – there will be a striking correlation between them.

    Hawaii cost = 33.8 kwh used = 6,610
    California cost = 19.53 kwh used = 6,536
    United States cost = 12.0 kwh used = 11,634
    Virginia cost = 11.65 kwh used = 13,345

    If you raise the price of electricity – consumption as well as emissions goes down its a fairly consistent relationship and even more pronounced in other countries

    If you raise the price of electricity many people will buy demand-side technology to reduce consumption just as
    they have bought more fuel efficient cars to keep those fuel
    costs down.

    If you raise the price of electricity AND you give the increase back to people who buy energy efficient equipment as rebates/loans – the cost
    to customers will be offset and the net result is less electricity use.

    The idea that somehow charging more for electricity is somehow “wrong” though runs right smack into the reality that it’s also EXACTLY what virtually all municipal and private water/sewer providers do. They use tiered schedules so that normal use is the lowest rate and the higher your use -the higher the rate.

    I know there is something “like” that for electricity but I think it is minimal and old and should be updated along with any demand-side programs but the thing is – no matter what the new things would be – Dominion expects each one to be a separate profitable item!

    And if it CUTS electricity use – they expect to be compensated !!!

    • Appreciate your honesty that the real goal is to increase prices.

      Nobody subsidized my CFL or LED bulbs, my Energy Star fridge or the tankless water heater at my former vacation home. These programs often enrich the contractor, the utility, while providing benefit to a tiny percentage of people. The big shifts underway are larger market forces. I do look forward to real time pricing and more info on my usage, because I will further cut my use.

      • well no. I’m NOT advocating increasing prices as a way to cut consumption – NOT TRUE!

        What I’m saying is that it is UNDENIABLE that higher prices result in lower consumption – AND that people – like you – all on their own – without subsidies – will buy technology to reduce use and lower costs.

        What you fail to address here is that more electricity use has IMPACTS to the environment as well as new plant costs passed onto customers – as Dominon has done all along and wants to do more of.

        What I AM proposing is to do the SAME THING that almost all providers of water/sewer do – which is establish tiered prices that go up when use does. Water/sewer providers increase prices on heavy users as a way to prevent higher infrastructure and operating costs to be put on all users. The higher prices incentivize more responsible use behaviors. It’s the OPPOSITE of subsidies. Right now, we are SUBSIDIZING higher consumption.

        And then I’ve got one step further – I’m advocating that increased prices NOT go to Dominion for profits but rather back to consumers to reward those who invest in technology to consume less.

        What we are doing right now is fiscally dumb and just downright irresponsible and wanton waste of electricity for no good reason other than it’s cheap and we can waste.

        And that dumb path is being aided and abetted by BOTH Dominion AND the SCC AND the GA for no good reason that makes any kind of fiscal sense much less the pollution that also results.

        Instead of doing what makes conservative sense – to conserve – to not waste – we have a bizarre system – on purpose – to incentivize consumption for the benefit of those who profit from consumption.

        It’s a corrupt system – no two ways about it – and the defenders of it are also enablers but not demanding that we do have a sensible and truly “conservative” approach to not wasting resources and polluting the environment.

        • No Larry that goes against the data I posted a few weeks ago. Virginia is apparently using far less energy than NJ and MA for example for residential. High electric costs in part forced them to lose their industry, and homeonwners mostly us nat gas and oil to heat their home. So they live in a high elec cost world, and we do not. Spoken as a renegade from South Jersey.

    • How do residential electricity sales relate to data centers? As I understand your numbers the data center usage would not be included.

      Your theory of raising prices to reduce demand would be a lot more compelling if Virginia ran a deregulated energy market. It would be more compelling if our state legislature weren’t bought and paid for by the monopoly providers. However, allowing the monopoly provider to raise prices to reduce demand in a state where there is no effective regulation of that monopoly by the General Assembly would be an economic catastrophe for all of us.

    • Larry, You cannot assume that electricity demand nationally matches electricity demand in Dominion’s service territory. Data centers have a much bigger impact on Dominion demand than they do nationally.

  2. Steve – any idea why/how the audits increased electricity usage in a high percentage of cases?

    • I could not find the full report on line. May ask the SCC staff for a view. My guess is people just ignored the advice and went about their life and bought a new 72 inch teevee. You can lead the horse to water…..

      • Thanks. Interesting that everybody (i.e. LarrytheG, Ms. Twitmeyer) tells me that residential electricity demand is falling. Yet, for a high percentage of the people who go through these audits, it goes up. I guess that it’s going down in aggregate but the audits don’t make a difference.

  3. So, environmentalists think that allowing consumers to get real-time feedback on their electrical usage will make a big difference. Let’s say the average Dominion customer pays an average electric bill of $150 a month. Let’s say that aggressive attention to energy conservation will shave 20% off the electric bill. That’s $30 a month.

    How many people will make the effort?

    Some people like Steve — an energy hog who likely has big screen TVs in every room and likely likes to keep his home at a toasty 74 degrees during the winter!! — might make the effort. But, then, people with smaller electric bills might not bother.

    • Comprehensive automation coupled with carbon based pricing might work. If the sun is shining and the wind is blowing then electricity is cheap. That pricing is sent to the environmental systems of homeowners and their automated systems keep the air cooled to 70 degrees. Then the wind stops blowing and the natural gas peaking plant is fired up along with a surcharge for buying offset carbon credits. The homeowner has decided, in advance, that the extra cost isn’t worth the extra comfort and the thermostats automatically readjust to 75 degrees.

      Today’s problem is that the externalities of dirty electrical generation aren’t priced into the cost of electricity. So, a kWh is a kWh is a kWh and just cutting kWh’s doesn’t generate enough savings to justify the investment.

  4. Since everyone is into social justice these days, let’s consider the social justice implications of these energy conservation programs.

    (1) Households with the biggest energy bills (biggest houses to cool and heat, owning the most appliances) tend to be higher-income households. Houses with the smallest energy bills tend to be lower-income households. Lower-income households are disproportionately African-American.

    (2) Those households with the biggest electricity bills (predominantly white, higher-income households) will have the most to save, therefore will be more likely to invest in energy conservation, and will be the primary beneficiaries of the subsidies.

    (3) The energy-conservation programs disproportionately benefit white people and neglect black people. Ergo, energy-conservation programs are racist.

    • Higher energy costs (eg; +gaso taxes) are definitely regressive hurting low incomes disproportionately. That’s why some of the proposed carbon tax programs try to be “revenue neutral”, by tranferring the extra tax money back to the population hurt by the tax increase.

    • Hence California’s tiered cost per kWh pricing scheme. Like a progressive tax system the first X number of kWh’s used are cheap. The next “bracket” are more expensive and so on.

    • Wonder if California ratepayers still pay for renewable electric power whether it is used by a consumer or not?

  5. In favor of LED bulbs, amazing in the stores these days like Target and Home Depot, the array of choices. I like some of the artistic retro designs where there is very artisitic LED filament in there, like an old fashioned Edison bulb.

  6. The fact is, most energy savings programs, if properly designed, will pay for themselves through reduced system expansion costs and O&M reductions; and if they don’t, they are perforce not properly designed. One thing that’s deeply wrong in this instance is Dominion’s retail rate structure. Packing all these programs into rate riders that add to customer costs, yet REFUSING to allow the base rates to be re-set through an overall reassessment of total investment and O&M during the latest test period data available, adjusted as needed to make it forward-looking, is a travesty.

    The SCC’s hands may be tied by the GA’s ratemaking mandates, here; but it could perform a proxy analysis based on how ratemaking OUGHT to work and include that result in its final order here, by way of illustrating how corrupt the current electric utility ratemaking process in Virginia has become. The SCC retains plenary INVESTIGATIVE authority over utility rates despite the restrictions placed on its periodic rate review ORDERS. For example, the SCC can find that so-and-so has NOT been shown to be in the public interest; but order so-and-so approved SOLELY on the basis of the GA’s overriding mandate. I wonder if the SCC has the political support or will to take on the Dominion lobby in that manner — but it’s getting beyond embarrassing for Virginians to put up with this level of supine regulatory emasculation much longer.

  7. This is slightly off-topic but interesting nonetheless…. This gets to Larry’s question about the pros and cons of solar energy in small island grids. From the Sun Herald:

    Maui Electric Company has asked the state Public Utilities Commission to allow the utility to pass a $155,000 cost for 1.4 gigawatt hours of solar power that was produced but not used.

    The utility in a Jan. 31 filing said it paid South Maui Renewable Resources $110,359.33 for 997.8 megawatt hours of “compensable curtailed energy” per its power purchase agreement, The Maui News reported .

    South Maui Renewable Resources has an annual energy contract for 6.75 gigawatt hours, according to the filing.

    • “Public Utilities Commission to allow the utility to pass a $155,000 cost for 1.4 gigawatt hours of solar power that was produced but not used.”

      This is one of the many ways that solar, done improperly, can become incredibly awkward, inefficient, and counter productive, and end of costing so damn much. Another related and concurrent way is how that solar must feed off gas plants, ramping them violently up and down, throughout the day to maintain or try to maintain stability of the grid, an inherent dysfunction that ends up driving up the cost the costs, and tearing up the functionality and longevity, of the gas plants.

      Hence solar can become a destructive parasite, unless it is properly properly mixed in with other generators, all of which depends on a variety of highly variable factors. Plus solar’s inherent dysfunction, collateral cost, and instability compounds in ever more ways as solar’s capacity penetrates the market.

      • Reed,

        I think you missed the mark on this one. First of all, Hawaii does not have natural gas. Naphtha, a byproduct of making jet fuel, is used to run a combined cycle plant on Kaua’i. Peakers are diesel-fueled reciprocating engines that drive a turbine. Most of the peakers on the mainland are gas-fired combustion turbines, essentially jet engines that turn a generator. Both types of peaking units are designed to start and stop much like turning on and off the ignition on your car. There is no “violent up and down.”

        Solar output reduces the need for these peaking units that generate electricity more expensively. The peakers remain useful to fill in periods when solar output is lower, such as for evening peaks.

        This payment appears to be owed under a contract for a specific amount of generation, a portion of which was generated but not used. The investor-owned utilities in Hawaii opposed third-party owned solar because it offset the use of assets they owned, and because solar resulted in lower cost electricity, diminishing the revenues of the investor-owned utilities.

        The co-op on Kaua’i, attempting to please its customers and its owners (who are the same people) invested in batteries to make sure all of the low-cost solar generation could be used to serve a portion of the evening peaks at a total cost that was lower than running the peaking units more often.

        • Tom, my comment is correct, base on a generic example of part of a quote supplied by Jim. The particulars of Hawaii have nothing to do with the general accuracy of the statement I made.

  8. Do I understand this correctly? Dominion is proposing that it prepare an audit to let me know how I can save electricity. So, I go out and pay to upgrade my insulation as they suggest. My electricity bill may or may not go down, but there will be a rider on my bill that pays Dominion for the electricity it would have provided me, whether or not I used it? In fact, if I don’t follow up on their recommendations, they get paid twice for that electricity–once as part of my actual usage and once in the rider? What a racket!

    • What the utility has proposed and what the utility will get may be different, and my understanding is to actually get paid for “lost” revenues will depend on some level of verification that the programs functioned as designed. The $97 million sought will go down if, as the SCC staff expects, participation is lower than hoped or the programs flop. But its in the application, I didn’t make up the number. I hope to follow through on this case (and IRP, and Grid Mod, and the ongoing tax case…full employment.)

      But of course after the audit Dominion will want you to do the upgrades using their contractor, their promoted appliances, etc so they can make even more money off you!! Why the retailers are not banging on this is beyond me.

  9. Maybe if the Attorney General wasn’t so busy advocating left-wing causes because he has to atone for his blackface days, he could be going after Dominion, which could actually help a lot people, not all of whom are privileged white people.

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