Calls by Governor Deval Patrick and House Speaker Salvatore F. DiMasi for a state energy policy that emphasizes conservation, as well as their concerns about the high cost of energy, are welcome news for the business community. At the same time, however, energy conservation, reliable supply, the environment, and costs are hardly new targets of state policy.
Consumers are paying some of the highest electricity rates in the nation, which severely limits the ability to attract and retain good jobs. Yet we add further costs to every electric consumer’s bill to fund programs that, though intended to promote energy efficiency and the use of renewables, lack proportion, rationality, accountability, and oversight.
It’s time to stop piling on these added charges to our electric bills and start examining and coordinating the myriad programs we have. There is the $125 million collected annually to fund energy efficiency programs (the Systems Benefit Charge). Despite the fact that Massachusetts already has one of the largest energy-efficiency programs in the nation on a per-capita basis, there are calls by some advocates to increase this charge – even though after overhead and transaction costs, the return to ratepayers is a fraction of what is put in. This program is decades old and needs a fresh look, especially for large customers who are paying hundreds of thousand of dollars per year. Adding additional money to the same old program is not the type of vision we need.
Consumers also pay about $25 million annually into a fund disbursed by the Massachusetts Technology Collaborative to site and encourage projects using renewable power. Renewable power is a good thing, when it is economically viable, but for now electricity from sources such as wind and solar power is much more expensive than existing sources. We should not levy new taxes to fund more expensive power.
There is also another program that requires energy suppliers to purchase renewable energy credits as part of their energy portfolio and pass the increased costs along to ratepayers. This program adds about $50 million to ratepayer bills, about $17 million of which is sent annually to the Division of Energy Resources as an alternative payment because there is a shortage of renewable energy on the market. On the horizon is the governor’s proposal to auction all carbon allowances under the Regional Greenhouse Gas Initiative, an estimated $125 million cost to ratepayers if all the allowances are auctioned.
Many of these funds are overseen by different agencies, each of which has its own standards on how to use the money. Incredibly, even the definition of renewable is different under different programs – the DOER program does not include hydroelectric generation and some types of biomass facilities under its definition of renewable, one of the reasons for the $17 million in additional costs.
All these programs together, adding up to $325 million to ratepayers’ bills, contribute to high electric rates, and companies are citing these costs as one of the reasons for leaving the state.
We don’t need more money; we need better accounting, coordination, and oversight for all these programs. All energy efficiency and renewable programs and any other program involving ratepayer funds should be subject to realistic, clear, third-party performance reviews and coordinated oversight by one advisory group. The purpose of these programs should be to promote energy efficiency and reliability of supply, and to lower costs.
One way to advance this agenda, as the governor has proposed, may be to free electric utilities from their dependence on per-kilowatt charges, and pay them for delivering services regardless of the amount of energy used. However, no company, including utilities, should automatically be made whole just because less of their product is being used. A reexamination of the way utilities are compensated should be accompanied by a review (and possible elimination) of the existing energy efficiency programs and a frank discussion as to whether the existing utility structure is the best way to administer energy-efficiency programs going forward.
Nothing can lower our rates to the level in some other states. But efficient use of currently collected money is the first step to more stable rates. The old programs need a fresh look, not additional funding, and new ideas need to be injected into the debate.
By Richard Lord and David Southworth
Richard Lord is president & CEO of Associated Industries of Massachusetts. David Southworth is president of the Southworth Company in Agawam, and a director of AIM.
4 July 2007
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