TRAVERSE CITY – Even with the push to develop alternative energy and energy efficiency, utility rates and regulations, by and large, still encourage growth in use of energy and resources, panelists said at the Mid-American Regulatory Conference Tuesday.
Michigan utilities are able to collect fees to cover energy efficiency programs, but the majority of their revenue is still based on energy used. In addition to most states still having such a use-based rate structure, there are also no incentives for consumers to find the most efficient energy source for what they are trying to do, panelists said.
“The core challenge here is doing something to change the paradigm for utility regulation,” said Martin Kushler, director of the utilities program for the American Council for an Energy-Efficient Economy. “Utilities don’t want serious energy efficiency.”
Kushler said reducing energy use is going to increase the cost of power, given the fixed costs. “Regulators must shift their focus from lowest rates to lowest total costs,” he said.
David Baker, president of Indiana American Water, said rate issues are more of a concern for water utilities. He said in many states, including Indiana, water rates actually fall for those who use more.
“It’s very challenging for us to change the behavior and attitudes of customers in water rich states like Indiana,” Baker said.
While he said most Midwest states would not have to implement the conservation rates used in some Western states to control excessive use, he said rates needed to be reversed to encourage less use. He also acknowledged that, in changing to that rate system, there would have to be a special industrial rate, at least as a transition.
“You do not want to scare off industrial users,” he said.
But energy and resource users need to have enough information to know they are using the most efficient resource, said Ron Edelstein, director of regulatory and government relations for the Gas Technology Institute. And he argued state regulators have a role in being sure that information is available.
“Regulators need to support the most energy efficient option,” he said.
He argued, for instance, that for most heating applications, natural gas is more efficient than electricity. But he and members of the panel audience argued in many cases electric utilities are offering incentives for people to switch to electricity.
Even without those incentives, gas appliances are still generally more expensive than electric, said Ken Costello with the National Regulatory Research Institute, “so it’s not clear which is cheaper.”
Costello argued utilities should be open to helping provide that information on the best uses for their product. But he said state regulatory commissions should also play a role in disseminating that information and, if necessary, helping residents purchase the most energy efficient option.
He noted the most concern is for tenants because landlords, who do not pay the utility bill, are likely to put in the least expensive appliances to purchase, not those with the lowest cost of ownership overall.
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