Editorial: Breaking The Circuit
Economically, these must be pretty good times for Massachusetts.
Why else would the state seriously consider reimbursing utility companies for money they don't make as a result of increased energy efficiency on the part of their customers?
Because by taking the pressure to sell away from utility companies' revenue, Massachusetts is positioning itself as a leader not only in energy efficiency, but in environmental protection as well.
"Decoupling" is what utility industry and government types call the plan. "Decoupling" perhaps seems less counterintuitive than "severing the link between electric and gas companies' revenue and sales," as the state Department of Public Utilities puts it.
The Associated Industries of Massa-chusetts hates the plan. They say decoupling is no more than corporate welfare.
Simple Subsidies?
In a way, AIM is right. Financial interactions between giant utilities and government regulators, tax dollars in hand, can easily reek of waste, abuse and general private-office skullduggery. The state must be sure that its decoupling plan isn't simply subsidizing utility companies' efforts to make money for selling less electricity while dressed up in the popular and nearly criticism-proof "green" vestments of the day. If it is not sure, the DPU, the state Department of Energy Resources and every other government agency and official that wants to put his or her fingerprints on the plan is distorting the utility market for no real gain at all for customers, the energy market or the state.
The truth is, the market distortion created by decoupling is at this stage the only practical, ready way for Massachusetts to spur widespread, corporate-supported energy efficiency.
In a perfect business world, the utilities would be finding ways to make money by selling energy efficiency rather than just electricity or gas. Begging the state to ensure that they retain their expected earnings even as they sell less and less electricity isn't exactly a technological or business innovation on the utilities' part, and it can't go on forever. With the pressure to sell enough electricity to satisfy investors taken off the table, National Grid and other utilities will have the freedom and opportunity to innovate. And intense innovation is the only way we're going to accelerate tangible reductions in energy use, and loosen the grip of natural gas and oil on our economy and in our environment.
Freedoms With Restraint
We hope the utilities make very good use of those freedoms and opportunities, and make their businesses more lean, efficient and inexpensive. We also hope that within the next seven years, they bring enough new, highly efficient, environmentally sound energy products to market that decoupling becomes unnecessary.
For right now, rates increase in large chunks to the shrieks of residential and commercial customers alike. And without the state subsidy, the only way for utilities to recoup their costs and turn a profit is to sell more - and more expensive - electricity and gas.
Despite the skeptics' cries to the contrary, there is evidence that such a strategy can bear fruit. California adopted a decoupling strategy in the early 1980s. Today, the average Golden State resident uses about a third less energy than the average American, according to the California Public Utilities Commission.
The DPU and the DOER say they must see decreases in electric and gas bills as proof that utility companies really are encouraging efficiency. They say Massachusetts can afford decoupling, can handle the complexities of enacting and enforcing the plan, and know enough to keep a close watch on how the utilities account for their subsidies.
We hope they can. And we hope the DPU and DOER set aggressive energy efficiency goals for the utilities that will make us look back and say this really was the right time to enact this policy. There is no better plan on the table to accelerate Massachusetts leadership in energy efficiency. With the right safeguards and accountabilities in place, this legislation can work - let's give it a chance.
WBJ Web Partners
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