Saving energy sounds good, especially when it shows up as a lower electricity bill each month.
Right now, that doesn't happen for New Mexico utility customers who try to reduce their power use.
Energy-efficiency advocates say that's unfortunate because if utilities used the best practices, the state's households and businesses could cut electricity use by almost a fourth while saving a net $1.7 billion in the next eight years, according to a new report.
By offering different incentives to utility companies, educating consumers and making sure money was available through loans, New Mexico could also reduce the water needed to produce energy by 4.6 billion gallons a year and reduce the need for coal-fired power plants, according to the report, released Wednesday by the Southwest Energy Efficiency Project based in Boulder, Colo.
Installing efficient appliances and light bulbs, weatherizing older structures and building efficient new buildings are all ways to decrease electricity and natural gas use. Utility companies like Public Service Company of New Mexico have energy-efficiency programs to help customers and are proposing more. Still, there's a long way to go, Howard Geller said, lead author on the six-state SWEEP report. "Utilities that do a good job with energy-efficiency programs find it strengthens their customer approval rating, too," Geller said.
But currently, utility companies still charge their customers for reducing electricity use, which seems to defy logic. To coax power companies into boosting energy efficiency among customers without always charging them for the savings, companies need to know they can pay their costs and make a return for their investors through incentives or changing the way companies collect their money.
Making money, one way or another
New Mexico's utility companies are guaranteed a profit margin for their investors and to recoup their fixed costs of providing electricity. Right now, they make their money by selling power. Their customer rates, approved by the Public Regulation Commission, allow companies to collect a portion of their fixed costs through electricity sales. The more power they sell to customers, the better. So there's not much incentive to reduce the amount of electricity their customers use.
In 2005, a state law required utilities to promote energy efficiency and reduce total electricity use 10 percent by 2020. The law also required the state to remove disincentives that discourage utilities from promoting energy efficiency.
Decoupling is one way to encourage energy efficiency without penalizing companies or customers, says Geller and PRC member Jason Marks. Decoupling separates a utility's fixed operating and maintenance costs from the power customers use. Decoupling is allowed for electric utilities in 13 states. More states allow decoupling for natural gas companies.
PNM proposed a decoupling measure a few years ago, but it was opposed by some energy-efficiency advocates and some PRC staff who thought the decoupling proposal was still a better deal for the company than for customers. Marks is pitching another decoupling proposal now. "Without decoupling, it's really hard for me to sell the public on funding energy-efficiency programs [through utility rates]," Marks said. "In the end, customers need to see they aren't being charged twice for energy efficiency."
Under a decoupling proposal, PNM and other electric utility companies would be guaranteed the money for their fixed costs and return on investment. If PNM ended up selling more electricity than it needed to cover those costs, customers would get a rebate. If the company sold less, it could charge customers a fee to make up the difference. "If decoupling had been in place the last five years, PNM customers would have received a rebate every year," Marks said.
The PRC, industry reps and energy-efficiency advocates have been meeting in workshops to draft a possible decoupling proposal. Marks hopes to bring it before the commission next week to start the rule-making process. But he only has a few months left in his final term to convince fellow commissioners, the public and utility companies that decoupling would be good for everyone.
Promoting less energy use
All three of the state's investor-owned utilities have energy-efficiency programs in place, such as offering rebates to customers who purchase refrigerators and washing machines that use less energy. Rural electric cooperatives are not yet subject to the same energy-efficiency mandates and aren't required to offer incentives to customers.
Public Service Company of New Mexico submitted a proposal to the PRC last week to beef up the company's energy efficiency with five new programs. The programs will save customers a net $10 million over time by reducing the operating, maintenance and fuel costs for PNM. But in the absence of a different rate structure, PNM estimates the energy-efficiency programs will cost residential customers about 31 cents a month. The bill for businesses will increase about 94 cents a month.
The programs, if approved by the PRC, also would reduce carbon-dioxide emissions from power plants by 47,000 metric tons and reduce water use by 33 million gallons. The new programs would provide energy audits and help with simple retrofits for low-income customers. A new pilot program also would give 48,000 customers a customized look at their energy use.
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