Wednesday, July 15, 2009

Inadequate Attention to Impact of Renewables Mandates on Low-Income Customers

A recent report draws attention to the cost impact of renewables mandates on low income electricity customers. Barbara R. Alexander, et al., Renewable Energy Mandates: An Analysis of Promises Made and Implications for Low Income Customers, June 2009.

In recent years, New York and other states adopted ambitious goals to increase the proportion of electricity obtained from renewable resources. Also, New York and nine other northeastern state formed an informal compact to create a market for greenhouse gas allowances, the Regional Greenhouse Gas Initiative (RGGI) which requires fossil fueled power plant owners to buy emission allowances and which raises the price of all electricity in the functionally deregulated NYISO markets, no matter how it is produced.

The new report loooks at three states and finds that such initiatives were undertaken with much optimism but little rigor and little regard to the impact of higher costs on low income consumers:
First, there is reason to question the reliance on many of the rosy promises and projections of public benefits that are likely to result from the adoption of the renewable resource energy mandates. Our analysis of several of the documents widely circulated in the various states typically concludes that these studies did not undertake any utility specific or customer class specific bill impact analysis.****

Second, proponents of state mandates for renewable resources should link their promises concerning future benefits to recovery of incentives * * * [which] should reward outstanding actual performance that is reflected in independent measurement and verification studies and not merely “bribe” the utility into taking the steps to assure compliance with the minimum statutory or regulatory spending objectives. Furthermore, renewable energy mandates that include utility incentives should also include penalties for failure to meet the targets.

Third, policymakers should require “bottoms up” integrated resource plans to determine the most cost effective generation supply portfolios under a variety of potential economic and fuel type scenarios. The role of renewable energy resources in achieving the most optimal portfolio should be identified and contrasted with the costs associated with compliance with the renewable energy mandates. The difference in costs should be recovered through a public benefit surcharge mechanism. ****

Fourth, renewable resources are likely to be expensive and states should be careful not to require a mandate to build new wind resources or subsidize solar installations for individuals unless there is an actual alternative traditional generation plant that will be avoided.****

Of the states evaluated in this report, only Massachusetts has in place a robust low income bill payment and efficiency program that is funded for full scale implementation. Another initiative missing from these case studies is the targeting of “green” jobs opportunities and working training and retraining to low income or disadvantaged populations.

Fifth, it would be reasonable to insist that any state mandates for investment in renewable resources and efficiency programs that rely on benefits that will occur late in the 20-year analysis of costs and benefits be accompanied by a robust low income bill payment assistance program to shield low use and low income customers from adverse bill impacts.

The report looked at Colorado, Michigan, and Massachusetts, and did not examine the advent of renewables surcharges and the RGGI program in New York. See
The New York PSC launched its renewables programs and a new surcharge to pay for them without express legislative authority, and has not addressed the impact on the poor of the higher prices that flow from the administrative initiatives.

It is perhaps revelatory of the New York Public Service Commission's values that it customarily takes an expansive (if not grandiose) view of its powers to act without legislation enabling its initiatives -- such as the system benefit charge, the renewables surcharge , and the "energy efficiency portfolio" now adding billions of dollars to electric bills for off-budget expenditure by NYSERDA and utilities under PSC direction -- but takes a crabbed view of its power when it comes to addressing issues affecting affordability of utility service to the poor. See PSC Implements 2% Assessment on Energy Utilities; Rebuffs PULP's Request to Protect Low Income Customers, PULP Network, July 2, 2009.

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