A Partnership Restored: Environmental and Consumer Advocates Join on Crucial Utility Issues

Although environmental and consumer advocates may sometimes differ over the best ways to increase energy efficiency, we share a strong common interest in ensuring that America pursues every opportunity to save energy more cheaply than it can be produced.

That’s why it’s puzzling when NRDC and consumer advocates appear to be at odds in some states over policies designed to accelerate energy efficiency progress and promote access to affordable utility service for all.

These differences often become evident in the staid hearing rooms of state commissions wrestling with utility regulation cases. However, as I noted in a recent ElectricityPolicy.com article co-authored with National Consumer Law Center (NCLC) senior policy analyst John Howat, both environmental and consumer advocates have a long tradition of standing up for the public interest before some of the nation’s most important utility regulators.

I believe the way to be most effective in that role is to speak with one voice, and we also need to do that more frequently.

We already are in agreement in a number of areas, as noted in our “Finding Common Ground between Consumer and Environmental Advocates” article published this week. For example:

• We believe there are significant market barriers to cost-effective energy efficiency resources;
• Utilities that effectively remove those barriers – while lowering customers’ costs and enhancing customer service – ought to be more profitable than utilities that don’t even try;  
• We oppose rate designs that reduce customers’ rewards for saving energy;
• We don’t want to reward utilities that promote wasteful uses of energy or resist efficiency standards for buildings and equipment;
• We favor energy efficiency program designs that promote affordability for all consumers and enhance the home energy security of vulnerable households; and
• We reject the application of energy efficiency or conservation rhetoric to promote billing and rate structures that undermine that security.

In our article, we then take a fresh look at three key areas that often divide environmental and consumer advocate groups: “decoupling,” prepaid utility service, and coordinated government and utility strategies for ensuring low-income customers retain access to essential energy services. Our purpose was to begin a dialogue to see if we could find strong agreement on these topics – and I believe that we succeeded.

Decoupling

The financial health of most gas and electric utilities is tied directly to retail sales because their fixed costs are recovered through usage charges based on volume. That creates little incentive to promote energy efficiency. Therefore, NRDC supports the concept of decoupling, which allows for periodic tune-ups in base rates that can restore to the utility – or consumers – any fixed-cost dollars under-recovered or over-recovered due to sales fluctuations.

Howat notes that NCLC has criticized some decoupling mechanisms in the past, but he recognizes their potential value in accelerating energy efficiency progress and sees them as clearly preferable to regressive rate designs that reduce customers’ rewards for saving energy by making all or part of a utility bill independent of electricity consumption. In the article, he and I agree that there is a need to break the link between utility profits and sales, and that adoption of decoupling mechanisms should not be linked to upfront financial penalties.  We also agree that if there are reductions in utilities’ costs of raising money following adoption of decoupling mechanisms, the savings should be passed through to customers.

Prepaid Utility Service

Faced with an increasing number of residential customers in arrears, electric and natural gas utilities in numerous states have sought to replace traditional credit-based service with a system requiring customers to pay in advance, with account balances decreasing as service is delivered. Some utilities are marketing prepaid service as a means of reducing energy use.

NCLC and other consumer groups oppose prepaid service for several reasons, including: utilities have no obligation to deliver shutoff notification by mail, to continue providing service after credits are exhausted, or work with customers to establish payment plans to ensure continued service. There also are additional fees.

However, he says that if prepaid service is implemented on a pilot basis, such programs should adhere to protections outlined in a National Association of State Utility Consumer Advocates resolution – and I agree. I also believe that prepaid service should be offered only on an opt-in basis and only to customers who are neither low-income nor credit-challenged.  

Low-Income Energy Services and LIHEAP

Environmental and consumer advocates have a longstanding tradition of supporting the federally funded Low-Income Heating Assistance Program (LIHEAP), which the states implement to help low-income households in extreme climates with their energy needs, as well as the Department of Energy’s Weatherization Assistance Program. 

However, as Howat notes: “We both acknowledge the constructive role of gas and electric utilities in support enhanced LIHEAP and weatherization appropriations, but we need to broaden the base of support for coordinated federal and state efforts to deliver targeted energy service to low-income communities.”