ComEd's Smarter Electric Grid Must Maximize the Potential for Cost-lowering Energy Efficiency

In case you missed it,  Commonwealth Edison has proposed legislation in the Illinois General Assembly that would allow the company to move full speed ahead in modernizing the grid, at a modest cost of $2.6 billion dollars.  The legislation would radically change traditional regulatory process for setting electricity rates which has been in place for decades to provide safeguards to consumers.  With an initial hearing on Tuesday, lawmakers in Springfield have begun the process of considering this proposal.

Now, of course, there’s a fair amount of agreement that the electric grid needs to be modernized.  Moreover, a recent decision in an Illinois appellate court created a serious barrier to modernization.  The court found that the Illinois Commerce Commission violated state law when it allowed ComEd to use a special mechanism known as a rider to recover its costs to run a pilot project for so-called smart meters.  Without the use of a rider, ComEd cannot gain advance approval for capital improvements to the grid, and faces the risk that any such investment will be disallowed during a subsequent rate case.

Yet, ComEd’s legislative response to that decision fails the laugh test.  ComEd wants to spend its ratepayers’ money, and lots of it, but also wants to dramatically depart from traditional regulatory process for setting rates.  In addition, the bill fails to incorporate common-sense energy efficiency measures that can entirely offset the cost of the infrastructure upgrades.  

Is there a way to embark in rebuilding our electricity infrastructure while protecting the people of Illinois?  We think so, and energy efficiency has a major role to play in accomplishing this.

Utilities all over the country, including in Illinois, have begun to use energy efficiency to avoid the need for more expensive generation from power plants.  The numbers are fairly simple:  If a utility spends 3 cents to save a unit of electricity, it typically saves 6 to 9 cents that it would otherwise have spent buying and distributing power, and bills go down as a result.  The way in which the utility “buys” energy savings is by offering its customers rebates and programs to reduce the amount of power they need for their homes and businesses through better motors, better windows, better appliances, better lighting, etc.  Under a state law passed in 2007, ComEd is already running energy efficiency programs that will actually save its customers $500 million as a result of the energy saving measures installed over the next three years. 

But there is a much deeper well of cost-effective energy efficiency to be captured.  In fact, ComEd’s own research shows that there is enough to entirely pay for the $2.6 billion in grid modernization projects.  A study produced for ComEd by the Cadmus Group, identified an excess of 2 million mega-watt hours per year of cost-effective savings within ComEd’s service territory, of which 1.5 million mega-watt hours per year could be realistically captured.  This is 15% more than is necessary to pay utility customers back the costs of upgrading the grid.

State Representative Elaine Nekritz of Des Plaines has proposed legislation to require that when utilities embark on big, new capital plans, they must use energy efficiency savings to offset every dollar of spending.  Legislators should insist that this amendment be part of any final utility legislation adopted this year, along with appropriate consumer protections and regulatory oversight for utility spending.

As this new utility battle heats up, the rhetoric will fly, and a serious dialogue about how to solve real energy policy problems might seem unlikely.  But at the end of the day, a compromise that spurs investment in our grid, with appropriate consumer protections is the best possible outcome.  We need an electric system that uses modern communications technology to enable new services for our homes and businesses, we need reasonable regulatory oversight, and we need to find ways to reduce the burden of high electric bills on Illinois families. We can achieve all three of these goals, but not without a strong commitment to energy efficiency.