I Hate to Say I Told You So

Last week the PSC approved utility surcharges on our monthly electric bills: fees which will subsidize state electric providers’ energy conservation programs. The fees are set to hit ratepayers in the spring. The idea behind this plan is that ratepayers—by taking the financial hit now—can take advantage of the energy conservation plans to lower their overall energy consumption and therefore their monthly bills. This is what the wonks call demand side management (DSM). Governor O’Malley’s deceptively entitled EmPower Maryland legislation codified this DSM initiative into law.

From Gadi Dechter’s Baltimore Sun article:

O'Malley heralded the regulatory approval. "The programs approved today will not only help build a more sustainable energy future, but will also provide the
opportunity for Maryland ratepayers to save on energy and ultimately lower their
bills," the governor said in a statement.

On its face, this appears to be a great idea, use less energy and lower your monthly bills. However, there is one little catch that Dechter failed to mention. In 2007 the PSC approved decoupling. Here is what I said about decoupling in my warning in the Examiner early last year:

Decoupling allows utilities to charge customers for the costs of purchasing and distributing energy. Utilities still get a return on their investment regardless of the amount of electricity consumed. In other words, no matter how much
you conserve, you will still be subject to rate increases.

Of course, EmPower is nothing more than Martin O’Malley’s dream of Californication for the Free State. However, decoupling and other DSM policies in general have not worked out well for Californians:

Analysis of California’s DSM policies by Thomas Tanton of the Pacific Research Institute found that while California flattened its per capita energy use since 1980, it “is not the same as reducing overall consumption or emissions.” In fact, California’s total energy consumption increased 65 percent since 1980…

California’s relative low per capita energy use is not due to its DSM policies, but to several factors Maryland cannot reproduce, such as its mild climate, which significantly reduces the need to cool or heat homes and businesses. Contrary to the green myth that California’s electricity rates are high but overall electric bills are low, the state’s residential electric bills rose 36 percent since 1990.

Furthermore, Tanton’s analysis shows that California’s DSM polices create “razor-thin supply margins, resulting in price volatility and rolling blackouts during periods of peak demand.”…

According to Energy Information Administration data, since California implemented decoupling in 1982 its electricity costs increased 9.98 cents to 12.51 cents per kilowatt hour, an increase of 25 percent.

Streiff perhaps, said it best about decoupling:

The goal of decoupling is not to provide cheaper or more reliable power to the consumer. It can't do that. The best it can do is create a feel-good as you spend a lot of money on energy efficient appliances to attempt to reduce your electric bill which, in a best case scenario, is going to continue to go up slowly.

We can follow all the cockamamie conservation schemes that come down the pike from Annapolis. However, as the California experience (and other states see Streiff’s post above) shows, they will do nothing to lower energy bills or solve the looming energy crunch. Maryland needs to get into the business of generating cheap and reliable energy. However, to do that Governor O’Malley would have to cross the environmentalists, who turned out so many votes for him in 2006. Don’t hold your breath.