Friday, June 13, 2008

Berkshire Eagle Editorial

This is my op-ed piece from June 13, 2008.

The Berkshire Eagle has editorialized a number of times in the past that the 1997 electricity deregulation legislation has been a failure. Nothing could be further from the truth. The legislation intended to lower the cost of energy, invest in renewable and clean energy resources, bolster the reliability of the state's electricity infrastructure, and strengthen consumer protection and education.

The Division of Energy Resources (DOER) estimates that Massachusetts consumers have saved $5 billion due to deregulation when compared to where prices would currently be had the state not implemented electricity restructuring. This amount couples the initial mandated 15% rate reduction for all customers plus the benefit of 9000 megawatts (MW) of new energy supply in the New England region that was encouraged by the move to retail market competition. This new capacity includes 450 projects in renewable energy and energy efficiency over the past ten years, funded by the Renewable Energy Trust Fund (RETF), an entity created in the 1997 legislation. These projects represent over 236.4 MW of renewable energy projects in Massachusetts, enough electricity to power 236,000 homes throughout the state each year. In addition to this direct investment in renewable energy, the restructuring act paved the way for energy efficiency and renewable energy to be introduced into active energy markets. This resulted in further investment in these energy sources, a decrease in the state’s reliability on fossil fuels, and reinforced the reliability of the entire grid.

In just the past decade, digital televisions, bigger homes with central air conditioning, faster computers, and all encompassing cell phones have changed the amount of electricity we consume. Demand for electricity in the New England region is rising at a 500MW per year rate. The restructuring act established strong consumer education and outreach mechanisms to help deal with this growth in demand. DOER and RETF have extensive public education platforms that they use to better educate consumers on their options for electricity service as well as state programs to increase energy efficiency and develop their own small scale renewable projects. In addition, the restructuring act requires electricity providers to ensure the transparency of the terms of service for each customer - allowing individual families and businesses to consider their levels of electricity consumption based on efficient and transparent information.

While electricity prices remain relatively high throughout the state, this is due much more to soaring prices of natural gas and oil - factors beyond individual state control - and the Commonwealth's lack of diversity in energy generation sources, than it is to the deregulation of the market. That being said, the state can and will do more. The restructuring act has saved ratepayers billions of dollars that would have otherwise been lost under a vertically integrated system. However, despite its success in doing so, the 1997 restructuring act was never meant to be a silver bullet for lowering energy costs – it was meant as a first step. Increasing reliability, educating ratepayers, lowering costs, and protecting our environment are all ongoing goals for energy policy in Massachusetts. The restructuring act was the successful beginning of a long process, one that has brought us to numerous clean energy legislative initiatives this session. We are building on the momentum of the 1997 legislation by instituting the Speaker's green energy bill, which will further bolster the clean energy industry by significantly increasing the amount of renewable energy and energy efficiency that electricity companies are required to provide to their customers. It also empowers individuals and businesses by strengthening consumer education and choice, through initiatives like the SMART meter pilot program and net metering. Furthermore, we are currently working on a green jobs bill that will parlay our continued emphasis on clean and renewable energy into good paying jobs for Massachusetts residents throughout the state. Had we not done the 1997 electricity restructuring act, there is no way that we would be on the cusp of the groundbreaking energy legislation that will be passed this session, reinforcing the Commonwealth's status as a world leader in creative and innovative public policy.

11 comments:

Southview said...

Blah, blah, blah....Pretty words that are meaningless and empty! The true facts are that when you deregulate a utility you take away any control the consumer has and prices are going to go up, and they have! All that talk about education and reinvestment and moving forward is just political Bull Shit talk. A lot of hot air to make yourself feel good because you made the wrong decision and everyone knows it, but in true politico fashion you ain't letting the facts stand in your way of convincing yourself you did good, good for who? Good for Dan Bosley and the utility corporations, to be certain, but certainly not good for the people of this state!

dan bosley said...

Pretty harsh Jack, but absolutely devoid of fact. The fact is what we did worked as expected and lowered costs we can control. We can do more and that's the point. But we can do more because of this act.
If we had not done this legislation, we would have been buying into a market that was short on supply and the feds would have let companies charge what they wanted under RMR federal requirements. Those are the facts.

Greg said...

More info on the Speaker's green energy bill, please. What does it have in store specifically for consumers? Tax breaks or grants for home solar? Smart residential metering? Tax breaks for installing energy efficient appliances?

I have a great mistrust of expecting any benefits to trickle down to the residential customer through incentives given to producers and distributors.

Waiting 11 years to take the next legislative step seems like an awfully long time.

I guess what shocked me the most when I moved here was not the rate per KWHour, but all the ticky tacky delivery fees and charges. Massachusetts consumers pay far more than most for electricity.

Southview said...

What?... (The fact is what we did worked as expected and lowered costs we can control.) Dan...Have you looked at your Electric Bill lately or at all? Greg is dead on pointing out the ridiculous surcharges you people allow to be tacked on. Hell, they don't need a rate increase, just tack on another surcharge, thank you very much! I'm sure it is easier to get a sur charge added than have to prove a rate increase is needed. Dan, just another back door loophole for corporations to slither through and it hasn't gone un-noticed! Usin barefooted banjo pluckin residents of North Adams are tired of having to squeal like a pig for corporations who just don't give a shit!

Southview said...

One more thing Dan.....Why isn't monies being spent on refurbishing our dams and their generating capabilities, instead of monies being spent to tear them down? Rejuvenating our water power capabilities is REAL viable progress that is truly in the consumers interest, not just pretty words forecasting a bright future down the road sometime in the future!

dan bosley said...

Greg, There are two surcharges that were placed on the bill in 1997. One is up to quarter of one per cent per kilowatt/hour. That was to create demand side management programs such as energy efficiency programs. Everyone can take advantage of these programs in order to lower your costs. The other is half of that cost on my bill and creates a program to promote renewable energy. I am looking at my electric bill for $109.69. The charges this month for both are $1.64 for DSM, and the other is $.33 for energy efficiency. These charges have allowed us to put tens of millions of dollars into both programs.
The reason that the bills look like there are more charges in Massachusetts is that part of our consumer education program was to break down the bills so that you could see what you were paying for each part. You pay transmission and distribution charges in each state, for example, but here, we break down the costs so that consumers know how much each costs. We pointed this out time and again when we passed the bill, but people haven't paid much attention.
Are there other costs? Yes, the federal government has mandated a cost increase to place money aside in anticipation that we will need to build more generation. We don't think it is necessary, but can't do anything about it.
We do have the highest electric costs in the nation and there are a lot of reasons for that. We are on the end of fuel pipelines. We are generally higher in labor costs in New England. Our weather plays a factor here as it does in the upper Plain state. We don't generate much power from coal. Our infrastructure is one of the oldest in the US. However, since we passed electric restructuring in 1997, the biggest factor has been fuel costs. In 1997, oil was less than $30/barrel and now it is $135/barrel. More to our situation, President Carter deregulated natural gas in the mid 1970's and prices actually fell and were stable for over 20 years. In the early 2000’s, the price skyrocketed. Since the New England area generates a lot of electricity form gas (and we use a disproportionate share to heat our homes in the winter also driving up prices) we have experienced a big increase due to fuel pricing. I don’t think even Jack can blame me for worldwide fossil fuel prices! BTW, Jack, I am not sure why you feel it is an advantage for me to keep prices high, I don’t own an electric company and have to pay these prices like everyone else.
One other point: why did we restructure electricity in 1997? The answer is that we hadn’t built a power plant in years and the system couldn’t sustain itself. We were in danger of running short on power and that meant purchasing power from elsewhere and shipping it in and that would have been more expansive. We didn’t advantage the electric companies, we broke apart the vertically integrated monolithic power companies and we allowed anyone to build generating facilities. This brought in new players and we built 9,000 megawatts of power and introduced much more cleaner power to the area. That is what the bill was designed to do.

dan bosley said...

Greg, Sorry this is so long, but this is a complicated topic. There are currently two bills going through the Legislature. (And yes, 11 years is a long time between bills, but first we wanted to measure the impact of the 1997 legislation and I have been filing bills since 2004 to advance this area.) Let me mention a few areas that, I believe, will impact price. Let me also say that the green energy bill is still in conference and I just got the green jobs bill, so the factors in the bill could change, but I will give you my best estimate of what I think will be in the bill.
First, there is a pilot program on smart meters. I would rather we went to smart meters, but some believe that we need to measure how this market will develop. In other words, there is universal agreement that if there is a price differential by time of use for electricity, we don’t know how a retail market would grow up around managing a system for the residential buyer. Would retail companies service the residential user? We need to answer that.
Second, net metering will be extended from monthly to yearly. For example, I received a call from a local small business that wanted to put solar panels on the top of their business. If you can only spin back on a monthly basis into the grid and get credited for that, the payback on such a system is 36 years! If we allow a yearly net metering true-up, the amortization is down to 16 years and that is cost effective.
Third, while I tried to put hydro into the renewable portfolio in 1997, the environmentalists were almost all opposed because they felt that it would impact our river ways. I lost that battle, but the opposite has happened. Not allowing hydro to be classified as a renewable energy has diminished the use of our existing plants. This will be changed in the new bill.
The list goes on and I will post more as the conference committee finished their work.
As for the Speaker’s Green Jobs bill, I believe this gives us an opportunity to lead the nation in the development of alternative energy resources. I think the oil-based economy is over and we need to create new resources. For example, the Worcester Polytechnic Institute is working on better, more efficient and cost effective fuel cells. We need to advance this work. We have the largest cluster of fuel cell companies in the nation in Massachusetts. I was at a company the other day, touring their facility where they are developing miniature fuel cells. We are on the brink of using hydrogen from coal in a safe and ecological manner. We need to advance that work while at the same time working to make our homes and businesses much more efficient. I think we will take a big step with our two bills.

CJ said...

I think you're on the right path Dan, keep up the good work. I would love to see hydrogen produced (using electrolysis) from solar, wind, and hydro sites and stored for fuel cells.

I've written a couple articles on iBerkshires suggesting public sector funds should be used to help local businesses (like the paper mills) install and use fuel cells - any thoughts on this?

dan bosley said...

Thanks, I think government ought to lead by example and install these new technologies on their own buildings. It gives credence to the technology and lowers costs. Under the green energy bill that should be coming soon, cities and towns should be able to apply for funding to help install alternative energy as well as energy efficiencies. We also included an energy piece to the dairy farm bill to help do such things as methane digesters. I understand that some Vermont farmers have had pretty good luck with these.

CJ said...

Yes they are. There is also a farm close by in Ct that I have been following. Their web site is www.cowpots.com. The generate enough power to power their farm, produce eco-friendly fertilizer, and produce bio-degradable planting pots.

Southview said...

cj...Great news. How big a pile of cow shit, for my front yard, do I have to order to power my house? I'm all for renewable resources. This ons sounds like a real winner!