ELECTRICITY:

Stimulus does not require 'decoupling' -- Markey

A comment from NARUC regarding the decoupling provision was added at 12:38 p.m. on Wednesday, Feb. 24.

Despite appearances to the contrary, the economic stimulus bill does not require states to "decouple" utility revenues from energy consumption, a key House Democrat said today.

"The language does not mandate decoupling," said Rep. Ed Markey (D-Mass.), chairman of the Energy and Environment Subcommittee on the Energy and Commerce Committee. "There are many ways to satisfy this requirement. It does not require states to implement decoupling," he said.

Decoupling is a rate-making policy that separates utilities' revenues from the amount of energy consumed in order to give utilities the incentive to pursue and support energy efficiency programs for their customers. Broadly speaking, if a state chooses decoupling policies, customers pay a flat rate on electricity as necessary for utilities to recover operating costs regardless of use.

The stimulus bill President Obama signed earlier this month provides about $3 billion in state energy grants. The Energy Department can provide the extra funds to the states if the governor has "obtained necessary assurances" that the state regulators will try to implement rate-making policies under which "utility financial incentives are aligned with helping their customers use energy more efficiently and that provide timely cost recovery and a timely earning opportunity for utilities associated with cost-effective measurable and verifiable efficiency savings, in a way that sustains or enhances utility customers' incentives to use energy more efficiently."

The original language in the House bill included the word "decoupling," but the National Association of Regulatory Utility Commissioners, as well as other critics who opposed the provision, were able to cut specific references to decoupling and make the provision more general, allowing state commissioners more flexibility to pursue efficiency policies. Markey said that with the changes implemented in the final bill, NARUC now supported the language in the bill.

NARUC spokesman Rob Thormeyer said the association did not support the final language but is working with the administration and Congress to implement the changes.

But Republicans lashed out at the stimulus language at an Energy and Environment Subcommittee hearing today. Ranking member Fred Upton (R-Mich.) said the provision counteracted the efficiency provisions also contained in the stimulus. "With decoupling in states, you don't actually see the savings," he said. "It just takes away the incentive for folks, businesses or homeowners that are going to actually install the devices that save energy."

The stimulus language "strongly implies for governors to move to a decoupling regime," added Rep. John Shimkus (R-Ill.). "There is no confusion that decoupling is a major issue," he said.

Bipartisan support for efficiency

Today's hearing was intended to focus on energy efficiency standards for buildings and appliances and other incentives as a part of a larger solution to reduce greenhouse gas emissions.

Aside from the decoupling provision, Republicans said energy efficiency is an issue everyone supports -- to a point. "Energy efficiency is the type of issue we can work together on," as opposed to the larger issue of regulating carbon emissions, said Rep. Michael Burgess (R-Texas).

Markey has introduced a bill, H.R. 889, that would create an energy efficiency resource standard, which sets required levels of nationwide electricity and natural gas savings achieved through utility efficiency programs, building codes, more efficient appliances and other measures.

The bill would steadily increase electricity and natural gas savings from 1 percent of electricity demand and 0.75 percent of natural gas demand in 2012 to 15 percent of electricity and 10 percent of natural gas by 2020. It would also allow companies to sell efficiency savings through contracts in order to meet the efficiency standard.

A representative of large industrial consumers said requiring efficiency standards could seriously harm them. "Most large industrial facilities are beyond the point where substantial savings can be achieved with plug-and-play measures such as high-efficiency light bulbs, insulation or motors," said John Anderson, president of the Electricity Consumers Resource Council. "The next levels are achieved when entire industrial processes are retooled, rebuilt ... these are big ticket items requiring very large outlays of capital. Further complicating this problem is the current credit crunch."

But other witnesses said the legislation was a right step toward promoting the most cost-effective measures needed to enhance energy security and fight climate change.

Rich Wells, vice president of energy at the Dow Chemical Corp., said efficiency will also help prevent a "dash for gas" as energy producers switch from coal to natural gas if a cap on carbon emissions is passed, which would cause gas prices to skyrocket. Dow depends on natural gas not only for energy but also as a feedstock for its products.

Markey said suggestions made at the hearing are "going to lead to a lot of productive conversations with members" over the next couple of months but would not commit to saying whether the efficiency standard would be a part of climate legislation that Energy and Commerce Chairman Henry Waxman (D-Calif.) plans to move by Memorial Day, or whether it would be considered separately, perhaps with a renewable energy standard -- a required percentage of renewable energy produced by the electric sector.

"We support an RES; we support a climate bill, and we will try and figure out the best way to get them both done this year," Markey said.

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