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Ralph Cavanagh’s Blog

Washington State Utility Rate Order Sets National Energy Efficiency Precedent

Ralph Cavanagh

Posted June 26, 2013 in Solving Global Warming

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A major energy-savings precedent was established for the entire country late yesterday when the state of Washington’s utility commission approved the nation’s most comprehensive utility rate plan to support energy efficiency measures that can lead to significant reductions in consumer bills and pollution.

The decision by the Washington Utilities and Transportation Commission (WUTC) involves the state’s largest utility, Puget Sound Energy (PSE), which serves more than 1 million electric customers and nearly 750,000 natural gas customers.Thumbnail image for lpl_enhancedlighting_257x376.jpg

Not only is it a victory for everyone who cares about reliable, affordable, and clean energy service in the PSE territory, it establishes an important rate model for the rest of the state, region, and nation on how to end longstanding conflicts of interest between utility shareholders and customers over energy efficiency -- our cheapest and cleanest way to do more with the same amount of energy.

Helping promote efficiency

A year ago, the utility commission issued an order that included encouragement for the Northwest Energy Coalition, NRDC, Earthjustice, and the utility to work together on a mutually acceptable way to remove long-standing financial barriers to utility involvement in promoting cost-effective energy efficiency. In other words, under traditional regulation, utility revenues automatically go down when customers do the right thing and save energy, so there’s less incentive for the utility to support energy-savings steps like weatherization and more efficient appliances.

The issue was first recognized in Washington and elsewhere more than two decades ago, but agreement on solutions has been elusive. Without them, the state’s official statutory goal of achieving “all cost-effective energy efficiency” will be much more difficult to achieve. 

Under the new system, small upward or downward annual rate adjustments (never exceeding 3 percent) will be used to ensure that PSE neither gains nor loses from changes in its retail sales of electricity and natural gas. Similar “decoupling” mechanisms have been tested in half the U.S. states, including Washington, but the PSE proposal is unusual in its comprehensiveness (covering virtually all electricity and natural gas sales) and its provisions ensuring accelerated progress in both energy efficiency achievement and low-income energy services.

Specifically, PSE will expand conservation programs for customers, including rebates for high-efficiency appliances, insulation, and lighting. PSE will also increase low-income bill assistance funding by $1.5 million per year.

"A 30-year conversation"

The decoupling proposal is one that PSE and the environmental groups first circulated last October. Two public workshops and numerous comments followed, and a revised proposal emerged in March with support also from the Commission staff and representatives of low-income and industrial interests. The Commission referred in its final order to “a 30-year conversation” on this subject, which is a sobering reminder of just how long I’ve been commuting to Olympia, and added a gratifying reference to NRDC’s “nationally recognized” expertise on decoupling, which owes much to many extraordinary and indefatigable colleagues. The Commission’s order closes with a review of the extensive efforts by NRDC, NWEC, Earthjustice and PSE to produce a joint proposal advancing the public interest, and concludes concisely, “In our view, these efforts succeeded.”

Yesterday’s Commission ruling should ensure that PSE remains a regional and national leader in delivering cost-effective energy savings to every class of customers. And that’s the kind of leadership the rest of the country ought to be embracing, too.

To read the news release that includes comments from me and other coalition members, click here.

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