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Roller Coaster Redux? Mark Ohrenschall Con.Web, February 27, 2003

Regional Conservation Savings Plummet
More Than 50 Percent from 2001 to 2002

Northwest utility conservation savings dropped more than 50 percent in 2002 from their record high in the energy crisis year of 2001, according to preliminary figures compiled by the Northwest Power Planning Council. The easing of the energy crisis, saturation of some measures and utility financial woes all likely contributed to this conservation decline, according to one Council official. Bonneville Power Administration and Northwest investor-owned and large publicly owned utilities project 2002 programmatic energy savings of slightly less than 68 average megawatts, a number not expected to change significantly with further reporting (and which incorporates Northwest Energy Efficiency Alliance activities). Those same entities in 2001 reported nearly 150 aMW of conservation acquisitions, an annual total unsurpassed in the 25-year history of regional utility energy-saving initiatives (accounting for BPA co-funding adjustments), a Council spreadsheet shows.

The 2001 figures reflect widespread attention to conservation during the 2000 and 2001 energy crisis, report Council officials. These bountiful savings also were relatively inexpensive, gained on total spending of $150 million.

Yet the apparent sharp decline in 2002, even though it still exceeds annual regional conservation totals from the late 1990s, raises a question of whether the Northwest is again hopping aboard the conservation roller coaster.

From a historical perspective, regional utility energy-saving programs have now saved about 1,560 aMW since 1978, the Council reports.

A Tale of Two Years
In late 2000 and well into 2001 skyscraping wholesale power market prices hit the Northwest and led to many utility rate increases, some in the range of 50 percent (BPA raised its wholesale rates an average of 46 percent). That period also featured urgent and extensive public calls for energy conservation, along with many new and/or accelerated utility conservation initiatives (see the Conservation in Demand category in the Con.WEB back issues/subject index section) . Compact fluorescent lamps were especially popular, with more than 8 million sold or distributed free by utilities regionwide in 2001.

"Clearly, during the energy crisis of 2000 and 2001, when wholesale electricity prices rose to an extent we'd never seen before , utilities realized that energy conservation reduces their demand for power and can reduce the amount they have to buy on the market," said Council chairman Larry Cassidy in a news release.

BPA programs accounted for 30.5 aMW in 2001, according to the Council's summary. Portland General Electric led Northwest retail utilities with 29.1 aMW, followed by PacifiCorp (20.4 aMW), Avista Utilities (18.4 aMW), Puget Sound Energy (17.6 aMW) and Seattle City Light (12.3 aMW). Altogether BPA, the region's six major investor-owned utilities and four largest public-power utilities notched 149.8 aMW of savings, a number that includes Alliance-related savings.

In 2002, though, these same utilities project substantial conservation declines. The regional total of 67.6 aMW is a "fairly complete" number that likely won't vary more than 5 percent with further utility reporting, Council economic analyst Ken Corum told Con.WEB.

The easing of the energy crisis contributed to the lower conservation numbers in 2002, he indicated. Some level of saturation with energy-saving technologies, such as CFLs, may also be at work.

In addition, he said, "Rates are up and there's pressure on utilities' budgets because they're trying to get back a measure of financial health again, because a lot of them borrowed rather than raised rates right away, so their ratepayers are paying things back. In a situation like that they look for ways to save money. Wholesale prices are down, so conservation doesn't look like as good a deal."

As for 2003 regional conservation numbers, Corum said he "wouldn't be surprised to see it drop off" once again.

More Information:
Regional Utility Conservation Acquisition Summary 1978-2002

Following The Roller Coaster:
Responses to Dropping Northwest Conservation Numbers

Our recent story on Northwest utility conservation savings dropping more than 50 percent from 2001 to 2002 ( Con.WEB, Feb. 27, 2003 above) generated several responses that merit a response.

Reader Fred Gordon took issue with the story's assertion that some level of saturation of energy-saving measures, specifically including compact fluorescent lamps, likely contributed to the lower 2002 numbers. He suggested reviewing the Northwest Power Planning Council's draft supply curves. "Saturation of CFLs is puny," he e-mailed, "and cannot explain a decline in investment."

Ken Corum of the Northwest Power Planning Council offered a rough estimate that 100 million CFLs could be cost-effectively installed in Northwest homes, based on approximately 5 million households regionwide with an average of about 20 bulbs apiece. In 2001, regionwide compact fluorescent sales and free distribution amounted to about 8.3 million lamps, which he said "has certainly put a hole in [the 100 million total] but has not exhausted it at all." With substantially reduced utility programs in 2002, regional CFL sales and distribution dropped to about 4 million in 2002, Corum said, but that still represents a big increase compared to pre-2001 annual sales. That suggests "at least a partially transformed market. That's a great achievement, but an achievement that won't be reflected in our accounting of utility program savings," he said.

Thanks to Fred for sharp-eyed reading and a well-taken point, and to Ken for the clarification.

Another Ken--Ken Keating of Bonneville Power Administration--offered another e-mail on the story, which was headlined "Roller Coaster Redux?": "Roller coasters are also created when you ramp up very fast to an unsustainable level. It was a danger that we at BPA saw as we went through the 2001-2002 years. We kept saying that we need to be careful not to create our own roller coaster by spending too fast (like spending more than one year of C&RD [conservation and renewables rate discount] in the first year and starting the spending six months early without increasing the C&RD pot). Front-loading C&RD impacts will create an up-and-down sensation as less dollars are available in the last couple of years. As you note, everyone's budget woes and the saturation of some markets like VendingMi$er and installing CFLs at the dams, as well as overpaying for CFLs in the market, create situations that are not sustainable. Nevertheless, BPA believes that it can meet the overall [conservation] targets despite the challenges of reduced resources."

Mary Smith of Puget Sound Energy informed us that her investor-owned utility recorded 8.6 average megawatts of savings in 2002, not 6.8 aMW as initially cited in the regional summary of conservation acquisition numbers. This raises the reported regional total for 2002 to slightly more than 69 aMW--still less than half the nearly 150 aMW in 2001.

We encourage readers to share comments, clarifications, criticisms, questions and other thoughts with us as well.