From the Wonk Room.
The
Obama economic recovery plan makes a major investment in the
modernization of our electricity
infrastructure,
in order to transform an often-overwhelmed patchwork of balkanized
regional networks into a national “smart grid” based on Internet-like
technology. Repower America, Al Gore’s campaign to have America use 100%
renewable electricity in ten years, argues that a national smart grid
“will save money, increase reliability and protect consumers from
outages, and make possible a clean electricity
system.”
Building a smart grid requires both new technology and regulatory
policy. In addition to a $20 billion
investment
in smart grid deployment, the recovery plan offers $2 billion in grants
to promote a subtle but key shift in electric utility regulatory policy:
Policies that ensure that a utility’s recovery of prudent fixed
costs of service is timely and independent of its retail sales,
without in the process shifting prudent costs from variable to fixed
charges.
Traditional electricity utility pricing discourages utilities from
promoting conservation and
efficiency—instead,
the more wasteful their consumers are, the better. So demand goes up,
utilities build new power plants, and still costs rise. Utility
shareholders’ interests are pitted against the rest of society.
Therefore, several states have implemented policies that decouple
profitability (“recovery of prudent
fixed costs of service”) from demand (“retail sales”), by using public
funds and rate adjustments to guarantee an expected annual profit for
the utility company and to subsidize investment in energy efficiency.
Obama’s economic recovery package contains $2 billion in state-level
block grants that will be
released “only if the governor of the recipient State notifies the
Secretary of Energy that the governor will seek, to the extent of his or
her authority, to ensure” that decoupling and energy efficiency
incentive programs will occur.
Because our electrical infrastructure is a vital public resource, the
profits of utility executives and shareholders must not be put above the
public good. As Public Citizen warns, decoupling for unregulated
utilities can lead to “windfall profits for the
industry.”
The California electricity debacle exposed the great failure of the
experiment of utility deregulation, and the recovery package does not go
far enough to bring utilities back under control.
President Obama, Secretary of Energy Steven
Chu,
and legislators like Sen. Jeff
Bingaman
(D-NM) have stated that our entire nation needs to move to a low-carbon
economy
as rapidly as possible, highlighting transformation of the electricity
grid as a key component.
Full decoupling language in the House-passed economic recovery package
(HR
1):