PUBLIC SERVICE COMMISSION FAILS TO SUPPORT ENERGY EFFICIENCY

by Geoff Young

The Public Service Commission (PSC) is a little-known state agency that regulates utility companies in Kentucky, including electricity and natural gas. The utilities are guaranteed a certain rate of profit, in exchange for operating our energy system in the public interest.
The law that governs the PSC includes the following mandates:
(1)Every utility may demand, collect, and receive fair, just, and reasonable rates for the services rendered or to be rendered by it to any person.
(2)Every utility shall furnish adequate, efficient and reasonable service, and may establish reasonable rules governing the conduct of it’s business and the conditions under which it shall be required to render service.
Over the past 70 years of it’s existence, the PSC has performed well in ensuring adequate energy. There are enough power plants to supply all Kentucky’s electricity needs, and when a utility applies to build a new one the PSC usually approves it. I don’t know what the phrase “reasonable service” means, so I’ll give the PSC a pass on that one. But in terms of ensuring efficient energy service, the PSC has failed badly.
People don’t need electricity or natural gas in themselves; we want the services that these energy sources provide. We need heating, cooling, light, and the ability to run motors and appliances. The PSC should be making sure that customers receive these energy services in the lowest-cost possible way.
Very often, the most cost-effective way to provide better energy services is to improve efficiency in the customer’s business or home.
Sealing leaks in air ducts, windows and buildings, increasing the amount of insulation in ceilings and walls, using compact fluorescent light bulbs, using more efficient electric motors and drives, and a thousand other improvements is much cheaper than building new power plants and gas pipelines. When new buildings are designed and constructed, efficiency can cut long term energy use by half or more. Cogeneration, or generating electricity and useful heat at the same time, is at least twice as efficient as using fuel to provide the electricity and heat separately. Berea College in Berea, Ky recently proposed a new cogeneration plant, but the PSC allowed the utility company to block it by imposing excessive fees and requirements.
Instead of requiring utilities to help us improve efficiency, the PSC has taken a passive role. It waits for a utility company to propose an efficiency program, at which point it usually approves it. In view of the vast amount of energy waste in our economy, that is too little and too late. Kentucky’s existing efficiency programs are pitifully small.
Energy efficiency is our biggest energy resource, but the PSC hasn’t realized the potential.
For the past two years, Sierra Club members in the Bluegrass (Lexington, Ky) Group have been calling for a “truce” with the utility industry: If Utilities are willing to greatly increase the size and scope of their energy efficiency programs, environmentalists will ask the PSC to reward them with somewhat higher profits. If they fail to harvest the efficiency resources that are available, however, we will call for their profits to be cut. A working group consisting of representatives from the Sierra Club, ASPI, KFTC and electric and gas utility companies has been set up to explore this issue.
A related problem is that the PSC ignores environmental impacts when it assesses which generating technologies a utility should choose. If a new coal-fired power plant has a cheaper purchase price than a hydroelectric turbine or solar electric panels, the PSC has stated that the cleaner technologies shall receive no economic bonus. That is the same as saying that the environmental costs of coal mining and burning are zero.
What can the environmental movement do about this agency that appears to have been captured by the industry it was set up to regulate? The most effective strategy is public pressure. We should write letters to our local newspapers saying that the PSC and the Governor are failing to implement Kentucky’s largest, cheapest and cleanest energy source, energy efficiency. The result is that our bills are higher than they need to be and the amount of environmental damage is larger. If the three commissioners who are now on the APSC fail to change their policies, we should demand that the Governor replace them with people who understand the importance of efficiency and clean energy sources.