WHEN THE New Hampshire Public Utilities Commission (PUC) rejected a plan to double the cost of a program known as NHSaves, it reignited a debate about the value of ratepayer-funded energy efficiency. The questions at the heart of the debate concern the cost versus the benefits of these programs, and whether people should have to pay for services that they may never use.
The concept behind ratepayer-funded energy efficiency says that because the benefits of such improvements accrue over time, the up-front costs may deter people from making those improvements. By offering grants that fund 25% to 50% of the up-front costs, customers may be more inclined to make the necessary investments.
The money to fund those grants come from surcharges on every ratepayer’s electricity or natural gas bill. The $73 million raised by these surcharges in 2020 was slated to increase dramatically in 2021-2023 under the since-rejected plan. It would have required electricity ratepayers to pay $8 to $16 per month instead of the $2-$8 per month they pay today. Business users, especially large manufacturers like SIG Sauer and BAE, would have paid hundreds of thousands of dollars more.
Cost, therefore, drives much of the debate over this issue. The cost question significantly impacts those living on low or fixed incomes. When their energy bill goes up, they must make sacrifices elsewhere in their budget. Some low-income homeowners may have to choose between heat and food. That choice has been documented for pensioners in England and Scotland for years. Called energy poverty, this problem affects many New Hampshire citizens as well.
On the business side, additional costs mean fewer dollars to invest in new products and the new jobs they generate.
After cost, the question of value in this debate revolves around the idea that using energy more efficiently will ultimately reduce the amount of energy we need to generate or acquire.
Paradoxically, saving energy often causes customers to use more, not less. Experts call this well understood phenomena a “rebound” effect. It was first noted for coal users back in the 1850s. Called Jevon’s paradox after the English economist who first documented it, the rebound effect states “that efficiency enables growth. New technologies that can produce more goods from a given amount of resources allow the economy as a whole to produce more. More resources get used overall. The paradox is that we tend to assume that the more efficiently we use a resource the less of it we will use.” Jevon called this increase in resource use a “backfire.”
Many subsequent studies have confirmed the rebound effect. The author of a recent University of Utah study said, “Lots of energy analysts tend to look at emissions as a technical problem that requires a technical solution; build more efficient vehicles, build homes to use less energy. What they don’t consider is human behavior. If you’ve got a hybrid car, the money you save on gas might allow you to drive more. My goal here is to let policymakers know that this rebound effect is a problem.”
With the inexorable forward march of new technology, how much energy efficiency can we ascribe to efficiency retrofits versus the savings that come with those new technologies? When the world moved from cathode ray tube to light emitting diode (LED) television screen technologies, power usage dropped by 50%.
If we cannot know whether people use more energy because of efficiency gains and cannot know how technological evolution affects such gains, how can we know if our ratepayer surcharge dollars are well spent?
Currently, government policy mandates these ratepayer contributions. But many customers will never be in a financial position to take advantage of these programs. Others may have taken the personal responsibility to make energy improvements on their own dime. Why should either of these types of customers be compelled to pay for windfalls to other ratepayers? And why should the government be deciding how people should spend their money?
Ultimately, the surcharges that fund energy efficiency are taxes, and only your elected state legislators have the authority to set them. Current House bill HB549 recognizes that reality and charts a path forward to keep these surcharges affordable in New Hampshire.
The PUC rejection of this major increase in the cost of energy efficiency programs recognizes that they have a significant impact on the ratepayers footing the bill. This repudiation will mean a new, less ambitious, and more affordable plan will be developed over the next few months.