Dear Chairman and members of the committee,
Thank you for the opportunity to testify before you today. As I sit before
you, Maryland
is on the cusp of an energy crisis. Utility rates are skyrocketing and brown-outs
are predicted as early as 2011. Immediate action is needed. Energy efficiency
is the only way we’ll stop the brown-outs, and it’s the fastest and most
economical way to meet our energy needs.
Maryland used to lead
the country in energy efficiency programs, investing an average of $13 per
person in energy efficiency programs annually. After Maryland
restructured its electric utility industry in 1999, all of the efficiency
programs were halted by Maryland’s
major utilities. In 2007, utilities invested less than $1 per person in
reducing our collective energy use. As a result of abandoning these programs our
yearly increase in demand for electricity swelled from a modest 0.8% annual
growth rate from 1992 through 1998 to a 2.4% annual growth rate from 1998
through 2004. In fact electricity consumption in Maryland increased 15.7%
from 1999 to 2005.
This unchecked demand for electricity has led to supply shortfalls, leaves Maryland vulnerable to
spikes in electric prices, and may leave consumers paying even higher rates to
pay for expensive new transmission lines or power plants. In order to control
costs for consumers, Maryland
has to get demand growth back under control. Since a kilowatt of energy
efficiency costs, on average 3-4 cents/kwh, it is far cheaper than building new
power plants or transmission lines and can be implemented right away, and start
generating energy savings right away. Energy efficiency programs are the best option
by all measures.
In effect, investing in energy efficiency is like building a “virtual” power
plant, and Maryland’s
utilities have already started the process. As with a traditional power plant,
this virtual power plant will be under development for several years and has
many different parts. If the programs have defects, they should be sent
back for correction and the utility should be held accountable.
It has been 9 years since the utilities have run energy efficiency programs.The
effort to embark on renewed energy efficiency programs will have a learning
curve for all players involved. Mistakes will be made, as we saw with Allegheny
Power’s recent lightbulb program.
When Allegheny failed to comply with the program plan
approved by the PSC - which included properly educating consumers about the program
financing and the savings that they will see on their bills as a result,
shipping the lightbulbs via UPS or FedEx rather than the US Postal Service,
getting them out before the Christmas rush, and more - the commission acted
swiftly to hold a hearing. For anyone at the hearing, the writing was on the
wall. After a few hours Allegheny representatives agreed to take responsibility
for the flubbed implementation. In the words of Allegheny
Power attorney Jeffrey P. Trout, “Allegheny
Power will eat, its shareholders will eat, 100 percent of this program. We,
Allegheny, screwed up the implementation of this program.”
While it is unfortunate that Allegheny’s botched implementation of a
residential energy efficient lighting program has led lawmakers to question the
value of all utility-run energy efficiency programs, it was also a critical
learning step in testing the accountability mechanisms in place. And I for one
argue, that in this case the accountability mechanisms worked. The costs of a
poorly-implemented program were borne by shareholders and it sent a strong
message to other utility companies that programs must be implemented in a
pro-consumer way.
Our utility companies need to get used to the fact that these programs are
here to stay. It’s the PSC’s job to make sure programs get implemented properly
and that utility companies, not the ratepayers, bear the cost of a flawed
implementation. And ultimately, it is critical for decision-makers to recognize
that energy efficiency programs in Maryland will
reduce bills for households across Maryland,
reduce strain on the grid, and reduce the need for costly new transmission
lines and power plants.
