Our continuing energy crisis:
Sport Utes, Global Warming and UB Enter Brave New World of Electric Deregulation

Does the epidemic popularity of sport utility vehicles mean that the energy crisis is over? Or just that the appeal of superfluous consumer goods conquers all? How easily we forget the social and environmental effects of our lifestyles.

In 1990, the United States sent troops to the Middle East to fight for oil. While that war cost billions and produced many casualties (in addition to U.S. and allied casualties, over 100,000 Iraqis died), it is only a dim memory for most of us as we race to the next oil war in our "sport utes," not-so-mini "mini-vans" and all variety of gas-guzzlers. Average U.S. vehicle fuel efficiency is declining while we still import over half the oil we consume.

Meanwhile, just last year the international scientific community (through the Intergovernmental Panel on Climate Change) concluded that global warming has begun and that the impact of global climate change could be severe if unchecked. The release of carbon dioxide from burning fossil fuels is foremost among the causes of climate change. Energy conservation and improvements in energy efficiency are essential to mitigate climate change and its effects on ecosystems, agriculture, public health, storm intensity and sea levels.

Global warming is by definition a global problem requiring a global solution. Unfortunately, the Clinton Administration has stopped calling for near-term reductions in carbon dioxide emissions by industrialized countries at the ongoing Global Climate Change Treaty negotiations. Why? Because U.S. energy use and carbon dioxide emissions are rising! It's time for real leadership and effective energy policies to turn that around.

The Challenge of Deregulation

Energy industries are now being deregulated. Deregulation has been ongoing in the natural gas industry for a number of years. A stealth campaign to deregulate or restructure the electric industry is now moving ahead swiftly in New York without the benefit of public participation or environmental safeguards.

Unlike the deregulation of other industries, deregulating the electric industry could have huge environmental consequences. Electric generation consumes vast amounts of primary fuels and is responsible for the lion's share of our air pollution and greenhouse gas emissions. But the big corporations that are pushing deregulation don't care about environmental consequences. All they want are lower rates.

Restructuring proposals will break up the electric utility monopolies like Niagara Mohawk and NYSEG, and allow other companies to generate power. "Retail competition" will permit new companies to sell power directly to consumers.

In May 1996, the NYS Public Service Commission (PSC) released its plan for restructuring that called for eventual retail competition and required utilities to present their own implementation plans last October. These plans are now being reviewed and implemented. Unfortunately, they appear likely to increase air pollution and seriously set back energy conservation and efficiency efforts‹despite overwhelming public support for environmental protection.

Statewide, environmental groups are challenging the PSC and Gov. George Pataki to see the environmental light. But it's an uphill battle. These groups also are pushing for mechanisms to maintain or accelerate the development of renewable, solar energy resources that are essential for addressing the global warming threat.

As deregulation approaches, we are going in the wrong direction fast. For example, Niagara Mohawk already has written contracts that incorporate rate structures that significantly discount increased energy use. These lock in new customers while providing incentives for energy waste, destroying the economics of energy- conservation measures and projects. UB's own nationally recognized campus energy conservation program may be threatened by this kind of "declining block" rate structure.

UB's Energy Program at Risk?

In the fall of 1994, UB's electric utility, Niagara Mohawk (NiMo), began discussions with the University about a multi-year custom contract for North Campus electricity. With the marketplace becoming more competitive, NiMo didn't want to lose UB as a customer. By spring of 1996, UB had signed a three year contract with NiMo under the SC-11 tariff.

While the new NiMo contract reduces electricity costs, it does have some troubling features. First, specific rate or price information is defined as a "trade secret" and hence is confidential. Should energy price information be secret? Doesn't the public have a right to know? What about our tradition of openness and public accountability?

Secondly, our contract with NiMo contains a "marginal rate" structure that charges different rates for different blocks of power. For example, while the North Campus's baseload requirements are met by electricity costing, say, an average of 7 cents a kilowatt hour, the remaining power used by the campus is purchased at a much lower price. Our previous contracts with NiMo allowed us to save energy at the baseload price, thus encouraging conservation. But this contract does not. Energy- conservation savings accrue at the lower rate, undermining the cost-effectiveness of energy projects‹making them less likely to happen.

If "marginal" or "declining block" rate structures undermine conservation and efficiency, are they environmentally responsible? Should NiMo have proposed this rate structure? Should UB have accepted it? Should the Public Service Commission have allowed it? While prudence demands that UB seek to lower costs, could another approach have yielded energy cost savings while preserving incentives for continued energy saving?

UB is still actively pursuing energy conservation improvements through the CES/Way energy project, though the future of our energy conservation program is an open question. Hopefully the North Campus SC-11 contract is not precedent-setting. I think the secrecy is inappropriate. And I worry about rate structures that make kilowatt hours at the margin too cheap to save.

Conservation's Benefits

There are many reasons to conserve energy. A recent independent study by the Colorado-based Results Center concluded that UB's energy conservation program has saved the University more than $60 million since its inception in the late 1970s.

But energy conservation also mitigates the numerous environmental and social impacts associated with energy production and use. These include air pollution, acid rain and global warming, oil spills and water pollution, loss of wilderness areas, construction of new power plants, foreign energy dependence and the risk of international conflict over energy supplies. Conservation is serious public service. This is no time to forget that.

Walter Simpson is UB's Energy Officer. He is also co-chair of the Western New York Sustainable Energy Association.