by Kyra Epstein
If done right, electric-utility restructuring could mean more efficiency and
renewables, and therefore less air pollution and global warming.
So far however, state legislators have done the bidding of utilities. The
environment and our children's health will pay the price.
When I hear about electricity-utility restructuring in my area, I feel:
a. Giddy excitement - we can finally start to clean up air pollution!
b. Dread and foreboding - air pollution is going to get worse!
c. Incredible confusion about the entire subject.
Most of us would choose answer (c), but even experts across the country don't seem to agree on either (a) or (b).
The electric-utility industry is being restructured - legislation has either already been passed in your state or is being considered. This may mean that you can finally choose which company sells you your electricity and how it is generated.
But breaking up a historic monopoly, as tormented airline and long-distance phone customers would agree, does not always mean lower prices, more reliable service or fewer headaches for customers.
And because this industry is one of the largest air polluters in the nation - 65 percent of the acid-rain-causing sulfur dioxide, 36 percent of the global-warming gas carbon dioxide and 29 percent of the smog precursors nitrogen oxides - the outcome of the restructuring "experiment" is critical, not just inconvenient.
For 60 years, electricity has been provided by a single company in each service area with a regulatory body overseeing rates and policies. Now, through restructuring, regulations are being eased and the market is being opened to anyone who wants to compete for consumer dollars.
"If you care about clean air and water and curbing global warming, if you are concerned about protecting our resources and if you care about off-shore drilling issues, you have a stake in electric-utility restructuring," said Dan Becker, the Club's Global Warming and Energy Program director in Washington, D.C. "Depending on how restructuring is done, we can either accelerate the devastation of the environment or we can make a down payment on stopping global warming by moving toward cleaner energy."
The track record so far is poor. In most states where restructuring has opened up the electricity market, energy conservation and renewable energy are taking a backseat to the demands of utilities in restructuring legislation.
Since Congress probably won't agree on federal legislation for at least two years, states that have not restructured are the battleground for legislation right now. But Rich Ferguson, Sierra Club California's Energy Committee chair, warns states to look before they leap into restructuring: "Before promoting new legislation, each state should decide if what's proposed is really going to foster competition or just unregulate monopolies."
Case in point: Rhode Island, the first state to allow competition in the electric-utility market, is not experiencing the results that advocates of restructuring had hoped for. Even Sierra Club activists, who opposed the restructuring bill, had hoped that competition would bring some positive outcomes like an expansion of renewable energy markets or the demise of nuclear-power plants.
"We knew we didn't get the requirement we wanted for renewable energy in the state's power mix, but we didn't realize the law wouldn't even lead to real competition," said Karina Lutz, Rhode Island Chapter director. "The competition for residential customers is mostly between the old monopoly and its spinoff 'green' subsidiary - which, of course, charges more."
Overall, energy use is at an all time high, which has motivated utilities to re-open plants that had been retired for safety reasons, or to continue operating plants that should have been retired. "We were concerned that this kind of legislation would increase energy use rather than conservation, and it appears that we were right," said Lutz. "Expensive nuclear-power plants we thought would close down were brought back to life in spite of safety concerns."
Lesson learned in Rhode Island: Make sure legislators feel the pressure to address environmental concerns. Good legislation, according to Nancy Hirsh, the Club's Energy Committee chair, would include a requirement for renewable energy supplied in each state. Good legislation would also include "public good" charges to ensure that low-income families get the power they need and that renewable energy and conservation programs are funded and managed by an independent agency.
In California, environmentalists won a few provisions in the state's legislation, including funding for energy efficiency, renewable-energy research and low-income programs. "California has a 'public goods charge' administered by an independent agency," said Ferguson. "You'll see the charge as a line item on your bill and the money is administered by independent, non-utility public agencies."
But California environmentalists and consumer advocates lost on the issue of stranded costs. These are costs incurred by utilities that spent money on nuclear and other expensive power plants, but which new regulations prevent from being recouped over time through normal customer charges. The utilities fought for - and won - a legislative provision requiring state residents to pay a "competitive transition charge," an extra fee for each kilowatt hour to go toward payback for stranded costs.
The issue is back on California's fall ballot as Proposition 9, the Utility Rate Reduction and Reform Act. The proposition, written by consumer advocates, would repeal the sections of legislation that guarantee utilities high, above-market prices for nuclear power and full capital recovery for their nuclear plants. The Sierra Club has not yet taken an official stand on the proposition.
Meanwhile, the Club's Energy Committee has prepared and distributed a guidance document on restructuring and is currently working on an official guidance document on green-electricity products.
There are two ways that you can make a difference. If your state has not yet restructured, you can demand that your legislators promote clean and renewable energy. "Activists need to write their representatives and work with their local chapters to make sure legislation will protect the environment and reduce air pollution," said Hirsh. Contact your chapter to find out how to get involved.
If legislation has already been passed in your state, you can use your dollars to vote for green energy. It's up to you to ask for it; in some states consumers automatically stay with traditional providers unless they specifically ask to switch to another energy supplier (see "Getting Green").
For more information on your state's legislation, call your chapter office or check on the Department of Energy Web site at www.eia.doe.gov/cneaf/electricity/chg_str/tab5rev.html.
The other three sections of this feature:
Definitions. What are stranded costs, anyway?
Swimming in the power pool.
Guide to getting green.
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