Consumers could be paying up to $1.3 billion more than they should because the operator of the regional power grid fails to account for savings from energy efficiency in its long-term forecasts for electricity demand, according to a new study.
The study, commissioned by the Sustainable FERC (Federal Energy Regulatory Commission) project, suggested the failure of the PJM Interconnection to include such projections increases costs to ratepayers from new investments in transmission lines that may not be needed or from increased power prices to provide enough power to keep the lights on.
The study did not break down the costs from state to state in the region, but New Jersey consumers are paying more because of both issues since a number of large transmission projects have been built or are underway, and congestion on the power grid here spikes energy prices well above neighboring states.
PJM is the nation’s largest operator of a power grid, stretching from the Eastern Seaboard to Illinois. The study projected costs throughout the region.
“We find that a significant amount of energy efficiency may be unaccounted for in PJM’s energy forecasts,’’ according to the report by the Brattle Group, a consulting firm often used by state regulators and others to analyze energy issues.
The findings are likely to fuel criticism from clean-energy advocates who have argued aggressive efforts to curb energy use in the region make the need for new transmission lines or new power plants unnecessary in New Jersey, a stance that has not altered either utility investments nor swayed state regulators.
“What this report clearly show, it adds additional costs to ratepayers where we don’t need to make investments,’’ said Jeff Tittel, director of the New Jersey Sierra Club. “We end up keeping power plants that pollute that we don’t need.’’
Allison Clements, director of the Sustainable FERC project, said the report notes its projection of $1.3 billion in added costs to consumers over three years is probably conservative.
“It only captures a piece of (energy savings) what’s out there,’’ said Clements, an attorney with the Natural Resources Defense Council. It only includes utility self-reported energy-efficiency requirements, not reductions from federal policies mandating more efficient appliances that use less power.
Other regional grid operators including the so-called ISO New England, an independent grid operator serving that region, and the New York ISO already have made efforts to incorporate energy-efficiency savings into their long-term load forecasts. The New England ISO avoided $400 million in new transmission investments in a regional grid much smaller than PJM, Clements said.
PJM did not dispute the results of the report. “PJM has recognized the need to better incorporate energy efficiency into our load forecasts and through this year has explored and developed potential enhancements to our load-forecasting process,’’ according to a statement by the organization.
If demand falls, it could reduce the need for infrastructure improvements, according to an analyst.
“All things being equal, if there is less demand it means lower power prices and lower infrastructure costs,’’ said Paul Patterson, an analyst with Glenrock Associates in New York City.
The state had hoped to reduce energy use by 20 percent by 2020 under an Energy Master Plan adopted by the Corzine administration. That goal has been slightly scaled back by the Christie administration in a revised plan.
Some utilities, such as Public Service Electric & Gas, have embraced energy efficiency, arguing they are best suited to provide the savings to customers. In August, the utility submitted a proposal to spend $110 million to invest in energy-efficiency projects at hospitals, multifamily units, nonprofit centers, and government agencies. The proposal has not yet been considered by the state Board of Public Utilities.
That proposal, however, is far less than the $8.1 billion the utility projects to spend on upgrading or building new transmission lines, most of which have been approved by PJM.