There are multiple winners if the state moves aggressively to promote energy efficiency, according to Ralph Izzo, chairman, president and chief executive officer of the Public Service Enterprise Group.
In a keynote address at a New Jersey Roundtable on energy efficiency in Trenton on Friday, Izzo argued that customers and the environment will not be the sole beneficiaries. Energy efficiency will also create jobs and benefit shareholders of companies that earn a fair profit.
There was little disagreement at the event that the state should more forcefully promote energy efficiency — a premise based on the widely held belief that the cheapest and cleanest source of energy is what you don’t use. How to get to that goal, however, sparked some disagreement.
Izzo argued that Public Service Electric & Gas, the company’s utility subsidiary, is willing to reduce the revenue it collects from customers in return for them reducing the gas and electricity they use, but only the utility collects the fixed costs of maintaining the reliability of the state’s largest power grid.
It is a theme Izzo has mentioned often in recent public appearances, saying the state’s energy infrastructure needs major upgrading in the wake of sweeping changes in how electricity is delivered to customers. For example, solar power and distributed generation facilities generate power locally instead of sending it over the traditional power grid.
“We cannot forego our fixed-cost issue,’’ Izzo told the audience at the event in the Wyndham Hotel in Trenton. For every dollar the consumer saves in energy costs, the utility loses 20 cents, he said. Of that, 4 cents goes to fixed costs.
“We need to make this a win-win-win … for the consumer, for the environment and for the utility because otherwise, it won’t happen,’’ Izzo said in his prepared remarks. That issue is likely to be played out in a $110 million filing by PSE&G before the state Board of Public Utilities to invest in energy-efficiency projects at hospitals, multifamily housing units, and government buildings.
“We have to get these policy issues resolved in the filing,’’ Izzo said. “If the policy goals are to lower energy usage to meet environmental goals and to lower costs for customers, then utilities should be incented to do that, not dis-incented.’’
Others were not so certain.
Sen. Bob Smith (D-Middlesex), the chairman of the Senate Environment and Energy Committee, argued that the state should make efforts to make energy-efficiency programs more competitive in the private sector.
“We don’t need government; we don’t need utilities,’’ said Smith, citing two legislative initiatives to promote energy efficiency that could achieve the goals. But even he and others who back the programs to cut energy use at government and other facilities conceded that they have failed to meet expectations. “It’s not happening as often as it should,’’ he said.
Dale Bryk, director of the Natural Resources Defense Council energy and transportation program said, however, that utilities should play a role in delivering policy goals that everyone supports. “We don’t want to penalize the utilities,’’ she said, adding that utilities have to be able retain their financial wellbeing.
Some utilities already are investing big sums in energy efficiency. PSE&G has spent $300 million in programs to help hospitals and others reduce their energy consumption, according to Jess Melanson, director of energy services for the Newark utility.
At South Jersey Gas, the utility has spent $30 million on similar programs since 2009, said Steve Cocchi, director of rates and revenue requirements. Its long-standing relationship with its customers has helped promote the issue, he said.
The question of how utilities could be compensated for lost revenue because customers are using less gas and electricity is one that remains largely unresolved.
Some advocate a process called decoupling, a system that would allow utilities to recover the cost of maintaining their infrastructure even when volume of sales fall by other rate adjustments in customers’ bills.
Evelyn Liebman, associate director for New Jersey AARP, warned the state should be wary of adopting such an approach. “It’s fraught with risks,’’ she said. “It shifts the risks to customers from shareholders.’’
But Melanson noted New Jersey is ranked 19th in the country in achieving energy-use reductions. Fourteen of those states have some sort of decoupling program, he said.
Yet Steve Goldenberg, an utility lawyer representing large energy users, cautioned that the programs need to be cost-effective and that a price ought to be paid if the utilities don’t deliver the promised results.