New Jersey Falling Behind Other States In Efforts to Boost Energy Efficiency

Experts at NJ Spotlight Roundtable agree more needs to be done, but no consensus reached as to best ways to attain that goal

Panelists at NJ Spotlight's most recent roundtable discussing energy efficiency.
New Jersey needs to do more to reduce energy use and is falling behind what other states are doing to curb the consumption of gas and electricity, according to a panel of experts at a recent NJ Spotlight roundtable.

While there was wide agreement about promoting energy efficiency, there was not as much consensus on how to go about achieving that goal and what type of regulatory changes, if any, may be necessary to spur new initiatives.

By virtually all accounts, reducing energy use by homes and businesses is the most cost effective way to lower gas and electric bills. It also helps to cut pollution from power plants and emissions that contribute to global warming.

“It’s literally the cheapest fuel source there is and it brings everyone’s prices down,’’ said Rate Counsel Stefanie Brand. “I don’t understand anyone who can be against doing more energy efficiency. That said, as a general proposition, we could do better.’’

New Jersey ranks 26th in the nation in the effectiveness of its energy-savings programs, according to a ranking by a nonprofit organization that promotes such efforts, Brand noted. “This is New Jersey. We’re not going to settle for 26th,’’ she said.

Her call to do more got no argument from other panelists, but they questioned the extent of changes that may be needed — going beyond the refinements in existing state- and utility-run programs suggested by Brand.

“Why are we all in love with it, and we’re in the middle of the pack in the U.S.?’’ asked Steven Gabel, president of Gabel Associates, a Highland Park energy-consulting firm, referring to energy efficiency. “It doesn’t make sense.’’

Some argued that some new system is needed to incent utilities to encourage customers to reduce energy use, which, if successful, undermines the company’s top line or the revenue they generate from the business. How is it possible to compensate utilities to switch from, say, building a power plant where they can earn a higher return on investment than they would by helping customers save money by lowering energy use?

To a large extent, that is the kind of questions confronting policymakers. Who ends up footing the bill also is an issue.

“What we need to do is change the culture of how utilities view energy efficiency as an option,’’ said Janine-Migden Ostrander, a principal in the Regulatory Assistance Project. Utilities ought to earn a return on their investment in energy efficiency, but not to the same extent they profit from building a power plant, she said.

But Brand remains unconvinced about the lost-revenue issue. “It not as simple as you think,’’ she argued, questioning why it’s necessary completely reform the industry ‘’for lost revenues that I don’t think exist.’’

Even if a utility does see its revenue drop because of energy savings, it can recoup those losses by increasing its investment in new power lines, she suggested. “The fact is utilities are making very good money,’’ Brand said.

[related]Public Service Electric & Gas is the New Jersey utility that has invested the most in energy-efficiency programs. But Jess Melanson, director of energy services for the Newark utility — which won a national award for a program to help hospitals reduce spending on energy — disagreed with Brand, as did others.

“It absolutely hurts the distribution utility,’’ said Melanson. “If we don’t remove the disincentives we won’t get the utilities to the table.’’

About half of the states in the country have adopted various types of so-called decoupling programs to protect utilities’ revenue if they cut customers energy bills. A legislative task force looked at the issue last year, but could not reach a consensus on how to achieve this.

Gabel said recent trends in the energy sector may help unlock the logjam preventing the state and others from doing more to promote energy efficiency.

They include recent changes adopted by the regional grid operator that pays power plants more for providing capacity and penalizes them heavily when they fail to do so — a factor that provides more value for energy-efficiency initiatives, he said. The Obama administration’s Clean Power Plan also offers new incentives for energy savings and new technology, such as battery storage, and will enhance the value of such efforts, he added.

Besides the state’s utilities, the panelists said the private sector also must play a big role in spurring energy conservation in New Jersey. Melanson said it can create the technologies that advance energy savings, such as smart thermostats.

Mary Barber, New Jersey director for clean energy for the Environmental Defense Fund, said private capital needs to be tapped to increase energy savings.

“We are never going to have enough taxpayer and ratepayer money to get this at the scale we know we need,’’ Barber said.