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The Misuse of Power

Why can't Com Ed get serious about conservation?

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In 1897, when Samuel Insull engineered the first franchise between the city of Chicago and the Commonwealth Electric Company, he could not have imagined that two contracts later a major issue would be what is loosely called conservation. When the city signed that first contract with Insull, and even in 1947, when Chicago renewed the exclusive franchise held by the successor Commonwealth Edison Company, electrical power was an exciting, expanding industry. Today, electricity is a drain on the economic resources of the nation--especially in Chicago, where rates are among the highest in the country--and the plants that produce it are a scourge on the environment.

Electric utilities all over the country have actually begun spending millions of dollars on creative techniques to reduce the use of electricity. But not Com Ed. It's preferred to build new power plants and increase the sale of electric power. There is a certain logic to this philosophy. But it stems from faulty decisions made since the mid-70s about future demand and how to respond to it.

In 1973, the Arab oil embargo against the West caused prices for electricity--most of which was produced in oil-burning power plants--to skyrocket. Demand fell. Before '73, demand had grown at about 7 percent a year. After '73, the growth rate fell to 2.5 percent a year, and it has since remained fairly steady at around that level. Some utilities in America did not adjust their demand forecasts to the new realities--Com Ed, for example. Among 110 investor-owned utilities surveyed by the Environmental Action Foundation for the period 1975 to 1985, Com Ed ranked 102nd in the quality of its periodic forecasting of its future needs, overestimating them by an average of 23.1 percent.

Having grossly overestimated future demand, Com Ed then proceeded to overbuild in order to meet it. As a result, in 1985 the Environmental Action Foundation in Washington, D.C., ranked Com Ed highest of the 110 utilities in excess capacity investment and in total annual excess costs. And since this 1986 ranking was made, Com Ed has added two more nuclear plants, Braidwood I and Braidwood II.

A 1988 assessment of excess capacity during the peak summer months that was made by the North American Electric Reliability Council, an industry-supported organization, found that Com Ed had produced 21.8 percent more power than it needed in its service area in July, 26.1 percent more in August, and 28.9 percent more in September. The industry considers 15 percent to be a good safety margin.

Yet Com Ed is contemplating the construction of a new plant in the late 90s. Contrary to the thinking that prevails in the industry, it continues to reason that expansion is the correct response to increased demand. Com Ed's logic is simple: We have so much electricity to sell now, why on earth should we try to limit its use? That would cut our profits and close our plants, causing considerable upset to our stockholders.

The view that Com Ed has of its role in society is called a commodity model by conservationists. The utility sees itself as selling a product at a profit, selling as much of the product as it can, stimulating sales, and increasing supplies as demand increases. In opposition to this view, the conservationists offer a service model, in which the role of the utilities is to provide a needed service to the community at the least possible cost. Another common term for this conservationist approach is "demand-side management."

When a utility is granted a franchise to be a city's single supplier of energy, the service model says, that does not entitle the utility to become one of the 1,000 top-earning U.S. companies, as Com Ed was reported to be by the Chicago Tribune this July, or one of the city's top ten companies, as Com Ed was in 1988, according to Crain's Chicago Business. Com Ed is entitled to earn at least a 14.5 percent return on its investment, according to the regulations of the Illinois Commerce Commission (ICC), which governs rates. But the investment on which Com Ed is allowed to profit is not limited to the cost of building and maintaining the capacity to supply the electric needs of northern Illinois; the ICC also allows Com Ed to compensate itself for all that excess capacity, which produces electricity Com Ed can peddle out of state at whatever price the market will bear. In 1987, Crain's reported, Com Ed's actual profit margin was 19.5 percent.

Com Ed is able to sell power throughout the midwest because utilities in other states have not grown in the same way. However, these other states have initiated conservation measures to reduce their needs. Wisconsin, especially, has a large conservation program under way. This is directed as much toward saving the atmosphere as toward saving costs. The electricity industry's nuclear plants--Com Ed has seven--create 50 percent of the nation's nuclear wastes; its fossil fuel plants--and Com Ed has ten of those--contribute heavily to acid rain.

The service model posits a rate structure that allows a utility to earn a fair return on its investment, with some of that investment directed to finding energy by conserving it. When the public installs a variety of conservation measures in its homes, offices, and factories, less electricity is used and bills are likely to go down, even if rates go up. And since less electricity is manufactured, the environment gains. Obviously, Com Ed would stand to lose some of that 19.5 percent profit by encouraging conservation. However, Ralph Cavanagh, an energy specialist with the National Resources Defense Council in San Francisco, points out that "these conservation methods offer very substantial net benefits to the utility as they replace new additions to capacity in the Edison system." New England utilities estimated that one massive conservation project would cost 6 cents per kilowatt hour saved, compared to a cost of 8 to 9.5 cents per kilowatt hour of electricity produced by building new plants.

In 1983, the ICC, following the lead of regulatory agencies throughout the country, ordered Com Ed to experiment with a variety of conservation tactics. A series of pilot programs was worked out by the utility and the ICC and put into effect over the next few years. Com Ed would give rebates to customers buying equipment that used less energy; it would help its customers to weatherize their buildings; it would help small businesses to reduce their energy use; and it would conduct seminars to teach the developers and managers of large residential buildings to economize on energy use.

Last year, the ICC hired ERC International of Portland, Oregon, to evaluate Com Ed's conservation activities. In the first draft of its report to the commission, submitted last December, ERC described the pilot programs as a failure. While they were "run as designed," and "administered economically," it was clear that Edison "does not perceive this as an urgent need," said ERC. The ICC was faulted for approving plans that were "not true pilot programs," that did not "effectively target Edison DSM [design-side management] needs," and did not "capitalize on previous utility experience."

ERC said, "These programs do not reflect the state of the art in the industry, either now or when they were proposed." Furthermore, Edison's efforts to minimize expenses "limited their successes." The pilot programs "lacked clear, measurable DSM goals," and "reflect inadequate recognition of market realities."

At the direction of the ICC, ERC removed much of the direct criticism of Com Ed from later drafts of its report. A commission staffer said this was done because the criticism went "beyond the scope of the auditor's contract between the company, the commission, and the consultant." The staffer said, "It will take a long time before the demand side is clearly understood and fully developed. We need to leave time to develop capability. The supply side took 100 years to fully develop. We don't think it's going to take 100 years, but let's put it on an even keel." The ICC seems to view the conservation of electricity with no more urgency than the utility it supposedly regulates.

In preparing itself to recommend a course of action to the mayor and City Council on the expiring Com Ed franchise, the Mayor's Energy Task Force has put much of its emphasis on conservation, seeing this as the most effective way to cut electric bills, reduce waste, and protect the environment while still serving the city's growing need for electricity. A steady stream of energy conservationists has appeared before the task force. Anne Hallett, cochair of the task force and a member of the Chicago Energy Commission, says, "There's a rich range of technologies on the drawing board today, in addition to all that we already have, so life may very well change a lot over the next five years. We have to have a much shorter franchise so that we can review the issues again in, say, five years, in the light of new technology." In July, the task force passed a resolution that said, "Demand Side Management and equitable distribution of benefits thereof should be a principal component of any new energy supply arrangement for the City of Chicago."

Although conservation would be advanced immeasurably if it enjoyed the utility's patronage, Com Ed's customers are free to act on their own. And some have. Every summer night, 240,000 gallons of water are stored in a gravel pit beneath the State of Illinois Building in what is called a thermal storage system. In the early morning, fans blow air cooled by the pit out into the building. (This system, along with the mechanical air-conditioning system that complements it, was inexpertly constructed but has since been fixed.) In the winter, the fans pull in and preserve hot air in the late afternoon and evening and blow it back into the building in the morning. Although Don Schlosser, spokesman for the Illinois Department of Central Management Services, could not say how much this system saves the state in energy costs, he referred me to a Building Operations Management magazine estimate that the savings could exceed $100,000 a year.

The Merchandise Mart in Chicago also has a thermal storage system, one of the largest in the world. The savings in energy provided by thermal storage systems are so large that two utilities that face power shortages, New York State Electric & Gas and the Minnesota-based United Power Association, "are selling half-price electricity and even giving up to $1,200 rebates to buyers of a $3,500 EPRI [Electric Power Research Institute]-licensed thermal storage system made by Cali-Dyne Corporation," according to an April 3, 1989, article by staff writer Paul Klebnikov in Forbes.

Thermal storage is one of a variety of recently developed demand-side approaches to heating and cooling, the idea behind them being to think of energy distribution from the buyer's--and environment's--point of view. The Massachusetts State Transportation Building in Boston is a notable example of energy efficiency: superior insulation and high-efficiency cooling and heating equipment together save about 40 percent of the electricity that a comparably sized conventional office building would use, or about $1 million a year, according to the New England Energy Policy Council. As Anne Hallett says, the list of new conservation techniques is a long one. Here are some others:

Supermarket refrigerators use an estimated 2 percent of all the electricity consumed in the U.S. A system pushed by the Electric Power Research Institute replaces the one compressor normally used in each of these refrigerators with several that are controlled by computers. Field tests of the system in Menlo Park, California, showed a 23 percent cut in electricity used. Now, 55 percent of the supermarket refrigerators sold by leading manufacturers contain this system.

Energy-saving home refrigerators have been on the market for some time, but there has been no serious effort to market them in Chicago. In states such as Washington, Oregon, California, and Wisconsin, however, utilities pay rebates to consumers who buy low-energy household appliances. During a pilot program, Com Ed did offer after-sale rebates of $30 to $50 in Cook County for the purchase of certain high-efficiency refrigerators that sell for about $700. About 8,000 rebates were handed out.

Air conditioners, toasters, irons--many appliances--are on the market today in low-energy models. Consumers buy them if they believe that lower electric bills will more than offset their small additional cost. And they buy them if their electric company offers a serious rebate program, something that Com Ed isn't doing but other utilities around the country are, the Wisconsin Electric Company in particular. The Natural Resources Defense Council recommends that these programs target mass purchasers, public housing authorities in particular, one reason being that high electric bills are disproportionately felt by the poor.

In 1990, the Center for Neighborhood Technology will open a buyers' co-op that will sell a wide range of high-efficiency fluorescent screw-in light bulbs imported from Japan. The 18-watt bulb, for instance, replaces a normal 60-watt bulb and burns over 10,000 hours. Executive director Scott Bernstein says these bulbs have a nicer color than the incandescents we are used to and generate a lot less heat, making summer cooling less costly. They retail at about $18.95 apiece, but Bernstein hopes to sell them at a substantial discount. The Kingston campus of the University of Rhode Island has saved $200,000 a year on its electric bill by installing high-efficiency bulbs.

Among Com Ed's pilot conservation programs was one to distribute a high-efficiency bulb. But Bernstein says the bulb was inferior and "the program was designed not to succeed." Com Ed offered one bulb to a customer at a price of $6. One high-efficiency bulb in a house is not likely to demonstrate to the people living there that $6 light bulbs can substantially cut their costs. Com Ed reported selling 120,342 of the bulbs.

Bernstein says that the most efficient low-energy bulbs come from Japan--from Norelco and Panasonic--but some American companies also make them. One of these is Durotest; its bulbs can be purchased by phone at 1-800-BUY-DURO. The 34-watt Durotest is the equivalent of the 18-watt bulb CNT will sell--but it is considerably cheaper, only $5.41. A survey of Chicago-area retailers indicated that the low-energy bulbs are not yet available here; but CNT intends to wholesale its bulbs to hardware stores.

Ralph Cavanagh of the National Resources Defense Council is urging that the city's new franchise agreement with Com Ed require the utility to give the bulbs away door-to-door to ensure that they enter widespread use. Cavanagh says the utility would pay one cent per kilowatt hour less to save electricity in that way than it would to produce it in a fossil fuel plant.

A much more modest requirement would oblige Com Ed at least to spend some of the $6 million in its advertising budget to advertise the bulbs and various high-efficiency appliances. Com Ed could also be told to substitute the low-energy bulbs for the very high energy bulbs it now offers customers who pay for the bulb service. In Massachusetts, one utility is leasing the bulbs at 20 cents a month.

In addition to low-energy light bulbs, a number of other devices have been developed to save energy in lighting, which accounts for a quarter of the electricity used in the U.S. An electronic ballast, which starts up and stabilizes the current in commercial fluorescent lights, is now available to replace the traditional magnetic ballasts. These cost about twice as much, but they need about 25 percent less energy to produce the illumination, and they eliminate the annoying flickering associated with fluorescent lights.

Sunlight can be used creatively to save power. In his Forbes article, Paul Klebnikov reported that lighting bills at the passenger terminal of the Albany County Airport in New York were cut by about 40 percent, heating bills by 20 percent, when a glass roof was installed along with a computer that dims the lights when appropriate.

Dimmers save energy at the Woodfield Corporate Center Number Four in Schaumburg. Maurice Gamze, of Gamze, Karobkin, Caloger, Inc., an architectural engineering firm, explains that the dimmers in the large office building automatically alter lighting and heating levels in response to sunlight. And the building is rigged so that when a person leaves his office, the lights go out.

Chicagoans have been cutting home heating costs for years by putting plastic over their windows in the winter. Now there's a low-emissivity window that is sold by all window manufacturers. According to Paul Klebnikov in Forbes: "Emissivity describes how a warm surface discards heat by emitting infrared rays. Low-e windows, which are coated with a virtually transparent film that cuts down on infrared emissions, typically cut heat loss at least 25 percent over conventional double-glazed windows." In the testing stage is a new gas-filled, plastic-coated window that is expected to let less heat through than the average insulated wall.

Advanced heat pumps conserve additional energy. Klebnikov wrote that Carrier's new Hydrotech 2000 heat pump "uses computers to control fans and a variable-speed compressor to cool a building in summer and heat it in winter, while diverting excess heat to a hot-water heater." This new heat pump is said to be about 30 percent more efficient than conventional pumps. (About 900,000 heat pumps are sold each year in the U.S.)

For those who heat with gas, these savings are mostly in gas bills. But over the years, says Charles Williams, director of energy management for the Department of Planning, Com Ed has convinced the developers of most large buildings in the Loop and many smaller ones to install electric heat. Conrad Reddick, special counsel for the task force, says, "Com Ed has given special rates and practices to encourage electric building heat, giving huge cost breaks to builders, but leaving tenants with built-in high demand and high bills for the life of the building." Charles Williams explains, "It is very expensive to put gas heat into a 60-story building. There's a lot of piping that has to be done whereas with electric heat only wiring is required. Com Ed has convinced the commerce commission to let them build the risers and transformers in those buildings at no cost to the builders. They charge it to the whole system because, they claim, it is part of the distribution system, part of the fixed costs. We are paying for the wiring of all those huge buildings downtown. But Com Ed doesn't consult with those builders about ways to conserve energy in these buildings where the heat is the most expensive. For instance, there are new heat windows that could save massive amounts of money. But builders, residential builders especially, are not willing to invest in those things because the tenants are the ones who bear the ultimate costs. But Com Ed could make that investment or finance it to create long-term savings in energy and costs. Whether Com Ed, with its huge excess capacity, can ever be convinced to make such investments is another matter."

High on any list of conservation measures that could be taken in Chicago is cogeneration. Cogeneration is 100 years old; Thomas Edison used it to supply electricity and heat to the island of Coronado before the turn of the century. Simply stated, cogeneration is the creation of heat and electricity from a single fuel source. For instance, the Sheraton-O'Hare provides itself with heat, air-conditioning, and electricity from one set of gas-run generators. The hotel reports saving about 66 percent on its energy bills by not buying from Com Ed.

In 1978, Congress passed the Public Utilities Regulatory Policies Act (PURPA) to encourage cogeneration to reduce the country's reliance on imported oil. The law stipulates that a local utility has to be willing to buy power from a cogenerator (most can produce much more than they need); must, at a reasonable cost, interconnect with the cogenerator to provide standby power; and must transport power from the cogenerator to other utilities that might want to buy this power.

Cogeneration contributes about 55,000 of the 656,000 megawatts of power currently generated in the U.S., and it is expected to account for more than 200,000 megawatts by the turn of the century, according to Charles Komanoff, a New York consultant to the Mayor's Energy Task Force. But if conditions don't change, northern Illinois is unlikely to be among the areas where cogeneration prospers. Thanks to its excess capacity, Com Ed sells its own power throughout the midwest. And despite PURPA, the utility reportedly makes cogeneration difficult.

"Edison charges exorbitant rates for the backup power," Charles Williams says. "If you go to Edison to talk about putting in your own generator, they'll try to talk you out of it. They'll offer you a special rate break, as they did for Abbott Laboratories when they considered putting in their own plant. If you're still determined to go ahead, they'll say, 'this is what it's going to cost you to make all the connections to protect our system.' Then you go ahead and they come back and say, 'We've done some additional studies and you have to do this and this.' And then they repeat that process until the costs are exorbitant. They've offered people rate breaks to take their plants out. I've talked to several people who said, 'we used to cogenerate here, and saved a lot of money, but Edison came in and said, We can do it for you cheaper if you take it out.'"

Anticipating growing demand, the Mayor's Energy Task Force has studied cogeneration as one of the ways to save Com Ed's customers money and avoid the new plant the utility plans to build in the 90s. It's looked at the Virginia Power Company, which last year asked for bids from cogenerators to supply that utility's future anticipated needs and received bids for ten times the power required, according to Conrad Reddick. In November 1988, a U.S. Department of Energy survey showed Virginia Power's prices to be 15 percent less than Com Ed's.

Still another conservation tactic is the use of rebates to encourage big customers to cut back on their demand for power during peak hours. The huge Hancock Center in Boston, which is part of a co-op of electricity users, takes part in such a program. It's paid to switch off nonessential escalators, elevators, and air-conditioning for short periods, and does so with little impact on the center's occupants, according to Frankie Knibb, a researcher at the Center for Neighborhood Technology.

Ralph Cavanagh argues that all such demand-side initiatives--though many can be taken unilaterally by the consumer--are most appropriate as aspects of a joint effort by consumers and utilities that is "planned, managed, purchased, and financed by the energy supplier so that this whole process doesn't depend on the city. These demand-side tactics are a resource for the utility just as their power plants, distribution systems, and so on are resources."

Com Ed apparently could do so much if its heart were in it. "Com Ed could provide technical assistance and financing for a great range of conservation tactics," says Charles Williams. "If you're keeping heat from coming through the windows, you can build a lot smaller air-conditioning system, which saves a lot of money. And if you have a very efficient cooling and heating system, you're still further ahead. Some utilities help builders with these things, but Com Ed has never taken any meaningful steps in this direction. Some cities, like San Francisco, and some states have codes that require all new buildings to be built for higher efficiency."

The Natural Resources Defense Council has urged Chicago to adopt the formats used by California's energy commission and the Northwest Power Planning Council, in which utilities help enforce residential and commercial codes that create efficiency standards for new construction and renovation, and also finance training programs for builders and inspectors. "Whether Chicago could do this," Williams says, "I don't know. Chicago can't even reform its building code. Chicago requires more air-conditioning capacity than most other cities, in turn requiring more and larger equipment. So it's not entirely Com Ed's fault. On the other hand, if Com Ed wanted to save energy, it could exert its considerable influence to bring about new codes. It doesn't have that interest."

Testifying before the Mayor's Energy Task Force, Ralph Cavanagh said it was possible for the city, "using a range of inexpensive conservation measures," to achieve "30 years of anticipated growth with a total reduction of electricity consumption in the residential and commercial sectors of about one-third."

But Cavanagh observed: "The obvious question is, if all this makes such good sense and so much is being done in other parts of the country, if the benefits are so great, why isn't Edison doing it? I am emphatically not saying that Edison is not doing it because they're dumb, because they're malingering, because they're a bad utility. I'm saying that they're not doing it because the incentive structure is set up wrong. The only party that doesn't benefit from conservation is the Edison stockholder. If you're saving power at less than it costs to make it, you are cutting profits. And therefore, if the incentive structure for Edison to make money is not repaired, it's going to be impossible to get an enduring commitment from the utility to make sure that conservation becomes a sustained priority at Edison."

"The way that utility rates are set imposes two facts of life on utility managers," consultant David Moskovitz wrote last spring in Issues in Science and Technology, a journal of the National Academy of Sciences. "Selling more electricity always adds to a utility's profit, regardless of the cost of producing the extra power or the price at which it is sold, and investments in conservation measures always hurt a utility's bottom line, regardless of their cost-effectiveness."

Moskovitz went on, "This surefire recipe for increased consumption means far more than just higher electric bills for the nation. The electric utilities now produce 68 percent of the sulphuric dioxide emissions that cause acid rain, 20 percent of the gases linked to the atmospheric greenhouse effect, and more than 50 percent of all nuclear wastes. Utility construction projects also consume 19 percent of the nation's private capital."

The ICC seems just as enamored of Com Ed's construction projects as the utility is. Before the ICC approved the Braidwood plants in 1975, it heard various expert proposals for conservation measures that were shown to cost far less than the new plants would (and the new plants wound up costing far more than they were supposed to). The ICC approved the plants anyway, and the costs of constructing and maintaining them went into Com Ed's rate base--were, in other words, passed on to the consumer.

Until recently, all utilities operated in the same way. The chairman of the Nevada Public Service Commission, Stephen Wiel, put it succinctly in the July 6 issue of the bible of the utility industry, Public Utilities Fortnightly. He said, "Electric utilities are still treated as if their role in society is to expand the nation's electricity grid in order to deliver all the reliable, safe electricity its citizens desire. The current rate-setting process does not accommodate conservation."

But that is changing, says Charles Williams, "as legislatures stand up and say, you're going to do things differently, and as they begin to learn there is a different way to do things. Or there is a management change that says, we're not going to continue down this path like dinosaurs. So it will be up to the mayor and the City Council to turn Com Ed around. The fact is that most utilities in the U.S., to one degree or another, are looking for cheaper ways to do things. With one or two exceptions, and Com Ed is probably the biggest dinosaur in the lot."

Com Ed is a national problem taken to an extreme. At its annual meeting last July, the executive committee of the National Association of Regulatory Utility Commissioners passed a resolution that "urges its member state commissions to (1) consider the loss of earning potential connected with the use of demand-side resources; and (2) adopt appropriate rate-making mechanisms to encourage utilities to help their customers improve end-use efficiency cost effectively; and (3) otherwise ensure that the successful implementation of a utility's least-cost plan is its most profitable course of action."

Accomplishing these ends will not be quick and easy. But several approaches have been suggested. In Issues in Science and Technology, David Moskovitz observed, "Various approaches to regulatory reform have been tried, but they have generally proved inadequate. A number of states, including Wisconsin and Washington, have sought to provide utilities with financial incentives to pursue conservation investments by allowing utilities to rate-base those investments. That is, they can earn a reasonable rate of return on energy-efficient investments just as they earn a return on investments in power plants, poles, and wires. Some states even try to tilt the balance in favor of conservation by allowing a higher rate of return on such investments.

"This approach, however, simply doesn't provide utilities with adequate incentive to pursue conservation vigorously. Most energy-efficiency measures are fairly inexpensive to implement, which means the investments don't add much to the utility's rate base. Thus, the added profit per kilowatt hour will not even offset the revenue lost from decreased sales, never mind compare with the profits promised by increased sales."

Furthermore, said Moskovitz, a utility is likely to indulge in the most rather than the least expensive conservation measures, thereby defeating conservation's purpose.

Another way is being taken by California, which has decoupled rates from sales. The program, called Electric Revenue Adjustment Mechanism (ERAM), compensates a utility for lost revenues but takes away profits that exceed the margin stipulated by the state. There is therefore no incentive in California to increase the sale of electricity, at least not in state. ERAM's shortcoming, said Moskovitz, is that it addresses demand but not production costs. Utilities are careless about production costs, he said, because they get to pass them on to consumers.

In Maine, where Moskovitz served for five years on that state's public utilities commission, an attempt is being made to tie a utility's rate of return to its success in reducing electric bills. The focus, Moskovitz explained, is on average monthly light bills, and it's up to the utility to figure out ways to reduce them by reducing consumption and costs. The utilities commission will conduct annual performance reviews, and adjust rates of return to reward or punish. "To make it attractive for utilities to promote and invest in conservation," wrote Moskovitz, "an upward adjustment will more than offset revenue losses from reduced sales." The utilities commission will grade the Maine utilities against an index of other New England utilities. "A utility that beats the index and is granted an increased rate of return may have to raise its price of electricity. But the bills for the great majority of customers will still be lower because of their reduced consumption."

Two bills now before Congress would set federal conservation standards and help states meet them. Republican representative Claudine Schneider of Rhode Island has introduced the Global Warming Prevention Act, which would appropriate $10 million "to assist states in addressing the various issues related to removing incentives against least-cost planning, which exist in the current system of state and federal regulations." One provision of Schneider's bill would require utilities to reimburse home owners for energy-efficient improvements.

The National Energy Efficiency Act of 1989, sponsored by Senator Tim Wirth, a Colorado Democrat, and cosigned by a dozen lawmakers, goes a step beyond Schneider's bill by establishing federal rate-setting standards that require that the prices electric (and gas) utilities can charge "shall be such that the implementation of least-cost supply measures (including conservation) permit the utility to realize higher earnings than would be realized from the implementation of other supply measures." In other words, utilities would be rewarded for not building new plants, for investing in conservation instead.

One of the thorny issues facing energy conservationists is that of equitable distribution of benefits. How do the poor living in substandard rental housing benefit from conservation measures? If they cannot take advantage of them, won't their electric bills rise while others drop, as rates rise to compensate the utilities for lost revenues?

The question is being raised among conservationists, and there's no clear answer. Typical is David Moskovitz's observation that "regulators and utilities must take care that energy-efficiency programs are targeted at the widest spectrum of customers. Special efforts may be needed to assist people with low or no income: They often can't afford to invest in conservation measures and generally live in the least energy-efficient buildings equipped with hand-me-down appliances." While Moskovitz makes specific recommendations in other areas, none are forthcoming with regard to those "special efforts" that he says "may be needed."

But the California and Washington laws governing conservation do include stipulations that the poor must be included in the benefits from conservation savings; and Ralph Cavanagh says "those states are meeting those requirements." There are measures that the poor can benefit from, Cavanagh insists. One might be the free distribution of high-efficiency light bulbs in targeted communities.

When the mayor's task force was writing its resolution on conservation this summer, concern for the poor was expressed by several members of the group. Language was added that called for "equitable distribution of benefits" derived from demand-side management.

Benefits could be distributed equitably, it is clear, only by sizable subsidies to the owners and operators of the housing the poor inhabit, and directly to the poor to help them purchase low-energy household goods. An alternative would be to let the poor's utility bills get bigger and increase the public assistance that helps to pay them.

In 1988, the Illinois Residential Affordable Payment Plan (IRAP), with funds from the federal government, processed 68,000 applications for help with utility bills. There were 9,153 emergency grants for shutoffs. (Com Ed reported 147,165 shutoffs in 1988.) The low-income Illi- nois Home Energy Assistance Program (IHEAP) received a total of 115,134 applications, but Edmond Weil, manager of family assistance at Chicago's Department of Human Services, which administers these programs in the city, estimates that there are about 250,000 homes eligible for assistance under IHEAP.

In the long run it is up to the ICC to change Commonwealth Edison's stripes. It is not clear that Chicago has any tool to force Com Ed to engage in conservation except the present threat to end the franchise. A short franchise of say three years, renewable only if certain serious conservation programs are launched, might be effective. Or it might not--especially if the city is careless about monitoring Com Ed's activities. The current franchise agreement contains requirements that have never been met and have never been monitored by the City Council.

What has changed is the level of private vigilance. Citizens groups are now in place that are watching the utility carefully, and will do for the City Council what the council hasn't done for itself.

Art accompanying story in printed newspaper (not available in this archive): illustrations/Tony Griff.

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