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Keeping The Lights On with Demand-Response and Energy Efficiency Programs

Consumers of electricity have long used energy efficiency and demand-response measures to conserve energy in California and the Northwest. Historically, consumers have reduced their energy use to save energy when faced with power outages, or to save money during hard economic times. The problem is that economic recessions, power outages and the need for new conservation are unpredictable.

For example, when California faced an energy crisis in 2000-2001, consumers significantly reduced their energy use. Demand reductions in the first six months of 2001 alone saved Californians approximately $660 million in spot market electricity purchases and helped avoid up to $20 billion in projected costs of summertime rolling blackouts. California survived the crisis, but at a cost of over $45 billion.

Today, Californians have sustained much of the conservation used during the crisis, even accounting for a slower economy. Energy efficiency programs throughout the West today include efficient lighting fixtures, efficient appliances, efficient heating, ventilation and air conditioning systems, building retrofits, and technology showing consumers how much money they can save. Demand response programs allow consumers to reduce their electricity usage in a given time period, or shift that usage to another time period, which saves them money by lowering peak time energy usage. The programs are now part of utility resource planning, and the simplest measures like replacement of lights and appliances have been largely completed.

These measures are essential, but are they enough to respond timely and reduce new demand to keep the lights on this summer?

California will find out. In January this year, operators of the San Onofre Nuclear Generating Station (SONGS) shut down two units of the power plant after they discovered “leaks” in one of the units. Southern California Edison (SCE) and San Diego Gas & Electric Company (SDG&E) own the 2,200 megawatt plant, which is located halfway between Los Angeles and San Diego and is critical to the grid to import electricity into the center of the most densely populated portions of southern California. Recently, SCE announced that the shutdown will extend through August, 2012, or until the Nuclear Regulatory Commission approves the operation of one of the units. That raises the possibility of rolling power outages as warmer temperatures and an increased risk of wildfires boost demand for power over the summer.

SCE has brought two retired natural gas-powered generators in Huntington Beach back online to help meet some of the power demands this summer, but will also have to rely on energy conservation efforts to prevent power outages. The two utilities and the California Independent System Operator (CAISO) have initiated a “Flex Alert” campaign calling for consumers to voluntarily reduce energy use when demand peaks in very hot weather.

This is an opportunity to promote the use of energy efficiency and demand response programs for future situations likes SONGS. But the current approach to SONGS will be costly. Southern California ratepayers will likely bear the costs of the repairs to the SONGS units, as well as the costs to replace the generation if SONGS is shut down for a longer period. Current estimates forecast that the costs will exceed $200 million.

Consumers don’t need to suffer rate shock to flex their power. But current energy efficiency and demand-response programs do not do enough to educate the public on how to change the way they use power on a long-term, consistent and predictable basis. Regulators and utilities should encourage consumers to increase their use of energy efficiency and demand-response measures. Consumers should be educated about the benefits of integrating efficiency and demand-response measures into the way they use electricity. They should also be educated on how they can use technology that monitors their energy consumption to meet their daily energy needs. But it may take the identification of new measures to be of real help to expand the benefits of conservation.

Situations like the energy crisis and SONGS remind us that electric power is not an unlimited resource. Making energy efficiency a part of our permanent lifestyle will make it a lot less painful to keep the lights on in the future.

Tara S. Kaushik is a senior associate with Manatt, Phelps & Phillips, LLP in the San Francisco office, where she focuses her legal practice on energy regulatory matters. She regularly advises and represents renewable power, clean technology, natural gas pipeline, oil refinery, and water utility companies, as well as tribal organizations concerning California and federal energy regulatory matters. Ms. Kaushik can be reached at (415) 291-7409 or tkaushik@manatt.com. This column is part of a series of articles by law firm Manatt, Phelps & Phillips, LLP’s Energy, Environment & Natural Resources practice. Earlier columns have discussed California’s Cap and Trade Program, Demise of Redevelopment in California, What’s Next for the Renewable Power Industry and Renewable Energy Projects On Tribal Lands.

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