Pa. industrial power users push for relief from conservation mandates

Pennsylvania's large industrial power users are quietly lobbying for an exemption from state energy-efficiency mandates that would save them millions of dollars they now pay to utility-administered conservation plans.

The Industrial Energy Consumers of Pennsylvania, whose 19 members are some of the state's heaviest users of electricity, say that allowing them to opt out of the mandates would make large customers more competitive with their rivals in other states.

Large industrial customers, who account for about a third of all electricity consumed in Pennsylvania, say their energy expenses are so high that they have sufficient incentive to maximize efficiency without a government directive.

But the program's advocates say the exemption would weaken state efforts to reduce power consumption overall, as mandated under Act 129. That 2008 law directs utilities to promote conservation measures, including programs that provide consumers with discounted low-wattage lighting, energy audits, and rebates for more efficient appliances or machinery. The state's seven electric utilities will charge all their customers a total of $1.2 billion to pay for the conservation programs in the next five years.

"Independent evaluators have demonstrated that Act 129 creates jobs in Pennsylvania, saves money for all Pennsylvania ratepayers, and saves electricity, as well," said Matt Elliott, executive director of the Keystone Energy Efficiency Alliance. "To allow up to a third of the load to opt out would significantly undermine all three of those benefits."

Conservation advocates say the effort by Pennsylvania industrial customers is part of a nationwide pushback against efficiency mandates. In several states, industrial opt-out movements "actually ended up rolling back the entire energy-efficiency programs," said Dylan Reed, a policy expert for Advanced Energy Economy, a national clean-energy advocacy group.

The legislation that would allow the industrial opt-outs, Senate Bill 805, was approved unanimously last fall by the Senate Appropriations Committee and by the Consumer Protection and Professional Licensure Committee. Its chief sponsor is State Sen. Lisa M. Boscola (D., Northampton), the minority chair of the consumer-protection committee.

"The opponents of this bill are arguing that these companies will not be energy-efficient if you take them out of Act 129," said Boscola's chief of staff, Stephen DeFrank. "We just don't buy that argument."

The program's supporters fear that the bill could come to a head soon. But a spokeswoman for the Senate Republican Caucus said the legislation now is not expected to reach the Senate floor before the summer recess.

Advocates say Act 129 has reduced power consumption and cut demand during peak hours, thereby reducing the need to build more electricity-generation infrastructure. It has also helped reduce greenhouse-gas emissions.

During its first phase, which ended in 2013, utilities were required to reduce consumption by 3 percent and to cut peak demand by 4.5 percent. The second phase of the program ended May 31. The third phase, which lasts until 2021, is just underway.

Every dollar invested in energy-saving programs returns $1.62 in benefits, according to a 2015 evaluation report issued by the Pennsylvania Public Utility Commission.

For residential and small commercial customers, the program's costs are buried in the utility's distribution charge. But the fee is broken out for industrial customers and can amount to more than $50,000 a month.

Peco Energy Co., the state's largest electric utility, is set to spend $85.5 million a year for Act 129 mandates for the next five years, said Ben Armstrong, Peco's spokesman. Large commercial and industrial customers account for about 36 percent, or about $30 million of the annual costs.

Elliott, of the Keystone Energy Efficiency Alliance, said the program's costs were "pretty negligible" for a typical large customer, amounting to about one-tenth of 1 percent of its cost of doing business.

The program accounts for between 2 percent and 5 percent of the total electricity bill for the largest customers, according to Boscola.

Michael K. Messer, president of the Industrial Energy Consumers of Pennsylvania, testified last year that large industrial customers have improved energy efficiency by 45 percent in the last three decades without Act 129, whose rebates and programs are often unsuitable for large customers. IECPA's members have included Hershey, Air Products & Chemicals Inc., ArcelorMittal USA Inc., Linde, and Merck.

"These programs are simply another unproductive cost that we must mitigate by making compromises or reductions in other areas," Messer told the House Consumer Affairs Committee.

Recently, New York state changed its energy-efficiency program to allow large users to direct surcharges to an account that can be used only for improvements at their own facilities, said Lindsay Baxter, a Pennsylvania Environmental Council program manager of energy and climate.

"This could be an alternative to a complete opt-out, but it requires a lot of measurement, and verification is potentially a lot more complex and costly," she said.

amaykuth@phillynews.com

215-854-2947 @maykuth


BY THE NUMBERS

$1.2B

Amount Pa. electric utilities will spend in the next five years on energy efficiency

$1.62

Amount returned for every dollar invested in energy efficiency

$85M

Amount Peco Energy spends per year for energy-efficiency mandates

36%

Share of Peco's

energy-efficiency costs borne

by industrial users

$2-$4

Average monthly program cost to a Pa. residential customer

SOURCE: Pa. PUC