The Okanogan County Electric Co-operative (OCEC) is proposing a residential electric demand charge. This means that residential customers will be charged a demand charge based on the 15-minute period in a given month when each customer is using the most electricity. OCEC contends more funding is needed to cover the cost necessary to maintain, improve, and repair the distribution system to reliably meet peak loads. The most significant indicator is the rise in peak demand in the valley particularly in the winter months.
Decoupling within the utility community is contributing to this approach to covering costs. Decoupling refers to a regulatory mechanism that separates a utility’s revenue from its sales volume. Historically, utilities earned profits based on the volume of electricity sold. It was assumed that the promotion of energy efficiency programs would reduce utility revenues. Decoupling was developed to provide a means for utilities to recover fixed costs even as energy use declined affecting profits.
Utilities became preoccupied with demand-side management (DSM) rather than investing in infrastructure, planning, and grid modernization. This does not mean local connection services were not maintained. However, the first result of efficiency promotion allowed utilities to deliver the increased availability of electricity to customers without improvement of grid efficiency or increase in power production. The second provision of DSM allows subsidies for alternative power and the promotion of energy efficiency. As the present proposal shows, DSM allows subsidizing those who pay less per kilowatt hour by penalizing larger users. This also occurs when promoting energy-efficient appliances. Those who benefit from the energy-saving rebate do so at the cost of those who don’t have the means to participate. Decoupling allowed for innovative ways to promote efficiencies or use peak demand charges to reduce electrical use and potentially penalize those who did not participate in various programs to increase efficiencies.
The problems we have now are: 1) we need more electricity production, not rationing electricity or DMS management, 2) Our present level of technology has exhausted our energy efficient measures absent modernization, and 3) we face the high cost of electrification coupled with a net-zero carbon goal.
If utilities can base their revenue on sales volume, we can easily incentivize the development of more energy sources and grid modernization. This means what we pay for electricity per kilowatt hour includes the forecasted investment needed to maintain efficient power delivery as well as new power sources. The result is those who can and need to reduce energy use can save and those who have more need for use in making a living are not penalized to subsidize users.
The promotion of the peak demand rates exposes the fact that Washington State doesn’t have sufficient dispatchable power. Washinton State has decommissioned carbon-based dispatchable power and is invested in wind and solar power to meet future needs. Alternative power sources can’t meet the new needs of digital communication and advancements in Artificial Intelligence (AI) nor the demands of modern households. Due to decommissioning dispatchable carbon power plants, utilities must seek ways to restrict the energy use of customers to fit into the low energy production of renewables. In the Northwest, wind and solar are only contributory to energy needs 30% of the time. Since the passage of the TransAlta Energy Transition Bill (SB 5769) in 2011, the plan to replace carbon energy sources with alternative energy has put us far behind in meeting Washington State’s energy needs.
There is a conflict between DSM, subsidizing renewables to achieve net-zero carbon electrification and the need for inexpensive electrical power for a growing digital and AI future. A recent study in September 2024 “The Crippling Cost of Electrification and Net Zero Energy Policies in the Pacific Northwest” identifies these conflicts. The study focused on using hourly electricity demand in 2023 as a template, coupled with estimates of future load growth arising from electric vehicles, and electric space and water heating, to estimate the cost of electrification and net-zero emissions goals. This estimate is compared to the alternative scenario in which the electricity goal is achieved by new nuclear power plants and natural gas generators. The total cost for the renewable scenario is $550 billion compared to $86 billion for the nuclear and natural gas scenarios. This estimate excluded the needed upgrade of local distribution systems to handle the higher peak electric demands from electric vehicle chargers and heat pumps. A typical residential customer’s bill will increase by 450% when including the additional electricity required for EV charging. This is problematic for OCEC customers with electric cars under the demand charge scenarios. The higher cost of electricity is also problematic for energy-intensive industries.
Under full electrification, and assuming an inflation rate of just 2% annually, the average residential customer bill will increase fourfold, from just over $100/month today to over $700/month in 2050. The average commercial customer bill will increase from $600/month today to about $3,800/month, even excluding the additional costs associated with operating commercial EVs and switching to electric heat pumps.
In summary, the current DSM approach and the decoupling of utility costs from the quantity of electricity sold is now redundant. The focus of Utilities and Washington State must address the high energy demand deficit we now face. The money transfers used to subsidize low electrical use and efficiency credits are now needed to expand our electrical reliability through grid modernization and dispatchable power to meet electrical demand. Utilities and Washington State need to face the fact that renewables are a high-cost investment resulting in decreased reliability and survivability in extreme weather conditions. Renewables and current policy are unable to keep up and supply the increasing demand. Billing residential customers based on peak demand is a DSM deceitful gimmick to motivate the reduction of electrical use. The real problem is we need new dispatchable power to meet our present energy needs. If the OCEC needs to upgrade our transmission system to handle the peak load growth, there is greater integrity to increasing the decoupled operational base costs for each residential customer. In the meantime, it is necessary to invest in dispatchable power and eliminate DSM.
The second Town Hall meeting is at 5:30 PM on February 13 at the Winthrop Barn.
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