1. Utilities Should Widely Advertise Offers for Different Time-of-Day Rates to Residential Customers to Encourage Load Shifting

The Public Service Law requires large electric utilities to offer residential customers the option of paying different rates for different times of day of instead of paying one rate for all electricity used. 109 For example, instead of paying 13 cents per kilowatt-hour 24 hours a day, a customer could pay 6 cents during the night and 15 cents during the day. Despite this law, it appears that few utilities effectively offer this service to customers. 110 Since this pricing could shift demand away from peak times, the PSC should require utilities to advertise its availability. Time of use pricing reduces electricity bills for customers who have the flexibility to use certain appliances, such as the clothes washer and dryer, dishwasher, or water heater, at times when the price is cheapest. This pricing also sends truer price signals to the customer, as it is far more expensive for the utilities to buy electricity during peak periods than in off-peak periods.

Given the failure of utilities to offer or advertise time of use pricing, significant peak demand reductions may be achievable if the PSC requires more aggressive efforts. The PSC should ensure that each retailer offer reasonable time-of-day (or at least day-night) pricing to all customers, and provide consumers an analysis of the possible savings from such pricing. Appropriate means of financing time-of-day meters will need to be analyzed.

2. Direct Metering or Submetering Should be Expanded

While time-of-day meters would enable direct metered customers to shift some power use to off-peak periods, consumption is not measured individually in many apartments, but rather through the building's "master" meter. Studies have indicated that residents in master-metered buildings tend to consume significantly more electricity than residents with direct meters or submeters. Consideration should be given to the possibility of converting master-metered buildings in New York State to direct metering or submetering. 111 In master-metered buildings, individual residents do not pay for their electricity directly. Rather, electricity charges are included in the rent. These tenants thus have no direct price signal associated with their electricity consumption.

Direct metering and submetering use direct market forces to encourage conservation. For example, a NYSERDA pilot project in 1981 showed an energy savings potential of 18-26 percent from submetering. 112 If comparable energy savings were achieved in the approximately 400,OQO apartments in 1,800 master-metered buildings in the Con Ed service area, 113 demand in the New York City load pocket would be reduced significantly. The considerable costs involved when converting to direct metering or submetering can be offset by the savings in the electricity bills over time.

Efforts to expand direct metering and submetering are ongoing, and should continue. For example, as part of its Residential Innovative Opportunities program, the NYSERDA has pilot projects to enhance submetering of cooperative apartment buildings, and has provided technical advice to building operators interested in converting to submetering.

109 See, PSL §66(27). This law applies only to corporations with annual gross revenues in excess of $200,000,000.

110In a December 20, 2000 Order, the PSC required electric utilities to file a report identifying measures that could be taken to reduce peak demand. While several of the utilities indicated that "real time pricing" for their very large users of electricity (i.e. commercial and industrial) might be included in their portfolio of strategies to reduce demand, very few identified programs that could reduce peak demand from residential customers. Only New York State Electric and Gas (NYSEG) offers residential customers both time of use pricing (to customers who use 35,000 kWh or more annually) and day-night pricing (to customers who use 1,000 kWh or more per month). ConEd indicated that residential customers would be eligible to participate in its Direct Load Program which would reward customers who voluntarily allow ConEd remotely to control their central air conditioning units during peak.

111 Current Energy Code requires all residential new construction to have separate meters for each dwelling (See, 9 NYCRR $7813.52(b)). Between 1951 and 1979, however, the PSC banned submetering. Thus, much of the housing built during this time-including most public housing and other publicly assisted co-ops-have master meters. The Energy Code states that whenever more than 50 percent of a residential building's electrical system is replaced in a 12 month period, each dwelling unit is to be provided with a separate meter. See, 9 NYCRR §78 10.6. 112NYSERDA, Facilitating Submetering Implementation, Report 96-7, May 1996, p. A-2. 113Ibid., p. S-1.

3. Utilities Should be Given Incentives to Encourage Energy Efficiency and Clean Distributed Generation

While generators of electricity are allowed to sell their power at market value in the current restructured environment, the transmission and distribution retailersthe utilities have remained regulated monopolies. That is, the rates received by the utilities from their customers for the transmission and distribution of electricity is still set through rate agreements with the PSC.

Among the most central issues raised by the restructured marketplace is whether the utilities' profits should be linked directly to sales.

Under the current rate structure there is a rate cap, which means the more electricity a retailer sells, the greater the retailer's profits. But, a retailer's fixed costs for distribution do not increase substantially when marginally more electricity is sold, and thus the rate of profit increases for each additional kilowatt-hour of electricity sold. As a consequence, clean distributed generation, energy conservation or efficiency—all of which reduce a retailer's sales-is usually not in a retailer's best interests despite its significant benefits to consumers and the public.

If the rate structure rewarded retailers for reductions in demand, energy conservation would more likely become a priority for retailers and consumers. The PSC should develop a formula for the distribution charge that rewards (or at least does not discourage) efficiency, distributed generation, and similar efforts.

F. The Federal Government Should Implement New Appliance Efficiency Standards The DOE should implement the new appliance energy efficiency standards 114 to reduce energy use in an important sector. Not only would this help New York's energy efficiency efforts, but since New York receives significant pollution from upwind States, efficiency efforts elsewhere can improve New York's air.

In 1977, the DOE promulgated efficiency standards for residential refrigerators, residential room air conditioners, and fluorescent lamp ballasts. These standards have been very successful in leading manufacturers to produce far more efficient products, often 25 percent or more efficient than previous models. The DOE estimates that the standards already promulgated will save enough energy to eliminate the need for over 13,000 MW of generation capacity nationwide.

In early 2001, the DOE announced the adoption of new energy efficiency standards for four additional types of appliances-residential central air conditioners and heat pumps, residential clothes washers, residential water heaters, and commercial heating and cooling equipment. These new standards are projected to save consumers and businesses more than $19 billion through the year 2030 and to alleviate the need to build 91 new 400-megawatt power plants. The residential central air conditioner standard alone is estimated to avoid the need for 53 of these plants. It is critical that these standards be adopted by the new administration and fully implemented.

VII. Challenge and Encourage New Yorkers to Assist in Reducing Demand

115

Every New Yorker can help to save energy, clean the air, and prevent climate change. By implementing these measures, consumers will also save on their electricity bills. State officials should use available opportunities to educate the public on efficiency, renewable power and conservation options.

An average U.S. family spends close to $1,500 a year on its home utility bills (both heating fuel and electricity bills). Businesses spend much more. Unfortunately, not even including inefficient appliances, a large portion of that energy is wasted through actions such as running an almost empty dish or clothes washer, or uninsulated attics, walls, floors, and basements. Lights left on when no one is around, at home or in stores or offices after hours, consume electricity needlessly. The DOE estimates that the amount of energy wasted nationwide is about the same amount of energy that we get from the Alaskan pipeline each year.

116

114See, 66 Fed. Reg. 33 13-33, January 12, 2001 (clothes washers); 66 Fed. Reg. 3335-56, January 12, 2001 (commercial heating and cooling equipment); 66 Fed. Reg. 4473-97, January 17, 2001 (water heaters); and 66 Fed. Reg. 7169-7200, January 22, 2001 (residential air conditioners).

115See, New Efficiency Rules Cut Need for 91 New Power Plants, Environment News Service, Washington, DC, January 19, 2001. A 'more complete description of the standards can be found at Http://www.eren.doe.gov/buildings/codes-standards/stkappl.htm.

116DOE, www.eren.doe.gov/comsumerinfo/energy savers/introbody.html. Electricity generated by fossil fuels for one home plus the energy that is generated in the home (for example, a boiler) emits twice as much carbon dioxide as does one typical car in 1 year. Every kilowatt hour of electricity avoided in New York State saves almost one pound of CO2 from entering the atmosphere.

Individual consumers can do many things at home to save electricity, reduce air pollutants, and reduce their energy bills. Table A-2 in the Appendix illustrates ways, many of which are free and available immediately, to save electricity. For example, if a household increases the air conditioner thermostat in summer by merely three degrees, it would save 937 kWh/yr, and $126 annually. If all New York households did the same, then 6.3 million MWh of energy would be avoided, along with over 3 million tons of carbon dioxide. Avoiding this amount of carbon dioxide is tantamount to removing 600,000 cars in 1 year.

APPENDIX

Savings show result of replacing one incandescent bulb with a compact fluorescent bulb in one household and in each of the 6,766,000 households in NYS.

$0.75
750 hours

4 hours

4 hours.

about 6 over 3 years

10,000 hours.

1 over 6.8 years.

Table A-2

Electricity Savings, Electricity Cost Savings, and Carbon Dioxide Emissions Avoided By Implementing Efficiency and Conservation Measures in One Household and in All New York Households

Source: U.S. Energy Information Administration, Household Energy Consumption and Expenditures 1993, and Rocky Mountain Institute's calculations at www.rmi.org (1999)

STATEMENT OF THOMAS E. STEWART, ON BEHALF OF THE OHIO OIL AND GAS ASSOCIATION AND THE INDEPENDENT PETROLEUM ASSOCIATION OF AMERICA Committee members, good morning. I am Thomas E. Stewart and I serve as the executive vice president of the Ohio Oil & Gas Association, a trade association whose one thousand three hundred members are involved in the exploration, production and development of crude oil and natural gas resources within the State of Ohio. This Association has represented the Ohio industry since 1947. I am also testifying on behalf of the Independent Petroleum Association of America (IPAA). IPAA represents the thousands of independent petroleum and natural gas producers throughout the nation.

Today's hearing continues the Environment and Public Works Committee's examination of environmental laws and their interaction with the nation's energy supply and demand. My testimony today will focus primarily on several environmental issues and how they impact the petroleum and natural gas exploration and production (E&P) industry.

Let me begin by describing the unique nature of the industry and the specific challenges we face in the context of Federal environmental law. The petroleum and natural gas E&P industry is distinguished by its breadth and diversity. Oil and gas are natural resources that are found in 33 States, 12 of which are represented on this committee. There are over 850,000 producing oi! and natural gas wells in the country in areas ranging from arid plains to forests to wetlands.

The operation of these wells has been regulated since the 1920's with an increasing emphasis on environmental controls since the 1960's. This regulation has been and continues to be done effectively by the States—a reality that has been recognized by the Congress and by the EPA. Because of the diverse conditions associated with oil and natural gas production, the regulatory process must be flexible and reflect the unique conditions in a State or areas within a State. It requires the technical expertise that has been developed in each State and which does not exist within the EPA. For this reason Federal law has generally deferred regulation of this industry to the States. Additionally, because so much of Federal law is written based on regulating small numbers of point sources, some laws have created particular problems for the oil and gas E&P industry. In some instances this has resulted in specifically crafted provisions to address the oil and gas E&P industry. Complying with environmental regulations remains a significant cost for the E&P industry, with estimates of annual costs ranging from about $1.6 billion to more than $2.6 billion. These costs are particularly significant during times of low commodity prices, such as occurred during the 1998–99 oil price crisis. Equally important is understanding that independent producers, who range from large publicly traded companies to small business operations, drill 85 percent of the wells within the United States. The common factor for these independents is that their revenues and hence their ability to meet these environmental costs comes solely from the exploration, production and sale of crude oil and natural gas from the wellhead. Unlike the large major producers-the integrated oil and gas industry-the independents have no means of passing on production and regulatory costs through other operations, such as refining and marketing. Ohio's producers are "price-takers" rather than "price-makers."