Making Conservation Profitable

STEVEN WASYLAK, maintenance director for the Christian Hill Nursing Home in Lowell, Mass., decided to do his part for energy conservation. So he replaced some incandescent bulbs with energy-saving fluorescent ones. His patients liked the brighter light; he liked the longevity and decreased heat of the bulbs. And the bulbs were free. He got them through a conservation program started by a local utility company and an environmental group. These seemingly strange bedfellows - New England Electric System and the Conservation Law Foundation - have united in a plan to invest in conservation measures without having the utility lose money.

Massachusetts Electric, one of New England Electric's three subsidiaries, started the program in July and plans to spend $65 million next year in high-efficiency lighting, cooling, heating, and building structure improvements in selected commercial and industrial buildings, and small restaurants and shops, as well as new and existing homes.

Conservation made profitable

Traditionally the ratemaking mechanisms reward the sale of energy and discourage conservation.

Under the plan, the company would recover what it has spent, as well as a 15 percent incentive, through a rate hike. Customers would pay more per kilowatt hour, but those who took advantage of the conservation programs would end up paying less, says Al Destrobats, New England Electric's vice president for demand and least-cost planning.

``We're sending a contrary signal,'' says Armond Cohen, a lawyer with the Conservation Law Foundation. ``The less you sell, the more you make. It's paying people to do what's in the public interest.''

``It's a plan to get free enterprise to work on behalf of the environment instead of against it,'' Mr. Cohen says.

According to company officials, these investments can save Massachusetts Electric customers more than $160 million in avoided construction of new power plants and power purchases.

Regulatory approval needed

The hitch is that the proposal has to be approved by state regulatory commissions. The company filed its plans in the three New England states where the company has subsidiaries; it expects to hear from Rhode Island and New Hampshire commissions by the end of the year, and from Massachusetts in the spring.

Six other utilities in Massachusetts are involved in similar plans. The reasons are a combination of economics and growing influence of environmentalists.

``We want to provide our customers with an energy conservation program which is a cutting-edge environmental protection effort,'' says John Rowe, New England Electric System president and chief executive. ``And we want energy conservation to be a profitable component of our business, not just a sideline.''

The utility's motives are not entirely altruistic. The plan developed out of settlement discussions after environmental groups sued against Massachusetts utility companies for not investing more in conservation.

At the same time, utility companies are finding that investing in power plants is not as sure as it once was. Nuclear plants are costly and meet with public opposition. Even nonnuclear plants take a long time to repay investments. ``The nice thing about conservation is, it's a stream of tiny investments,'' says Cohen. ``You can turn it turn on and off like a spigot.''

``The general environment in Massachusetts and New England is that we're in a tight electrical supply situation,'' says Rachel Shimshak, director of policy for the state's executive office of energy resources. ``The time was ripe for working with utilities to promote greater energy efficiency and savings for consumers.''

The National Association of Regulatory Utility Commissioners (NERUC) passed a resolution in July endorsing the idea of making conservation more profitable for utilities.

Twelve states are considering incentive programs, says Richard Morgan, an economist on the NERUC staff subcommittee on energy conservation. This is the latest wrinkle in demand-side management, a buzzword in utility company circles.

Most companies now have a conservation and load management department that encourages customers to use less power and to shift use to off-peak hours.

``There is a strong and growing trend to mine energy that's now being wasted as the most economical and environmental alternative,'' says Alan Nogee, energy policy analyst at the Massachusetts Public Interest Research Group, an environmental organization.

Working with traditional foes

At the same time that utilities are being forced to adopt conservation measures, environmental groups are also learning to work with their traditional adversaries.

The Conservation Law Foundation has aggressively pursued environmental causes. Its lawsuits have stopped attempts by the United States Department of the Interior to allow offshore oil drilling at the Georges Bank fishing ground, jump-started the long-delayed cleanup of Boston Harbor, and thwarted a US Forest Service plan to double timbering in New Hampshire. But Cohen sees a need to work in concert with utilities for energy conservation:

``In an age of fiscal austerity, it's not likely that the government is going to step forward and make large-scale energy-efficient investments. Electrical production accounts for two-thirds of the acid rain problem and about a one-third of the global warning problem. Our position is that we have to work together or perish.''

Ms. Shimshak adds: ``Parties that used to be on completely opposite sides of issues are sitting down, working with mutually agreed-upon consultants, creating programs that will save money, save energy, help meet our future energy needs, and not hurt the environment - that's pretty remarkable.''