McNees, Wallace & Nurick LLC: Pennsylvanians Penalized As Companies Are Forced To Waste Money Under Guise Of Energy Efficiency

McNees, Wallace & Nurick LLC: Pennsylvanians Penalized As Companies Are Forced To Waste Money Under Guise Of Energy Efficiency

By Pamela C. Polacek

Anyone who has paid an electric bill knows the importance of energy efficiency.

Turn off the lights when you leave the room, install energy-saving light bulbs, keep the thermostat at a reasonable temperature: Every day, energy consumers, both individual and corporate, analyze their energy use and make decisions that help them save money and decrease their carbon footprint.

For large companies that use a lot of energy, looking for energy efficiency gains is part of their lifeblood. These manufacturers have been doing energy efficiency analyses on their own for years as a way to save money. Many have efficiency engineers who are dedicated to that task and, in most cases, have more expertise than the utilities.

Unfortunately, those efforts and other business investments are being impaired by a state policy that requires customers to pay for mandatory utility-administered energy efficiency and conservation programs.

In 2008, Pennsylvania established Act 129, an energy efficiency and conservation law that requires all electric companies with at least 100,000 customers to implement an energy efficiency program approved by the state's Public Utility Commission.

State law allows the major electric companies to spend up to $250 million across the state to meet energy savings goals. Some of that money goes into audits of your home or business energy use, tips on how you can save money, and to replace light bulbs and air conditioning equipment.

Depending on the customer's needs, funding might also go to a custom project based on other energy savings opportunities that are unique to the customer's building, such as installing an energy efficient elevator system. For many manufacturers, however, the plans generally do not provide sufficient funding for the larger process-related initiatives that they can pursue to be more energy efficient, such as replacing a melting furnace that can cost millions of dollars.

Large manufacturers end up paying a surcharge on their electric bills to support energy savings projects for other customers throughout the utility's coverage area. In some cases, manufacturers subsidize efficiency projects for their competitors. Our firm represents large companies that pay tens of thousands of dollars per month to meet these mandates.

For large manufacturers using a lot of energy, even the smallest change in energy price means a large change in cost. These companies are already motivated to do all they can to reduce energy use as part of growing their bottom line. Requiring them to pay into this program diverts resources that could be used for important business projects, such as more significant process changes, technology upgrades or to employ additional Pennsylvanians.

It makes more sense to allow manufacturers to use the $20,000 or $30,000 a month that is currently spent subsidizing these mandated energy plans for projects that could benefit their business and the economy.

We now have an opportunity to fix this problem.

Legislation now in the state Senate would allow companies to opt out of these state-required energy efficiency programs. Senate Bill 805, sponsored by Sen. Lisa M. Boscola, D-Lehigh County, would allow large commercial and industrial energy users to voluntarily opt-out of Act 129's utility-administered Energy Efficiency and Conservation (EE&C) Plans.

Senator Boscola puts the case simply: "The vast majority of these large customers are being forced to participate in EE&C Plans that promise them no benefit while still costing between 2 percent and 5 percent of their total electricity spend."

Of the 24 states that have mandatory EE&C programs, 13 of them allow larger customers to opt-out. Manufacturers in those 13 states enjoy a competitive advantage over our own companies.

When Pennsylvania manufacturers are forced to spend additional money to subsidize state energy savings mandates, everybody pays. Not only are costs passed onto customers, but anything that hurts the competitiveness of our manufacturers threatens the more than 500,000 workers these companies employ.

The primary beneficiaries of the mandatory programs are the limited portion of the accounts that get funding, and the consultants that advise them using the Act 129 funds. Despite claims to the contrary, the customers who are funding the projects do not see a measurable decrease to market prices to offset this subsidy. The Public Utility Commission determined that the impact was too speculative to warrant study.

Companies will always invest in energy efficiency, provided the investments deliver a return. Competition in the manufacturing sector will ensure these companies will always look for ways to save energy – and costs.

It is time for Pennsylvania to level the playing field for its larger employers. It's good business – and good government.

Pamela C. Polacek practices in the Energy and Environmental Practice Group for McNees, Wallace & Nurick, LLC in Harrisburg.

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McNees is a full-service law firm based in central Pennsylvania with more than 130 attorneys representing corporations, associations, institutions and individuals. The firm serves clients worldwide from offices in Harrisburg, Lancaster, State College and Scranton, PA; Columbus, OH; and Washington, D.C. McNees is also a member of the ALFA International Global Legal Network. www.mwn.com | @McNeeslaw | LinkedIn

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