11/5/16 - CRAIN'S: Guess who gets zapped by Springfield's latest energy-efficiency plan?

By STEVE DANIELS

Who knew cutting electricity usage could cost so much?

The state's large industrial and manufacturing companies would see significant increases in their electric bills to help bankroll a dramatic expansion of energy-efficiency programs run by Commonwealth Edison and downstate utility Ameren Illinois as part of a wide-ranging draft energy bill circulating in Springfield.

Over the next 13 years, the efficiency charges alone would cause electricity costs for the average Illinois industrial user (as defined by the U.S. Energy Information Administration) to rise $8,271 in 2020, scaling up dramatically to an increase of $43,871 by 2030, according to an analysis by Argonne National Laboratory.

For large manufacturers like steelmakers, the efficiency charge, which would gradually increase by more than five times in that period, would add hundreds of thousands in costs in the short term and potentially well over $1 million by 2030.

The average monthly electricity charge paid by Illinois manufacturers last year was 6.67 cents per kilowatt-hour, according to the EIA (see the PDF). The efficiency charge alone for larger industrial customers would boost that by 1.7 percent in 2020 and 9 percent in 2030.

For a state whose business climate is a persistent source of concern and debate as some manufacturers consider relocating to cheaper locales, the approach raises questions.

"This could be a tipping point for some companies," says Mark Denzler, vice president and chief operating officer of the Illinois Manufacturers' Association. "Energy (costs) have been one of the few advantages in Illinois for the last 20 years."

IMA, an influential voice in the state's capital, hasn't yet taken a position on the bill as a whole because it hasn't seen the latest draft. But the Illinois Industrial Energy Consumers group, representing the largest industrial players in the state, opposes it.

Much of the focus on energy politics in Illinois has centered on the imminent closure of two of the state's six nuclear power plants, which owner Exelon has offered to keep open if lawmakers approve a statewide surcharge on electric bills to funnel hundreds of millions of new revenue to them. That also would hike costs for manufacturers.

But billions in projected statewide savings on energy use from the efficiency initiative are key to selling the legislation to skeptical lawmakers and the public. Those savings enable proponents to claim the bill won't really cost ratepayers much if anything over time even though it contains several substantial surcharges to cover the efficiency program, nuclear bailout and the financing of new wind farms and solar projects.

In the abstract, no one opposes more-efficient use of electricity. It saves money and helps the environment, and a 2007 Illinois law requires utilities to administer efficiency programs to save gradually increasing amounts of electricity. That led in the early stages to the sale of cheap compact fluorescent light bulbs subsidized by ComEd, courtesy of the ratepayer-financed efficiency program.

But ComEd executives have said they've already achieved the "easy" efficiency gains from simple household changes in behavior. To achieve the audacious goals called for by groups like the Natural Resources Defense Council (the bill requires that the 800,000 megawatt-hours saved by the ComEd program so far increase over the next decade-plus to 20 million megawatt-hours) will mean more aggressive action by large commercial users, the green lobby says.

Large industrial customers typically invest in efficiency upgrades with relatively short-term payback times, but there's more they could do, says Chris Neme, principal and co-founder of Hinesburg, Vt.-based consultancy Energy Futures Group, which works with NRDC.

"The evidence over the last 20 years suggests that even for very large and sophisticated customers, they don't come close to getting all the cost-effective sources available," he says.

NRDC estimates that the savings from efficiency outnumber the costs by about 3 to 1.

But advocates for large commercial users counter that, with energy costs a major concern, industrials have been investing in efficiency for years—well before it became a cause celebre in the age of climate change. They are resentful that they're being asked to pay so much more for programs controlled exclusively by the utility that likely will benefit peers and competitors that haven't invested as much in saving electricity.

IMA's Denzler says manufacturers want the ability to opt out of the utility program and pursue their own initiatives, which they can do in Illinois to comply with requirements to reduce natural gas consumption. The bill doesn't currently allow for that.

Also raising the costs for power consumers, both commercial and residential, is that ComEd would be allowed for the first time to earn a profit from administering the efficiency programs. Under current law, ComEd recovers its costs via a surcharge on customer electric bills but isn't permitted to earn a return.

Neme, representing NRDC, says more-efficient use of electricity benefits all customers, whether they participate directly in the programs or not, by holding down prices and lowering their bills. Efficiency gains are a particularly potent price suppressor if they take hold at peak-demand times like hot summer afternoons. "That's the challenge of efficiency," he says. "The benefits don't show up on your bill in as visible a way as the costs do."