Avoided cost. There's a term we don't deal with much nowadays, but there was a time when it was everyday talk in the power industry -- thanks to the Public Utility Regulatory Policies Act, the law that observed its 30th birthday in November, as my colleague Peter Maloney recalled in a post this past Wednesday. He took a look at PURPA in our weekly publications, and will explore it and its progeny more in the coming months. At any rate, way back when, PURPA regulations made qualifying power facilities get paid amounts linked to utilities' avoided costs.
In the 1980s we even published something called Avoided-Cost Quarterly. Not everyone can say that. But the term is being used in a different context now.
It was delightful and somewhat nostalgic, then, to stumble on it in a Forbes magazine article describing the regulatory devices to promote conservation. That's the context for "avoided cost" today. Forbes' November 24 issue, "Energy + Genius" (subscription required), puts efficiency/conservation in the context of the multifariously, rapidly changing energy conversation. It touches on almost countless energy subjects, with some seriously cogent, though relatively short, pieces on conservation, energy storage, nuclear fusion, a Chinese clean-coal technology inventor, plug-in vehicles and lots more, including transmission.
The transmission piece focuses on American Electric Power, ending with AEP chief Michael Morris hoping for "finally ... an adult energy bill" out of Congress -- meaning something that will get transmission built, and doubtless other things. The definition of "adult" will differ.
The conservation article features Jim Rogers of Duke Energy, whose "Save-a-Watt" program is under consideration by states. Duke would get a return on efficiency investments, getting paid on an avoided-cost basis. The article also mentions Public Service Electric & Gas, which has a different plan for increasing energy efficiency in New Jersey. Both are different from "decoupling," which California instituted for its utilities many years ago.
"Decoupling is a good idea," Rogers says in a Forbes interview. "I can easily see decoupling and save-a-watt both being deployed. But decoupling to me only makes a company economically indifferent, and I can't think of a single thing that's ever been achieved by indifference."
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