Wednesday, January 12, 2011

SB 104 - A Bad Idea for Energy-Efficiency and for Montana

By Molly Severtson
Interim Director
The Policy Institute

Tomorrow, January 13, 2011, the Senate Energy and Telecommunications Committee will consider Senate Bill 104, sponsored by Sen. Jason Priest (R-Red Lodge). The bill would limit the Public Service Commission's ability to implement inverted block rate structures for electrical services. I will be there to testify before the committee in favor generally of inverted block rate structures as a concept, and specifically in opposition to Senate Bill 104.

Inverted block rate structures are cost structures in which each additional block or unit of energy above a given level is charged at a higher rate than preceding blocks. In short, the less energy you use, the less per unit you pay for that energy. Inversely, the more energy you use, the more per unit you pay for that energy.

As Montana moves forward into an uncertain energy future, it’s important to remember that energy conservation is the lowest-cost energy to which we have access. Inverted block rates create both an incentive and a reward for all consumers for reducing energy usage. In addition, increased conservation means less need to purchase power in the market or to build new power plants in the future, benefitting consumers in the long term.

Republicans are expected to argue that inverted block rate structures will disproportionately affect low-income Montanans, as their homes are often older and less energy-efficient, and they're less able to make energy-efficiency upgrades to their houses or apartments. Saying nothing of the hypocrisy of this position as Republicans just made more than 250 budgetary cuts (many of them in the social services arena) in a procedural trick, it is important to remember that Northwestern Energy’s inverted block rate structure is of benefit to 75-80% of their residential customers. Also, for every low-income household this affects negatively, there are many more high-end “McMansions” in Montana that will be affected. In addition, energy assistance programs will still be available to low-income folks who are negatively affected by the structure.

Finally, and perhaps more to the point, rate-making is an extremely complex arena and is something in which the legislature should not even be involved.

For these reasons, The Policy Institute opposes SB104. I urge you to do the same by attending the hearing, or contacting the legislators on the Senate Energy and Telecommunications Committee.

UPDATE: A Missoulian story on the hearing.

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