Energy conservation and efficiency

May 2009

Perhaps you have noticed in recent years our emphasis on marketing and load building has decreased and for all practical purposes has been eliminated. At least recently, we have begun putting more emphasis on promoting energy conservation and efficiency which of course, if effective, will reduce our energy sales.

Being a business administration graduate, this has been somewhat of a tough swing for me. Electric utilities are businesses with large amounts of fixed costs. Fundamental 101 Economics dictates that the best way to reduce per unit cost in our type of business is to increase sales and spread those fixed costs over more kilowatt-hours. So, why are we and most other electric utilities getting away from the traditional best practice for this type of business?

As it turns out, there are two basic driving forces for this change. First, virtually all electric utilities are in need of added generation capacity to meet our growing demand. New generation is always more expensive than existing generation, and with the newer environmental regulations, it is expected to be a great deal more expensive. This has spawned the theory that it may be less expensive to “find” generation capacity in our own system by incenting existing customers to use less energy. The theory could hold true even if the electric utility needs to spend money providing these incentives. What it really means is that from the utility standpoint, encouraging energy conservation and efficiency may have an adverse effect on our system requiring higher electric rates. Ironically, it still may be a good idea because the alternative of building additional expensive generation will increase our rates even more.

The second basic driving force toward energy conservation is the American Recovery and Reinvestment Act of 2009, otherwise known as the Federal Stimulus Package. Included with this Act is an allocation of millions of dollars for each state to be directed toward the energy sector. The funds allocated to North Dakota will in turn be distributed through a state program. The North Dakota State Energy Program is currently being drafted, but it is almost certain to contain incentive money to promote efficient use of electricity. Likely uses of the funds will be rebates for the purchase of efficient energy devices, such as compact fluorescent light (CFL) bulbs and programmable thermostats. There may be incentives to install geothermal or high efficiency air source heat pumps.

When the state program is developed, we intend to be at least one source of information as to how you can take advantage of the program and cut your energy usage. We hope to do this by including information in the Nodak Neighbor, providing information on our web page, and having knowledgeable people who can answer your questions about energy saving opportunities. Watch for this information, as it will be useful if you wish to mitigate higher energy prices in the future with more efficient use of this energy.