Governor's Energy Plan on PCN Call-In Show

This show originally aired on June 25th but it is still available on the PCN website as a podcast. These are rough notes; there were some background distractions so I may have missed some things. Those interested in the topic should watch the entire program themselves.

Apologies in advance for any errors or misconceptions.

Callers' questions are indicated with a C.

PCN Call-In Show June 25th on Governor Rendell’s Energy Plan

Guest: Roy Kienitz, Deputy Chief of Staff

Host: Larry Kaspar

LK: What are rate caps and why are they important?

RK: About 10 years ago PA went through electrical deregulation and they went from a regulated market where the government controls cost to an unregulated market and went through a transition and now going to see higher rates.

LK: plan for deregulating electric dates back several years, why was this done?

RK: big trend in 1990’s a big trend to move away form regulated electricity, companies have to justify every dollar charged back to customers. a lot of hype that prices would go down if there was competition.

LK: why

RK; politicians said maybe if there was middle period where there was a cap on rates. Biggest part of state still under cap, estimates that next year rates could go up 20% or higher.

LK: was this known when deregulated?

RK: some people predicted this others presented rosy scenario. If rates go up 2% a year for ten years okay but going up 20% at once or 60% at once is a big deal. Energy costs have gone way up, so no surprise that cost of electricity goes up. not in our control.

LK: why in some parts of the state and not others

RK: had to do with sunk costs in different parts of state, great fear back then was that you would deregulate and then prices drop and companies would not get a return on their investment. turns out not to have been problem. turned into complicated system that caps come off at difference times

LK:

RK: in Pike Co we had unfortunate coincidence of rate cap comes off just after Katrina and gas prices spiked so bids came in and rates would go up 80%. The govt worked to fix this and got bids down. most people are not paying attention to this issue right now. Folks in H’burg trying to manage transition. Have to have transition but someone people say no. I think there is a middle way and those are the negotiations going on right now. Trying to reduce pollution and moderate prices.

LK: desire on part of govt to ramp up the prices and phase them in?

RK: Phase in now before price goes into affect

LK: budget issue

RK: The governor proposed comprehensive energy program, let people reduce use on their own and do environmentally progressive things. Top of gov’s list for this year is comprehensive energy package. let’s actually do something.

C: I built a house in Oct made sure windows have southern exposure and went online to try go to solar panels but trying to find grants or subsidies is difficult.

RK: great question, part of gov’s package is a comprehensive program to spur solar energy, up to 35% of cost, part of reason is to help homeowners generate their own power and stimulate industries to pull in companies to build solar panels here. Drew in companies that make wind energy manufacturers and want to do the same with solar.

LK: talk from the gov to subsidize

RK: cost going down but still 10K for homeowners, trying to help people finance that and eventually that will be competitive but now offering incentives. In NJ incentives of up to 50% that has created huge boom in solar polar installation

LK: where go for info

RKL grants not available yet. proposed to create program but assembly not said yes or funded, then will come up with guidelines, etc.

C: gov’s plan no one single answer. solar. In Bucks Co a company that has generated 1000 green collar jobs. In PA approximately 70 windmills installed but higher demand. what are chances that a citizen can be heard, what is env issue that is holding this up

RK: when we work with energy producers who want to come in an build wind farms. now best way is to use high windmills, 400 feet tall. not every land owner wants to live near one of these things. some local govts or homeoweners don’t want, some concern that turbines can harm some birds or bats. that’s a legitimate concern and there are ways of handling it working with wind power developers to build mills. two plants in PA to build entire mill working full time but limit to what they can produce now

LK: solar panel farm at Navy Yard?

RKl doesn’t know specifics, know some of it. commonwealth right now doesn’t have a development assistance plan for energy. we need to do this for environment and become next big industry. we were on cutting edge of railroad and coal and oil industries. we are looking to get into an industry on the up slope.

C: deregulation originated in Reagan era, failed conservative economics, like airline industry. possibility of strong resurgence of D’s, can be rescinded by D congress.

RK: on elective deregulation side there is a big federal side, interstate deregulation of industry. most direct effect happens at state level. this law was passed in pa under Ridge, half of states went through that. Turned into huge disaster in CA, threw out the governor, huge mess, partly because they did it in a particularly bad way, Enron. Now a movement in PA house to reregulate electricity and that is gaining some support.

LK: smart meters

RK: part of deregulation is, utility company charges flat rate per unit, but electricity more expensive at different times of day. a smart meter lets you pay more when electricity expensive and less when it is isn’t. You can use appliances, etc when cheaper or turn off ac for short periods during expensive times. smart meter can communicate with appliances to save a little or a lot. our goal is to put into hands of consumer what they want to do, pay flat rate or learn how to conserve more.

LK: expense in installing and maintaining?

RK: utility company pays for box, in a set period of time, 6 to 8 years, they have to give all consumers a smart meter. The company having a smart meter means they never have to send a technician to your house, can turn on and off electricity remotely so don’t have to have someone come out when you move.

LK: how does it look in the legislature

RK: diff bills passed house or senate, more meetings, hopefully. The governor’s big fear is that people will say it is complicated so lets do it later.

LK: Bud Geroge’s bill that electric companies have to reduce output by 2%

RK: telling companies they have to get electrical usage to shrink. California successful, hasn’t’ seen increase in electric use in 15 years. work with customers to install efficient lightbulbs and appliances, motion sensor lights. many little technologies that gradually add up. we’d like to bring that to PA. it’s win win.

LK; ethanol?

RK: the easiest way to make ethanol is with corn, that was a real growth market for the last 4 years and now corn prices have shot up. the actual scientific studies show 10% of price increases due to ethanol but rest due to weather, etc. Ethanol made from corn never long term solution to gas. cellulosic ethanol technology almost ready but not quite. now really robust market for ethanol so more incentive to get project going. hopefully in 4 or 5 years little corn but switch grass , etc used for cellulosic. in high pollution areas 10% of gas is ethanol but want to meet with cellulosic. eventually 10% all over state.

C: oil in PA, need to do cold oil

LK: yes pa has oil but we don’t’ have much left compared to other areas. can turn coal into oil which has been investigated. trying to develop this for 10 years but not yet developed. things coming on line are windfarms, etc. coal to oil is very expensive, people not willing to put money into it, but climate changes effect could be worse than importing oil. import a billion gallons are year. 10% ethanol, X% of diesel if biodisel. will be working at this for decades. Truth is worldwide market of oil is established by what it takes to get it out of the ground in the Middle East, regardless of where it comes from.

C: interested in looking into solar panels, a lot of the Amish got into solar panels. uses heating oil but found out that it would cost a couple of thousand dollars to do solar.

RK: I could not agree with more. very heartening to hear people call in and be interested in this. This is exactly what motivates the governor. to try to put a program together. Still at its early stages but states that have created incentives to do this have seen success.

LK: how much power generated

RK: average house has enough roof space to generate all the power they need, depending on number of trees, which direction house is pointing, need someone to come out and look at house, do the math and tell people how much it would cost and what they would get out of it.

C: You mentioned California, don’t they have a high budget deficit and high taxes

RK: California is a big place and they do a lot of things, history of poorly managed state budget, boom and bust economy. completely and totally separate from their energy policy. 20 years they said they didn’t want to see increasing energy costs, so work on making cars more efficient and other uses more efficient, and has been good for their economy.

LK: what is budget picture, how healthy in PA?

RK: most of our surrounding states have big budget deficit, but we have a surplus. investment in new jobs has held up as other places seen those things crashed. our employment picture has held up longer, tax revenues held up. governor believes that we have been willing to invest in things that cause job growth. not as tough for us as others.

LK: what energy efficiencies in government?

RK: when the governor was elected X% of energy form renewables, now 30% goal is 50%, fuel efficiency in state cars, reduce energy consumption of building s10%. governor really willing to serve as a test bed in buildings we run

C: solar panels to heat a house would cost $30K an only about 30% efficient, ethanol not a product that has grown in PA. Float some bonds and get nuclear energy back on course and plug in electric cars.

RK: something to what he says. nuclear energy is about 20% of US use, some countries much higher. Anyone living in H’burg area in 1978 understands there are some negative. nuclear plant cost 5 billion. last new plant in PA 1978. state gov’t is never going to have enough money to have a say whether someone will spend 5 billion, but wind, solar occur on a small enough scale that we can have an effect.

C: live in a home with a geothermal heat pump. so little talk of this, pay $90 a month to cool my house. want to replace pump as is 20 year sold. been all over state website but cannot find out who is making these systems. prev caller wrong, good possibility for wind

RK: PA has a bunch of areas in state with class 5 wind resources, highest level, can generate a lot of power there. Good point on geothermal. exploiting differ in temp between hot summer heat and cooler underground, harness natural heat or cool, or tap into cool water in lakes. geothermal included in governor’s plan

LK: legislature serious?

RK: more so than last year.

C: solar panels, retired people can’t afford costs, in winter sometimes months at a time roof covered with snow

RK: not solution for everyone, but if we can come up with a program that would subsidize a third of the cost would work for some people. The way we do energy now you don’t pay for equipment but pay monthly bills, but with solar panels pay a lot up front but none month to month, finance capital expense in other ways. In 5 or 10 years when costs of solar panels come down it will be easier. The $30K is might be a little high but range is right, but the issue is how much is $100 or $200 a month for 30 years, if cost balanced out.

C: roads, in other countries putting pipes under roads to heat building. how does this fit into energy picture?

RK: that is one I have not heard of,

C: electrical engineer by background, believes solution of the future is electricity. solar panels extremely inefficient. wind power and ethanol not the solution, should look at centrally generated electricity, can we convert coal we have into clean burning coal?

RK: concern is carbon dioxide emissions. technologies being developed where coal is burned and then capture carbon dioxide. don’t actually exist yet but people working on it. if the technology were ready it would cost billions. would love to see it built in pa but not quite ready yet. doing some work to try to prepare for it, where would it be best located. there is a future in it but not quite ready.

LK: what thinking going into Rendell energy program, climate change

RK: we’re looking to take individual steps of implementation that will take individual steps to lower carbon emissions. Hopefully next year in DC there will be talk of a national policy.

C: hydroelectric not mentioned

RK: we discuss it internally. can we find locations . some smaller programs. not sure it could be scaled up to the level that solar and wind is. big boom in 50s and 60s and then big environmental backlash because of dams and fish. perception problem but possibilities

LK: summary

RK: 4 or 5 things, energy fund in pa paid for by energy companies to invest in renewable, want to get to point where all fuel sold for cars and trucks has renewable component, want to make technical changes and introduce stability in electricity market, get elect companies to conserve, will we give ratepayers a break when rate caps come off.