April 2009

Tackling Climate Change

CONTENTS

Defining Affordability
Rising bills call for legislative solutions that keep consumers in mind

by Megan McKoy and Scott Gates

Tackling Climate Change:

Oct. 2009 - "In search of a better battery" Sept. 2009 - "Cleaner generation"
Aug. 2009 - "The new nuclear"

July 2009 - "At the speed of light"

May 2009 - "Renewing Innovation"

April 2009 - "Defining affordability"

March 2009 - "More productive kilowatts"

Feb. 2009 - "Citizen lobbyists"

Jan. 2009 - "Planning our energy future"

Dec. 2008 - "Affordable & reliable"

Oct. 2008 - "Can we capture carbon?"

Aug. 2008 - "Reactor renaissance"

July 2008 - "Putting you first"

June 2008 - "Running out of power"

May 2008 - "A sound approach"

Hard times have folks on edge, forcing many to make difficult choices on what bills to pay each month. To complicate things, Congress has begun debating national energy and climate change policies that, if poorly developed, could dramatically increase the cost of electricity.

In all of this, electric cooperative members across the country agree on one thing: There’s not enough money to go around.
“Our next door neighbor is 77, and her husband died last February,” recalled Jean Biggs, an electric co-op member in Delaware. “Now all she lives on is her Social Security. I looked over there one day — it was 90 degrees and her windows were open. So I went over there and I said ‘Is your air conditioner broken?’, She replied, ‘Jean, I can’t afford to run it. I don’t have the money.’”

“Prices are going up,” notes Carl Weston, an electric co-op member in Alabama. “I’m fortunate enough that I can get along and do little odd jobs to make a little extra money to pay the extra power bills, but there are some people that have nothing. I feel so sorry for some of them. I think the government should move toward getting power as cheap as possible.”

“My wife and I are retired but still young enough that we’re working part time,” says Janis Baskers, an electric co-op member in Michigan. “We can probably absorb electricity cost shifts right now. But as time goes on it will become more and more difficult to deal with dramatic increases. We need to have a national plan that provides clean, affordable — and that’s the key word, affordable — energy.”

Why are electric rates rising?

The factors behind rising electricity rates compare to buying a car. Co-op loads have grown to the point that any excess generation capacity built decades ago has been used up. It’s like a car that’s paid for. To replace it with a new one will be more expensive.

Buying a car burdens a household budget, but generally only for a short time. While major repairs may be needed occasionally and gas remains a regular expense, the vehicle continues to provide reliable transportation for years after the last payment is made.

Costs for electricity are similar. It’s expensive to build a power plant. But once it’s paid for consumers can rely on a facility that will continue to churn out reliable, affordable electricity for decades to come.

The United States last went through a power plant building surge — and corresponding spike in electric rates — in the early ’80s.

When more electricity was needed in the mid- to late-1990s, “peaking” units were installed to produce power only when large numbers of consumers needed it. The majority of these units were fueled by natural gas, a fast and cheap source of power.
Electric co-ops alone constructed more gas-fired turbines in five years than they had during the first 50 years of the rural electrification program.

Today, electric co-ops meet 62 percent of their power requirements from coal plants, 15 percent from nuclear plants and 10 percent from natural gas. Hydropower and other renewable sources (like wind and landfill gas) make up 11 percent; the remaining 2 percent primarily comes from diesel.

Platte-Clay Electric Cooperative’s Dave Christensen uses an infrared camera to help with an energy audit at a member’s home. Members are turning to their electric cooperatives for help making their homes more energy efficient. Bob McEowen photo.

Changing energy policy

With demand for electricity rising once more and capacity maxed out, utilities again need to build power plants. Over the next decade, co-ops must build 21,000 megawatts of generating capacity just to keep the lights on. But what worked in the 1970s, ‘80s, and ‘90s may not get the job done in 2009 and beyond.

Unfortunately, energy and climate change policies under consideration in Washington, D.C., may limit the diversity of fuels available. This could present electric cooperatives with their greatest challenge in history.

“When you look at the Obama administration and the makeup of Congress, there’s not much question they’re going to take up a climate change bill, and they likely will pass one,” explains NRECA CEO Glenn English. “It’s clear that lawmakers simply do not want to see any more coal-fired power plants built until we can cost-effectively remove and store the carbon emitted. This opposition will likely spill over to any generation using carbon-based fuels.

“Co-ops recognize that to ensure a reliable supply of power there are going to be substantial increases in costs,” he adds. “The question then becomes: ‘What can we do to minimize those increases? And what can we do to help our members?’”

One thing is certain for the future of energy in America: electric cooperatives, while raising concerns about increases in cost, are committed to working closely with Congress to minimize the impact these changes will have on members.

Co-ops lead efficiency efforts

English believes energy efficiency, which will reduce overall demand for electric power, is one key to meeting new energy policy challenges while maintaining affordable electricity.

“We’ve got to tap government programs to help reduce the amount of power low-income consumers need,” says English. “These folks, who have the hardest time paying electric bills, also have the least efficient homes.”

Roughly 92 percent of all electric co-ops actively promote energy efficiency or conservation in some fashion. According to the U.S. Energy Information Administration, the nation’s electricity consumption is growing annually at a rate of 1.07 percent. This means by 2030 demand will have shot up a full 26 percent. Energy efficiency efforts can shave this growth. The Electric Power Research Institute, a research consortium made up of electric utilities, including electric cooperatives, estimates that a concentrated national focus on efficiency could result in annual energy savings of 22 percent, or 236 billion kilowatts, by 2030.

“Our Energy, Our Future”

Affordability plays a key role in NRECA’s “Our Energy, Our Future” grassroots awareness campaign. The effort, which seeks participation from millions of co-op consumers, focuses on educating Congress about the need to craft energy and climate change policies that will support a diverse mix of power generation while keeping electricity reasonably priced.

“We’ve always counted on our consumers being part of the solution,” relates English. “It’s not a case where you can sit back and expect somebody to take care of you. It’s a case in which we’ve all got to work together.”

This year, “Our Energy, Our Future” looks for co-op consumers to ask if Congress will work with electric co-ops to ensure reliable power is available at a price consumers can afford.

“If consumers don’t get engaged, then obviously electric bills are going to be far higher that they should be and people will suffer,” warns English. “Without our consumers’ help, local co-ops will not be able to stop it. Consumers could even find themselves in a situation where reliable electric power may not be so reliable. The stakes are enormous.”

McKoy and Gates are writers for the National Rural Electric Cooperative Association. To get involved with the Our Energy campaign, visit www.ourenergy.coop.

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