You Can't Bully Me on Energy Efficiency, Grant Bosse and the Union Leader

One of my heroes is the late Peter W. Cox, co-founder of the legendary alternative newsweekly Maine Times.  In 1986, Peter gave me one of the biggest breaks of my career by adding me to his stable of staff writers – all of whom were eager practitioners of the kind of activist journalism Maine Times helped invent, and all of whom tended to inspire angry letters to the editor from whichever scions of the status quo we had offended that week.

Peter published almost all such letters and always refused our entreaties to be allowed a rebuttal.  Time after time, he would explain how unseemly it would be for the paper or its editorial staff to get the last word in an argument with a reader.   According to Peter, silence was the most eloquent rebuke in such circumstances.

Grant Bosse is no Peter Cox.  And, of course, the newspaper of which Bosse is editorial page editor is no Maine Times.

My proof of that begins with the editorial Bosse penned on August 10 about New Hampshire’s new Energy Efficiency Resource Standard (EERS).  The subject is of interest to me because, having forsaken journalism for law and Maine for New Hampshire, I now serve as the Granite State’s consumer advocate, tasked with representing the interests of residential utility customers before the New Hampshire Public Utilities Commission (PUC) and elsewhere.

In my present capacity as head of the Office of Consumer Advocate (OCA), I am convinced that the single most important thing we can do in the realms of electricity and natural gas is deploy every last bit of cost-effective energy efficiency that technology allows.  Bosse and his newspaper disagree.

They editorialized that ratepayer-funded energy efficiency programs offer false promises.  According to them, we’re just raising utility rates to pay for programs that increase rather than decrease overall energy consumption.  “Improving your gas mileage makes every mile cheaper, so you drive more,” the editorial claimed. “Making appliances more efficient makes them cheaper to operate. Throughout history, each advance in energy efficiency has increased consumption.”

Naturally, I fired off a letter to the editor.  Said I, about the claim that energy efficiency programs increase consumption:  “You cite no evidence to support this allegation, as to ratepayer-funded efficiency programs in New Hampshire, because no such evidence exists.”

Not only did Bosse spurn the high road by deeming my argument unworthy of rebuttal, he published my letter along with a patronizing and misleading column in rejoinder in which he brandishes something called the “Khazzoom-Brookes Postulate.”  According to Bosse, I’m not just ignorant of history – i.e., the postulate and its antecedent, the Jevons Paradox, first described in 1865 -- but I am also someone “who thinks he knows what’s best for consumers, and it’s paying higher electric rates to pay for their neighbor’s storm windows.”

Others can decide whether I am an ignoramus because I had never heard of the economist J. Daniel Khazzoom, now retired from U.C. Berkeley, before I read about him in the Union Leader.  I have, however, been involved in ratepayer-funded energy efficiency programs since 2001, and one cannot do such work without being aware of what is commonly referred to as the “rebound effect.”  Regardless of whether you call it that, or the Jevons Paradox, or the Khazzoom-Brookes Postulate, the claim is that if you make consumers more energy efficient they will just turn around and increase their usage.  “Buy a more fuel-efficient car, drive more,” is the simple illustration offered by Yale University economist Kenneth Gillingham and his co-authors in their article “The Rebound Effect and Energy Efficiency Policy,” published last year in the Review of Environmental Economics & Policy.

Jevons was right in 1865.  The invention of the steam engine made coal a more energy efficient fuel, which increased rather than decreased consumption of the resource.  But this hardly means that every efficiency gain in every economic context has the same effect.  Swapping your monster pickup for a Prius won’t cause you to make two laps a day between home and work instead of one, for example.  Gillingham and his colleagues concluded that the existing economic literature “does not support claims that energy efficiency gains will be reversed by the rebound effect. Thus we would argue that the continued focus on backfire in policy debates is largely unwarranted, and is perhaps distracting attention from the most important issues.”

Translation:  No ‘gotcha’ moment for Grant Bosse in relation to my office’s steadfast commitment to ratepayer-funded energy efficiency programs.  I never said the rebound effect was a myth; I merely observed that no evidence exists that the efficacy of New Hampshire’s energy efficiency programs has been undermined by consumers increasing their energy use.  Since Bosse cannot rebut this contention he chose to distort it by quoting it selectively and accusing me of being insufficiently schooled in economic history.

You don’t have to be a PhD economist to see the reckless falsehood in the claim that ratepayer funded energy efficiency programs amount to nothing but you being forced, through your electric rates, to pay for your neighbor’s storm windows.  Here’s an example of how it really works:  Your neighbor needs new storm windows because her house is leaking all kinds of energy as a result.  But replacing the storm windows isn’t cost-effective; she could borrow money to complete the project but the monthly payment would exceed the monthly savings on her energy bill.  So the ratepayer-funded energy efficiency program kicks in a rebate, the homeowner’s savings now exceed the monthly loan payment, and everyone comes out ahead if the reduced energy usage lowers the costs that all customers pay.

That’s what we mean by “all cost effective energy efficiency,” the official mantra of the energy efficiency resource standard.  As long as an energy efficiency measure meets a rigorous cost-effectiveness test, there are no false promises because the subsidy paid by all ratepayers to achieve the reduced consumption will always be less expensive than the next unit of energy your utility (or competitive energy supplier) would otherwise have to acquire.  Making sure that monitoring and evaluation of energy efficiency programs is truly rigorous would be a way better use of the Union Leader’s resources than is lecturing the state’s consumer advocate about arcane economic theories.

The EERS just approved by the PUC is an important step forward, but it is still a relatively modest one.  Our Energy Efficiency Resource Standard doesn’t kick in for a full year.  The utilities held out for a “heads-I-win-tails-you-lose” mechanism that guarantees them reimbursement for lost fixed-cost revenue even if they don’t actually lose it.  The three-year commitment to reduce electric sales by 3.1 percent and natural gas sales by 2.5 percent makes ours not just the last but also the least of the EERSes in New England.  New England’s most ambitious EERS, in Massachusetts, calls for savings of nearly 3 percent each year.

So we should be doing more rather than less ratepayer-funded energy efficiency.  Grant Bosse and the Union Leader are entitled to disagree.  But when they resort to obscurantism, ad hominem attacks and straw-person arguments, they’re just wasting energy.