Tough To Unplugg

Consumers find it difficult to use less energy, perhaps because power is relatively cheap

September 30, 2007|By Paul Adams | Paul Adams,SUN REPORTER

Homeowners fumed and politicians fretted when electricity prices increased by a record amount this past summer. But did people unplug?

Not by much.

Utility records show the average Maryland household used nearly as much electricity as in past years, even when adjusting for differences in weather from one year to the next.

In the case of Baltimore Gas and Electric, significant conservation gains in the summer of 2006 were nearly erased this year as customers increased consumption again.

Energy experts and economists say the data reflect how hard it is for consumers to give up their plasma televisions, computers and air conditioning at a time when electricity amounts to less than 2 percent of the average household budget.

On a daily basis, the electricity portion of a typical Marylander's utility bill in the summertime - the most expensive part of the year - still costs about as much as a large mocha frappuccino at Starbucks. Economists say that helps explain why consumers aren't rushing to conserve.

"If something costs less than 2 percent of your income, you probably don't spend a lot of time worrying about it," said Lester B. Lave, an energy expert and economist with Carnegie Mellon University.

As much as the rate increases hurt, he said, economic studies suggest it takes more to get people to change behavior.

That could pose difficult policy questions for utility regulators and lawmakers in coming months as they consider new programs aimed at getting people to conserve.

Two big utilities, Baltimore Gas and Electric Co. and Pepco Holdings Inc., want the state's permission to invest millions of dollars in new technology and rebate programs designed to get consumers to curb demand.

At the same time, Gov. Martin O'Malley has called for a 15 percent reduction in electricity consumption statewide.

The outcome of the initiatives could prove critical to keeping prices down and preventing a potential energy shortfall in coming years.

Utilities have testified at regulatory hearings that they can lessen the need for expensive new power plants and still meet demand if consumers learn to cut back.

BGE and other utilities make most of their money by delivering electricity, not by producing it.

The latest numbers from utilities suggest consumers are making some effort to conserve, but they may need more of a financial incentive to move beyond the marginal decreases seen so far.

Customers of Baltimore Gas and Electric - the state's largest utility - curbed electricity use by 3.7 percent in summer 2006, when news of a 72 percent rate increase dominated news and political debate. Consumer outrage prompted lawmakers to temporarily cap the rate increase at 15 percent.

The push to conserve had diminished considerably by the time the remaining 50 percent of the rate increase took effect in June.

Rise in use

Preliminary data show BGE customers increased consumption this past summer by almost 3 percent compared with the summer of 2006.

The Sun looked at summer consumption because that is when both utility prices and consumption are highest. The numbers were adjusted to account for differences in weather from one summer to the next.

Projecting out five years, BGE estimates the rise in rates - more than 70 percent in two years - would cause customers to curb use by an average of 1 percent to 2 percent from current levels.

Pepco and Delmarva Power report similar numbers - with most customers curbing usage by 0.5 percent to 2 percent since rate increases took effect along with the move to deregulation.

"In the short run, people may adjust their behavior a little bit," said Mark Case, senior vice president of regulatory affairs for BGE. But industry experience shows that consumers often revert back to their old behaviors over time.

Pepco experience

Mark Browning, Pepco's director of rates and technical services, said the utility's electricity sales have "softened" slightly since a roughly 40 percent rate increase took effect for its Maryland customers last summer.

The reductions are likely the result of consumers investing in efficient light bulbs and turning up their thermostats to reduce cooling costs. But he said larger decreases may be evident in future years as consumers invest in more efficient appliances and air conditioners, he said.

Case argues the rate increases may be having less impact on household budgets than many realize. When adjusted for inflation, BGE's rates today are still lower than they were in 1995, he said.

And the utility's own analysis shows the average BGE household spends 1.2 percent of its income on electricity today, compared with 1.6 percent during the early 1990s.

In the summer - when customers use the most electricity and BGE charges its highest rate - the average household is spending just over $5 a day on electricity and distribution charges, based on 2007 numbers the utility provided. For most, the cost drops significantly in the winter, when rates are lower and air conditioners are idle.

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