Carnegie Mellon Electricity Industry Center

2006-07 Seminars

Motivating Municipal and Co-operative Utilities to Reduce Greenhouse Gas Emissions: The Case of Energy Efficiency and Conservation.

Dr. Elizabeth Wilson
Assistant Professor of Energy and Environmental Policy and Law
The Humphrey Institute of Public Affairs at the University of Minnesota

Abstract
Approximately 39% of U.S. carbon dioxide emissions originate from the production of electricity and any global policy to limit greenhouse gas emissions must target this sector, yet almost all research has focused upon Investor Owned Utilities (generating roughly 80% of electricity), and ignored unique challenges facing rural cooperatives and municipality owned utilities (with 20% of generation, varying significantly by state). Munis and co-ops are important for several different reasons: 1) overall, they are more dependent on coal and thus produce more CO2 per kWh, 2) the rural co-operatives are simultaneously experiencing high demand growth due to land use change and suburban sprawl into previously rural service territories and declining demand in rural zones experiencing population out-migration and 3) both munis and co-ops are less subject to government regulation than Investor Owned Utilities, with only seven states actively regulating and are motivated by a significantly different set of concerns than IOUs. As a case study, we seek to understand how implementation of efficiency and conservation occurs in munis and co-ops. For the electric sector’s Investor owned utilities, much research has addressed this problem and identified institutional considerations for program implementation. However, energy efficiency in municipal and co-operative utilities is only sparsely studied and this research effort begins to fill this gap. We examine implementation of energy efficiency and conservation programs in municipal and rural electric utilities in Minnesota. Minnesota established its “Conservation Improvement Program” (CIP) in 1982, and requires electric generators and natural gas providers in the state to dedicate a percentage of their revenues to energy efficiency programs and conservations efforts. An analysis in 2005 by the Office of the Legislature found that additional programs could be cost-effectively implemented. Additionally, while municipality and co-operative organizations generate roughly 32% of electricity in the state, the CIP from these organizations is not subject to the same level of scrutiny and evaluation as the Investor Owned Utilities. Curiously, estimated energy savings per CIP dollar spent by the Municipal and Co-operative Utilities vary several orders of magnitude ranging from 0.06 – 26.19 kilowatt-hours saved per CIP dollar spent, suggesting a lack of accounting consistency across programs. After first describing the relative importance of municipal and co-operative utilities, we present an analysis that identifies the unique challenges and managerial constraints facing programmatic implementation and present results of a survey of muni and co-op managers.