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June 22, 2011

Getting Less Than We Paid for from Efficiency Vermont

"It's good to get more than you pay for" (or something close to that) is the lead of a radio ad from Efficiency Vermont (EV) promoting the purchase of compact fluorescent lights (CFLs). We are urged to rush out and buy these bulbs at the bargain price of 99 cents each, and it is true that normally these bulbs cost much more. What the ad doesn't say is that you already paid much more that 99 cents for these bulbs and the only way you can get your money back is to go out and buy them whether you want to or not.

The reason the CFLs are so cheap is that EV is buying down the price so that retailers can make the 99 cent offer. The money that EV uses for this incentive program comes from a .918 cents per kilowatt hour surcharge on your electric bill, which is equivalent to a tax of about 6% on your electricity usage. If you live in Burlington, the "energy efficiency charge" goes to Burlington Electric Department. If you're IBM, you don't have to pay because you have enough clout to get the legislature to let you run your own efficiency program.

I want to run my own efficiency program, too. It wouldn't start with curly CFLs since oil for heating and transportation is a much bigger part of my budget (as it is for most Vermonters) than electricity for lighting. But, like you if you're a Vermonter, I've already paid for the CFLs whether I want them or not.

According to its audited financial statement of 2009, Efficiency Vermont spent $25.6 of our electricity surcharges that year; $8.6 million went for salary related expense; $.5 million went for conferences; $.6 million for copying and printing. $9.5 million went for "incentive payments and rebates". To be fair, the staff does much more than just administer the rebate program; but do we want to support this payroll at the expense of making electric bills higher? This deserves to be debated in the legislature and legislators need to take a stand we can hold them accountable for.

Even if you believe that Americans urgently need to use less electricity for lighting, the CFL program is largely unnecessary and probably counterproductive. Starting in 2012 a federal law signed by President Bush will forbid the selling of inefficient light bulbs like today's incandescents. The bill is technology neutral so new, efficient incandescents (if there are any) are OK. New LED bulbs are getting cheaper and cheaper; they are even more efficient than CFLs, give better light, and don't contain dangerous-to-dispose of mercury as CFLs do. But, since CFLs last a long time and we are being paid with our own dollars to buy them now, we won't be rushing out to buy LEDs. In other words we paid money to reimburse ourselves to do something which the new law would have forced us to do anyway and perhaps we made the switch to CFLs when we should have waited for LEDs.

Rebates and incentives go to corporations as well as individuals; fair enough because corporations (except IBM) also pay the surcharge. But, taking an example from a St. Albans Messenger story on the EV website, at least some of the incentives sound redundant and unnecessary. A company called Kaytek got new, more efficient lighting which "is expected to pay for itself within a year and save the company $32,000 annually… Efficiency Vermont provided technical expertise and a financial incentive." But why is a "financial incentive" necessary for something which pays for itself in a year? Why couldn't Kaytek have hired its own technical expert? But remember Kaytek had already "contributed" to EV through their electric bill. They'd have been foolish to go elsewhere. EV takes credit for the energy savings in cases like this; but it is quite likely that, absent this program, companies would make their own – perhaps better – decisions on how and where to invest. Supporters of EV and the efficiency surcharge will argue that they might invest in something other than energy efficiency just as we might not buy CFLs if we hadn't already been forced to pay for them. Yup, that's how a free economy works.

The Mt. Mansfield Company in Stowe got energy consulting from EV which results in their making snow more efficiently and saving scads of energy and money. Saving energy and money is good; do we really believe Mt. Mansfield wouldn't have done this on their own assuming it makes sense? Do we really need to move "efficiency" money through our electric bills to electric utilities, through EV with its overhead, and then back to those savvy enough to use "free" service from EV? In fact we are giving EV a monopoly on these services by subsidizing them to offer the services free or at reduced cost. This does NOT help build a competitive energy efficiency industry in Vermont. To be fair, EV does subcontract but efficiency venders should be able to sell directly to their customers.

Efficiency Vermont's proposed budget for 2011 is $40,787,200 "Prior to Performance Based Fee" of which $32.7 million would come from the fee on our electric bills – which would have to be raised. The Vermont Public Service Department is recommending that the increase be held to "only" 3%. The decision of how much to tax your electric bill is made not by the legislature but by the Public Service Board – the legislature delegated this. In fact this money doesn't even show up in Vermont's budget – it's a stealth tax.

This procedure means that the merits of spending taxpayer (OK, ratepayer) money to finance EV programs, such as buying down the cost of compact fluorescent lights and running cute TV ads showing the curly bulbs bellied up to a Western bar, don't get debated alongside the other tough decisions that have to made about taxpayer money. Maybe EV's programs would survive such a process; maybe they wouldn't. But it's very bad government to have spending off the books or to have a stealth tax which can increase without the benefit and public scrutiny of legislative process.

Related posts:

Broad-Based Vermont Stealth Tax to Increase 19% February 1

Stealth Taxes

The End of the Age of Incentives

We Need to Use More Electricity

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