Sustainable Energy Utility is Awash in Funds But Not Results

Powerful supporters of the Sustainable Energy Utility (SEU) are fighting legislation to repeal the Regional Greenhouse Gas Initiative (RGGI) because 65% of the revenue generated from CO2 auction permits would continue to enrich the SEU for eight more years. These supporters appear ready to ignore the fact the emission reductions goals of RGGI were met weeks after the first quarterly auction in 2008 and RGGI auction revenues have been wasted. They will try to convince us the SEU will go broke without this income. Meanwhile, in two years the SEU has amassed $26 million in assets (three years operating funds) and will shortly raise $60 Million more using s state authorized bond issue on top of already spending about $10 Million.
The state of Delaware set up the non-profit agency in 2007 to run various energy efficiency programs. The problem is the core programs of the SEU are off to a very slow start and appear to have fatal flaws that will ensure wasted funding for years to come.
The biggest flaw is the starting premise that government financed and controlled energy efficiency programs can “bend” the curve of what the free market economy already does. The U.S. Energy Information Agency has tracked the improvement in the Energy Intensity of our economy since 1949. Annual energy use is divided by Gross Domestic Product (in constant dollars). Our economy consistently improves 1.8% a year and Delaware statistics show the same trend. This improvement dwarfs the impact of RGGI funded projects by 100 times.
United States Cold Storage, Inc. in Milford spent $1.6 Million for electricity in 2010. Michael Lynch, Vice President of Engineering says, “USCS works hard to make our facility in Milford as energy efficient as possible and would prefer to keep the money we spend on RGGI to continue to do our own energy efficiency projects”. In the same way individuals can decide the best way to spend their own money.
The low income Weatherization Assistance Program (WAP) has been shut down for a year because of poor workmanship, shoddy materials, and work that was billed but not completed. The Attorney General’s office is looking into possible criminal charges. The programs spent millions of federal stimulus and state regional cap and trade taxes to fund the program.
The SEU programs have similar flaws to the WAP program. Grants of up to 50% of the cost of a project are available on a sliding scale that becomes more generous as the percent of energy savings increase. This leads to a built in bias to report high savings. In most cases energy auditors and contractors are the same company leaving them to self police. The SEU only does spot checks to see if the work was done correctly and expected energy savings were achieved and does not guarantee the work. We have already seen one example where a homeowner audit was based on higher than actual initial electricity usage and actual kilowatt hour pricing. We have also heard a complaint from an experienced auditor who refused to participate in the SEU program because of reporting problems with the required software that force misrepresentation of the work to be done and the results to be expected.
Other SEU programs offering various financing schemes have found no takers because of prevailing wage requirements and lack of need for capital by banks who have adequate capital. Two stimulus funded programs for appliance rebates and lighting rebates were one time programs with no long term need to exist. Programs using energy savings to pay initial project are already served by private companies. It seems like most programs conceived by the SEU fill no real long term need and implementation is ponderous at best. Typical advice is to donate only to charities using at least 80% of revenue for programs. After two years of operation, the SEU is still barely spending 50% of revenue on programs.
A task force has been formed by the SEU to take the organization private after the federal stimulus money runs out which would leave them exempt from Freedom of Information Act (FOIA) requests. Much of the information presented above regarding the SEU came from a FOIA request.

David T. Stevenson
Director, Center for Energy Competitiveness
Caesar Rodney Institute

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