National Grid CEO backs a bright idea: conservation

That might be a little surprising, since Holliday is the chief executive officer of National Grid, which provides electricity for much of Western New York and currently stands to make more money with every extra kilowatt its customers use.

But Holliday is convinced that increased energy efficiency is a strong first step toward reducing energy use and easing the burden of higher electricity prices in a state where the Public Service Commission predicts that electricity use will rise 13 percent by 2015.

"That's the right way to aim," says Holliday, a London-based executive who stopped in Buffalo last week. "Energy efficiency is the first thing to do."

Gov. Eliot Spitzer already is trying to push the state in that direction, proposing an ambitious plan to reduce New York's electricity consumption by 15 percent by 2015. A preliminary PSC staff report issued earlier this month estimates that the savings from meeting Spitzer's goal would outpace its costs by more than 2-to-1. It estimates that National Grid customers who jump on the efficiency bandwagon could cut their bills by between 12 percent and 25 percent.

That push is on top of the Spitzer administration's earlier push to make appliances more energy efficient and tighten building codes, while speeding up the process for approving new power plants.

By pushing conservation and renewables, some conventional new power plants might not be needed, while more of the state's generation could be taken over by renewable energy sources, like the windmills that recently started producing electricity from the old Bethlehem Steel complex in Lackawanna.

But renewable power has its limits, in both cost and reliability. The electricity generated by renewable power plants often is too expensive and it isn't always available, such as on hot days when there isn't any breeze to turn windmills. A clean-coal plant proposed for the Huntley Station in the Town of Tonawanda is on hold while developers seek new funding to make its costs viable.

"The solution to this problem is not to bet on any one horse. The solution is to bet on every horse in the race," Holliday says. "If we back everything, we might just meet some of the lofty targets we've set" for renewable energy.

That would allow the state to maintain a smaller stable of power plants that need to be on standby to start producing electricity when demand is at its highest. That reduction in peak demand would take a big chunk out of New York's electric infrastructure costs, he says.

But conservation won't do it alone. Holliday says rate plans need to be redesigned to eliminate incentives that allow utilities to make more money when their customers use more electricity and natural gas.

National Fuel Gas Co.'s current $52 million rate increase proposal would do just that, while also offering $12 million in rebates and incentivesÂ… funded through higher ratesÂ… that would help its more than 500,000 customers in the region buy energy-efficient equipment, from new furnaces to programmable thermostats. A PSC report in April ordered all New York utilities to submit rate plans that include similar features, known in the industry as decoupling.

"Decoupling is an important first step," Holliday says.

But he also says rate plans need to be changed to encourage customers to use less energy during times when electricity demand is highest and also to invest in improvements that increase energy efficiency. That, however, will also require more sophisticated electric meters.

After all, the most affordable electricity is the kilowatt that you don't use. "The cheapest solution is energy efficiency," Holliday says.