The City of Tallahassee recently ignored a cost effectiveness analysis which indicated that all 191 proposed measures to save electricity through conservation would increase electric rates.
Instead of relying on the analysis as a guide, the City Commission voted to ignore the results and approve an alternative methodology that would allow the City to move forward with conservation programs.
The cost effectiveness analysis that the City Commission ignored is the rate impact test that has been used by the Florida Public Service Commission over the last 20 years. This test has been used to make sure that the investor owned utilities regulated by the PSC were not implementing conservation programs that caused rates to increase.
In other words, the City of Tallahassee did something that the largest utilities in the state of Florida are not allowed to do – implemented conservation measures that will eventually increase electric rates.
In a hearing before the Florida PSC in February, 2007, a City of Tallahassee utility official testified that “original screening of measures in our internal IRP did not show any measures that passed the rate impact test.”
An expert witness argued that programs that failed the rate impact test put upward pressure on rates. The Florida Public Service Commission staff agreed and stated in their analysis that the “costs of conservation programs that fail the rate impact test would tend to increase rates.”
The Florida Public Service Commission reviews the City of Tallahassee utility operations, but has no authority over the City of Tallahassee with regards to the implementation of conservation programs. This authority is left to the City Commission and City of Tallahassee utility officials.
Once the City Commission got passed the issue of cost-effectiveness, they voted to spend $50-60 million on conservation programs over a 5-6 year period.
So why did the City of Tallahassee proceed with conservation programs that would increase rates? A discussion with a City of Tallahassee utility official explained that the path the city chose to follow put a higher priority on our carbon footprint (which is already the lowest in the state) than on lower electric rates for consumers.