Despite the contentious global warming debate, most people would agree that – all other things being equal – it would be beneficial to get all of our energy from environmentally clean sources.

But here lies the problem, all things are not equal. Alternative energy has not flourished because it is much more expensive than traditional sources of power. Therefore, the free market model and the traditional electrical utility mission of providing reliable and cost-effective electricity have not provided an opportunity for alternative energy.

Recently though, the realization that it might not be a good thing to continue to dump carbon into the atmosphere, the impediment to alternative energy – cost – has given way to environmental concerns.

These environmental concerns have gained enough credibility to cause politicians and policymakers to begin the race toward implementing green energy. And this is where the next great debate begins.

How, and at what speed, will clean energy be delivered? Will government use the regulatory hammer to drive home it’s goal or will the free market and individual choice play a role? 

Proponents of the regulatory approach argue that without government intervention, the adoption of renewable energy will be slow and inefficient. 

Proponents of incentives and individual choice argue that massive government intervention into the energy sector will have unforeseen economic impacts and negatively affect economic growth.

In Florida we have good examples of both approaches. 

The Regulatory Approach – FP&L Solar

In July 2008, the Florida Public Service Commission approved a request for three new solar projects proposed by Florida Power & Light. The costs of these projects will be recovered from all FP&L ratepayers through hearings at the PSC. The cost is expected to be close to $1 billion over 10 years.

The FPSC action is the result of policy passed by the Florida Legislature and signed by Governor Crist that allows utilities to recover the cost of renewable energy projects that generate up to 110 megawatts of electricity.

The move was championed as way to limit the amount of carbon released into the atmosphere and, in addition, a way to create green jobs. The responsibility for implementing the project rested solely with FP&L. In return, they recovered their costs and a return on their investment.

This regulatory approach leaves the individual and the free market out of the delivery of the renewable energy and requires each person to shoulder the costs incurred by a monopoly that is regulated by elected officials.

The Incentives Approach – The City of Gainesville

In a move to increase the use of solar power, the City of Gainesville, Florida has implemented a delivery approach based on incentives.

The city provides financial incentives for investors to build small solar plants by agreeing to buy power from them at inflated prices for a certain period of time. This gives the investors a method to recover costs and a guaranteed return on their investment. 

The argument by proponents is that the money recouped by the investors will stay in the community and create local “green” jobs and begin to stimulate the green sector.

Every year, the city of Gainesville agrees to buy another 4 megawatts of power — about enough for 750 homes. This only raises electric bills about 1 percent a year.

This approach gives the City of Gainesville the flexibility to raise or lower the amount of money spent to provide solar based various factors.

Which Path to Take

Deciding on what path to take may depend on the urgency associated with the problem, what trade-offs are acceptable, and who wins and loses.

If you believe that the problem is acutely urgent and the impact of higher electric bills will not significantly affect economic growth, then the regulatory or government mandate approach may be the best option.

However, if you believe that this is an issue that must be addressed, but in a way that promotes fiscal discipline and integrates the solution with free market principles, then the incentives approach may be the best path to take.

Who are the winners and losers? Follow the money. The regulatory approach clearly favors the regulated monopoly electric utilities and the politicians. The incentives approach limits government control and favors individuals and smaller investors. 

Is this an urgent issue? At the national level, President Obama has made this a top priority. However, its worth noting that Florida ranks 12th in per capita carbon output. This means we are doing better than 38 states. These states include Texas, Ohio, and Pennsylvania. 

Which approach creates more jobs in Florida? This could be the million dollar question. FP&L has been silent on the number of local jobs created. Some surmise that outside contractors were called in to do most of the work. With regards to Gainesville, this is still an open question.

Implications for Tallahassee

What approach do you think Tallahassee should take? Should the city engage in more incentives or should they rely on the regulatory approach?

First, we have reported here that due to the use of natural gas we have one of the lowest carbon footprints in the country. But what does that mean in terms that we can understand?

For each kilowatt hour of electricity generated, approximately 1.2 pounds of CO2 emission is created. A home that uses 1,000 kwh per month would generate approximately 1200 pounds of CO2 emissions per month.

For comparison purposes, lets look at the amount of CO2 emissions generated from automobiles. A gallon of fuel generates approximately 20 pounds of CO2 emissions. A vehicle that averages 20 mpg and drives 1000 miles a month would generate approximately 1000 pounds of CO2 emissions.

The City of Tallahassee electric utility has approximately 90,000 residential customers and the 198,000 people that live in these residences drive approximately 150,000 automobiles.  Based on these numbers it would appear automobiles generate more CO2 emissions than our use of electricity. Lets take a closer look.

For one month, on average, the 90,000 residences generate 54,000 tons of CO2 emissions while the automobiles driven generate 75,000 tons of CO2 emissions. These numbers indicate there are more opportunities to further lower our carbon footprint by reducing automobile emissions than emissions generated by the use of electricity.

Given these numbers, maybe public policies should lean toward making it easier to give up our car 3 or 4 times a month versus cutting our electric use by 10%? 

What do you think would be easier to give up?

A data request by Tallahassee Reports indicates that the City of Tallahassee budgeted close to $15.5 million to various conservation programs for fiscal year 2008, which began on October 1, 2007.

At the end of fiscal year 2008, the City of Tallahassee had expended less than $1 million on conservation programs. This left approximately $14.5 million that rolled over to fiscal year 2009.

The fiscal year 2009 budget for the various conservation programs added approximately $3.2 million to the rolled over amount from 2008 for a total fiscal year 2009 budget of approximately $19 million.

As of May 15, 2009, over 7 months into the fiscal year, the City of Tallahassee has spent less than a million dollars leaving a balance of over $17 million.

The lack of urgency towards the conservation programs is in stark contrast to the urgent problems faced by the Leon County School Board. Over the last three years the Leon County School Board has cut approximately $35 million due to the downturn in the economy. This includes a cut of approximately 150 teachers for the upcoming school year.

In addition, the School Board is faced with the real possibility of a revenue shortfall from the state coffers beginning with the 2009 school year.  A shortfall of more than $4 million will result in more cuts during the school year.

Consider this: The City of Tallahassee could use the $17 million of unspent conservation money collected over the last two years to cover the electric utility bill of the Leon County School Board for the next two years. This would allow the School Board to return 150 teachers back to the classroom.

What do you think about this proposal?

Green expenditures in the fiscal year 2009 budget include $10 million for smart meters, $7 million for energy conservation, and $300,000 for the creation of the green department. These 3 programs total $17,300,000 in spending in fiscal year 2009.

The immediate benefits of these expenditures to the citizens of Tallahassee are non-existent and our research indicates the long-term benefits are questionable. Remember, smart meter success depends on the level of participation 2 or 3 years from now and the conservation programs were found not to be cost-effective, but were adopted anyway.

While the benefits are not readily apparent, the costs of pursuing such policies are hidden deep within the City of Tallahassee budget. These costs are found in programs that touch many citizens but were cut due to “current financial pressures.”

It is time that the citizens of Tallahassee understand some of the budgeting priorities of the Tallahassee City Commission. We can find $17,300,000 for programs with questionable immediate or long term benefits during times of “financial stress” but we cut the following:

• The Youth Travel Team Program – the total annual cost $2,400 (Equal to one of Mayor Marks’ sister city trips).  Participants include approximately 250-300 children.
• The DARE Program – the total annual cost $15,071. Participants include elementary age school children.
• After School Drop-In Program– the total annual cost $90,000. Participants include hundreds of children from single parent families or families of working parents.
• Elimination of Crossing Guard Program – the annual cost $50,000. Affected citizens include worried parents and hundreds of elementary aged school children.
• Reduction in Adults Sports Programs – the total annual cost $72,000.
• Special Event Police Security– the total annual cost is approximately $100,000. Affected citizens include the thousands who attend events such as Springtime Tallahassee and Downtown GetDowns.

The total expenditures for the programs outlined above is approximately $330,000. The number of citizens affected has to be in the tens of thousands and mostly under the age of 18.

What is going on? Do the people in Tallahassee truly understand and endorse these priorities?

Commissioner Lightsey commented that the City should wait and conduct further research into the various options available, as well as consider any possible future taxes and offsets before launching into an RFP process for any new energy projects.

She defended the customer base saying that the customers already pay higher rates because of the various carbon reducing programs and that adding any further projects without some sort of offset would be “a very very hard sell.” She would later say that City is “already very clean” and that at some point “someone’s got to speak for the customer base.”

The video showcases her comments in their entirety.

You can view the slide presentation here.

Among the facts revealed are:

• The City of Tallahassee has a Carbon Reduction Task Team that investigates the feasibility of implementing policies that reduce carbon emissions in Tallahassee.
• EPER is charged with tracking how the carbon footprint of Tallahassee compares to other municipalities.
• The City of Tallahassee ranks in the top 10 of cities in the United States with the lowest CO2 emission rates.
• The City of Tallahassee’s electric utility has the lowest carbon emissions per MegaWatt hour of power produced in the state of Florida.

The dialogue between the City Commissioners that followed was started by Mayor Marks. The  Mayor commented that  “Tallahassee needs community input on which direction to head on these issues.”

Commissioner Katz followed with the idea of putting out a request for proposal (RFP) for a “solar panel farm” and Commissioner Gillum continued with a view that reducing our carbon footprint was the way to go given the number of alternative energy projects that are looking for support these day.

Commissioner Lightsey had a different view.  She argued that these alternative power projects will increase our already high rates. She was concerned about how higher rates would impact consumers. Mayor Marks responded by saying “this  is why we need community input.”

Mayor Marks also hinted that a structure was being set by the EPER department to facilitate a community dialogue on these issues.

You can view the slide presentation here.

Among the facts revealed are:

• The City of Tallahassee has a Carbon Reduction Task Team that investigates the feasibility of implementing policies that reduce carbon emissions in Tallahassee.
• EPER is charged with tracking how the carbon footprint of Tallahassee compares to other municipalities.
• The City of Tallahassee ranks in the top 10 of cities in the United States with the lowest CO2 emission rates.
• The City of Tallahassee’s electric utility has the lowest carbon emissions per MegaWatt hour of power produced in the state of Florida.

The dialogue between the City Commissioners that followed was started by Mayor Marks. The  Mayor commented that  “Tallahassee needs community input on which direction to head on these issues.”

Commissioner Katz followed with the idea of putting out a request for proposal (RFP) for a “solar panel farm” and Commissioner Gillum continued with a view that reducing our carbon footprint was the way to go given the number of alternative energy projects that are looking for support these day.

Commissioner Lightsey had a different view.  She argued that these alternative power projects will increase our already high rates. She was concerned about how higher rates would impact consumers. Mayor Marks responded by saying “this  is why we need community input.”

Mayor Marks also hinted that a structure was being set by the EPER department to facilitate a community dialogue on these issues.

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.

The Democrat caption boldly states ” the rooftop solar system is projected to cut firm’s annual power bill by $5,000.” The news article had no information on the cost of system. 

Here is what was omitted:

After one ten minute phone call, Tallahassee Reports found out the system cost $170,000. A quick calculation indicates that saving $5,000 a year will allow Mr. Diestelhorst to break even after 34 years and that is if there is no other costs.

Why would Mr. Diestelhorst, a businessman, sign-up for such a questionable financial deal – could it be his love of the environment or maybe his infatuation with solar power?

Maybe he signed up because he received approximately $140,000 in government subsidies. That makes his cost approximately $30,000 and his break even period only 6 years. 

When asked why the cost and subsidy information was omitted, the journalist said this information would be covered later when he had more time.

Now the question is was the omission an editorial blunder or an institutional bias? Either way, the citizens of Tallahassee depend on a responsible source for information from the Tallahassee Democrat and they clearly did not get that in Thursday’s edition.

A review by Tallahassee Reports indicates that one reason the parking program may be implemented is because it qualifies as a green program.

Fact 1 : The parking application program provides for “Alternative Transportation” which includes bike riding, bus riding, and car pooling. Those that choose “Alternative Transportation” three days a week will receive a discount on parking fees.

Fact 2:  The City’s Green Initiatives 2008 Annual Report indicates that:

The City shall utilize a collaborative approach to environmental stewardship, which raises awareness among its employees, engages its citizens, and seeks to develop public-private partnerships. The effectiveness of this policy shall be monitored and validated through a comprehensive measurement and verification methodology……the City will develop transportation policies that”promote alternative fuels and ecncourage commuter choices.

Why?…In a letter, responding  to the concerns of Jackie Pons, Leon County School Superintendent, Mayor Marks wrote:

“It is unfortunate that many City, County, and State Governments are in a situation where budgets must be cut and yet continue to provide the high level of service to which many have grown accustomed. Reducing the school crossing guard budget was an extremely difficult decision for our City Commission to make, as were many others that impacted many important service areas in our community.”

But if budget issues are the problem, why fund the “Schools on Solar” program. One possible answer is outlined in the City’s “GREEN INITIATIVES 2008 Annual Report”. In that publication, the “Schools on Solar” program is listed as a “Go Green Tallahassee” initiative award winner.

Another possible answer for the cuts is the direction coming from the City Commission. In a number of interviews of city employees by Tallahassee Reports, it has been revealed that the directive from the “4th Floor” is to focus on “going green.” The recent budget decisions seem to reflect this priority.  

According to the City’s website, the solar program’s “main focus… is education. “Schools on Solar” will provide students information on energy conservation and renewable energy.”  This education does not include any discussion of the immediate costs associated with solar power. In fact, as with the Trousdale Solar Project, information on the City’s website severly over states the economic benefit of the project.

Update..in a document detailing Tallahassee’s $118,000,000 wish list from the yet to be passed stimulus bill, the City is asking for $5,000,000 to expand the “Schools on Solar Program”.  If  recieved, the $5 million would be spent on electricty generation that is 5-10 times more expensive than what we currently pay.  In addition, 70%-80% of the $5,000,000 stimulus will go to Arizona to help create jobs making the solar panels.

Update.. Mayor Marks and City Commissioner Gillum opposed the crossing guard budget cuts. However, during the same meeting,  all five City Commissioners voted for the creation of the Green Department  at a cost of $200-$300,000.

Fact 1: The newly created Director position, costing citizens approximately $120,000  was not advertised internally or to the public.

Fact 2: Budget documents indicate that the creation of the new Department cost the taxpayers little or no money. However,  Tallahassee Reports analysis indicates that vacant positions – that could have been cut- were pulled in from other areas of the City to help fund the new Department. In addition, a data request indicates that the Department is currently using temporary positions in addition to the 12 originaly budgeted positions. A conservative analysis indicates that the creation of the Green Department cost the taxpayers at least $200-$250,000 in new money.

Fact 3: There is some question about what the City Commissioners knew when they voted for the EPER, because the EPER was never voted on separately. After spending hours reviewing City Commission meeting minutes and agenda materials the vote that created the Green Department is documented  in the public record as follows:

Voted 5-0 to approve the City Manager’s reorganization, including the elimination of two director positions, i.e., Economic Development Director, and Gas Utility General Manager, for a FY08 savings of $76,905 in the General Fund. (Source: City Commission Meeting Summary, April 9th, 2008)

Fact 4: Commission meeting minutes and agenda materials failed to state that the newly created Green Department not only created a new Director position, but that this new position would report directly to the City Manager on par with the three assistant City Managers that are responsible for the electric utility, police & fire, and public works.