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In short, there is not a precise figure for the cost-effective potential for fuel 

 switching in the region. Very Uttle is known about the potential in multifamily housing 

 and the commercial sector. Even in the case of single-family housing, the potential is 

 uncertain. Nonetheless. Council staff estimates there are from 500 to 900 average 

 megawatts of cost-effective fuel switching opportunities in the single-family market. 

 This is a sizable resource. It is not so large, however, as to negate the need for 

 additional generating resources. 



Regarding market considerations, it is generally difficult to establish whether a 

 market is working effectively or not. Both electricity and natiu^ gas distribution are 

 accomplished by regulated, investor-owned companies or through public utilities. 

 Thus, neither the market for electricity nor the market for natural gas could be 

 considered competitive. However, the market for energy, generally, is not a monopoly. 

 Consumers can choose their fuels, and they can affect their energy usage by investing 

 in efficient equipment or buildings. There is a history of lively competition between 

 electricity, natural gas, oil and some other energy sources for residential space and 

 water heating markets. This competition continues today to various degrees throughout 

 the region and, in fact, colors much of the growing interaction between natural gas and 

 electric industries. 



All indications are that for new, single-family housing, the market is functioning 

 quite well. Natural gas is capturing something on the order of 90 percent of the market 

 where gas is available. Pa-haps the most important factor in increasing the use of 

 natural gas in new housing is revision of line extension policies to make gas more 

 available. This is the province of the state regulatory commissions. Gas historically 

 has not been a major factor in multifamily construction in this region, although it is 

 commonly used in other parts of the country. We don't know why. We do not have 

 reliable information on the use of gas in the commercial sector. 



In the case of single-family retrofits. Council staff is currently undertaking an 

 analysis of the effectiveness of the market in bringing about cost-effective fuel 

 switching. It seems clear from the experience of Snohomish County Pubhc Utility 

 District and Washington Natural Gas Company that when both utilities work together, 

 customers are more likely to switch. From the experience of Washington Water Power, 

 an electric and gas utility, incentives accelerate fuel switching. Currently, the Council 

 has not decided to what degree, if any, electric utilities should offer incentives to 

 promote fuel switching. This issue will be considered in the course of our ongoing gas 

 analysis. We believe that electric utility resistance to fuel switching would be reduced - 

 - perhaps overcome — if cooperative programs could be devised in which gas utilities 



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