^ 



167 



These figures are much larger than those reported by the Bonneville Power 

 Administration. The differences arc really not a dispute over the potemiaL BPA 

 includes some of these conversions expected to result from price and constimer 

 preference in its forecast; my analyses and the other smdies are of laiimiczi potennal 

 and do not separate out the amount expected to occur without market inierventjon. 

 BPA excludes any savings from homes with zonal space heat; the others do not. BPA 

 includes only the potential in the service territories of its requirements customers; the 

 other studies include the service territories of generating public utilities and investor- 

 owned unlines. We really do not have any disagreement on how many homes are 

 electrically heated, or on how many of them can be economically reached by gas lines. 



Measuring the cost-effectiveness of fuel conversions is not 'dimple. The proper 

 comparison is between the total cost of serving the cud-use with gas, versus the total 

 cos; of serving that end-use with electricity. BPA and other regional utilities are 

 acquiring new elecuic generating resources using natural gas as fueL In a 

 thermodynamic sense, the issue is whether to bum gas at 40% - 30% cfBdency in new 

 combined-cycle power plants, or whether to bum it at 60% - 90% efficiency in direct 

 space and water heating applications. In an economic sense, however, it is a more 

 complex issue. The total cost of gas service includes securing new gas supplies, adding 

 gas transmission and distribution capacity, installing service connections, meters, and 

 regulators, and installing and maintainJTig gas appliances. Under conditions of growing 

 loads, the total cost of continuing to serve the same loads with electricity .alaj indudes 

 the cost of new generating resources phis transmission and distribution upgrades. If the 

 total cost of serving loads with gas is lower than the total cost of serving the same loads 

 with new elecuic resources, then sound public poUcy dictates that gas should be used. 



Since the marginal cost of new gas resources is lower than the marginal cost of 

 new electricity resources, there are cost-eflecitve oppominilies for conversions to natural 

 gas. However, since the cost of gas distribution system expansions is not small, there are 

 many possible opportunities which are jiQi cost-effective. TIjc primary situations where 

 conversion is not cost-effective is where the home is a considerable distance - over 1000 

 feet - from a gas distribution main, in smaller dwelling units where the load to be 

 served is small, and in better insulated newer units where the load to be served is small, 



The savings are considerable. The average cost of fuel conversions is about 

 20% - 40% (1-2 cents/kwh) lower than the average of new clcctriod rcsourcea. Ai the 

 maTimiim economic and technical potential of 1500 average megawans, the savings 

 would equal SlOO - S250 million per year for the region. 



OBSTACLES TO COST-EFFECTIVE FUEL CHOICE 



There are many obstacles to cost-effective fuel choice. Some are technical, some 

 economic, and some politicaL 



The technical obstacles are the least burdensome. Gas appliances are now made 

 which can be vented without a chimney. They cost a bit more -Jiim cuuvcntiooal 

 appliances. Gas utilities have limited capital resources, and limited construcuon 



Testimony of Jim T p-rar Comminee on Small Business 



June 3, 1993 Page 2 



