279 



So we have one section of the Act which implies that the rate impact of conservation 

 should not exceed the rate impact of generation (Section 6), and another section which 

 defmes "cost effective" in a way that prohibits this from occurring. 



The conflict is likely a result of ignoring the fact that conservation does not "create" 

 electric energy; it simply pays for existing or planned users of electricity to reduce 

 existing or planned use. The same is true for consumer- developed renewable energy 

 resources. All of the other forms of "resource" dealt with in the Act create electric 

 energy. 



The conflicts in the Act could be resolved by removing the word "incremental" from 

 Sections 3.(4)(A)(ii) and 3.(4)(D); and defming "system cost" in Section 3.(4)(B) as 

 including the average cost of existing generation in the cost of a conservation measure or 

 resource, or a renewable resource which reduces a consumers' need for electricity. In 

 other words, the cost per kWh of releasing the energy from its existing use (conservation 

 or a consumer non-electric renewable resource) must be added to the cost of generating 

 the saved or displaced electric energy. 



The result would fit with standard utility planning processes quite well. New loads would 

 be served with the lowest cost resource. The rate impacts on consumers as a result of 

 using a conservation resource would be the same as for a generating resource, except for 

 the 10% preference given to conservation. All "resources" (including conservation and 

 consumer-developed renewable resources) would include the cost of generating the 

 electric energy. 



Please note the attached analysis "Alternative Ways to Treat Conservation and Related 

 Rate Impacts." 



B:\wpwiaVdala\oaaioaiif.lic 



