Gas DSM and Fuel Switching: Opportunities and Experiences

1993

Executive Summary

New York State's electric utilities and the State government have pursued electric demand-side management (DSM) since the mid- to late-1980's. While their efforts produced significant energy savings, utility plans for the next decade project a dramatic increase in savings.

However, in New York State, as in many other states and provinces throughout the United States and Canada, gas utility DSM efforts are more limited. Unlike the full-scale incentive programs offered by New York electric utilities, gas utility efforts are primarily limited to studies, mandated energy audits, and an occasional pilot program. Another type of DSM program, fuel switching (or converting customers from one fuel to another when the costs of conversion are less than the costs to society of not converting) is also limited due primarily to a long history of controversy about interfuel competition.

The potential advantages of gas DSM in New York State are several-fold. First, DSM can lower customer bills. Participating customers benefit because their consumption is lower. All customers taken as a whole benefit provided the DSM programs are less expensive per unit of gas saved than the marginal cost of gas. Second, DSM programs can reduce pollutant emissions by reducing the amount of gas that is burned. In particular, reductions in natural gas use reduce nitrogen oxide emissions, an important contributor to acid rain. Third, DSM programs can free up gas for other uses such as in the industrial and transportation sectors. Use of gas in these end-uses will usually reduce emissions and will often save consumers money. Additional incentive to pursue gas DSM comes from the federal Energy Policy Act of 1992, which requires state utility commissions to consider implementing integrated resource planning for gas utilities and regulatory changes that would make energy efficiency investments profitable for gas utilities (U.S. Congress 1992).

Based in part on these considerations, the New York State Public Service Commission, other government agencies, and New York State gas utilities are interested in pursuing gas DSM programs more extensively. Gas-cooling programs recently offered by several gas and electric utilities provide the groundwork for further fuel- switching efforts.

To provide a foundation for these discussions, the New York State Energy Research and Development Authority (NYSERDA), in conjunction with the New York Gas Group (a consortium of New York gas utilities, abbreviated NYGAS) asked the American Council for an Energy-Efficient Economy (ACEEE) to the study the economic savings potential for gas DSM and fuel-switching measures and to review gas DSM and fuel-switching program experience to date throughout the country.

To confine the project's scope, the project steering committee limited the analysis to the residential and commercial sectors, and to an examination of savings opportunities in the service areas of three representative New York gas utilities: Long Island Lighting Company (LILCo), Brooklyn Union Gas (BUG), and National Fuel Gas (NFG). These utilities serve a downstate suburban area (Long Island), a downstate urban area (parts of New York City), and an upstate mixed urban/suburban/rural area (in and around Buffalo), respectively.

Click to order hard copy.

400 pp., 1994, $40.00, U932

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