The decision for states to choose the rate approach versus the mass approach is similar to preferences for decoupling or not decoupling. That is, if my utility serves a vibrant region of economic growth, I don’t want decoupling. I don’t want my revenue held constant and decoupled from sales. I want my revenue pegged to sales. If my utility is facing declining sales for whatever reason, sure, decoupling sounds great!
Similarly, if my state is friendly to business, and I think it is going to outperform whatever the EPA uses for a baseline growth rate, I might be interested in the torturous rate method.
Measurement and Verification
One thing I must say about the CPP is that it doesn’t include any hokeyness involving the counterfactual or what would have happened without the CPP. In other words, nobody, not even the EPA, cares about why or how emissions are reduced.
However, for trading rate-based approach, the savings must be certified by measurement and verification. The problem is, this does not mesh well with today’s status quo evaluation, measurement and verification, which requires soothsayer estimates of what energy users would otherwise do – the attribution racket.
The physics of climate change don’t care about what would have happened.
Trashing the Status Quo
Quite possibly another good thing about the CPP is that maybe states, to reduce cost and for simplification, will align with the concrete realities of energy efficiency and the physical world. I already mentioned last week that the CPP will blow up (smithereens) the equity issue because, to least expensively comply, energy users served by “dirty power” supplies will get the attention first (see winners and losers above). Additionally, state A will pay state B for credits or allowances (winners and losers). Since this is going to happen in a major way, maybe we can trash the foolish fuel switching sacred cow.
If utilities want to get creative, they can shift their loads to customer sites, beyond the fence line of the power plant. For instance, electric water heaters powered from within the fence line could be replaced with natural gas-fired water heaters.
Last Word on M&V
Energy efficiency may not need M&V by rule for the mass option, but it would be a wise thing to do. If states are going to pour money into energy efficiency, they need to make sure they know what is happening so it shows up at the meter – or in this case, the exhaust stack.