Council Retains Market-based Approach to Fuel-switching Policy

Ever since the first Northwest Power Plan in 1982, the Council has recognized that consumers have a choice of fuels for their water heaters. The predominant choice is natural gas.

And ever since that first power plan, the Council has considered that switching from electricity to natural gas is not a form of electricity conservation under the Northwest Power Act, the federal law behind the power plan. The Act defines conservation as the “more efficient use of electricity.”

Nonetheless, consumers make choices, and there is great potential to reduce electricity use in homes by switching from electricity to natural gas for water heating. Consumers will decide whether to switch based on many factors, including cost of the fuel, cost of the appliance, personal likes and dislikes, and so on. But as the Council considers the future demand and supply of electricity, the potential and impact for fuel switching is an important consideration.

So, as the Council works on the seventh five-year revision of its power plan, the question of how to treat fuel-switching again is being addressed.

Currently, the Council recognizes that 1) the direct use of natural gas for some uses is more efficient than the use of electricity generated by burning natural gas for those uses, and 2) a market-oriented approach is the best way to assesses efficient fuel decisions in the region.

A study prepared by the Council staff concluded that if consumers selected their water heating fuel based solely on lowest cost, the forecasted demand for electricity in 2035 (the 20-year horizon of the power plan) could be lower by 114 average megawatts. However, the study also notes that figure is an absolute maximum and that actual reductions would be less. Nonetheless the market share of natural gas for water heating has been growing since 1986, and that trend is expected to continue.

After a public comment period, the Council provided guidance to staff to consider a slight modification of the policy, which would recognize that the changing nature of energy markets, the benefits from competition among fuel choices, and the desire to promote informed energy source choices support the Council taking a market-oriented approach to encouraging efficient fuel decisions.