Million-watt question: Can California conserve?

It has cut back for now, but the state must stay on an energy diet for two years

Simon Lillico was accustomed to turning off the lights and computer monitors at work in his native New Zealand. Saving energy, and money, was just part of the culture.

He's doing the same around the offices of the San Francisco audio-visual-equipment firm where he now works, this time motivated by California's electricity crisis.

The thousand-megawatt question is how long Simon, and others, will continue their energy-saving ways.

Conservation has a mixed record in the United States, a byproduct of the nation's affluence and historical energy-resource abundance. But as California attempts to emerge from the nation's most serious energy crisis in decades, conservation is being tested anew. Will it last? Or will it fade as the state's "Stage 3" electricity alerts, warning of blackouts, become routine? (Western states confront crisis, page 5.)

The answer will be crucial to California keeping the lights on over the next two years. Despite all the steps to help out the state's utilities, the margin between supply and demand here will remain dangerously thin until 2003. Conservation, most analysts agree, is the most sure-fire way to keep blackouts at bay.

Indeed, California Gov. Gray Davis has made it a key part of his program for maintaining adequate power for the state.

Last week, the state Legislature passed and the governor signed what is considered the cornerstone of the state's rescue program. It authorizes the state to issue $10 billion in bonds to raise money to buy power on long-term contracts and then resell it to utilities.

Governor Davis says he hopes the state will be able to get contracts at prices that will not require higher consumer electricity rates.

In addition, he outlined an $800 million energy-conservation program that includes everything from appliance rebates to strict requirements that businesses cut outdoor lighting by half or face fines.

Conservation is seen as essential if the state is to survive the summer without blackouts. Davis's program aims to shave 8 percent off the summer peak-electricity demand.

The rescue program is controversial in several ways. Those in favor of free markets and true deregulation say the state's entry into the electricity market is unprecedented in scale and will mean greater inefficiencies over the long run.

And some consumer activists say the state is clearly headed toward a utility bailout and are threatening a ballot initiative to undo the governor's program.

One of the few points of consensus is on conservation. "People have woken up to the fact that the fastest, cheapest, and most environmentally smart way to increase electricity supply is to conserve energy," says Bill Walker, director of the California office of the Environmental Working Group.

Yet with the governor continuing to promise no hikes in consumer rates, some analysts say he is working at cross purposes to conservation. "Energy conservation without some tangible way to really demonstrate the supply crunch is contradictory," says Michael Zenker, director of the California office of Cambridge Energy Research Associates. "We think the more effective approach would be higher prices."

Higher prices would be politically risky for Davis, but many analysts say they are key to spurring strong conservation.

The oil shocks of the 1970s and '80s put the country on a crash course of greater energy efficiency, thanks to higher prices. As a result, says Brookings Institution energy analyst Pietro Nivola, the US uses half the energy per dollar of economic output it did in 1973. "When prices are ratcheted up, it induces a massive adjustment in behavior."

One component of the California program could end up raising rates. It is a provision that would allow higher prices for consumers using over 130 percent of a regional baseline of electricity use. But so far, the mantra from the state capital continues to be that prices should not rise.

And even with higher prices, consumer-behavior changes don't always last. Despite the oil shocks of the 1970s and '80s, consumption in the US is creeping up again.

After its peak in 1978, annual per capita energy consumption declined for five years, according to the Energy Information Administration in Washington. But since then, it has been on a gradual incline. While refrigerators, dishwashers, and ovens are all more energy efficient, many households and businesses are simply using more energy-dependent devices.

One major electricity consumer is air-conditioning. And it is increasingly prevalent. The percent of American households with central air in 1978 was 23 percent. Today, it is nearly 50 percent.

The picture is particularly ugly on the road, where Mr. Nivola says Americans are buying bigger cars than ever and driving them more miles.

And Americans consume about twice as much energy per year as their counterparts in Japan and most of Western Europe. "It's ingrained in the culture," says Nivola.

One byproduct of electricity restructuring has been that utilities may have lessened their commitment to conservation. "Under deregulation, saving energy and saving customers money hurt a power company's bottom line," a recent Environmental Working Group study concludes.

Whether or not that's the case, conservation is back atop nearly everyone's agenda. The California Independent Systems Operator, which manages the state's power needs, says conservation is saving enough electricity to power 1 million homes and is often the margin preventing blackouts.

The question on the minds of many experts, however, is whether the new conservation ethic will stick - and for how long.

(c) Copyright 2001. The Christian Science Publishing Society

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