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The Price of Energy Efficiency 

The New Orleans City Council's Utilities Committee will hold a public hearing this Wednesday (June 15) on a proposal to establish a citywide energy-efficiency program called the 'Energy Smart Plan." The plan seeks to offset anticipated increases in energy costs in the coming years by reducing demand and implementing energy-efficient practices in homes and businesses all over town.

At a time when most of the city is in a rebuilding mode, this kind of program makes perfect sense. Wednesday's hearing (at 1 p.m. in the Council Chamber) will cap a year of work by a team of more than 50 clean-energy advocates, nonprofits, government officials and regulators at all levels, council advisors, Entergy New Orleans and local homebuilders.

The message that proponents of the Energy Smart Plan have is simple: If you were caught off guard by $4-a-gallon gasoline, start paying attention now to utility issues " because all forms of energy are getting more expensive. According to the Louisiana Public Service Commission, Entergy New Orleans has the most expensive rates in the state.

The goal of the program is to bring significant energy-efficiency improvements to 2,800 homes a year for three years. As with all home improvements, these upgrades will have a cost, and the cost for each home will vary according to the extent of the improvements made.

Participation in the program will be voluntary, but the benefits of energy efficiency and lower overall demand for power are citywide. Therefore, the cost to launch the program will be borne by all ratepayers in the form of a small add-on to monthly utility bills " but the add-on will be capped for many ratepayers.

The additional cost, called a 'system benefit charge," will be 1 mill per kilowatt-hour, or $1 for every 1,000 kWh consumed. For small- to medium-size residential customers, this means an increase of $1 to $2 a month. For commercial customers, the charge would be capped at $100 a month, and for heavy industrial customers, the fee would be capped at $200 a month. Ratepayers whose incomes are less than 150 percent of the federal poverty level will have the charge capped at $1 a month.

Timing is always important, and supporters of the plan say the charge will not be levied until this time next year. By then, Entergy New Orleans' base rate is expected to be lower than it is today because more residents and businesses will have returned, thus spreading Entergy's fixed costs over a larger number of customers. By the time the system benefit charge goes into effect, proponents say, it will be more than offset by anticipated reductions in today's base rate.

The system benefit charge will generate roughly $3.7 million a year, which will be used to leverage up to $11 million more a year in grants and private investments. Customers who opt for the energy-efficiency improvements can finance the improvements by dedicating a portion of the savings on their utility bills toward repayment of the cost of the improvements.

Money from the benefit charge will be collected by Entergy but turned over to a nonprofit corporation that will be created to shepherd the initiative. The nonprofit will be modeled after the Energy Trust of Oregon (www.energytrust.org). The program will be administered by a company selected by the council via competitive bids " but participants in the process that led to creation of the Energy Smart Plan will be ineligible to bid.

Overall, the Energy Smart Plan is the result of a community-wide effort to promote energy efficiency and conservation. Community education also is a significant component of the program.

Politically, it will be interesting to see how Entergy New Orleans responds to a program that is designed to reduce demand for its product. Several sources familiar with the initiative say ENO came to the table willingly at first but that the company is backing off now that something concrete has evolved.

We'll know soon enough where Entergy stands " along with the City Council. Meanwhile, we should all pay more attention to utility issues. If you think $4-a-gallon gasoline hurts, just wait.

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