Lessons From the Blackout of 2003 A Study on Alternative Electric Demand Structures

On Thursday, August 14, 2003, New York City experienced a blackout of major proportions, part of an event that affected eight states and part of Canada as well. The Cooperative Coalition to Prevent Blackouts (CCPB), and the Federation of New York Housing Cooperatives and Condominiums (FNYHC) - one of the coalition's founding members - has been warning the various state and federal agencies for years that an event such as this was bound to happen. The mystery of why it happened and who is to blame is still under investigation, but it appears a single mishap paralyzed the Northeast, plunging more than 50 million people into darkness, stranding residents and commuters, shutting down public transportation, and costing an estimated billions of dollars in lost business and spoiled provisions.

It may take weeks before federal investigators determine the cause of the massive blackout, but officials believe that it started somewhere in the Midwest when transmission problems occurred within the electrical power grid in Ohio, and caused a cascading effect that shut down much of New York and the entire Northeast and Canada from Connecticut to Michigan and kept most New Yorkers in the dark for some 29 hours.

Since its inception, the coalition has been trying to convince the powers that control New York State's electrical supply - the Independent Systems Operator (ISO), the Public Service Commission (PSC) and the New York State Energy Research and Development Authority (NYSERDA) - that conservation and electrical behavior modification is the only course to prevent more occurrences like the August 14th blackout.

The CCPB is headed by Jordi Reyes-Montblanc, president of the HDFC. Other members include Peter Funk, former president of the board of 322 Central Park West, and Don West, director of Seward Park Houses. The coalition utilizes the consulting expertise of Lewis Kwit of Energy Investment Systems (EIS).

Submetering Works for Savings

Currently, the coalition is trying to overcome a number of roadblocks that stand in the way of consumer conservation efforts. It is a well-established fact that the submetering of electricity can conserve electricity, but in a co-op under current PSC rules, shareholder approval is required to install individual unit meters. I have been to many informational shareholder meetings on the topic that are derailed by a few loud, uninformed shareholders who overtake the meeting and force the board to withdraw the proposal. If you remove the politics and let a duly elected, educated board decide the community's fate, nine out of ten times they'll go with the submetering proposal, because it just makes sense.

Unlike other utilities, the consumer is unaware of how much they spend on electricity and how the charges are calculated. Phone calls are charged by the minute, water by gallons, gas and oil is measured by consumption. Electricity is charged after the fact. To be able to read an electric bill you practically need a math degree! To understand the tariffs - which are the definitive charges on your electric bill - you need to be a rocket scientist! The coalition predicts if the consumer understands how they are billed, they will act accordingly and conserve. To achieve this, consumers need to be educated and billed with what's referred to as "Real-time Pricing," or RTP.

In simple terms, real-time pricing means the consumer pays different electrical costs at certain times. When electricity demand is low - at night, early in the morning and on weekends - the consumer's costs are lower. When demand is high, like during rush hour and weekdays, electric costs are higher. As with other utility usage, once the consumer is educated and understands that RTP will save them money, they will adjust their electrical behavior accordingly.

Submetering represents a new paradigm of energy conservation in which the time that electricity is used is more important than how much power is actually consumed. According to a time-sensitive pricing approach, when power is in short supply, costs are higher, thus discouraging excessive use. At 2 a.m. when supply is plentiful, costs are lower.

Residential buildings may now participate in this pricing system by purchasing power from Con Edison based on an hourly cost. New York State's Public Service Commission (PSC) and Independent System Operator (ISO) endorse this concept, but RTP can only be operational if electrical meters are programmed to discern usage in short time intervals. The coalition has had numerous discussions with the ISO about offering incentives to the residential community as they do with the industrial industry, to make installing time-sensitive submeters attractive.

Certain commercial consumers are paid not to consume electricity during a "curtailment event." The coalition has demanded that these incentives be made available to the residential community. How is this accomplished? By installing "curtailment devices" to particular electrical equipment, like window air-conditioners. These devices automatically turn the equipment off during a "curtailment event," thus reducing the peak load of electricity, the demand is decreased and the risk of blackouts are diminished.

Benefits of Supply and Demand

The benefits of being in this program are twofold. On the one hand, you're a good citizen for reducing the amount of electricity you use during peak hours and on the other, you get paid for not using as much of that precious commodity. These devices are consumer-friendly and easy to use. They may be manually overridden if the consumer does not want the equipment turned off and chooses to pay the higher electrical cost at that particular time.

The coalition is calling for the creation of a balanced approach to electric affordability and reliability in the residential sector. In addition to new power plants, the coalition advocates the implementation of a demand side strategy that incorporates real time pricing and load curtailment, which is the flip side of the "demand" coin. Curtailment refers to the targeted conservation of electricity when supplies are scarce and blackouts are imminent.

New York State has entrusted the ISO to declare "curtailment events" when a capacity emergency threatens, such as the event we experienced on August 14th. Today's technologies enable energy users to automatically shut off electric-intensive equipment, such as window air conditioners or building- wide public space air conditioners. Customers registered with the ISO to allow automatic curtailment during these critical times are being paid by the ISO for their capacity to conserve when blackouts are forecast. We hope to create a multifamily curtailment infrastructure that is capable of responding to capacity and distribution power emergencies.

In order to accomplish this, a building must have advanced (interval) meters that read electric consumption in 15-minute cycles. The coalition is currently seeking J-51 tax abatement eligibility to promote the implementation of this load-controlling equipment. This would help empower residential consumers to impact the cost and supply of electricity directly, as a supplement to broad government and industry actions. J-51 eligibility would support the installation of equipment and the ISO would follow with financial incentives to participate in these curtailment programs. By supporting this measure, the City Council would clearly articulate its faith in consumers and consumer-oriented load curtailment.

Legislative Action Anticipated

On August 18, 2003, City Council member Gail Brewer introduced legislation (Intro 534-03) to help accomplish this task. The legislation intends to correct a misconception and misinterpretation regarding J-51 tax benefits for Mitchell-Lama buildings.

The HPD currently denies Mitchell-Lama developments that claim J-51 benefits for energy conservation equipment (submeters) if the development receives a subsidy from NYSERDA. Under present law, if a Mitchell-Lama receives any government subsidy they are not entitled to J-51 benefits because it is considered "double dipping."

HPD has interpreted this law to mean that any subsidy from NYSERDA is a government subsidy. The problem with this interpretation is that they are wrong. NYSERDA is funded by consumer dollars, from what is called the System Benefits Charge (SBC) on our electricity bills. This first part of the bill corrects HPD's misinterpretation.

The second part of Intro 524-03 would allow load curtailment devices to be considered for J-51 tax abatements for all buildings, including Mitchell-Lamas. Hearings on Intro 524-03 will begin shortly. It seems all we needed was the most extensive blackout in U.S. history for the city to see the light.

The residual benefits will extend far beyond cutting usage and saving money; it just might prevent future blackouts. In the very near future Fairview Owners Corp, a co-op in Forest Hills, Queens and a number of buildings in Manhattan will be among the first buildings to implement RTP electric service and test automatic load curtailment devices. We have every reason to believe the program will be successful and realize cost and energy savings. If you are interested in more information on this subject, or wish to investigate the installation of interval meters and introducing RTP in your cooperative, you may contact the coalition at 718-760-7540.

Gregory J. Carlson is the executive director of the Federation of New York Housing Cooperatives and Condominiums, as well as a member of the Cooperative Coalition to Prevent Blackouts.

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