28.8.04

ELECTRICITY KEEPING ITS OWN BOOKS, FORSOOTH! Years ago, the Milwaukee Road's electrified mountain lines




employed regenerative braking, in which the train going down the mountain helped power the train going up the mountain. As one enthusiast describes it,

Perhaps the coolest aspect of the electrification system adopted by the Milwaukee was regeneration. When trains went down hill the electric motors were used as generators. This both slowed the train down (with substantial savings in the cost of replacing brake-shoes), and returned power to the system to help ascending trains, reducing the overall power needs by about twelve percent. Heavy capital costs, but significant operational savings (despite padding of costs); the net benefit was later found to amount to a return on investment of nine percent annually.
The Milwaukee's publicists were somewhat more colorful (40 Trains 46, July 1970, print edition.)
The restored current automatically sets back the power company's meters and credits the Railway with the amount. Electricity keeping its own books, forsooth!
Ah, but at what rate does the Power Company credit the consumer? Michael at Knowledge Problem has discovered an Iowa regulatory case in which "setting back the meter" isn't good enough for the Power Company, who would like to buy at wholesale and sell at retail.
Under net metering, a retail energy consumer with a small generator is only billed by the electric utility for the net power consumption over the billing period. In the Iowa case, the cooperative wanted to charge the retail consumer the retail price for power the consumer took from the system, and pay the retail consumer a lower “avoided cost” rate for any power the consumer put back into the system. The plaintiffs wanted to to be paid at the higher retail rate for power put back into the system.

The Iowa Supreme Court decided for the plaintiffs on the grounds that the underlying law, PURPA, was intended to encourage renewable resource development, and paying the (higher) retail rate would encourage renewable resources more than paying the (lower) avoided cost rate. In a dissenting opinion, a judge argued that PURPA required payment of a rate not higher than the incremental cost to the utility (i.e., the avoided cost), and the retail rate “is manifestly not the cost to the utility.”

After citing the dissenting opinion, IREC commented, “This argument is well reasoned, but not the majority opinion.”
Sounds like a somewhat more sophisticated meter than the St. Paul used. If the wind turbine owned by the plaintiff in the case simply runs the meter backwards, there is insufficient information to dispute the rate. There is a serious legal problem here, but the analogy Mr Giberson offers is strained.
Economically, the arguments in favor of net metering are all mush. If I picked apples from a tree in my backyard and took them into the supermarket, should the supermarket have to pay me the retail price for my apples? The cooperative’s proposal to charge retail for amounts consumed and pay avoided costs for amounts produced by the generator-equipped customer seems a little more reasonable, at least as a matter of logic.
I think his main point is that the Power Company is functioning as a sales agent for the windmill owner, who would otherwise be in the position of the orchard owner who would have to market his own apples in excess of his own consumption. But is it not the case that the opportunity cost of the apple I ate myself -- or the windmill-generated electricity I used to power my trains -- is the retail price? I have avoided paying that price by doing it myself.

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