When Monopoly Utilities Stifle Innovation their Customers Pay the Price

Jay Jacobson, Plymouth, MN

Earlier this year, Minnesota’s utility regulators fined Xcel Energy for delaying the deployment of smaller solar installations. This is the latest case in the sad history of public utilities stifling competition and putting profits ahead of helping customers save energy and money.

We often forget that Xcel Energy and other utilities are monopolies. Some are nonprofit cooperatives, but not Xcel or others that are corporate-owned. They are incentivized to thwart conservation because it reduces their revenue. The money you save by conserving energy is money the utility can’t put in its own shareholders’ pockets. The result is a loss for everybody: you waste money buying energy that didn’t need to be generated with natural resources that could have been preserved and an environmental cost that could have been avoided. A loss for everybody other than the utility itself, of course.

What’s worse, these anti-consumer actions stifle innovation. There’s no reason for entrepreneurs to invent the next technique or device that saves money while helping the environment when all it gets you is a cease-and-desist letter. I experienced this myself when I developed an electric meter solution for multi-family housing complexes in the 1990s. Decades before modern Wi-Fi smart meters hit the market, my technology allowed landlords and renters to work together to save money. Renters saved money in their family budget and ended up with newer, nicer appliances while landlords lowered their bills, helping keep down housing prices. Landlords would buy electricity at lower bulk commercial rates and re-sell it to tenants using smart meters. Renters could then save up to 50% of their electric bill while the building’s total energy usage could decline by 20-30%. Everybody saved money all while promoting greener housing options.

Today, landlords have the control over energy-hogging appliances but no incentive to buy efficient ones. Tenants have the incentive to increase efficiency, but no control over how to do so. As a result, everyone has an incentive to be inefficient. My patented system gave renters and landlords a reason to cooperate, solving the “split incentives” dilemma between owners and tenants.

This was a popular win-win and was installed and helping over 2,000 renters save money in short order. That is, until Xcel Energy lobbied the Minnesota Public Utilities Commission to make my innovation effectively illegal.

Regulatory incentives for innovative solutions that provide energy savings and boost conservation should be a feature of our infrastructure system, not a bug to be squashed. I’m far from the only small-time inventor with this story. There are countless examples of new technologies that could help our environment and family wallets being shot down by the powerful lobbying of big utilities. Lobbying which, by the way, you are forced to pay for: it’s built right into your electric rates!

During the 2021 legislative session, while continuing to support futuristic, green energy solutions, I hope our government leaders also work to promote proven, cost-effective conservation programs by incentivizing innovation, encouraging entrepreneurs, and rewarding solutions that work for all concerned.

Jay Jacobson, Plymouth, MN

Jacobson has worked as contractor in renewable energy and conservation for four decades. He’s a leadership council member of the Minnesota Conservative Energy Forum.

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