Cogeneration as a competitive alternative to Pacific Gas and Electric

PG&E

Competitive Bypass of PG&E

Given the higher degree of overall efficiency and the lower costs and resources required for transmission provided by on-site cogeneration facilities and the bypassing of PG&E's systems, it is recommended that the CPUC continue in its encouragement of cogeneration through the provisions of financial incentives and protective measures that ensure a backup power supply. This will provide the greatest potential value to consumers and tax payers in terms of technological, natural, and financial resources used in the generation of heat and electricity, and thus is the best course of action from an economic standpoint. Continuing to encourage cogeneration will also force PG&E and other utility companies to become more efficient and effective competitors, whereas discouraging cogeneration would allow these companies to build and maintain more monopolistic control over power supplies, which would lead to distinct disadvantages for business and residential consumers.

Counterarguments

Cogeneration has led to a definite loss of business for major utility companies, as some of their largest customers are bypassing their systems and causing profitability problems due to the low marginal costs of power production. This has led to perceived (and real) fiscal weaknesses in these companies as future profits and security become increasingly uncertain. In addition, cogeneration by businesses is generally not as efficient a means of electricity production as can be procured from utilities, and in many operations the amount of electricity needed cannot be created without a surplus of heat from cogeneration. Ultimately, however, cogeneration is a more efficient option for many businesses, and PG&E and other utilities should not be given advantages through the discouraging of cogeneration. These utility companies must become more efficient businesses, or perhaps a truly public utility system that is not operated for profit would be the best alternative.