JOHN B. PHILLIPS : Executive Director, California Energy Coalition

Usually we pay our light and heat bills with no questions asked. But what about 20 years from now, when millions more will have moved to California? Already, eight energy cooperatives exist, wherein large companies band together, cut down on energy they don’t use and sell it back to a utility. The gas or electric company then supplies individual customers. John B. Phillips, an innovator of the concept and executive director of the California Energy Coalition in Laguna Beach, recently spoke with Times correspondent Ted Johnson.

How does a cooperative work?

Groups of large energy users, such as companies, can align themselves with their utility to produce power that the utility would either have to go out and buy or build a plant for. That’s benign energy. It has no environmental impact on the community. What we do is orchestrate a reduction so that users A through Z each give up certain amounts of energy. When we pool it all together, this is significant. So instead of the utility going out and buying a generator for the extra capacity, they buy the capacity from their own customers. It’s even good for the uninvolved rate payer--people in their homes. That energy the companies give up is used by you in your home.

Now the coalition is developing a way to cut down on overall energy use by adopting more efficient technologies. How will that work?

What makes it work is not the new technologies, but the interaction of the members in a partnership. I realized that among our members--including Koll Co., South Coast Plaza, Trammel Crow, Fluor--we had tremendous cohesion in this group of users. Then when we brought in the municipal governments of Irvine and Newport Beach, it got even larger. What we are trying to do is to get the utilities and major businesses to be partners so that we can keep the businesses in the communities. We hope that what we are doing here will be a model for other utilities and they can do it, too. So I felt we could develop a regional energy efficiency plan that would be comprehensive. About a year ago, we took that idea and went to the Southern California Edison Co. and the Gas Co. and they joined us in a partnership. I can tell you that our numbers show that more than 400 megawatts of energy capacity and efficiency can be harvested out of this region. What we will do is take that energy, bring it to the utilities, and that will reduce the energy usage of the whole region by 400 megawatts. That will give the utilities a longer period where they can grow without having to build additional capacity. For example, San Onofre is closing down a reactor, 460 megawatts. I can say to the Southern California Edison Co. that we can replace San Onofre Unit 1 without having to build one kilowatt of new power plant. Pretty damn impressive.

How will you save the energy?

We have a term called negawatt , that is a 1000 kilowatts of saved energy. It is the opposite of a megawatt. So what we will do is build these negawatt power “plants” in this region, and it is going to equate to 400 megawatts of power. It will be made up of all kinds of things, such as energy-efficient lights, energy-efficient motors, improved operations, some thermal energy storage, some gas-driven fuels, some gas refrigeration, all coordinated through the partnership. The utilities will take the responsibility of building it and see that it is maintained. We will do five or six demonstration projects in 1993, two or three for the city of Irvine, two or three for the Irvine Co.

How will it save money?

For example, in the city of Irvine, we are doing a (demonstration) project where the energy use is going to be reduced from, let us say $300,000 a year to $200,000 a year. Yet the cost of implementing it, the energy efficiency programs, is going to be about $300,000. But the city of Irvine doesn’t have $300,000 to spend on doing this. (With our proposal) the utilities will spend the money. The city of Irvine’s bill will go down from $300,000 to $200,000. But they also will get a bill from the utility that says, “Your energy cost is now $200,000, but we’re going to charge you $80,000 a year as a fixed charge to pay off the investment we made in the energy efficiency program.” So Irvine is paying $280,000, but they are still saving money. At the end of about five years, the capital charge goes away and their bill goes down to $200,000. So the utility company gets the value of the savings, the city of Irvine gets the lower cost and the rest of the people don’t have to buy a power plant because the energy is saved.

Why would the utilities want to get involved in this?

Choice is coming in this business. It’s already there in the (natural) gas business. Steelcase buys its gas from Texas, and the utility has to transport it. Five years from now the same thing will happen on the electricity side. When that happens, that utility is nothing but a highway. That’s all it is. We’re saying to the utility, ‘Get smart, get ahead of this. Don’t be reactive. Make your customers want to stay with you. Sell them a service.’ You don’t care in your house whether it is gas or electric. You want something done efficiently. I’m saying move from being a provider of a commodity to a provider of a service. If you don’t do that, baby, it’s over.

Do you see something like this catching on in the Clinton Administration?

I’m pleased with the election because I think the attitude in Washington will be responsive to these types of initiatives. But the beauty of what we have done is we have done it in a nonpolitical environment. We didn’t go to the government and say we wanted a grant, or say we want you to pass some legislation. We didn’t say we wanted the government to give us anything. What we did do is say, “We want you to stay out of our way.” Let the private sector build this process. Don’t try to micro-manage us. I expect support from Clinton, but the only kind of support I want is an affirmative nod. What I would hope to happen is when we are successful in this in mid-1993, maybe he would turn the Department of Energy on to it. They could then develop a national model to further this in other parts of the country.

On the need to make utilities more customer oriented.

“Rather than selling pounds of energy, we’re saying ‘Sell energy as a service, not as a commodity. Don’t sell kilowatts, sell light.’ ”

On the dependence on foreign oil.

“It is obscene that we use as much oil as we do, that our dependence is so critical that we have to go to war over it. There are business reasons for it because a lot of people are making a lot of money, but it is obscene.”

On utilities turning to more efficient energy.

“The irony is what is appropriate today probably won’t be two years from now. You have to have the flexibility to change and adapt.”

On Clinton’s choice for energy secretary, Hazel O’Leary.

“He put in someone who was a utility executive. What a good idea. Put in someone who knows something about it.”