Ethical Grid?

So much of what’s discussed in offices these days – and forever really – focuses on this: What’s best for the company? How do we increase profits?

That’s totally understandable, given that a primary responsibility of any for-profit enterprise is to benefit its owners and investors. Still, as individuals, and I would argue, as part of the capitalist system, we have responsibilities that go beyond improving the financial bottom line. Most of all, we have a duty to be ethical.

The initial thought of almost everyone in business or government when the issue of ethics comes up is, “Oh, I’m ethical in everything I do. I follow the letter of the law.” But there is much more to it than that, and the energy efficiency sector of the US electric industry provides a perfect example.

When it comes to ethics, there are three ways of doing business: immorally, amorally and morally. The immoral approach is based on pure selfishness; the goal of immoral managers is profitability and organizational success at any price.

The amoral approach, which is unfortunately a dominant one in US business, focuses on what can be done legally to maximize profits. Amoral managers may be well-intentioned, but they don’t give a lot of thought to what their decisions mean to others. They lack empathy.

Moral managers are different. They run their thoughts and plans through another filter before making a decision. They ask, “Is what I’m doing fair to others? Is it just?”

My definition of an ethical grid flows from that. To me, an ethical grid is an electric industry in which the rights and responsibilities of utilities are carefully and properly balanced with legitimate interests of power consumers, the environment and society at large.

What does that mean when it comes to energy efficiency? You might think it would be hard to argue against EE. After all, it helps customers reduce their electric bills, and it trims both the use of fossil fuels and the emissions that result from using them.

Still, assessing from an ethical perspective the degree to which utilities should help their customers become more energy efficient is no easy task. There’s a lot to consider.

From the customer’s perspective, the benefits of aggressive utility-sponsored efficiency programs are clear and significant. Most homes and many businesses are pretty inefficient, and would gain quite a bit if a utility provided incentives to insulate, to change out old lighting for new, and to replace energy-hog appliances and equipment.

Society as a whole would also appear to gain if utility customers took a big leap forward in their efficiency. After all, a customer base that was more miserly in its energy use would demand less power, and utilities could get by burning a lot less fossil fuel.

That wouldn’t just reduce emissions. It would reduce the need for mountaintop coal mining and natural gas fracking, and save more of the nation’s fossil fuels for future generations. Businesses that are more energy efficient also would likely be more competitive and successful, thereby protecting existing jobs and maybe creating new ones.

But utilities – particularly ones that are investor-owned – are regulated, and are authorized by their regulators to earn a rate of return on equity, or profit. And, after all, electric utilities were created to provide electricity. Is there really any justification for them to help their customers use less and less of what historically has been their primary product?

A simple way to help resolve ethical issues is to use a Venn diagram, with three partially overlapping circles labeled “legal responsibility,” “economic responsibility” and “ethical responsibility.” The sweet spot in the middle, where all three circles overlap, is where utilities, regulators and EE advocates should find themselves every day.

There’s no perfect model yet for providing utilities with just the right financial incentives to help residential and business customers optimize their energy efficiency and minimize their use of electricity. But it’s clear that the ethical thing to do is to pursue that model with abandon by learning what others are doing, measuring the success of different approaches, and fine-tuning until we get it right.

Housley Carr is the founder and editor of www.ethicalgrid.com, a new web-based publication that focuses on ethical issues challenging the US electric industry.