The report is a national review of state regulatory mechanisms to encourage utilities to provide customer energy efficiency programs. Such policies have been adopted in over a dozen states around the country and appear to be successfully enhancing utility support for funding and implementing energy efficiency programs, says ACEEE.
Policies include mechanisms to “decouple” revenues and profits from sales, and approaches that provide shareholder financial incentives for achieving energy efficiency program objectives, according to the report.
“In 25 years of work in this field, I have never seen a more compelling set of circumstances for energy efficiency,” says Martin Kushler, ACEEE Utilities Program Director and co-author of the study. “Unfortunately, under traditional regulation, utilities are reluctant to encourage customer energy efficiency because lower customer sales mean less utility profit. That’s why these regulatory reform mechanisms are so important.”
A number of factors are converging to produce a rapidly growing interest in energy efficiency by policymakers, regulators, and even utilities themselves, according to ACEEE. These include: high fuel prices; escalating power plant construction costs; increased uncertainty surrounding cost-recovery for new generating plants; mounting concerns around utility system reliability; public opposition to the location of new generation and transmission facilities; and looming environmental costs, particularly including potential carbon emissions costs.
“Such policies really work to gain the support of senior utility management for customer energy efficiency programs, which is critical for such programs to be offered and for them to succeed,” says Dan York, co-author of the study. “These policies enable utilities to ‘do well by doing good’—we expect to see more and more states enact such policies as the experience with these mechanisms becomes more widely known.”
Aligning Utility Interests with Energy Efficiency Objectives: A Review of Recent Efforts at Decoupling and Performance Incentives is available for free download.
