Why utility stockholders don't need financial incentives to support demand-side management
- MSB Associates, Madison, WI (USA)
Conventional wisdom says that if public utility commissions want utilities to support demand-side management (DSM), they have to offer financial incentives to reward those utilities for their DSM efforts. As the reasoning goes, since DSM reduces utility sales and plant growth, stockholders will be worse off when DSM is promoted if some sort of offsetting incentive is not available. But there is a problem with this philosophy as it applies to utility growth and stockholder returns. There's no evidence that growth is, in general, good for utility stockholders. In fact, the evidence disputing the growth is good for the stockholder hypothesis is overwhelming. With many state commissions considering providing shareholder incentives for utility DSM investments and performance, it is time for regulators to focus on the evidence: reducing growth via DSM programs is not likely to harm and probably will benefit electric utility shareholders. Utility managers and employees, however, may be hurt when utility sales growth is reduced. In light of the evidence, if DSM incentives are to be used they should focus on the managers and employees of the utility, not the stockholders.
- OSTI ID:
- 5418920
- Journal Information:
- Electricity Journal; (United States), Vol. 4:5; ISSN 1040-6190
- Country of Publication:
- United States
- Language:
- English
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