Conservation incentives: Balancing risk and reward
Although the notion that conservation is integral to least-cost electric service is accepted by regulators and utilities alike, acceptance does not always translate into action. Disincentives to demand-side management (DSM) implementation are built into the traditional regulatory process. A number of ways to remove the disincentives exist, for example, allowing utilities to recover lost revenues, including demand-side investments in rate base, or even decoupling revenues from sales. Still, removing disincentives may not be enough to promote utility investment in demand-side resources. When disincentives are removed, utilities remain financially indifferent over whether to meet forecasted demand through supply or demand-side investment. As such, utilities are not actively encouraged to invest in DSM, which many believe to be the more benign and socially beneficial resource option. Last fall, the Oregon Public Utility Commission noted that even after eliminating regulatory disincentives, the relative novelty of demand-side resources and their nature (including lack of direct utility control over the conservation facility itself) may make such resources seem riskier [than supply side resources] to utilities. A number of state public utility commissions have concluded recently that an appropriate way to promote DSM is to offer financial incentives that reward utility shareholders for implementing DSM programs and penalize them for inadequate efforts.
- OSTI ID:
- 6353286
- Journal Information:
- Public Utilities Fortnightly; (United States), Journal Name: Public Utilities Fortnightly; (United States) Vol. 131:6; ISSN PUFNAV; ISSN 0033-3808
- Country of Publication:
- United States
- Language:
- English
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