Alternative ways to decouple electric utility revenues from sales
- Oak Ridge National Lab., TN (United States)
Decoupling approaches have the flexibility to be combined with various types of incentive regulation. For example, instead of price-cap regulation, which would penalize a utility for running demand-side management (DSM) programs, revenue-cap regulation would encourage utilities to be innovative and aggressive in their cost cutting, while ensuring that shareholders are rewarded for running cost-effective DSM programs. Incentives for utility shareholders are becoming more important as the electric utility industry becomes more competitive, at the same time that society imposes additional environmental responsibilities on utilities. This paper focuses on one set of such incentives, those that affect a utility's motivation to implement DSM programs. A key element of these regulatory disincentives is the net lost revenues caused by programs that improve customer energy efficiency, thereby causing sales to decline. Between rate cases, lower sales mean lower utility revenues. Because revenues decrease more than costs do, shareholder earnings decline between rate cases.
- OSTI ID:
- 6464451
- Journal Information:
- Electricity Journal; (United States), Vol. 7:6; ISSN 1040-6190
- Country of Publication:
- United States
- Language:
- English
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