Aligning Utility Interests with Energy Efficiency Objectives: A Review of Recent Efforts at Decoupling and Performance Incentives

  • Kushler M
  • York D
  • Witte P
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Electric utility industry experts have long recognized that under typical regulatory structures (e.g., traditional rate-of-return regulation, rate caps, etc.), utilities do not have an economic incentive to provide programs to help their customers be more energy-efficient. In fact, they typically have a disincentive because reduced energy sales reduce utility revenues and earnings. The financial incentives are very much tilted in favor of increased electricity sales and expanding supply-side systems. This report examines recent experience with two key regulatory approaches to overcome these structural disincentives: (1) decoupling of utility revenues and profits through periodic true-up of actual to projected sales; and (2) providing shareholder performance incentives for achieving energy efficiency program objectives.

Author-supplied keywords

  • decoupling
  • energy efficiency
  • performance incentives
  • utility

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  • Martin Kushler

  • Dan York

  • Patti Witte

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