To read more from Josh Schellenberg, check out his blog at EnergyDSM.com.
Finding the right regulatory framework to reward investor-owned utilities for energy efficiency has been a holy grail in the electricity business. In many areas of the world, utility revenue is still tied to electricity sales. In this situation, why would investor-owned utilities want their customers to be more efficient and use less electricity? It’s like expecting McDonald’s to sell less food or Apple to sell fewer iPods.
Decoupling is the logical answer for many in the industry. In decoupled states, utility revenue does not depend on the amount of electricity sales. For example, investor-owned utilities in California are rewarded for energy efficiency and various other metrics (i.e. reliability, customer satisfaction). None of these metrics are tied to the amount of electricity sales. If California utilities sell more electricity than expected, that extra revenue goes back to the customer in the form of lower rates.
This regulatory framework has been quite successful in California. It is the only state in the country to keep per capita energy use constant over the past few decades. Even as new technologies like computers and plasma televisions have become available, energy use for the average Californian has not changed. Decoupling has played a key role in accomplishing this feat.
One drawback with this framework is that it takes a lot of time and effort to determine the impact of utility efforts on the energy efficiency of its customers. To reach an agreement, the utilities and the California Public Utilities Commission (CPUC) carry out lengthily studies. Not surprisingly, the utilities often claim more credit for energy efficiency improvements than the CPUC is willing to give. Consider this excerpt from a May 4, 2010 Reuters article:
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