Utility Conservation Programs: A Regulatory and Design Framework

Abstract

Investing in opportunities to conserve electricity is frequently very economic to the energy user. Often, it also is in society's, ratepayers', or a utility's economic interest to promote this conservation by the utility providing a financial incentive to the customer for the investment. Such a conservation program, whether undertaken by a utility on its own initiative or required by a public service commission, raises several issues of public policy that must be carefully examined. First, a regulatory framework is necessary to ensure compatibility between the design of a conservation program and its stated goals. At times, regulatory policies inconsistent with the stated goal of a conservation program have been applied. Second, constraints that necessitate the utility offering less than the theoretical maximum amount of a financial incentive under the applicable regulatory policy need to be recognized. Finally, a methodology to assess the induced impacts of the conservation program is necessary to evaluate the program's cost-effectiveness under any of the chosen regulatory policies.