Signs of hope? More states move to decouple rates and efficiency

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By: SGN Staff

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Quick Take: Decoupling and its cousin lost revenue adjustment are ways to reduce the dis-incentive for utility energy efficiency (EE) programs. EE reduces the power sold by a utility. Without decoupling or a similar mechanism, the utility gets less revenue.

 

Decoupling style mechanisms are far from perfect. In essence, they tell the utility: "Go ahead and do a lot of hard work to implement energy efficiency. At the end of the year, we'll look at how much money you lost. And we'll probably put you back to where you would have been any way. Probably. Unless we're in a bad mood. Or the advocacy groups pressure us."

 

Okay, better than nothing – but not exactly a way to make utilities eager to implement EE. Removing a disincentive is NOT the same as installing an incentive. Even so, it's better than nothing. So I was pleased to see the latest report from the Institute for Energy Efficiency on the state of energy efficiency. Since the last report in 2011, the number of states with some type of approach to compensate utilities has climbed to 35 – 27 with policies in place and 8 more with proposals in the works. - By Jesse Berst

 

​ IEE Report Profiles State Energy Efficiency Regulatory Frameworks

 

With electric utility company energy efficiency budgets up 80 percent since 2007, more and more states are adopting policy frameworks that enable utility companies to pursue efficiency as a sustainable business.  In its newest report, “State Electric Efficiency Regulatory Frameworks, July 2012,” IEE presents the latest findings on these state policies.

 

“Supportive regulatory frameworks,” said Lisa Wood, IEE Executive Director, “are the key to expanding the electric power industry’s already large commitment to energy efficiency even further.  Through them, the power industry can fully and seamlessly integrate electric efficiency programs into their long-term financial and system planning concerns.  And through these regulatory frameworks, the nation’s homes and businesses will be able to continue to benefit from energy efficiency far into the future.”

 

Since its last update in June 2011, IEE found that 35 states now have or are pursuing some type of approach to compensate utilities for the revenue they lose due to their energy-efficiency programs.  Of the 35 states, 27 have policies in place and eight more have open cases that await a decision by their respective regulators.

 

In these 27 states with policies already in place, 14 have enacted revenue decoupling, which breaks the link between the recovery of a utility’s authorized fixed costs and its sales.  Rhode Island has approved utility revenue decoupling since IEE’s last update, and there are six states awaiting decisions on their proposed decoupling mechanisms.