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

Research Report U061


Marty Kushler, Dan York, and Patti Witte


Under typical regulatory structures, utilities do not have an economic incentive to provide programs to help their customers be more energy-efficient. Doing so reduces energy sales and associated revenues and earnings. Utilities are increasingly being called upon to increase their levels of spending and support for customer energy efficiency programs despite this disincentive. This report examines recent experience with two key regulatory approaches to overcome these structural disincentives: (1) "decoupling" of utility revenues and profits, and (2) providing shareholder "performance incentives" for achieving energy efficiency program objectives.