Dealing with the paradox of energy efficiency promotion by electric utilities

Utility-based Demand-Side Management (DSM) programmes started after the oil crises of the 70's and were adopted by utilities as a standard practice. However, deregulation of the electricity industry threatened DSM. More recent concerns regarding energy dependence and environmental impact of energy use caused renewed attention on the utilities role in energy efficiency fostering. EE is presently a cross-cutting issue, influencing energy policy definition and regulatory activity worldwide. Some instruments for influencing the behaviour of electric utilities in the market are used by regulators, corresponding to both impositions and stimuli, such as defining savings targets or decoupling profits from energy sales. The paper addresses categories of regulatory instruments and refers to examples of countries and regions using these identified categories of instruments. Although some cases show voluntary involvement of utilities in EE promotion on the grounds of customer retention strategies, there is a clear prevalence of regulatory constrained markets where utilities rationally engage in energy efficiency promotion.