Institutional barriers to DSM (demand side management): Reviewing the regulatory bargain

The paper discusses traditional arguments for utility regulation in the context of the current utility environment. It reviews several DSM delivery options using a matrix of key financial considerations for utilities and consumers. The strengths and weaknesses of each option are discussed and an assessment of current prospects for DSM implementation is provided. The premise of the paper is that adoption of DSM by utilities and consumers has lagged because of technical and behavioral uncertainties. In addition, regulatory practices and DSM delivery mechanisms have not provided adequate means to extract the benefits of DSM and allocate the risks in a way that offers clear advantages over generating options. The paper concludes with a brief discussion of the potential for value of service approaches to resolve these problems.