Utility Conservation Programs: A Regulatory and Design Framework

Investing in opportunities to conserveelectricity is frequently very economic to theenergy user. Often, it also is in society's, ratepayers',or a utility's economic interest to promotethis conservation by the utility providing afinancial incentive to the customer for the investment.Such a conservation program, whether undertakenby a utility on its own initiative or requiredby a public service commission, raises severalissues of public policy that must be carefullyexamined.First, a regulatory framework is necessary toensure compatibility between the design of a conservationprogram and its stated goals. At times,regulatory policies inconsistent with the statedgoal of a conservation program have been applied.Second, constraints that necessitate the utilityoffering less than the theoretical maximum amountof a financial incentive under the applicable regulatorypolicy need to be recognized. Finally, amethodology to assess the induced impacts of theconservation program is necessary to evaluate theprogram's cost-effectiveness under any of thechosen regulatory policies.