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Energy Competition Warrants Heat Pump Promotion

Fortnightly Magazine - April 1 1996

Citing competition in residential energy markets, the Connecticut Department of Public Utility Control (DPUC) has approved a new heat-pump rate discount and installation rebate program proposed by United Illuminating Co. (em but with an eye trained on market share.

The DPUC acknowledged a prior reluctance to approve tariffs that promote specific end uses, but found that competition justified new approaches. It also cited other positive factors, including: 1) the utility's long-term surplus capacity outlook, 2) its low marginal cost, and 3) heat pump efficiencies.

Nevertheless, the DPUC cautioned that it would not allow utilities to charge some customers for margins lost to price competition in other service classes. It noted that Southern Connecticut Gas Co., a natural gas local distribution company, had already threatened to counter United's proposal by lowering its own rates for add-on heat pump customers. The DPUC suggested that utilities should look to markets not yet fully saturated so that new sales represent a true increase in overall revenues and not just a shifting of market share.

The decision also sets minimum standards for evaluating similar discounts, including a test to gauge the impact of discounts on rates, program participants, the environment, and other regulated industries. Re United Illum. Co., Dkt. No. 95-07-13, Jan. 17, 1995 (Conn.D.P.U.).

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