[BETA] Fortnightly

Can DSM live with

competition?

Between 1992 and 1994, demand-side management (DSM) spending grew at a median annual rate of 16 percent for a survey group of 37 electric utilities (those reporting DSM expenditures of at least $5 million for 1993). For 1994-98, however, the same utilities project a median annual decline of 3 percent in their DSM expenditures. (Taken together, the 37 utilities - located primarily along the east and west coasts and in the industrial Midwest - accounted for 51.9 percent of all DSM expenditures for U.S. utilities for 1993, and 27.6 percent of the retail sales.)

The bywords for tomorrow's programs: cost-effective and service-oriented. Instead of rebates and direct installation of DSM measures, utilities plan to emphasize recovery of program costs from participants, provision of financing, shared savings programs, and market transformation. More emphasis will be placed on programs for commercial and industrial customers, and less on the residential ratepayer.

The waxing or waning of DSM programs at individual utilities may be traced to certain factors. DSM efforts will find greater favor where the utility:

s fears losing customers through competition

s needs new peaking resources

s enjoys financial incentives

s attaches substantial importance to state regulations on integrated resource planning.

On the other hand, DSM will lose ground where the utility:

s emphasizes rate discounts, energy audits, and innovative pricing

s fears losing customers to other utilities, to self- or cogeneration, or through customer relocation

s exhibits a history of aggressive DSM usage

s reduces avoided costs

s experiences excess capacity. t

Martin Schweitzer is a member of the research staff at Oak Ridge National Laboratory. Miriam Pye is a research associate at the American Council for an Energy-Efficient Economy. The information presented here is based on data collected from 37 electric utilities and 22 state regulatory commissions. The full report on this study, Key Factors Responsible for Changes in Electric Utility DSM Usage, is available from ORNL or ACEEE.

Note: This material was compiled as part of U.S. government contract No. DE-AC05-96OR22464. The U.S. government retains

a nonexclusive, royalty-free license to publish or reproduce the published form of this contribution, or allow others to do so.

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