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2008 Regulators Forum: Putting Efficiency First

New rate structures prioritize conservation, but will customers buy it?

Fortnightly Magazine - November 2008

to go to 15 or 20 or even 50 percent—the legislature passed a bill to do that. It has been fortuitous, because as prices for new construction have skyrocketed, energy efficiency objectives become very cost effective. I’m very happy that our legislators took this step a couple of years ago, because this is going to be some of the most inexpensive power we’re going to be able to put on the system.


Fortnightly: As utilities are investing in these areas, will structural changes be necessary to make sure those investments are most effective for ratepayers in the long term?

Morgan (D.C.): One of the messages we’ve heard over and over as we talk about DR and smart metering in the Mid-Atlantic region is there’s no point in having smart meters if you’re still going to have dumb rates. You’ve got to have rates that take advantage of the capability of those meters and provide customers with an opportunity to save energy and save money by avoiding consumption at the time when prices are high.

We need to learn what we can from the pilots that are under way. We have one here, PowerCentsDC, where we’re testing three different types of dynamic rates using smart meters, and some enabling technology, with a sample of about 1,200 residential customers. We’ll learn how customers respond.

Ervin (N.C.): I have to be fairly careful about answering that question because we’re conducting hearings on the Save-a-Watt program.

Our legislature passed a fairly comprehensive amendment to our efficiency plant certification and generating plant cost-recovery statutes last year in conjunction with our renewable portfolio standard. They were attempting, as best as I can interpret their statutory language, to make sure we had sufficient statutory authority to do what we needed to do to encourage an optimum level of investment in energy efficiency. We’ve certainly had energy efficiency programs for a good while. These programs are nothing new, but the degree of emphasis has increased. The general assembly seems to be saying to us, ‘We want you to have the full panoply of options available to ensure an optimal level of efficiency investment occurs,’ but leaves us considerable discretion as to how such incentives should be structured, what level of incentives are appropriate, that sort of thing.

In many instances it becomes a policy question and to some extent a fact question, based on the record of individual cases about whether a utility is investing optimally in energy efficiency and what we need to do to ensure that optimal level of investment is actually made. The only thing you really can do as a legislature is to set out the basic policy framework that you want the commission to implement, and then give them the tools and discretion to do the best they can. At least that’s what our legislature I think has done.

Smith (Idaho): In Idaho in 2007 we implemented a three-year pilot in which we calculated our fixed-cost adjustment, to ensure the utility is made whole for the fixed costs we calculated on a per-customer basis