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New York Negawatts

Balancing risks and opportunities in efficiency investments.

Fortnightly Magazine - January 2010

4. For the text of the resolution and the rationale for shareholder incentives in general, see David Moskovitz, “Profits and Progress Through Least-Cost Planning,” Sponsored by the National Association of Regulatory Utility Commissioners, Washington D.C., November 1989.

5. For a description of early incentive designs and a discussion of their merits, see Stoft, S, J. Eto and S. Kito, DSM Shareholder Incentives: Current Designs and Economic Theory , Energy & Environment Division, Lawrence Berkeley Laboratory, University of California, Berkeley, California, January 1995.

6. Performance Incentives for Energy Efficiency Programs by State , The Edison Foundation, Institute for Electric Efficiency, April 2009.

7. Joe Bryson, Aligning Utility Incentives with Investment in Energy Efficiency: A Resource for the National Action Plan for Energy Efficiency , U.S. Environmental Protection Agency, November 2007.

8. For a thorough discussion of the California demand-side management incentive mechanism, see Jiong Eom and James L. Sweeney, “Shareholder Incentives for Utility-Delivered Energy Efficiency Programs in California,” Precourt Energy Efficiency Center, Stanford University, Stanford, CA, April 2009.

9. Savings from energy-efficiency programs typically are measures at three levels: ex ante , or as designed; “gross” savings, or ex ante estimates adjusted for the actual conditions; and “net” savings—gross savings adjusted for market effects such as free-ridership, spillover, and take-back.

10. As a simple example, if a utility has a 90-percent probability of achieving its annual savings target in each year, and savings in each year are determined independently, there would be only a 73-percent probability of the utility reaching its target in every year and earning the maximum award.

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