The sweeping regulatory reform implemented in Michigan over the past year is often couched as a response to the economic crisis. Decoupling rates from utility profits, the reasoning goes, will...
New York Negawatts
Balancing risks and opportunities in efficiency investments.
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.