Electric utilities nationwide are attempting to retreat from commitments to energy efficiency (em a retreat that will benefit few customers, while damaging many. This retreat is driven by fear of retail wheeling (em that consumers will be able to shop for the lowest prices among competing entities. In turn, the threat of retail wheeling has spurred utilities to a frantic scramble to cut costs and trim rates. Among the costs to fall under the knife are programs associated with resource planning, including demand-side management (DSM).Some utilities have attempted to discontinue DSM entirely. Others have proposed to continue DSM only where it has no rate impact on nonparticipants. But these cost-cutting efforts occur even though DSM programs can actually reduce the utility's total revenue requirement if they satisfy the Total Resource Cost test (TRC), the most commonly used cost/benefit test. Participants in DSM programs that qualify under TRC actually see their electricity use fall and their bills drop.
Regulators, facing skittish electric utilities, are caught in the middle. Despite the current rush toward competition, regulators should not abandon cost-effective DSM simply for fear of the short-run rate impacts.
Streamlining utility operating activities is good business practice if quality of service remains the same. But that's not what is happening.