Changing market conditions and newly instituted price-cap regulation give electric utilities a greater disincentive for demand-side management (DSM), according to the Maine Public Utilities Commission (PUC). While approving a 1996 DSM savings target of 36 million kilowatt-hours (Kwh) for Central Maine Power Co. under the utility's new price-cap plan (see Re Central Maine Power Co., 159 PUR4th 209 (Me.P.U.C. 1995)), the PUC found that the five-year plan could provide a greater disincentive to DSM than traditional regulation because it increases regulatory lag and as well as the utility's opportunity to profit by promoting increased sales. In addition, the threat of stranded investment, including DSM expenditures, associated with increasing competition for certain end-use services could also lead the utility to shy away from a level of DSM investment consistent with existing least-cost planning principles. The utility had proposed a DSM target of only 14 Kwh.
While refusing to alter its reliance on least-cost planning as a fundamental regulatory principle, both as a matter of law and sound economic policy, the PUC tailored the DSM target requirements to give the utility greater flexibility to meet changing market conditions. It ruled that the utility could: 1) minimize near-therm rate impacts by maximizing participant contributions for DSM initiatives; 2) design DSM programs to achieve other corporate goals, such as increased customer satisfaction and loyalty; and 3) design DSM programs with customer preferences in mind. Re Central Maine Power Co., Docket No. 95-598, Nov. 22, 1995 (Me.P.U.C.).