The Colorado Public Service Commission (PSC) has renewed its commitment to rate recovery of costs associated with utility-sponsored demand-side management (DSM) programs. At the same time, however, it has formally rejected a series of broader-based rate reforms under development since 1991. The rulings came in a case involving the Public Service Co. of Colorado, an electric utility. The PSC found a "ubiquitous lack of support" for mechanisms to encourage utility conservation investments that could reduce total system costs, but might also reduce sales levels. The rejected mechanisms include: 1) a parity revenue incentive mechanism (PRISM) that would link profits and achievement of energy-efficiency targets; 2) a statistical recoupling mechanism (SRM) to improve revenue-per-customer decoupling by using weather and economic factors to break the link between profits and sales levels; and 3) an inducement revenue formula (IRF) to compensate the utility for lost revenues associated with conservation efforts. (In an earlier ruling, the PSC approved the IRF as a default mechanism to be implemented by the utility beginning in 1996, but called for further study and hearings on the other rate reform proposals. See Re Public Service Co. of Colorado, 152 PUR4th 431 (1994)).
Simulations showed that the PRISM incentive plan would have required the utility to pay ratepayers $3.97 million in 1994 and $4.5 million in 1995. The SRM decoupling plan would have required rate increases ranging from $.04 to $9 million between 1991 and 1994. The IRF mechanism would have required additional customer revenues of $6 million in 1994 and $10 million in 1995.