The latest ‘incremental’ policy changes might realign utility financial incentives.
Back in 1978, Congress passed an energy bill, the National Energy Act, including an obscure provision that seemed like an incremental tweak to U.S. energy policy. But eventually, that incremental tweak—the Public Utility Regulatory Policies Act (PURPA)—smashed through the gates of the vertically integrated utility construct. PURPA introduced competition into wholesale power markets in a way that fundamentally changed the U.S. utility industry.
Now, with language in an obscure section of the Energy Independence and Security Act of 2007 (EISA), Congress seems to be turning the PURPA battering ram toward another set of gates—the gates that separate energy production from energy conservation in the American system of utility ratemaking. While the new mandates are subtler than the original ones, they might lead toward a similarly dramatic industry makeover.