California Public Service Commission

Must DSM Programs Increase Rates?

As competition in the electric industry increases, so does utility concern about the effect of demand-side management (DSM) programs on electricity prices. Because DSM programs often raise prices, several utilities have recently reduced the scope of their DSM programs or focused these programs more on customer service and less on improving energy efficiency (see sidebar). Whether all utilities should follow suit is, however, open to question. We contend that DSM programs do not always exert upward pressure on prices (em just sometimes.