Fresh Energy proposes decoupling, improved energy conservation for Otter Tail Power

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Today, Fresh Energy filed expert testimony in Otter Tail Power’s current rate case at the Public Utilities Commission (PUC), proposing a full revenue decoupling mechanism that could improve energy conservation investments for consumers.

  • Otter Tail Power had proposed increasing the monthly customer charge from $8.50 to $13.30
  • This monthly charge largely discourages energy conservation and energy efficiency because customers will pay the same amount no matter how much energy they use
  • Fresh Energy opposed the increase and instead put forward a decoupling proposal that would help address Otter Tail Power’s concerns around stable revenue streams while allowing for substantial energy efficiency efforts and cost savings by the utility and its customers

In February 2016, Minnesota-based investor-owned utility Otter Tail Power filed its first rate case since 2010, proposing an increase in its residential fixed customer charge. Fresh Energy intervened in Otter Tail Power’s rate case to provide expert testimony challenging the requested customer charge increase, and recommending that the Commission deny the request. Based on its experts’ analysis, Fresh Energy has also proposed a revenue decoupling mechanism, which largely removes the utility’s disincentive to pursue energy efficiency and achieves many of the goals of an increased customer charge while preserving customers’ incentive to invest in energy efficiency through implementation via a volumetric rate.

One of the most significant benefits to decoupling is that it removes disincentives for utilities to conserve energy. For example, utilities under a standard business model can often increase their profits by selling more energy. The foundation of their business creates a disincentive for energy conservation programs that reduce the amount of energy that customers use. Decoupling does not guarantee that a utility will conserve more energy, but it can certainly mitigate a significant barrier to do so.

Other utilities in Minnesota have already implemented decoupling programs as a way to modernize their revenue collection. Fresh Energy’s support for, and advocacy in favor of, these policies stems from the way decoupling can help utilities invest more heavily in energy efficiency programs – leading to more cost savings for consumers and the utility alike. More importantly, decoupling removes the need for utilities to implement increased monthly fixed fees that limit the ability for consumers to save money through conservation.

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