A recent article published in the Electricity Journal, co-authored by Fresh Energy and the Natural Resources Defense Council (NRDC), shows that utilities with decoupling policies are putting more money into energy efficiency and achieving greater energy savings.
- The study examined five electric utilities with decoupling policies in place and a long history of energy efficiency programs
- It examined levels of energy efficiency spending and savings before and after decoupling was put in place
- Every utility demonstrated an increase in both spending and savings after decoupling was implemented, some more than doubled.
Last year the Minnesota Public Utilities Commission approved the first decoupling mechanism for an electric utility in the state (two natural gas utilities have already implemented the policy). Fresh Energy and NRDC advocated for that decision because decoupling helps move utilities past the business model of simply selling more and more kilowatt hours. The argument behind decoupling is that once a utility is free from the motive to sell energy to make profits, it can increase investments in measures that help customers save money and keep costs down for all ratepayers.
Following the decision, we sought to examine how decoupling has impacted other utilities’ efforts in energy efficiency investment and energy savings achievements. We examined significant data from five electric utilities across three states, examining energy efficiency performance over many years to determine changes in utility expenditures and savings over several years before and after a decoupling mechanism was implemented.
Our research found a clear connection between decoupling mechanisms and increases in electric utility spending on energy efficiency and savings achieved. It is important to note that decoupling only removes the disincentive for utilities to invest in energy efficiency. Complementary policies such as Energy Efficiency Resource Standards and demand-side management financial incentives are needed to drive utility engagement on energy efficiency. One impediment to conducting this research on a bigger scale was accessibility to robust energy efficiency program data in the periods before and after decoupling was implemented. As electric and gas utilities gain more experience with decoupling policies, better data should be available to dive even deeper into the connection between decoupling and utility energy efficiency performance.