Most utility companies are encouraging their customers to conserve energy. But from a business point of view, there’s a down side to energy efficiency: selling less power also means less revenue for the utility companies that provide the power. And the less a utility earns, the less it is likely to invest in new, cleaner forms of energy. So in order to insulate utilities from this outcome and encourage them to invest in cleaner energy, a number of states have enacted policies that effectively “decouple” a utility’s revenue from its profits, while ensuring a flat rate for customers.
Decoupling was introduced in the late 1970s and early 1980s (for gas and electricity, respectively) in California, where it is widely deemed a success. Power consumption in California has remained flat since decoupling was enacted, despite the state’s population growth, while power use nationally doubled, per capita.
That said, decoupling is not universally embraced. Critics say it’s not fair to consumers, since those who make the greatest efforts to conserve pay the same rates as those who do not. Still, individuals and companies have other means of reducing their energy costs, such as by using two-way meters and participating in demand response programs in which they pay lower rates during periods of low demand.
Maryland, Massachusetts, Idaho, and New York are among the other states that are using the decoupling strategy, but some lawmakers are pushing for the practice to become mandatory and had hoped the stimulus bill would be the vehicle for doing so. It is not… Or it is, depending on whom you ask and how you interpret the language in the legislation.
While earlier versions of the bill explicitly called for decoupling, the version that passed uses suggestive language without a right-out mandate. It says that in order to receive continued funding from the act, states should employ a policy that ensures that a utility’s financial incentives are aligned with helping its customers use energy more efficiently.
According to an article by Jonathan Stein in Mother Jones, a number of Republican lawmakers used the occasion of a preliminary meeting of the House Subcommittee on Energy and Environment, where lawmakers were to begin crafting climate control legislation, to raise the issue of decoupling. Stein reports that, “Republicans on the panel repeatedly insisted that the stimulus bill made decoupling mandatory. They also distributed a chart claiming that under decoupling, residential or commercial energy users would be charged a flat fee (like cable TV subscribers) that could mean a rate drop for high-energy users and a rate increase for low-energy users.”
The New York Times, via Greenwire, reports that Rep. Ed Markey (D-Mass.), the chairman of the Energy and Environment Subcommittee on the Energy and Commerce Committee, said at this same meeting that the stimulus does not require decouplng and that there are a number of other ways states could employ toward the same goals. Indeed, a number of states prefer to create other incentives for utilities to encourage conservation.
Stein expresses preemptive worries that Republicans will hammer away at the question of whether states will move en masse toward decoupling and therefore stymie climate control legislation. What’s your take?