Friday, November 21st, 2014

The Obameter

Require states to provide incentives for utilities to reduce energy consumption

"Will 'flip' incentives to utility companies by: requiring states to conduct proceedings to implement incentive changes; and offering them targeted technical assistance. These measures will benefit utilities for improving energy efficiency, rather than just from supporting higher energy consumption. This 'regulatory equity' starts with the decoupling of profits from increased energy usage, which will incentivize utilities to partner with consumers and the federal and state governments to reduce monthly energy bills for families and businesses. The federal government under an Obama administration will play an important and positive role in flipping the profit model for the utility sector so that shareholder profit is based on reliability and performance as opposed to total production."

Updates

A decoupling mandate was included in the stimulus bill

Energy efficiency was a big part of Barack Obama's environmental platform, and among the promises he made on the campaign trail was a pledge to require states to provide incentives for utilities to reduce energy consumption.
 
What Obama was referring to is known as "decoupling." For most utilities, energy efficiency is linked to revenue; when a utility reduces energy consumption, it sells less energy and reduces its profit. Under this business model, energy efficiency threatens a utility's bottom line. However, under decoupling, if energy sales are less than forecast, energy rates could be adjusted to compensate the utility. These rates are typically set by a state's public utility commission.
 
Several states, including Massachusetts and California, adopted decoupling policies before the Obama administration took office.

Obama used the stimulus bill to promote decoupling. The package includes $3.1 billion -- over and above the annual appropriation of $45 million -- for states to implement projects related to energy efficiency and renewable energy, according to the Alliance to Save Energy.
 
But that funding comes with some caveats: States must adopt decoupling and stricter, more energy-efficient building codes to get federal dollars. The promise must be put into a letter. (For example, you can read Wyoming's here .)
 
According to the Alliance to Save Energy, all states have sent in their letters. While it remains to be seen whether the funding will be effective, Obama promised to require states to provide incentives for utilities to reduce energy consumption through decoupling policies, and the stimulus funding and grant requirements do just that. We give Obama a Promise Kept as a result.

Sources:

The Congressional Research Service, Energy Provisions in the American Recovery and Reinvestment Act , accessed Dec. 21, 2009

The Illinois Climate Change Advisory Group, brief on decoupling , accessed Dec. 21, 2009
 
E-mail interview, policy experts at the Alliance to Save Energy, Dec. 18, 2009
 
E-mail interview, Laura Furrey, Research Associate for the American Council for an Energy-Efficient Economy, Dec. 18, 2009