The Secret To Unleashing Natural Gas Utility Energy Efficiency Programs

Stephen Bicker, NW Natural
Ed Wisniewski, Consortium for Energy Efficiency

Keywords

Abstract

Almost universally, state legislative and regulatory bodies have embraced costrecovery rate structures for local distribution companies engaged in serving broad markets with uneven potential for profitability. Cost-recovery rate design enables utilities to serve users that otherwise would not have had access to service without incurring tremendous up front distribution and pipeline interconnection costs. More recently, this form of rate design has provided some limited benefit to utilities offering energy efficiency services by allowing them to pass program costs on to the ratepayers. . Nevertheless, few utilities are comfortable with a role that unreservedly champions energy efficiency. This is particularly true for investor-owned, natural gas utilities due primarily to their lower avoided costs of energy commodity.

This paper addresses a significant impediment to natural gas efficiency programs, suggests the significance of overcoming the impediment and identifies an alternative regulatory framework for doing so. It begins by suggesting reasons why natural gas utilities have played a limited role in energy efficiency and roughly quantifies the opportunity remaining to save natural gas. It then explores traditional regulatory approaches intended to encourage utilities to offer energy efficiency programs. Finally, a regulatory model is proposed that greatly reduces the penalties for energy efficiency inherent in traditional regulation.