Rate Decoupling

Here is a blog post from Carter Lavin, who presented this at the EcoAction meeting last night:

Currently utility profits and their energy sales are “coupled” so utilities make more money by selling more electricity. This incentivizes them to make and sell as much electricity as possible in the cheapest way possible. Because environmental costs are for the most part externalized by these utilities, they do not pay for the ecological damage they cause, they tend to use the cheapest and most energy dense fuel which in the United States is coal. This system is part of the reason for the general inefficiency of electricity use in the United States as the burden of action and financing falls upon individuals while the utilities have the reverse incentive.

Rate Decoupling is a policy which state and regional utility commissions can enact that provides utilities a guaranteed level of revenue in return for a certain quality of service to a specific region. This means that if a utility wants to generate a higher profit they need to reduce energy demand so they may reduce energy supplied and save on fuel and operating costs.



Right now utilities occasionally launch energy efficiency initiatives but they are on small scales and infrequent. In a rate decoupled system these types of programs would be bigger, better and more frequent.

To give you an idea of how much energy we could save through rate decoupling:

California implemented rate decoupling in the early 90s and utilities started energy efficiency programs that, along with state building and appliance energy efficiency programs saved 40 Billion kWh of electricity every year- roughly 2.8% of total American residential electricity usage in 2007 and roughly 20% of the amount of energy generated by California in 2007. If we did rate decoupling in every state and were about half as successful as they were, we would cut national energy use by 10%, and every individual and each utility would make money doing it.

It would also create many green collared jobs to help with all the retrofitting and energy audits that utilities would provide for free or at steeply discounted rates for their customers.

Currently Arizona, California, Connecticut, Colorado, Idaho, Maine, Massachusetts, Minnesota, New Hampshire, New Mexico, New York, Nevada, Oregon, Rhode Island and Washington State are currently reviewing rate decoupling and similar new rate structures.

This is a policy problem that can be solved by advocating change to those who are in charge of policy. Once that change is made then it will be the utilities who are going to push us to adapt more energy efficient buildings and appliances. The people who are in charge of making this decision are the people who regulate the utilities. These are boards that are sometimes regional and sometimes within a specific state and they are typically called Public Utilities Commissions or Public Service Boards or Public Service Commissions and you can find a list of them on PublicUtilityhome.com. Contact them and say that you support rate decoupling in order to increase grid stability, improve energy efficiency, protect the environment, and create green collared jobs.

If you want to read a imaginative description of what would life in a rate decoupled world be like, I suggest reading the chapter in Thomas Friedman's book Hot, Flat and Crowded called “If it isn't boring, it isn't green.”

Image from Stateinnovation.org