Utilities may be reluctant to help launch energy efficiency projects in general because these can cut directly into their energy sales… more energy conserved by customers means less profits for the utility. For programs like PAYS, utilities are faced with the added risk of providing the initial outlay in capital for the project. These factors make the status quo much more appealing than any action on energy efficiency. Energy efficiency which cuts into utility profits presents an undeniable conflict of interest which needs to be resolved.
One option that has been exercised in several areas around the world already, is decoupling. For most utilities, energy consumption by customers and revenue for the utility are locked in a deadly embrace. Decoupling means that this link is cut. Utility revenues become independent from the amount of energy used by customers, letting utilities become much more enthusiastic about helping customers become more energy efficient. Everyone gets to be on the same page.
Let’s use my own bill and utility as an example of how decoupling can work. BC Hydro has a program in place that partially decouples electricity rates from their revenue. Each year they have to submit a revenue requirement application to the utilities commission, outlining their budget and operating expenses for the next 12 months. They also get to suggest a rate plan to allow them to cover these expenses. Once the application and plan are approved, BC Hydro can set its rates for the next year- the important thing to note here is that this plan is revenue neutral. The rates BC Hydro sets for the year allow them to cover their expenses, not to maximize their profits.
In conjunction with the partial decoupling, BC Hydro has a stepped rate structure in place to encourage energy conservation. Every customer has a basic daily charge for being connected to BC Hydro’s grid (it comes in at just under $4 per month, so it is not exactly a massive financial burden on the customer). In addition to the basic charge, the rate per kWh is divided into two steps. The first is a lower rate that applies to the first 1,350 kWh used in a two month period. If a customer goes over that amount, the extra energy used is charged at a higher rate.
Since I use a whopping 150 kWh on average each month, I am unlikely to ever get bumped into that second rate step. Even though I get to pay the lower rate, my electricity bill still depends on how much energy I am using, so I will benefit from becoming more energy efficient. Meanwhile, BC Hydro benefits from my energy conservation because it means they may be able to avoid investing in further hydro dam construction and other capital expenses for extra power generation.
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Thanks to mechanisms like decoupling, more and more utilities are helping to lead the parade towards greater energy efficiency. They are developing specific programs to help promote energy efficiency and offer a multitude of rebate and financial incentive programs. Although most of these programs target specific appliances like refrigerators, washing machines or dryers, some do provide rebates for retrofit projects like those offered by Smartcool. With the providers of energy on board, energy efficiency will only continue to gather speed until it has caught everyone up in its wake.
If you are interested in more information on utility motivation for energy efficiency, check out some of the “light” reading available here:
