Sharing the savings to promote energy efficiency

Shared-savings incentives offer a new way for regulated utilities to improve earnings by encouraging customer energy efficiency. Benefits of cost-effective energy efficiency measures can be shared explicitly among customers participating in an utility demand-side management (DSM) program, all utility ratepayers, and the utility itself. For participating customers, electricity bills are lowered directly; for ratepayers, the costs of providing electric services are reduced; and for utility shareholders, they are allowed to retain a fraction of the net benefits as additional earnings. In this study, we define the basic elements of shared-savings arrangements for utility demandside resources. Next, we compare and contrast specific details of the arrangements approved for three different utilities: Pacific Gas and Electric Company (PGE program cost recovery and the timing of incentive recovery;more » performance thresholds; program spending and earnings caps; program eligibility criteria; treatment of lost revenues; and for NEES, a complementary, non-shared-savings incentive. We conclude that the ``collaborative`` processes used to develop incentives for each utility proved extremely useful in allowing parties to negotiate trade-offs inherent between various program design features.« less