Growing Number of States Paying Utilities to Meet Energy Efficiency Goals

Growing Number of States Paying Utilities to Meet Energy Efficiency Goals

In Minnesota, new bonuses by the state helped Xcel Energy conserve more energy last year than in any other year, resulting in $40 million in new revenue

By Dan Haugen, Midwest Energy News

Imagine pulling into a gas station and being offered a complimentary tune-up to improve your car’s fuel efficiency. You’d probably wonder: what’s the catch?

So how about when your electric utility gives you a free compact fluorescent light bulb? Or your gas company offers to help pay for new windows or a more efficient furnace?

Gas and electric utilities have unique relationships with their customers in that they spend money on programs to reduce demand for the products they sell.

Why is this? Most states require utilities to invest in conservation programs as part of the regulation they accept for being able to operate as regional monopolies. In other words, they’re doing it because they have to.

A growing list of states, however, are experimenting with a new approach. Instead of mandating a minimum investment in energy-efficiency programs, policymakers are designing incentives that reward utilities with new revenue for meeting or exceeding conservation goals.

The hope is that giving utilities a path to earning a profit from encouraging efficiency will inspire more companies to proactively ramp up their conservation programs beyond what might have been achieved through mandates only.

Environmental Practice
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