The following blog post, by the American Council for an Energy-Efficient Economy (ACEEE), gets at something I’ve been harping on for years – namely, the need to shift Dominion Energy’s incentive structure *towards* being efficient and *away from* just generating more electricity and building more infrastructure. The technical word for that is “decoupling,” and as ACEEE explains, “Having decoupling in place while pursuing beneficial electrification can help keep costs of electrification down, make decarbonization goals more achievable, and secure the benefits of electrification for customers.” In short, what decoupling does is “makes utilities indifferent to sales by providing them with revenues at the level approved by the regulator, regardless of how much they sell.” Finally, with regard to the COVID crisis – including adverse impacts to utilities’ revenues – ACEEE explains, “Decoupling is smart for the long term as we move towards electrification, which will take many years, while COVID-19 revenue impacts are hopefully short-lived.” In short, there’s really no good reason NOT to do this, and a lot of great reasons TO do it. So let’s do it!
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With the shift toward electrification, decoupling remains key for driving decarbonization
By Rachel Gold, Director, Utilities Program, ACEEE and Jessica Shipley
Senior Associate, Regulatory Assistance Project
States across the United States are increasingly prioritizing electrification of transportation and buildings to meet their decarbonization goals. Utilities are an important driver of this investment, so it’s critical that their business incentives be aligned with the public policy goals of an affordable, reliable, decarbonized and efficient energy system.
To keep costs down for electric customers and avoid inefficient utility spending, we need to remove utilities’ incentive – embedded in traditional cost of service regulation – to increase sales and deemphasize energy efficiency investments. Decoupling, which does just that, will be more crucial than ever in an era of electrification to ensure that we grow utility investment in the clean energy economy in a smart, efficient way. Having decoupling in place while pursuing beneficial electrification can help keep costs of electrification down, make decarbonization goals more achievable, and secure the benefits of electrification for customers. Utility regulators in states across the country should preserve, adopt or update decoupling policies as needed to meet decarbonization goals that require beneficial electrification alongside energy efficiency…
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