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Oregon Utilities Break Conservation Barriers
Portland General Electric and NW Natural want to break, or decouple, the connection between profits and volume of energy sold, one of the most powerful disincentives for utilities to invest in energy efficiency. Utilities earn profits on the rate per kilowatthour (kWh). When they invest in conservation for their customers their revenues drop. Decoupling utilities' revenues from the number of kWhs they sell helps to overcome their reluctance to invest in energy efficiency.
Supported by the Citizens Utility Board of Oregon , the NW Energy Coalition , the Oregon Office of Energy and other consumer, environmental and low-income groups, the NW Natural proposal explicitly recognizes the value of decoupling in eliminating the disincentive for the utility to encourage conservation. If decoupling is approved NW Natural has agreed to dedicate 1.2 percent of its retail revenues to investments in cost-effective energy efficiency for its customers. The company's system benefits charge would also support the first-ever weatherization targeted exclusively at leaky gas-heated homes.
Utilities will still collect distribution charges based on the amount of energy they sell, but the amount they charge will be limited. Capping the amount utilities charge for the cost of delivering electricity or natural gas severs the existing link between the profits utilities earn and the volume of energy their customers consume. Under decoupling, distribution charges will be set based on the average annual distribution charge over a period of years encompassing a variety of weather and market conditions adjusted annually. For example, rebates would be given to reflect over-collections from cold weather and surcharges would be applied to collect lost utility revenues when customers cut back their energy consumption voluntarily in the face of high prices.
Decoupling also has the effect of shielding utilities and their customers from the uncertainties of weather variations, business cycles and other factors that affect energy consumption. Utilities can count on making a steady profit regardless of the amount of energy they sell. Customers will receive more consistent energy bills and won't be as exposed to the fluctuating energy costs that go along with annual and seasonal weather variations. Decoupling would particularly help low-income customers who face service shutoffs during winter months when energy consumption, and bills, are highest.
Mark Glyde and Steven Weiss