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Effects of Electric Utility Decoupling on Energy Efficiency

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  • Jenya Kahn-Lang

Abstract

Most economists agree that revenue decoupling eliminates utilities’ incentives to encourage overconsumption of energy, but critics argue that decoupled utilities have no incentive to promote energy efficiency. This paper models the repeated game between regulator and utility and shows that decoupled utilities have greater equilibrium utility demand-side management (DSM) investment in the presence of DSM-related shareholder incentives. It then shows empirically that decoupling is historically associated with significant residential electricity consumption reductions, augmented DSM spending levels, and increased DSM investment efficacy.

Suggested Citation

  • Jenya Kahn-Lang, 2016. "Effects of Electric Utility Decoupling on Energy Efficiency," The Energy Journal, , vol. 37(4), pages 297-314, October.
    • Handle: RePEc:sae:enejou:v:37:y:2016:i:4:p:297-314
    DOI: 10.5547/01956574.37.4.jkah
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    References listed on IDEAS

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    1. Severin Borenstein & Meghan R. Busse & Ryan Kellogg, 2012. "Career Concerns, Inaction and Market Inefficiency: Evidence From Utility Regulation," Journal of Industrial Economics, Wiley Blackwell, vol. 60(2), pages 220-248, June.
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    3. Lesh, Pamela G., 2009. "Rate Impacts and Key Design Elements of Gas and Electric Utility Decoupling: A Comprehensive Review," The Electricity Journal, Elsevier, vol. 22(8), pages 65-71, October.
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    5. repec:aen:journl:1992v13-04-a03 is not listed on IDEAS
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