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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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    Cited by:

    1. Arlan Brucal & Nori Tarui, 2018. "Revenue Decoupling for Electric Utilities: Impacts on Prices and Welfare," Working Papers 201814, University of Hawaii at Manoa, Department of Economics.
    2. Brucal, Arlan & Tarui, Nori, 2021. "The effects of utility revenue decoupling on electricity prices," Energy Economics, Elsevier, vol. 101(C).
    3. Victor von Loessl & Heike Wetzel, 2019. "Revenue decoupling and energy consumption: Empirical evidence from the U.S. electric utilities sector," MAGKS Papers on Economics 201918, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    4. Datta, Souvik, 2019. "Decoupling and demand-side management: Evidence from the US electric industry," Energy Policy, Elsevier, vol. 132(C), pages 175-184.
    5. Arlan Brucal & Nori Tarui, 2018. "Revenue Decoupling for Electric Utilities: Impacts on Prices and Welfare," Working Papers 201814, University of Hawaii at Manoa, Department of Economics.
    6. von Loessl, Victor & Wetzel, Heike, 2022. "Revenue decoupling, energy demand, and energy efficiency: Empirical evidence from the U.S. electricity sector," Utilities Policy, Elsevier, vol. 79(C).

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    More about this item

    Keywords

    Decoupling; Demand-side management; Energy efficiency; Electric; utility regulation;
    All these keywords.

    JEL classification:

    • F0 - International Economics - - General

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