How Decoupling Creates Win-Win for Power Companies and Customers

8/3/2019 How Decoupling Creates Win-Win for Power Companies and Customers

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How Decoupling CreatesWin-Win for Power

Companies and Customers

Article by

Lewis Verduyn

October, 2011

Clutha River ForumPO Box 124, Lake Wanaka 9343, New Zealand

[email protected]

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mailto:[email protected]:[email protected]


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It saves energy, cuts electricity bills, creates 'green collar' jobs, protects the

environment, sets the agenda for cleantech energy, and reduces climatechange impacts. Decoupling is a proven energy efficiency strategy that ticksall the boxes.

Energy efficiency (EE), negawatts, the fifth fuel whatever you want to call it, is thecheapest, fastest, smartest way to add supply capacity. It can save us billions ofdollars annually.1 It can create jobs and future-proof our economy. It can save ourrivers from unnecessary dams, and its carbon-free.

Better still, energy efficiency has emerged as the largest single lever to limit climatechange. The United Nations Foundation has estimated that a 2.5 percentimprovement in efficiency worldwide would keep carbon dioxide (CO2) concentrationsin the atmosphere below 550 parts per million, minimizing climate change impacts.2

Energy efficiency component in policy scenarios

But New Zealand is far from being energy efficient. Despite decades of campaignsurging us to reduce electricity consumption, we continue to rank among the least

energy efficient countries in the OECD,3 while paying ever higher electricity prices.Why are we struggling?

Working against us is an electricity industry driven by consumption, not by energyefficiency. Thats no surprise, given that we have a 20th century grow-and-build4

market model based on production, consumption and construction.

As a supply strategy, the traditional grow-and-build model worked well during muchof last century, when supply networks were developed, and when improvingtechnology and economies of scale kept electricity prices relatively affordable andstable. It delivered major networks and inestimable benefits.

But the imperatives have changed in todays capital and carbon-constrained world.The costs of new generation, both financially and environmentally, are enormous.

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We need a market that promotes efficiency, and clean energy. We need a smartmarket that works in the 21st century.

Decoupling is a regulatory mechanism that decouples the link between increasedsales and increased profits. It is a proven strategy that stimulates investment inenergy efficiency, new renewables and distributed generation.5

How decoupling works

In the grow-and-build market, the more electricity a power company sells, the moremoney it makes. When there is enough demand for more electricity, it can justify anew power station, funded by customers and with profits returned to shareholders.More consumption equals more profits. More demand equals more power stations andmore profits. In short, there is a throughput incentive.

Traditional regulated markets, typically found in the US, have a strong throughputincentive. Restructured markets, such as that of New Zealand, also encourageelectricity generators to sell as much electricity to consumers as they can at the

highest attainable rate.

It follows that power companies are not seriously interested in lowering electricityconsumption through energy efficiency, in spite of the positive impacts on supply,customer bills, and the environment.

However, the decoupling mechanism removes the throughput incentive by ensuringthat power companies have stable revenues regardless of sales volume.

In its essential form, an approved revenue target is set by the regulator over a fixedperiod usually a year, to provide a safe and reliable service, with a fair return for

investors, and at a fair cost to customers. The power company then collects revenueregardless of sales volume. Regularly usually monthly, the revenue return isreviewed to see if the predetermined revenue requirement is being met, and if it isunder or over a true-up rate adjustment is made.6 If energy sales are less thanexpected, rates rise slightly to reach the target revenue, and profits increase. Ifenergy sales are higher than expected, rates and profits diminish.

A typical rate adjustment is only be 2-3 percent (capped), equating to less than 1percent of a customers power bill in most cases,7 which is usually imperceptible toconsumers, especially those with lower power bills because of less consumption. Sincethe rate adjustments are always opposite the direction of changes in overallconsumption, decoupling has a stabilizing effect on customer bills.

The revenue target is calculated on a per-customer basis, and moves up or downaccordingly, protecting customers from risk. Power companies are motivated to addcustomers, because approved revenues then increase, and saved energy can be soldto new customers without the cost of adding equivalent generating capacity.

Performance incentives are a key component of the mechanism. At the same time,any efficiency measures that reduce the fixed costs of supply will increase profits,whereas previously inefficiency could be offset by sales.

Decision-making then refocuses on cost-effective investments to deliver moreefficient energy to customers, even when such investments reduce sales.

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Shareholder and customer interests aligned

Electricity prices under the grow-and-build model face continuous upward pressure.8

Power companies are motivated not only to achieve fixed-cost recovery and profits forshareholders, they are also intent on financing new generation and passing on thosecosts to the consumer. But with decoupling, the pressure to raise prices is eliminatedbecause company profits are maintained or improved while energy consumption and

projected demand is reduced.

Power companies run savings programmes to help their customers lower theirelectricity bills.9 In the longer term, consumers often pay much less than they wouldhave done under the previous growth-based system. For example, after threedecades of decoupling in California, electricity bills are about 20 percent below the USnational average.10

A compelling benefit of decoupling for power companies is that it provides reliablefixed-cost recovery and therefore revenue certainty, by eliminating the financial risksassociated with reduced sales; when consumers become more energy efficient with

new appliances or habits, when weather limits supply (hydro reservoir dry years), andwhen economic conditions depress the market.

By investing in energy efficiency, power companies can meet demand growth at lessthan half the cost of new generation,11 and deploy it much faster, while reducingtransmission capacity problems.

And since fewer new power stations are needed, everyone benefits by avoiding theeconomic and environmental costs of unnecessary generation.

Power company investments in energy efficiency also yield faster returns than

investments in new generation. Importantly, as the cost of new generation continuesto climb and the cost of energy efficiency continues to fall, the returns on efficiencyinvestments are outpacing the returns from new generation.

Under decoupling, building new power stations without first investing in all cost-effective energy efficiency is a huge misallocation of capital. Efficiency becomes thesupply option of first choice.

The bottom line is that decoupling results in a positive alignment between shareholderand customer interests. With decoupling, power companies can make money whentheir customers save money.

The decoupling success story

Decoupling electricity began in 1982, when California adopted an Electric RevenueAdjustment Mechanism to decouple power company revenue from sales.12 Themechanism successfully removed disincentives for energy efficiency and reduced ratevolatility.

In 1996, however, the state regulator decided that deregulating power companieswould be more effective. Deregulation was a disaster as rates spiralled out of control,impacting heavily on consumers. Energy resources were squandered and after

electricity shortages in 2000 and 2001, decoupling was re-adopted in a landmarkprogramme that resulted in two billion dollars of investments in energy efficiencymeasures from 2006 to 2008.13

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The cost has averaged 2 to 3 cents per avoided kilowatt hour, which is about one-fifththe cost of electricity generated from new sources. Every dollar invested by the powercompanies in efficiency has reaped more than two dollars in savings for customers.The average saving per family has been about US$1000 per year.14

In the past three decades, electricity consumption per capita grew 50 percent in therest of the US, while it stayed relatively flat in high-tech, fast-growing California,

which has cut electricity consumption by a massive 40%.

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Efficiency measures saved California households US$56 billion from 1972-2006,enabling households to redirect expenditure toward other goods and services,creating about 1.5 million jobs with a total payroll of US$45 billion. Reduced demandhas resulted in slower growth in energy supply chains, but for every new job foregone

in the supply sector, more than 50 new jobs have been created across the economy.16

In total, California saves over 40,000GWh annually17 through a combination of utilityefficiency programs and building and appliance standards, compared to the aggregateof other US states.

California energy consumption compared to US energy consumption

Californias success story has prompted decoupling roll-outs across the US. Full orpartial decoupling has been enacted in 17 states and is under consideration in 11more and the District of Columbia.18 In many cases, decoupling has been supportedby the large power companies.

Even with Californias impressive achievement so far, the state still thinks that withfurther effort, it can achieve as much additional electricity savings by 2020 as it hasin the past three decades.

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Last year, California adopted a revised scheme called decoupling plus, which aims tomake investments in energy efficiency more profitable for power companies than newpower stations would be.19

The winning recipe is not a secret

Governments around the world are realizing that specific incentives and regulations

must be in place to achieve progress in energy efficiency, and that the markets andthe providers, will have to change in order to make it happen.

Obvious, is the need to integrate a three-part policy including utility incentives,government standards, and technology innovation. Policy-makers and regulators havea number of market and standards-focused options.

While various market mechanisms may stimulate certain energy efficiency measures,only revenue decoupling removes the throughput incentive, while being flexibleenough to meet the needs of utilities and customers alike.20

To decouple successfully, it is vital that the regulator treats the return on energyefficiency expenditure in the same way as new plant, as this provides the necessaryincentive for utilities to actively pursue efficiency for profit.

Regulators can opt for lesser degrees of decoupling, but the full true-up approach isconsidered best practice because it encourages, at a reasonable cost, the full range ofmeasures to promote efficiency and clean energy.21

When designing the mechanism, regulators must be sure that utilities have readyaccess to project finance, and ensure that investment risk is not passed on to theconsumer. Progress and outcomes need reliable monitoring and verificationprogrammes, and the revenue true-up process requires robust fairness tools.

Power companies should be able to design and administer programmes that involveall stakeholders regulators, lines utilities and customers.

Decoupling is only part of the recipe. It is also essential to set standards and targetsthat create forward momentum, and to leverage innovation by providing financialincentives for research and development, and deployment.

Improvements in standards are particularly important. Half of Californias savings aredue to building and appliance standards, which are revised upward every three years.Building codes should move toward the goal of zero net energy, in line with the

success of passive design.22

When the energy market is driven by efficiency, the result is an ever-expandingefficiency industry, with energy companies taking a leading role if theyre smart.

Much of Californias success can be credited to Art Rosenfeld, the formerCommissioner of the California Electricity Commission from 2000 to 2010, whodesigned aggressive and visionary energy policies. The winning recipe is not a secret,and can be adapted to any market:23

1. RD&D and Standards

2. Integrate energy efficiency into resource procurement3. Motivate utilities by decoupling revenues from sales4. Set energy saving targets

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5. Well-designed programmes6. Independent evaluation of savings7. Performance-based incentives

Well-planned and implemented, this formula turns the market, stimulating investmentin efficiency and cleantech energy - the ultimate climate-friendly energy strategy.

But there are barriers to success, and they are not financial or technological.Researchers talk about policy-makers with knowledge gaps,24 and energy companieswith habitual behaviour.25

Success factor is the strength of political will

A commitment to energy efficiency is one thing, achieving it is another.

Regardless of government policy and efficiency targets, progress will be slow unlesspower companies are provided with incentives to invest as much in efficiency as theydo in generation. If our government and our power companies were as committed toefficiency as they are to generation, we would be winning already.

Without a favourable regulatory environment, the motivations of power companiesand policy-makers will remain at cross purposes.

Efficiency technologies and new renewables are rapidly expanding and will influenceevery aspect of our lives in the 21stcentury. Efficiency will soften the transition to aclean energy economy, and both will enable more sustainable economic activity, morecompetitive businesses, more green collar jobs, more energy security, moreenvironmental protection, and the shortest route to reducing climate change impacts.

To that end, decoupling removes critical barriers to investment in energy efficiencyand cleantech, simply and effectively eliminating a power companys throughputincentive, while stabilizing consumer power bills, and reducing the overall level ofbusiness and financial risk that power companies and their customers face.

If thats not enough, the decoupling mechanism represents an essential paradigmshift from quantitative economics (volume-based) to qualitative economics (quality-based) the fundamental antidote to unsustainable 'growth at any cost' in our finiteworld.

Given the positive attributes of revenue decoupling, it is reasonable to expect that itwill continue to gain in popularity and become the regulatory method of choice for the

21st century electricity sector.26

Energy - clean and efficient, and decoupled, is not only the opportunity of the 21st

century, it is our top survival strategy.

What is missing is a long-term vision for New Zealand, and the strength of politicalwill to achieve it.

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1 Rob Bishop (2001). New Zealands Energy Efficiency Potential A Top Down Analysis, Energy SolutionsLtd.http://www.energysolutions.co.nz/pdf/New%20Zealand's%20Energy%20Efficiency%20Potential.pdfVery large savings from energy efficiency are possible in New Zealand. This study, using assumptionsbelieved to be realistic and conservative, shows that, for fast implementation of efficiency, a cumulativebenefit of up to $75 billion dollars could be achieved by 2020, at a cost of only $12 billion.

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Expert Report (2007). Realizing the Potential of Energy Efficiency, Targets, Policies and Measures for G8Countries, United Nations Foundation.http://www.globalproblems-globalsolutions-files.org/unf_website/PDF/realizing_potential_energy_efficiency.pdfBased on extensive consultations with senior energy experts from around the world, this report proposesthat G8 countries pledge to double their historical rate of energy efficiency improvement. This translatesroughly to a 2.5 percent annual improvement. Accomplishing a 2.5 percent efficiency improvement on aworldwide basis would save 97 EJ and return energy consumption to 2004 levels. Importantly, doubling therate of energy efficiency would make it possible to keep carbon dioxide (CO2) concentrations in theatmosphere below 550 parts per million (ppm) through the end of the century if the goal were expandedworldwide. This calculation is based on the assumption that the 2.5 percent improvement through 2030 thenlinearly falls to 1 percent by 2100.

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Massimo Filippini, Lester C. Hunt (October 2009). Energy Demand and Energy Efficiency in the OECDCountries: A Stochastic Demand Frontier Approach, Centre for Energy Policy and Economics, Swiss FederalInstitutes of Technology.http://www.cepe.ethz.ch/publications/workingPapers/CEPE_WP68.pdfFigure 4 gives the ordered data for the latter period only, 1998-2006. This shows that the ordering doeschange, with the five least efficient countries being Finland, Belgium, the Slovak Republic, Canada and NewZealand and the five most efficient countries being Germany, Switzerland, Denmark, Italy and Ireland.

4Michael Valocchi, John Juliano and Allan Schurr (2010, March). Switching Perspectives, Creating NewBusiness Models for a Changing World of Energy, IBM Institute for Business Value.http://www.fuqua.duke.edu/edge/documents/IBM_-_New_energy_biz_models-optional.PDFFrom the early days of the integrated monopoly utility until the mid-to-late 1960s, electric utilitiesaggressively pursued a grow-and-build strategy as core to their operating model. ...Because each

succeeding class of turbine generator units had greater output, higher thermal efficiency and lower cost-per-unit output, the cost of generating electricity declined as production rose. To escalate production and achievethese economies of scale, utilities actively encouraged more and more usage of electricity. Economies ofscale eventually plateaued, as generating units reached a practical optimum size by the early 1970s. Butthere has been significant stagnation in business models as well. In reality, todays business models in manyplaces differ little from the business models of the grow-and-build era, even though the imperatives arevastly different.

5Stephen Heins and Joel Sandersen. (2007). Decoupling: Divorcing Electricity Sales from RevenuesCreates Win-Win for Utilities and Customers. Summer Study on Energy Efficiency in Industry. Orion EnergySystems. European Council for an Energy Efficient Economy (eceee), c/o Borg & Co, Sveavgen 98, IVS-113 50, Stockholm, Sweden.http://www.eceee.org/conference_proceedings/ACEEE_industry/2007/Panel_5/p5_4/Paper/

Breaking the linkage between utility sales and utility revenues will remove the disincentives and stimulateutility investment in energy efficiency, renewable energy and distributed generation.

6 United Nations Foundation. (2010, September). International Energy Efficiency Initiative. - Changing theUtility Business Model(abridged by European Institute).http://www.europeaninstitute.org/Documents/international-energy-efficiency-initiative.htmlActual deviations from this formula are discovered through monitoring and verification programs andreconciled through credits to consumers (in the case of excess utility revenue) or recoveries from consumers(in the case of a revenue shortfall). This is often referred to as a true-up process.

7 National Renewable Energy Laboratory. (2009, December). Decoupling Policies: Options to EncourageEnergy Efficiency Policies for Utilities. U.S. Department of Energy, Office of Energy Efficiency andRenewable Energy.

http://www.nrel.gov/docs/fy10osti/46606.pdfThe decoupling adjustments, positive or negative, tend to be small, resulting in less than a $2.00 differencein a customers average monthly electric bill (less than a 1% change in the total bill in the majority of cases).
http://www.energysolutions.co.nz/pdf/New%20Zealand's%20Energy%20Efficiency%20Potential.pdfhttp://www.globalproblems-globalsolutions-files.org/unf_website/PDF/realizing_potential_energy_efficiency.pdfhttp://www.globalproblems-globalsolutions-files.org/unf_website/PDF/realizing_potential_energy_efficiency.pdfhttp://www.cepe.ethz.ch/publications/workingPapers/CEPE_WP68.pdfhttp://www.fuqua.duke.edu/edge/documents/IBM_-_New_energy_biz_models-optional.PDFhttp://www.eceee.org/conference_proceedings/ACEEE_industry/2007/Panel_5/p5_4/Paper/http://www.europeaninstitute.org/Documents/international-energy-efficiency-initiative.htmlhttp://www.nrel.gov/docs/fy10osti/46606.pdfhttp://www.energysolutions.co.nz/pdf/New%20Zealand's%20Energy%20Efficiency%20Potential.pdfhttp://www.globalproblems-globalsolutions-files.org/unf_website/PDF/realizing_potential_energy_efficiency.pdfhttp://www.globalproblems-globalsolutions-files.org/unf_website/PDF/realizing_potential_energy_efficiency.pdfhttp://www.cepe.ethz.ch/publications/workingPapers/CEPE_WP68.pdfhttp://www.fuqua.duke.edu/edge/documents/IBM_-_New_energy_biz_models-optional.PDFhttp://www.eceee.org/conference_proceedings/ACEEE_industry/2007/Panel_5/p5_4/Paper/http://www.europeaninstitute.org/Documents/international-energy-efficiency-initiative.htmlhttp://www.nrel.gov/docs/fy10osti/46606.pdf


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8Ministry of Economic Development. (2008).Schedule of Domestic Electricity Prices: Updated to 15November 2008.http://www.med.govt.nz/templates/MultipageDocumentTOC____39087.aspxThe price of electricity increased 7.5% in the year between 2007 and 2008, and 41% in the five yearsbetween 2003 and 2008.

9Cassie Zinzow, e4energy, Economy-Environment-Energy-Efficiency, Decoupling, Making Energy Efficiency

a Reality.http://www.stateinnovation.org/Research/Energy-and-Environment/Utility-Decoupling/Decoupling20Brochure-(2).aspxAs utilities begin to implement efficiency programs more enthusiastically, energy demand should stabilizeand eventually decline. Decoupling will not impose any new or additional costs on customers and initiallyrates will only oscillate up or down very modestly. However, residential electric consumers will now havemore opportunities to use energy efficient practices in their own home through their utilitys support, whichwill result in lower utility bills. As energy efficiency becomes a more prevalent practice, the residential sectorwill also benefit from overall declining utility rates.

10United Nations Foundation. (2010, September). International Energy Efficiency Initiative. - Changing theUtility Business Model(abridged by European Institute).http://www.europeaninstitute.org/Documents/international-energy-efficiency-initiative.html

Under decoupling, Californias per capita energy has remained relatively flat over the last thirty years. To putthis in perspective, energy use per capita in the rest of the country has increased by 50 percent. As a result,Californians enjoy electricity bills that are approximately 20 percent below the national average.

11United Nations Foundation. (2010, September). International Energy Efficiency Initiative. - Changing theUtility Business Model(abridged by European Institute).http://www.europeaninstitute.org/Documents/international-energy-efficiency-initiative.htmlRecent improvements in technology and practice have brought the cost of freeing up a kilowatt-hour ofelectricity through energy efficiency down to less than half of the cost of building new generation.

12 Brian C. Prusnek (2005, May 18). Promoting Energy Efficiency in California.http://www.epa.gov/statelocalclimate/documents/pdf/PrusnekPresentation.pdf

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John Bacino (2007, September 10). Utility Decoupling: Giving Utilities Incentives to Promote EnergyEfficiency.http://www.progressivestates.org/blog/672/utility-decoupling-giving-utilities-incentives-to-promote-energy-efficiencyCalifornia is just one of many states to have disastrous experiences with deregulation. Deregulation has notdelivered energy savings and has often undermined state programs, as in California, that were promotingenergy conservation. After the mass electricity shortages in 2000 and 2001, California re-adopteddecoupling in a groundbreaking energy-efficiency campaign that includes two billion dollars of approvedinvestments in efficiency from 2006 to 2008.

14International Rivers. (2009, January).The Power of Negawatts. Efficiency: The Greenest ElectricitySource.http://www.internationalrivers.org/files/EnergyFactSheet.pdfWeve saved $16 billion a year in electricity, with a net savings of about $1,000 per family per year, notes

John Wilson, formerly of the California Energy Commission. Put another way, every dollar invested byCalifornias utilities in efficiency measures has generated more than two dollars in savings for customers.

15 David Roland-Holst (2008, October). Energy Efficiency, Innovation, and Job Creation in Californiahttp://areweb.berkeley.edu/~dwrh/CERES_Web/Docs/UCB%20Energy%20Innovation%20and%20Job%20Creation%2010-20-08.pdfOver the last thirty-five years, as a result of landmark energy efficiency policies, California has de-coupledfrom national trends of electricity demand, reducing its per capita requirements to 40 percent below thenational average.

16David Roland-Holst (2008, October). Energy Efficiency, Innovation, and Job Creation in Californiahttp://areweb.berkeley.edu/~dwrh/CERES_Web/Docs/UCB%20Energy%20Innovation%20and%20Job%20Creation%2010-20-08.pdf

Energy efficiency measures have, enabled California households to redirect their expenditures toward othergoods and services, creating about 1.5 million FTE jobs with a total payroll of $45 billion, driven by well-documented household energy savings of $56 billion from 1972-2006. The same efficiency measuresresulted in slower (but still positive) growth in energy supply chains, including oil, gas, and electric power. For
http://www.med.govt.nz/templates/MultipageDocumentTOC____39087.aspxhttp://www.med.govt.nz/templates/MultipageDocumentTOC____39087.aspxhttp://www.med.govt.nz/templates/MultipageDocumentTOC____39087.aspxhttp://www.stateinnovation.org/Research/Energy-and-Environment/Utility-Decoupling/Decoupling20Brochure-(2).aspxhttp://www.stateinnovation.org/Research/Energy-and-Environment/Utility-Decoupling/Decoupling20Brochure-(2).aspxhttp://www.europeaninstitute.org/Documents/international-energy-efficiency-initiative.htmlhttp://www.europeaninstitute.org/Documents/international-energy-efficiency-initiative.htmlhttp://www.epa.gov/statelocalclimate/documents/pdf/PrusnekPresentation.pdfhttp://www.progressivestates.org/blog/672/utility-decoupling-giving-utilities-incentives-to-promote-energy-efficiencyhttp://www.progressivestates.org/blog/672/utility-decoupling-giving-utilities-incentives-to-promote-energy-efficiencyhttp://www.internationalrivers.org/files/EnergyFactSheet.pdfhttp://areweb.berkeley.edu/~dwrh/CERES_Web/Docs/UCB%20Energy%20Innovation%20and%20Job%20Creation%2010-20-08.pdfhttp://areweb.berkeley.edu/~dwrh/CERES_Web/Docs/UCB%20Energy%20Innovation%20and%20Job%20Creation%2010-20-08.pdfhttp://areweb.berkeley.edu/~dwrh/CERES_Web/Docs/UCB%20Energy%20Innovation%20and%20Job%20Creation%2010-20-08.pdfhttp://areweb.berkeley.edu/~dwrh/CERES_Web/Docs/UCB%20Energy%20Innovation%20and%20Job%20Creation%2010-20-08.pdfhttp://www.med.govt.nz/templates/MultipageDocumentTOC____39087.aspxhttp://www.med.govt.nz/templates/MultipageDocumentTOC____39087.aspxhttp://www.med.govt.nz/templates/MultipageDocumentTOC____39087.aspxhttp://www.stateinnovation.org/Research/Energy-and-Environment/Utility-Decoupling/Decoupling20Brochure-(2).aspxhttp://www.stateinnovation.org/Research/Energy-and-Environment/Utility-Decoupling/Decoupling20Brochure-(2).aspxhttp://www.europeaninstitute.org/Documents/international-energy-efficiency-initiative.htmlhttp://www.europeaninstitute.org/Documents/international-energy-efficiency-initiative.htmlhttp://www.epa.gov/statelocalclimate/documents/pdf/PrusnekPresentation.pdfhttp://www.progressivestates.org/blog/672/utility-decoupling-giving-utilities-incentives-to-promote-energy-efficiencyhttp://www.progressivestates.org/blog/672/utility-decoupling-giving-utilities-incentives-to-promote-energy-efficiencyhttp://www.internationalrivers.org/files/EnergyFactSheet.pdfhttp://areweb.berkeley.edu/~dwrh/CERES_Web/Docs/UCB%20Energy%20Innovation%20and%20Job%20Creation%2010-20-08.pdfhttp://areweb.berkeley.edu/~dwrh/CERES_Web/Docs/UCB%20Energy%20Innovation%20and%20Job%20Creation%2010-20-08.pdfhttp://areweb.berkeley.edu/~dwrh/CERES_Web/Docs/UCB%20Energy%20Innovation%20and%20Job%20Creation%2010-20-08.pdfhttp://areweb.berkeley.edu/~dwrh/CERES_Web/Docs/UCB%20Energy%20Innovation%20and%20Job%20Creation%2010-20-08.pdf


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every new job foregone in these sectors, however, more than 50 new jobs have been created across thestates diverse economy.

17EPA State Clean Energy-Environment Technical Forum. (2005, November 10). Call #10: State andRegional Clean Energy Planning.http://www.epa.gov/statelocalclimate/documents/pdf/Clean_Energy_Planning_11_09_05.pdfThe EAP II notes that Californias energy efficiency efforts, particularly efficiency requirements for

appliances and new buildings, have already reduced peak capacity needs by more than 12,000 MW andcontinue to save about 40,000 GWh of electricity annually.

18United Nations Foundation. (2010, September). International Energy Efficiency Initiative. - Changing theUtility Business Model(abridged by European Institute).http://www.europeaninstitute.org/Documents/international-energy-efficiency-initiative.html

19California Public Utilities Commission, Californias Decoupling Policy.http://www.fypower.org/pdf/Decoupling.pdf

20 PEW Center on Global Climate Change. (2011, February 10). Revenue Decoupling Detail. - OtherMechanisms to Encourage Efficiency.http://www.pewclimate.org/docUploads/Revenue_Decoupling_detail_0.pdf

21Pacific Economics Group. (2011, July). What's New. Pacific Economics Group (PEG), 414 Mission, SantaFe, CIR, chico, CA 95926, USA.http://www.pacificeconomicsgroup.com/whats-new.html'Dr. Lowry discussed basic approaches to decoupling, decoupling precedents, and criteria for choosingbetween alternative decoupling methods such as decoupling trueup plans and straight fixed variable ("SFV")pricing. He commented that "the trueup approach to decoupling is the best practice approach because itencourages, at a reasonable administrative cost, the full range of measures that can promote clean energy.These advantages help to explain why decoupling trueup plans are spreading rapidly in the gas and electricpower industry and are used or scheduled for use in most states that have a strong commitment to cleanenergy'.22International Rivers. (2009, January).The Power of Negawatts. Efficiency: The Greenest Electricity Source.

International Rivers, 1847 Berkeley Way, Berkeley CA 94703, USA.http://www.internationalrivers.org/files/EnergyFactSheet.pdfHalf the states savings are due to building and appliance standards, which are revised upward every threeyears. We were told the 1993 standards couldnt be done, and today were meeting a standard that is 20%more efficient than that one, Wilson says. I think well get to zero-net-energy buildings in 10 years.

23 Sheryl Carter, Devra Wang and Audrey Chang. The Rosenfeld Effect in California: TheArt of EnergyEfficiency. Natural Resources Defense Council.http://www.energy.ca.gov/commissioners/rosenfeld_docs/rosenfeld_effect/presentations/NRDC.pdf

24 Prof. Don Cleland (2006, July). Energy Efficiency Potential. Institute of Technology and Engineering.Massey University.http://ips.ac.nz/events/completed-activities/breaking_pdfs/Don%20Cleland.pdf

25Akaash Sachdeva and Philip Wallis (2010, August). Our demand: reducing electricity use in Victoriathrough demand management. Monash University. Monash Sustainability Institute. The University ofMelbourne.http://www.monash.edu.au/research/sustainability-institute/assets/documents/dm-electricity-report.pdfStrategies that address the financial barriers to DM (demand management) should be complemented byconclusions from behaviour change literature to address barriers related to bounded rationality and habitualbehaviour among management.

26 Navigant Consulting, A Ceres Report. (2010, July). The 21st Century Electric Utility: Positioning for a Low-Carbon Future, Ceres, Boston, MA, USA.http://www.ceres.org/resources/reports/the-21st-century-electric-utility-positioning-for-a-low-carbon-future-1Given decouplings positive attributes especially its effectiveness in removing utilities inherent conflict of

interest and given concerns about alternatives to decoupling, it is reasonable to expect that decoupling willcontinue to gain in popularity and become the regulatory method of choice for maintaining utilities financialhealth while capturing EE as the key resource for the 21st century power sector. Utility targets andperformance incentives, combined with the right rate model, will help ensure that utilities become drivers for
http://www.epa.gov/statelocalclimate/documents/pdf/Clean_Energy_Planning_11_09_05.pdfhttp://www.europeaninstitute.org/Documents/international-energy-efficiency-initiative.htmlhttp://www.fypower.org/pdf/Decoupling.pdfhttp://www.pewclimate.org/docUploads/Revenue_Decoupling_detail_0.pdfhttp://www.pacificeconomicsgroup.com/whats-new.htmlhttp://www.internationalrivers.org/files/EnergyFactSheet.pdfhttp://www.energy.ca.gov/commissioners/rosenfeld_docs/rosenfeld_effect/presentations/NRDC.pdfhttp://ips.ac.nz/events/completed-activities/breaking_pdfs/Don%20Cleland.pdfhttp://www.monash.edu.au/research/sustainability-institute/assets/documents/dm-electricity-report.pdfhttp://www.ceres.org/resources/reports/the-21st-century-electric-utility-positioning-for-a-low-carbon-future-1http://www.epa.gov/statelocalclimate/documents/pdf/Clean_Energy_Planning_11_09_05.pdfhttp://www.europeaninstitute.org/Documents/international-energy-efficiency-initiative.htmlhttp://www.fypower.org/pdf/Decoupling.pdfhttp://www.pewclimate.org/docUploads/Revenue_Decoupling_detail_0.pdfhttp://www.pacificeconomicsgroup.com/whats-new.htmlhttp://www.internationalrivers.org/files/EnergyFactSheet.pdfhttp://www.energy.ca.gov/commissioners/rosenfeld_docs/rosenfeld_effect/presentations/NRDC.pdfhttp://ips.ac.nz/events/completed-activities/breaking_pdfs/Don%20Cleland.pdfhttp://www.monash.edu.au/research/sustainability-institute/assets/documents/dm-electricity-report.pdfhttp://www.ceres.org/resources/reports/the-21st-century-electric-utility-positioning-for-a-low-carbon-future-1


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EE (Energy Efficiency) and DER (Distributed Energy Resource) in a manner that wont harm the utilityscredit ratings or other financial metrics.