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Today, reporter Dan Haugen takes a look at how states are turning to financial incentives – rather than mandates – to encourage utilities to promote energy efficiency.

Utilities have no market incentive to convince people to use less of their product – in order to make more money, they have to keep building more power plants and transmission lines. In the long run, saving energy is more cost effective, so state regulators have come up with a variety of schemes to reward utilities for selling less power.

Minnesota’s new incentive structure helped Xcel Energy save 416 gigawatt hours of electricity last year – a record.

But what’s going on in other states?

Haugen recommends the Edison Foundation’s State Electric Efficiency Regulatory Frameworks report (PDF), which was just released in June. The report includes state-by-state summaries of the types of efficiency incentives that are being used.

It’s a little wonky, but now that you know the difference between a Revenue Decoupling Mechanism and a Lost Revenue Adjustment Mechanism, you should be able to sort it out

Ken Paulman

Ken is the director of the Energy News Network at Fresh Energy and is a founding editor of both Midwest Energy News and Southeast Energy News. Prior to joining Fresh Energy, he was the managing editor for online news at Minnesota Public Radio. He started his journalism career in 2002 as a copy editor for the Duluth News Tribune before spending five years at the Spokesman-Review in Spokane, Washington, where he worked as a copy editor, online producer, features editor and night city editor. A Nebraska native, Ken has a bachelor's degree from the University of Nebraska-Lincoln and a master's degree from the University of Oregon. He is a member of the Society of Professional Journalists and Investigative Reporters and Editors.

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