A simple change that can help utilities and their customers conserve energy 1

This is good news: According to NW Current, more and more utilities are becoming interested in "decoupling" -- which could be the single most cost-effective step I've heard of for encouraging conservation.

Here's how decoupling works. Utility rates are pretty tightly regulated; rate structures are dictated by utility commissions and the like. Traditionally, rate structures link a utility's profits to its sales: the more a utility sells, the greater its profits. But that creates a huge disincentive for conservation. If utilities get people to cut their consumption, they cut into their own earnings. In fact, a private utility that tries to get its customers to use gas more efficiently could run the risk of a shareholder lawsuit.

Under decoupling, though, utility rates are structured so that a utility's profit margins can rise when consumption falls. (In other words, a utility's earnings are "decoupled" from its gross sales.) This simple change can make it profitable for utilities to promote conservation. As a result, decoupling aligns the utility's incentives with the incentives of its customers: everyone has an incentive to use energy more efficiently. Northwest Natural, an Oregon gas company, has been operating under a decoupled rate structure since 2002. One result: it's shifted staff from marketing (trying to get people to buy more gas) to customer service. Whee!

Decoupling is one of those nifty little ideas with huge potential payoff for a seemingly insignificant change. It doesn't take much to make decoupling a reality -- it relies on a simple alteration to the rules, rather than regulatory strictures or costly upgrades to technology. So it's nice to see it catching on.

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