The Maryland Public Service Commission (PSC) has approving a mechanism to “decouple” utility rates, which could lead to large-scale energy conservation as well as demand reduction initiatives.
Decoupling of utility revenues removes the financial disincentives companies face if aggressive conservation efforts are successful and sales of electricity are reduced, says Public Service Commission Chairman Steven B. Larsen.
In the absence of the decoupling mechanism, utilities face a disincentive to encourage conservation, because if conservation efforts are successful, their revenues from the distribution charges will drop and they risk not covering their fixed distribution costs, the PSC says.
Under the decoupling mechanism, or the Bill Stabilization Adjustment as it is referred to in the filing, utility companies could modify distribution rates to make up lost revenues and cover their fixed costs if customers conserve more and demand for electricity drops.
Decoupling is an approach to energy conservation that has been endorsed by environmental and industry groups, public service commissions across the country, and utilities as a way of removing any disincentive the utility in promoting major conservation programs.
Maryland Gov. Martin O’Malley’s gubernatorial transition report on energy Maryland’s Energy Future, Energy Transition Report 2007, recommends that the PSC “investigate performance-based or alternate approaches to ratemaking in order to encourage the use of renewable energy, energy efficiency, demand side management and new technology.”
