Decoupling: Incentives for Energy Savings

Decoupling is a tool designed to break the link between how much energy a utility delivers and the revenues it collects, thereby eliminating the utility's incentive to increase profits by increasing sales. With minor periodic adjustments in rates to stabilize revenues, the utility is indifferent to sales volumes and less prone to risk.

RAP provides assistance to state commissions on utility business models that remove disincentives to acquire energy efficiency and other demand-side resources, while providing shareholder incentives for aggressive energy and demand savings.

RAP recently participated with the Lawrence Berkeley National Laboratory (LBNL) on this study of various combinations of decoupling and incentive mechanisms. We also helped Minnesota establish decoupling standards and criteria, as documented in this report prepared for the state's Public Utilities Commission.

For more detail, see RAP's 94-page guide to revenue regulation and decoupling, which includes a comprehensive case study.