Demand response programs can help utilities manage their peak demand, reduce energy costs, and generate environmental benefits. In this presentation, Janine Migden-Ostrander discusses options for evaluating and compensating utilities for these types of programs and suggests that the public interest guide cost-effectiveness decisions by regulators. Ms. Migden-Ostrander presents a 3-legged stool for aligning utility interests with public policy. Allowing utilities to recover program and administrative costs, lost contributions to fixed costs, and incentive payments for program performance will effectively align the utility’s interests with public policy outcomes. Ms. Migden-Ostrander suggests several approaches to recovering lost contributions to fixed costs and shares the state of Arkansas’ performance incentives scheme for energy efficiency.