Solutions to the Throughput Incentive
The New Jersey Utility Work Group, tasked with addressing a comprehensive set of issues around the future administration and delivery of energy efficiency programs, invited Rich Sedano to present the working group with solutions to the utility throughput incentive. Traditional regulation motivates a utility to increase sales and to resist any measures that might reduce sales — the so-called “throughput incentive.” However, this methodology is at odds with the objectives of energy efficiency programs. Although public interest dictates the acquisition of resources with the lowest social costs, neither traditional regulation nor markets produce the right mix. One method for addressing this disconnect is decoupling, which ensures that utilities have a reasonable opportunity to collect approximately the same revenues that they would under conventional regulation, independent of changes in sales volume. Mr. Sedano provides a practical, in-depth look at the nuances of decoupling and other alternatives to the throughput incentive. Pivotal to any regulatory measure, he also addresses effective communication with customers.
Mr. Sedano participated in the working group meeting as a result of RAP’s state technical assistance program, which is supported by the U.S. Department of Energy.