This is an excerpt from EERE Network News, a weekly electronic newsletter.

July 25, 2007

Maryland Removes Utility Disincentives for Energy Efficiency

The Maryland Public Service Commission (PSC) approved a new rate mechanism on July 20th for the state's largest utilities, eliminating a disincentive for the utilities to promote energy efficiency. The new rate mechanism allows the utilities to increase their rates for power distribution to make up for lost revenues if the demand for electricity drops, thereby "decoupling" their revenues from electricity sales. In the absence of the decoupling mechanism, utilities face a disincentive to encourage energy efficiency and conservation, because if those efforts are successful, their revenues drop. Under the new mechanism, the largest energy users bear an increasing cost burden as other users benefit from improving their energy efficiency.

According to the Maryland PSC, decoupling is an approach that has been endorsed by environmental and industry groups and other public service commissions and utilities as a way of encouraging utilities to spearhead major energy efficiency programs. The approach was recommended in an energy report produced earlier this year by Governor Martin O'Malley. A report produced last year by the American Council for an Energy Efficiency Economy (ACEEE) also endorsed decoupling, and cited California and Oregon as leading examples of its implementation. See the Maryland PSC press release (PDF 48 KB) and the ACEEE report. Download Adobe Reader.