Efficient Energy Solutions – How Revenue Decoupling Helps Utility Providers

It doesn’t take a financial expert to realize that utility providers stand to lose money when power users use less energy on a regular basis. However, with energy efficiency becoming increasingly popular among investors and companies of all sizes, utility providers have every reason to encourage efficient energy solutions, except one: instead of saving money through energy efficient design like everyone else, utility providers will lose money in proportion to what others save. Long seen by eco conscious legislators and energy efficiency companies as the ultimate barrier to large-scale energy efficiency, utility providers’ financial interest has proven resistant to the call for efficient energy solutions; that is, until the implementation of revenue decoupling.

Used by utility providers nationwide, revenue decoupling allows utility providers to restructure their rates to avoid losing money when their customers use less energy. Instead of basing energy rates on usage, under revenue decoupling, utilities adjust their rates to meet revenue targets set by utility regulators, eliminating lost revenue due to fluctuating energy use. Although the practice’s initial beneficiaries are utilities, its final beneficiaries are power users and the environment. With rate decoupling in place, utilities participate in state campaigns to curb energy use by a certain percentage in the near future-a plan made possible by utilities teaming up with energy efficiency companies in the form of utility demand-side management programs, where energy efficiency companies handle the implementation of efficient design in a geographic area.

To move the programs forward, a potential combination of government incentives, utility provider incentives and long-term, interest-free financing offered by certain efficiency providers can negate upfront investment cost and, overall, result in projects that cost as much as 70 percent less than they would if implemented independently. Many utility demand-side management programs target small businesses, which constitute a long unreachable energy efficiency market due to the traditional options for implementing efficient design: paying for a project upfront or securing a large bank loan. But through the programs, and even through long-term interest-free financing offered by efficiency providers alone, small business can now pay for a project in full with their utility savings, with the repayment period usually lasting three years or less.

If you own a small business and are interested in making it energy efficient, contacting a local or regional efficiency provider about utility demand-side programs in your region should be your first move. However, if you find that your state doesn’t have a program that applies to your area, contacting an energy efficiency solutions provider about financing options is the next best choice. With the aid of revenue decoupling, utility providers nationwide are becoming receptive to demand-side management programs. But even in the absence of a demand program, efficiency providers offer attractive financing that can make energy efficiency affordable as well.