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Efficiency Isn’t the Enemy

Since the time of Thomas Edison, electric utilities have collected revenues and generated profits by selling electricity. That’s what they do. Recently, however, some utilities have recognized that their customers are more interested in saving energy than in buying it. So in order to keep the peace and continue making ends meet, these innovators have adopted “revenue decoupling”.

Decoupling infers that utility revenues are no longer connected to the amount of electricity sold. In other words, utilities have found a way to make the same amount of money regardless of how much electricity their customers use. Which means they can also freely promote efficiency (and even renewables) with as much gusto as they promote consumption.

Here in Colorado, an administrative law judge recently recommended that Xcel adopt full revenue decoupling as a pilot program for residential customers. The program is anticipated to be offered shortly and to be run through 2021.

Why would Xcel want to do this? In addition to satisfying customer appetite for efficiency and renewables, Xcel’s residential customers are projected to continue decreasing their consumption (from 651 kWh per month to a projected 586 kWh per month in 2021). A revenue decoupling adjustment (RDA) provides a way for the utility to recover fixed costs (for things like power plants and transmission lines) despite falling revenues from the actual purchase of electricity. It avoids pressure to increase rates by instead charging an adjustment should consumption decline.

For households in Xcel electric service territory, this means that you should see a new RDA line item on your bill. If Xcel collects less revenue per customer than would be expected under business-as-usual conditions, the adjustment would be charged to customers. If Xcel collects more revenue per customer, the adjustment would be a credit. So in order for revenue decoupling to benefit your bottom-line as a consumer, think energy efficiency. If a significant number of Xcel’s customers become more efficient, Xcel’s adjustment will be a charge on your bills. So unless you’ve also become more efficient, you run the risk of paying what you’ve been paying plus a new charge (which would have a cap in place). If, on the other hand, you become more efficient, you may pay less than what you’ve been paying even with an additional RDA charge.

As part of the judge’s recommendation, entities like the Southwest Energy Efficiency Project (SWEEP) and others (Your Energy Colorado, anyone?) will partner with Xcel to educate customers on the change. So be on the lookout for more information as they program begins to take shape. Or read the judge’s recommended decision yourself.

 

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