Sen. Jeff Bingaman of New Mexico, the ranking Democrat on the Senate Energy and Natural Resources Committee, last week called on state regulators to follow the example of Oregon and structure utility rates in a way that would encourage energy efficiency and the conservation of natural gas as the winter heating season approaches.
As it stands now, gas utility rates in most states are structured to "discourage utilities from promoting energy efficiency and helping their customers to use less natural gas," he said last Tuesday during a Senate energy panel hearing that examined the fuel supply and price situation for the upcoming winter. Utility revenues currently are directly tied to the amount of gas consumed, according to Bingaman.
He noted that Oregon regulators in 2002, as part of a three-year pilot program involving Northwest Natural Gas, imposed a conservation tariff that broke the link between the utility's sales and its profitability, creating "a financial incentive for the utility to go ahead and encourage conservation by its customers" in Oregon and southwestern Washington State.
"It seems a no-brainer that every public utility commission in the country ought to be implementing conservation tariffs immediately so that this additional incentive is there for the utilities under their jurisdiction to encourage conservation," Bingaman said.
"The rest of the country has been looking at it ever since" Oregon took the lead three years ago. "At some point, they ought to get busy and [just] do it...It aligns the incentives of the utility with the incentives of their customers," he noted.
Local distribution companies (LDC) still are basically throughput-based, Larry Downes, chairman of the American Gas Association (AGA), told the committee. But "what you are seeing right now is that [LDCs] are filing for these decoupling tariffs because...if there is a separation of throughput from our rates (the way we actually recover our costs), that does create an even greater incentive for our companies as far as focusing on efficiency and conservation."
And, "I expect that you will see, because of the situation that we face right now, increasing receptivity on the part of local utility commissions" to these decoupling tariffs, he said.
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