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States Find New Ways to Encourage Energy Efficiency

26 July 2011

In Minnesota, early evidence suggests the state’s recently revamped incentives are working. Xcel Energy helped its customers conserve about 416 gigawatt hours of electricity last year — more than any other year in the company’s history. Under the new incentive structure, the utility will be rewarded about 14 percent of the net benefit of those energy savings, which totaled approximately $291 million. That’s about $40 million in new revenue for the company’s shareholders.

When I talk about the Next Generation Energy Act in Minnesota, which requires utilities to reduce their energy sales by 1.5% a year, people often ask me if their own energy saving actions would be made moot by utilities raising prices to match this reduction in sales.  Luckily, utilities get incentives for offering us incentives to save energy!

:: Midwest Energy News

One Comment leave one →
  1. 28 July 2011 8:08 pm

    “the utility will be rewarded about 14 percent of the net benefit of those energy savings” – I can’t quite figure out where the money comes from – does this mean that if the utility incentivises customers to save $100 million worth of energy, they get to raise their rates by $14 million?

    I agree that individual savings won’t be made moot by the increases though, and I’d make the argument this way…

    If you really invest in energy savings, you’re still being a pioneer and an “early adopter.” Say you reduce your energy use by 20% next year – all things equal, you save 20% on your bill. But the whole state certainly hasn’t reduced by 20% (sadly) – so your 20% reduction isn’t going to cause the utility to raise statewide rates by anything near 20%. Their goal is 1.5%. (And if I understand it they only raise rates by 14% of that 1.5%?) You still come out well ahead.

    And if you don’t conserve, the utility will still find that 1.5% elsewhere, and inch the rates up as a result (I guess?) and your bill -will- go up, not down, if you keep your usage constant.

    Not quite an “elevator pitch” I guess, there’s probably a clearer argument out there somewhere!

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