Chapter 6

Making Cost-Effective Energy Efficiency Fit Utility Business Models

Why has It Taken So Long?

Ralph Cavanagh, Energy Program Co-Director, Natural Resources Defense Council, The author gratefully acknowledges perceptive comments and editorial guidance from Sheryl Carter, Sierra Martinez, Patricia Remick, and Devra Wang. Figures 6.1, 6.3 and 6.4 were prepared by Sierra Martinez.

1 Introduction

Most utilities, whether publicly or privately owned, operate under a system of price regulation that treats them like commodity distribution businesses, whose principal rewards lie in boosting unit sales and reducing average unit costs. For electric utilities at least, this worked very well for much of the 20th century; from 1973–2000, for example, ...

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