Colin Durrant, CLF Director of Communications
Boston, MA (October 23, 2007) – Today, the Massachusetts Department of Public Utilities launches a series of hearings to explore how electric utility ratemaking can be reformed to encourage increased investments in energy efficiency. The Conservation Law Foundation (CLF) and several environmental groups are testifying in support of a solution called “decoupling” that separates utility profits from the amount of electricity they sell in order to boost investments in the efficiency measures that curb electricity use and reduce global warming pollution.
“Energy efficiency is the most cost effective, readily available means to reduce the state’s insatiable electricity demand and mitigate the catastrophic impacts of global warming. Right now, every kilowatt utilities save through efficiency has a negative impact on their bottom line. Decoupling breaks that link.” said Shanna Vale, a CLF staff attorney and expert on decoupling.
Traditionally, a utility’s revenues are tied directly—or coupled—to the amount of electricity it sells, an arrangement that CLF says discourages utilities from investing in energy efficiency measures that reduce electricity demand and global warming pollution from power plants. The electric power sector is the second largest source of greenhouse gas emissions in Massachusetts.
The hearings will focus primarily on “decoupling,” a reform that breaks the connection between utility revenues and electricity sales, removing the disincentive to invest in energy efficiency. Decoupling works by allowing regulators to determine, in advance, a utility’s fixed costs and set rates to produce just enough revenue to cover those costs. If efficiency programs lead to reduced electricity sales, decoupling allows for a periodic “true-up” to ensure that utilities will recover fixed costs regardless of electric sales volume, thus disconnecting utility revenues from the volume of electricity sold. Conversely, if the true-up shows an amount in excess of fixed costs paid by ratepayers, a refund is issued to consumers.
“We welcome the state’s efforts to work with utilities, consumers, and environmental advocates to achieve a solution that will boost efficiency programs to reduce electricity use, keep the lights on, and reduce greenhouse gas and other air pollution,” said Vale.
ABOUT THE HEARINGS:
The Department of Public Utilities will hold a series of panel hearings from 10am-1pm and 2pm-5pm on October 23, October 25, October 29, October 30, November 1 and November 2, 2007 at the Division of Insurance Hearing Room, Fifth Floor, One South Station, Boston, MA. CLF attorney Shanna Vale will testify on October 23 from 10am-1pm, October 25 from 10am-1pm, October 29 from 10am-1pm, and October 30 from 10am-1pm. Closing statements are held on November 2.
The Conservation Law Foundation works to solve the most significant environmental challenges facing New England. CLF’s advocates use law, economics and science to create innovate strategies to conserve natural resources, protect public health and promote vital communities in our region. Founded, in 1966, CLF is a nonprofit, member-supported organization with offices in Maine, Massachusetts, New Hampshire, Rhode Island and Vermont.