Encourage Utilities to Embrace Energy Efficiency for Customers

Using energy more efficiently is one of the most effective ways to address climate change and reduce dependence on power plants, which create carbon pollution by burning fossil fuels. In fact, electric and natural gas utilities account for more than half of the global-warming pollution associated with U.S. fossil-fuel consumption today. Yet utilities have traditionally had little incentive to promote efficiency for their customers. These companies have fixed costs—maintaining power lines, keeping plants running, and other operating expenses—that don’t decrease when customers buy less energy.

Andreas Lindlahr/iStock

NRDC helps make it easier for utilities and customers to benefit from energy-efficiency programs. One solution we helped pioneer is decoupling, which enables utilities to maintain financial integrity even when customers reduce their energy use. Decoupling allows for periodic tune-ups in electricity and natural gas rates to ensure that utilities cover their fixed costs even when consumers no longer need to buy as much energy from them due to smarter energy use. Companies can encourage customers to use energy more efficiently without having a negative impact on the utilities’ bottom line.

We have helped public and private utilities in more than half the U.S. states (and counting) to embrace this solution, and we encourage more to get on board. These advances have helped inspire utilities to invest $7 billion annually in programs to help their residential, business, industrial, and agricultural clients cut energy waste.

In addition, we advocate for state-level policies that unleash greater energy savings. Nineteen states now require utilities to help customers achieve energy-efficiency savings equivalent to at least 1 percent of the utility’s system-wide sales per year. In addition, we focus on rate designs that enable conservation, affordability, and cut energy waste on the customer side while increasing their reliance on clean, renewable power.

NRDC also encourages states to fully account for efficiency potential when they forecast whether they need new power plants or transmission lines. Turning to efficiency before building expensive infrastructure saves utilities money and lowers people’s bills.