Financial Impacts of a Combined Energy Efficiency and Net-Metered PV Portfolio on a Prototypical Northeast Utility
Utilities are concerned about stagnant or declining sales growth driven, in part, by policy goals mandating energy savings and policy- and market-driven customer-sited solar photovoltaic (PV). In response to these concerns, regulators and policymakers are balancing the benefits of energy efficiency (EE) and distributed energy resources (DERs) to reduce energy use and peak demand growth with maintaining the utility’s financial viability. Additionally, such approaches that maintain the utility’s financial viability may come at an increased cost to customers and erosion of bill savings.
We examine the financial impacts of a combined portfolio of EE and distributed PV systems on a prototypical northeast utility’s shareholders and ratepayers. Specifically, we quantify the shareholder and ratepayer impacts for a northeastern, distribution-only utility (“NE utility”) that achieves aggressive EE savings and PV penetration levels (i.e., AEV scenario) compared to a Business-As-Usual (BAU) future. We also consider several ratemaking and regulatory mechanisms which have historically been used to address potential misalignments between utility profit achievement and motivation to pursue customer-funded EE programs. These mechanisms may also be effective at mitigating similar misalignments with distributed PV. Specifically, in the AEV scenario, we model revenue decoupling; rate designs that collect a greater share of non-fuel costs via demand or customer charges (as opposed to volumetric charges); and targeted shareholder incentive mechanisms.
Finally, the report assesses bill impacts on participating and non-participating customers using illustrative EE program types and PV investments. The bill impacts take into account the timing of when a customer makes an EE or PV investment, as well as the perspective taken on what constitutes a bill impact.
Year of Publication
A journal article based on this research, published in February 2018, Utilities Policy can be found here.