In 2007, the New York State Public Service Commission decided to further its push to promote energy conservation by adopting a revenue decoupling scheme for utility billing. This program aims to incentivize customers to use less energy, while maintaining a consistent revenue stream for utilities by eliminating the correlation between revenues and sales volumes.
The Public Service Commission approves the amount of revenue each utility can collect over a certain block of time, based on the utility’s predicted sales volumes. At the end of the period, each utility compares its revenue forecast to its actual sales and calculates the true-up adjustment. If sales exceed the forecasted revenue, the utility will issue customers a credit under the decoupling mechanism. If sales do not meet expectations, the utility will add a surcharge to the customer’s bill in order to recoup the revenue shortfall. Utilities such as Consolidated Edison of New York, Central Hudson Gas & Electric, and Orange & Rockland all added a revenue decoupling line item to their invoices within the last several months. The decoupling mechanism only affects the delivery costs of electricity and natural gas; the commodity portions will be unchanged under this initiative.
Although some groups accuse the scheme of being too generous to utilities, the program is crucial to conserving energy. Under the prior billing structure, the utility boosted its revenue stream as it sold more energy. Furthermore, the utility’s revenue would decrease as energy efficiency increased and the aggregate usage of customers dropped. With revenue decoupling in place, the utility will no longer be penalized by a decline in net usage due to efficiency improvements. This method encourages the utility to invest in energy conserving measures, presumably reducing the demand of customers. The decoupling legislation is part of New York’s plan to reduce electricity usage 15 percent by 2015.
New York is one of twenty states that uses decoupling for either electricity or gas. Some critics of decoupling claim that consumers will pay more for less energy. So far though, the adjustments have typically ranged between plus or minus 1 percent on a utility bill. According to Brandi Colander, an attorney for the NRDC, “rates may be going up slightly, but bills are going down”.
California has implemented a successful revenue decoupling program in the last several decades. The state began natural gas decoupling in 1978 and electricity decoupling in 1982. Since 1970, California has reduced its residential energy use per capita 19 percent, while that figure has risen 9 percent for the United States.
California's energy use per capita has remained flat for 30 years
