ACEEE PRESS BRIEF

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October 24, 2001

WASHINGTON, D.C. -- The United States is dealing with concerns about national security and the reliability and high cost of electricity. Expanded energy efficiency efforts would address all three issues. A new report by the American Council for an Energy-Efficient Economy (ACEEE), Can We Just "Rely on the Market" to Provide Energy Efficiency? An Examination of the Role of Private Market Actors in an Era of Electric Utility Restructuring, examines who should provide energy efficiency services.

"Some argue that the best solution is to simply deregulate energy markets and allow the market itself to deliver energy efficiency. The results of this new study strongly indicate that such an approach will fail," stated Martin Kushler, Director of Utility Programs for ACEEE.

The study focused on nine states that were among the earliest to adopt a policy of deregulating their electric utilities (Arizona, California, Connecticut, Illinois, Massachusetts, Michigan, New York, Pennsylvania, and Rhode Island). Interviews were held with nearly one hundred energy service companies, independent electricity providers, utility distribution companies, and expert national observers of the energy efficiency market. The report's findings are that electric deregulation had not resulted in these private market entities stepping in to replace energy efficiency efforts previously conducted by regulated utility companies.

On the contrary, these private market actors tended to concentrate their energy efficiency activities in areas where there were still some legislative or regulatory support programs for energy efficiency efforts. Over 80 percent of energy service companies interviewed rated such public policy support as crucial for their energy efficiency delivery business.

Dr. Kushler summed up the implications of this study for the deregulation debate as follows: "Ironically, this study shows that continuing government/regulatory policies and programs to support energy efficiency would actually play an important role in enhancing the ability of those private market firms to provide energy efficiency in the marketplace. Therefore, it appears that the proper question is not: Can private market actors replace government/regulatory policies and programs? but rather: How can government/regulatory policies and programs help maximize the energy efficiency provided by these private firms?"