Key Factors Responsible for Changes in Electric-Utility DSM Usage

Martin Schweitzer and Miriam Pye

1995

Executive Summary

In light of recent and ongoing changes in the electric-utility industry, considerable attention has been focused on the question of how utility-sponsored demand-side management (DSM) programs will fare in a more competitive environment. Researchers at Oak Ridge National Laboratory and the American Council for an Energy-Efficient Economy surveyed staff at 37 electric utilities and 22 state regulatory commissions for the purpose of identifying recent and projected changes in utilities' use of DSM resources and the key factors responsible for this. In addition, we obtained and examined the latest responses to the Energy Information Administration's (EIA) annual census of electric utilities (Form EIA-861). Based on the EIA data, we intentionally chose a collection of states and utilities that provided a mix of those whose DSM use was increasing most rapidly and those whose reliance on DSM resources was declining most precipitously or growing most slowly, to help us discover the most important factors responsible for changing patterns of DSM usage. This work was sponsored by the Competitive Resources Strategy Program, Office of Utility Technologies, Office of Energy Efficiency and Renewable Energy, U.S. Department of Energy.

We developed and tested seventeen hypotheses describing possible relationships between many different explanatory variables and changes in the use of DSM resources. Key factors that we examined included general motives for DSM usage, competition for customers, concern with rates, provision of services, utility characteristics, and state regulations. Recent changes in DSM usage were measured in terms of how DSM expen-ditures, cumulative energy savings, and cumulative peak demand reduction had grown (or declined) from 1992 to 1994, while changes for the near-term future were measured by how these same items were projected to change from 1994 to 1998.

Key Findings

Between 1992 and 1994, the median annual growth rate for utility DSM expenditures was 16% for the utilities studied and 11% for the states. In contrast, the median utility projected an annual decline in DSM expenditures of 3% for 1994–1998, while the median state growth rate was projected to be 1.5% annually. The growth rate in cumulative energy savings also is expected to be substantially less in the near-term future than it was in the recent past, but the decline in growth will not be as dramatic as for DSM expenditures. In contrast, the projected growth rate in cumulative peak demand reductions will come much closer to matching the recent historical record than will either DSM expenditures or energy savings. These changes are shown graphically in Fig. ES.1.

In general, utilities reported that their programs will change over the next few years in ways designed to make them more cost-effective and service-oriented.

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81 pp., 1995, $18.00 U955

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