A Short History of Utility Transformation

Abstract

A utility executive responsible for energy efficiency programs
commented to me that too many of his colleagues were emphasizing
market transformation programs instead of directly offering efficiency
projects to customers. A utility executive saying this shows just how
much the market has already transformed! For those who would un-
derstand what can drive utilities to become vehicles for end-use effi-
ciency, the secret is hidden in twenty five years of history.
In the United States, the electric utilities’ first involvement in en-
ergy efficiency beyond its own plants was legislated in response to
the oil crises of 1973 and 1977. The federal government directed en-
ergy conservation programs, aimed primarily at residential heating
fuel, to be implemented by states through Public Utility Commissions
(PUCs) and the regulated utilities. The programs consisted of infor-
mation services—bill inserts and energy audits—and low cost loans,
reimbursing costs from the rate base.
But there was no change in how the utilities saw themselves. In
the same epoch independent energy service companies (ESCOs) first
appeared in the US. When, with failing oil prices in the 1980’s, these
ESCOs turned to electricity conservation projects, they received a cold
shoulder from utilities. The reason: under a cost-plus regulatory re-
gime, increasing demand justifies capacity upon which profit is
earned