Utility Program Overview

Utility energy efficiency and load management programs, also known as demand-side management or DSM programs, are a primary strategy for increasing energy efficiency in the Southwest and throughout the United States. Utilities educate customers, provide rebates and other financial incentives, and offer technical assistance in order to increase the adoption of cost-effective energy efficiency measures. The rationale for such programs is that it is far less costly to save energy than to supply energy from any new source, and it is better for the environment too.

SWEEP promotes the expansion and improvement of electric and natural gas utility energy efficiency programs in the Southwest. We work on legislation and regulations to establish energy savings goals or requirements, decoupling of utility cost recovery and electricity sales, and financial incentives so that utilities and their shareholders are not penalized when they help their customers save energy. We advise utilities as they design and implement energy efficiency programs, and we frequently appear before state utility commissions when utility energy efficiency policies and programs are under review.

Electric utilities in the Southwest greatly expanded their energy efficiency and demand response programs in recent years. As shown in the table below, total funding for these programs was only about $29 million in 2002, SWEEP's first full year of activity. Funding steadily increased to $340 million in 2012 and then to $390 million in 2016.

Electric Utility Spending on DSM Programs in the Southwest, 2002-15

State DSM program budget (million $ per year)
2002 2004 2006 2008 2010 2012 2014 2015 2016

AZ

4

4

19

45

94

127

126

121

130

CO

11

21

18

28

66

96

96

107

107

NV

3

11

30

55

46

38

52

45

49

NM

1

1

1

10

24

28

34

39

40

UT

9

16

27

36

51

47

82

61

60

WY

~0

~0

~0

~0

3

4

6

7

8

Region

29

54

95

174

284

340

395

390

390

Utility energy efficiency programs in the region are yielding significant benefits. SWEEP estimates that households and businesses will save more than $7 billion as a result of utility DSM programs implemented during 2007-16 (see Table below). These programs have already cut carbon dioxide emissions by about 60 million metric tons, and even greater reductions will occur in the future due to energy efficiency measures now in operation. Utility DSM programs are also cutting load growth thereby reducing the need for costly and controversial new power plants.

Electricity Savings, Net Economic Benefits, and Avoided CO2 Emissions from Utility DSM Programs in the Southwest

Year First-year Energy Savings
(GWh/yr)
Energy Savings from Cumulative Programs
(GWh/yr)
Net Economic Benefits from Annual Programs
(Million $)
Avoided CO2 Emissions2
(1000 metric tons)

2007

743

1,219

330

853

2008

1,046

2,265

460

1,585

2009

1,510

3,775

650

3,825

2010

1,690

5,465

725

3,825

2011

1,890

7,355

865

5,148

2012

2,163

9,518

850

6,663

2013

2,266

11,784

800

8,249

2014

2,325

14,109

840

9,876

2015

2,369

16,478

750

1,535

2016 2,394 18,396

830

12,877

                                     TOTAL

18,396

 

           ------

7,100

60,254

         

The growth in DSM activity has been heavily influenced by policies enacted in recent years. The next table summarizes the key policies affecting DSM efforts in each state. In short there are many more policies in place today compared to ten years ago.

Key Policies Influencing Electric Utility DSM Programs in the Southwest

Policy AZ CO NM NV UT WY
Energy efficiency goals or standards X X X X    
Integrated Resource Planning X X X X X X
Use of Societal Cost Test, Utility Cost Test or Total Resource Cost Test with valuation of non-energy benefits as sole/primary cost-effectiveness test X X X   X
Convenient DSM cost recovery mechanism X X X X X X
Financial Incentive for utility shareholders X X X   X  
Electric decoupling or lost revenue recovery mechanism X X   X    
Gas decoupling or lost revenue recovery mechanism X     X X X
Industrial self-direction option X X X   X X