DSM Policy & Programs 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 main rationale for such programs is that it is 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 over the past 15 years, as shown in the chart below. Total funding for utility DSM programs in the region increased from about $50 million in 2004 to $380 million in 2018.

Electric DSM Program Spending

Gas utilities in region also implement energy efficiency programs for their customers. This table shows the budgets for and energy savings resulting from programs implemented by the major gas utilities in the region.

The growth in DSM activity has been heavily influenced by policies enacted in recent years. The table below shows the key policies affecting DSM efforts in each state. In short, there are many more policies in place today compared to fifteen 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 X -
Convenient DSM cost recovery mechanism X X X X X X
Financial Incentive for utility shareholders X X X X X -
Electric decoupling or lost revenue recovery mechanism - X - - - -
Gas decoupling or lost revenue recovery mechanism X - - X X X
Industrial self-direction option X X X - X X