Utility incentives and statistical recoupling: An empirical analysis☆

The current system of regulating electric utilities in the U.S. provides rewards for selling more electricity. Conversely, utilities are penalized for running even the most cost-effective, energy-efficiency programs because these programs reduce sales and, thus, decrease utility earnings and profits. A number of mechanisms have been developed to address this problem. We report on a systematic evaluation of one approach, called statistical recoupling, for resolving the problem. Data for the Utah service territory of Utah Power and Light are used to estimate the revenue impacts of the methodology if it had been in place during 1993 and 1994.