Effects of Electric Utility Demand-Side Management Programs on Electricity Prices

Authors

  • Eric Hirst
  • Stan Hadley

DOI:

https://doi.org/10.15173/esr.v7i1.355

Abstract

As competition in the US electricity industry grows, utilities (and others) worry more about the increases in electricity prices that demand-side management (DSM) programs often cause. Therefore, several utilities have reduced the scope of their DSM programs or focused these programs more on customer service and less on improving energy efficiency. This study uses the Oak Ridge Financial Model (ORFIN) to calculate the rate impacts of DSM. These simulations suggest that DSM programs, although they reduce electric bills, often increase electricity prices. However, utilities can run DSM programs that cut prices. Reducing DSM-program costs, focusing programs on those areas where large transmission and distribution investments can be deferred, timing DSM programs to match avoided costs, and shifting more of the utility's fixed costs to the monthly customer charge will cut DSM-induced price increases.

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Published

2008-09-19

Issue

Section

Articles