Did you know that “The average Californian today uses about 40 percent less electricity per year than the average American”?
Utilities traditionally make more money when they sell more electricity…. As a result, their natural inclination is to encourage their customers to use more. With the state trying to save energy through its efficiency standards, that incentive seemed increasingly perverse….The solution was a policy known as “decoupling” because it severed the link between consumption and profits. Here’s how it worked: the commission first set a revenue target for utilities by calculating how much money they needed to make to recover their fixed costs, plus an approved profit rate. Next, the commission estimated how much power it expected the utility to sell. Then, it established an energy price that would allow the utility to meet its revenue target at the expected level of sales. If the utility sold more power than it needed to meet its target, the difference was returned to consumers. If it sold less, rates were increased to make up the difference. Applied to natural-gas sales in 1978 and electricity in 1982, decoupling had a profound effect.
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