IAEE Members and subscribers to The Energy Journal: Please log in to access the full text article or receive discounted pricing for this article.

Direct Investment in Conservation Measures by a Public Utility

During the period 1978-1980, public policy toward U.S.-regulated utilities mandated residential conservation programs. Public utilities encouraged residential customers to invest in home conservation measures to help meet the national goal of energy security. The actual programs growing out of this legislation can be grouped as information programs (such as the energy audit program), financial incentives or subsidy programs, and direct investment programs. Our focus is on the third type wherein the public utility itself does home-retrofit conservation work (weather stripping, caulking, storm windows and doors, and attic and wall insulation), and the residential customer pays no direct charges. (In Marino and Sicilian (1986) we provide an economic analysis of information and financial incentives programs.) Our principal goals are: (a) to give an economic explanation of why a regulated utility would want to provide conservation measures that reduce the demand for its primary product and (b) to examine whether existing regulatory structure and utility programs are likely to lead to economic efficiency in conservation investment. We also provide an idealized regulatory structure and conservation program that does lead to economic efficiency.

Purchase ( $25 )

Energy Specializations: Energy Investment and Finance – Corporate Strategy; Energy Efficiency; Electricity – Policy and Regulation

JEL Codes: Q21: Renewable Resources and Conservation: Demand and Supply; Prices, Q20: Renewable Resources and Conservation: General, L95: Gas Utilities; Pipelines; Water Utilities, L94: Electric Utilities, Q43: Energy and the Macroeconomy, Q38: Nonrenewable Resources and Conservation: Government Policy, Q31: Nonrenewable Resources and Conservation: Demand and Supply; Prices, Q41: Energy: Demand and Supply; Prices

Keywords: Residential energy conservation, Public policy, Utilities, Investment, Rate of return regulation

DOI: 10.5547/ISSN0195-6574-EJ-Vol8-No2-10

Published in Volume 8, Number 2 of the bi-monthly journal of the IAEE's Energy Economics Education Foundation.


© 2023 International Association for Energy Economics | Privacy Policy | Return Policy