The Design of Residential Energy Conservation Programs Under Least‐Cost Planning

Abstract

Act to state governments. With more discretion and enhanced flexibility in overall program administration, states have begun to involve gas and electric utilities directly in program design.An outcome of the new role of the states has been the adoption or development of mandated least-cost (LC) approaches to utility planning in over half of the state utility regulatory commissions in the United States (Berry, 1988).' The strategy of LC planning is to select the mix of supply-side and demand-side measures that will assure reliable energy at the least possible cosL Supply-side measures increase the available supply of energy; demand-side measures constrain the demand for the available supply. RCS and other demand-side residential energy conservation programs have been regarded by policymakers, conservation advocates, and some utilities as LC options to the altemative of traditional supply sources, including new power plant construction-apCTspective that has broader implicationsfor achieving environmental policy goals and controlling rates for consumers.The emergence of LC planning represents an interesting tum of events in the nature of energy policy design, as related to the role of the political process. During the Reagan years, devolution of the RCS was instituted in response to utility companies' opposition to the RCS mandate. The industry's position was that the RCS represented federal interference in an area traditionally regulated at the state level (Walsh, 1989). Under LC planning, however, utilities come under closer scrutiny than had been conducted under federal oversight of the RCS, with conservation programs now becoming an integral part of regulatory proceedings. Thus, although Dryzek and Ripley (1988, p. 706) observe that political divisions may produce barriers to "ambitious policy design," the Reagan administration's response to special interests in this instance may have served, ironically, to strengthen rather than weaken the usefulness of evaluation in the design of energy policy.The factors enhancing evaluation's role are both structural and functional. The structural aspect is that design takes place at the state level, rather than the national level. Thus programs can be calibrated to meetrelatively specific local conditions. The functional element lies in the differentiation, or diversity, of programmatic options that