Rewarding Energy Efficiency and Innovation

The most effective path to energy efficiency is actually using less energy. Yet in a traditional business model, power companies have an economic incentive to encourage customers to use more energy – and they lose money (and profits) when people conserve. The Izaak Walton League is working to change that, with state-level work that you can model in your state too.

The Minnesota Public Utilities Commission approved a proposal the League developed with Minnesota’s largest natural gas utility to “decouple” energy sales from the calculation of energy profits. Under this new model, rates are designed to ensure the company earns enough to cover the cost of doing business plus a profit, regardless of how much – or little – energy it sells. This removes the incentive for encouraging increased energy consumption. Building on the success of this first model, the League worked with the state’s largest electric utility and third largest gas utility to develop similar rate decoupling programs.

We successfully petitioned the Minnesota Public Utilities Commission to update how it calculates the cost of generating power. Calculations of the “externality values to power purchases” – such as costs residents pay to treat polluted water or for related healthcare expenses – were decades old and did not include the latest science. Electricity choices are made by comparing costs, and to ignore the costs of damage to the environment and public health gives the dirtiest energy alternatives a cost advantage. This change levels the playing field for energy production by counting the full costs of power generation by all methods. In turn, this will help shift the mix of resources used by utilities toward renewables.

In another nationwide “first,” the League succeeded in securing a true calculation of the value of solar energy. The Minnesota Public Utilities Commission approved a statewide “Value of Solar” methodology to more accurately calculate the net value of solar power – particularly power generated by homeowners and communities. This is an objective way to ensure customers are fairly compensated for the energy their solar systems generate. It also ensures that utilities and other customers accurately pay for the benefits this solar energy provides. It’s a positive step that directly links benefits and financial costs while fairly compensating customers who help add solar to the grid. This victory is the culmination of two years of work by the League and our allies to engage utilities and stakeholders in overcoming hurdles to greater adoption of solar energy in the state.

Photo credit: iStock
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