The California Public Utilities Commission (CPUC) has modified its policies on incentive mechanisms for utility demand-side management (DSM) efforts, while adopting new shareholder incentives for Pacific Gas & Electric Co., San Diego Gas & Electric Co., Southern California Edison Co., and Southern California Gas Co. The new incentive mechanism substantially shifts DSM performance risk to shareholders using after-the-fact measurement techniques designed to hold the utilities accountable not only for achieving net benefits from conservation programs, but also for the cost-effectiveness of all DSM activities. The CPUC suggested that the utilities manage the risk by diversifying their DSM portfolios. The new mechanism will be applied to portfolios rather than on a program-specific basis, and requires a utility to guarantee that ratepayers pay no more for residential and nonresidential DSM portfolios than the supply-side resources DSM is designed to replace. Re Utility Demand-side Management, Decision 94-10-059, R. 91-08-003, I. 91-08-002, Oct 26, 1994 (Cal.P.U.C.).
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