HOW COMPETITION MIGHT AFFECT ELECTRIC-UTILITY DSM PROGRAMS

This paper discusses competition in the electricity industry and how i t might affect utility DSM programs. The roles that state regulatory c ommissions could play to affect retail competition and DSM programs ar e examined. Commissions could set exit or reentry fees for customers w ho want to buy electricity from an entity other than the local utility . Or they could 'tax' the use of the local distribution system to disc ourage uneconomic wheeling and to pay for DSM programs. The effects of DSM programs on retail electricity prices and how utilities might red esign their DSM programs for a more competitive environment are consid ered. In the future, utility DSM programs may (1) focus more on custom er service and less on system-resource benefits, (2) emphasize capacit y reductions more and energy savings less as utilities seek to minimiz e the lost revenues associated with DSM, (3) become more cost-effectiv e as utilities identify better ways to deliver DSM services at lower c ost, and (4) involve fewer inter- and intraclass transfers as utilitie s increasingly have individual customers pay for their own DSM service s. While DSM programs in the future may be different from what they ar e today, they will continue to be important to utilities as powerful m arketing tools and to society because of their environmental and econo mic-productivity benefits.