A new vision for energy efficiency

The U.S. electric utility industry has long encouraged its customers to get more value from their electricity dollar. Today, the industry—facing volatile costs and mounting concerns about the environment—is coming together to create a new role for energy efficiency—one that enables technology to deliver more value to customers and electric utilities alike.

For example, "smart" meters, two-way communication, and automation are rapidly improving information exchange between utilities and their customers. These technologies can provide intelligence about outages, help improve power quality, support real-time pricing and billing, and open the door to many other value-added services that could improve both customer value and utility business operations. And in the not-too-distant future, smart technologies and appliances—what the Electric Power Research Institute calls dynamic systems—promise to learn how to best combine efficiency, comfort, and convenience for their users.

The past generation of efficiency efforts

The electric utility industry's efforts to encourage energy efficiency date back to the 1970s. These early programs focused on providing general information to customers. During the early 1980s, many states directed their utilities to begin using conservation and load management programs to offset rising fuel costs, increasing construction costs, and growing public concerns about the environmental impacts of fossil-fired and nuclear generation. These efficiency measures educated and motivated customers to buy energy-efficient appliances, and many programs also included incentives for customers to allow their utility to cycle or shut off their large appliances for short periods during periods of peak demand.

Most utility efficiency programs were scaled back in the mid-1990s as retail prices declined (in real terms) and states implemented or considered retail competition. According to the U.S. Energy Information Administration (EIA), 1993 was the top year for utility spending on efficiency efforts, with total nationwide expenditures of more than $2.7 billion (including both direct and indirect program costs). By 1996, total utility efficiency spending had fallen to $1.9 billion, and by 1999 it had fallen to less than $1.5 billion. In many restructured states, however, authority for spending to promote efficiency shifted from utilities to state or nonprofit entities (through the collection of system benefit charges or public benefit funds), expenditures that are not reflected in these figures.