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Demand-side management (DSM) plays an increasingly important role for utilities and regulators, but we know little about the nationwide scope, performance, or costs of such programs. The information we do have on DSM programs comes to us largely through anecdotes, samples of a few utilities, or estimates based on assumptions.
Fortunately, the picture improved dramatically in April when the Energy Information Administration (EIA) published DSM data from all U.S. electric utilities, based on utility responses to Schedule V in EIA Form 861.
Of some 3,250 U.S. utilities that completed EIA-861, 872 reported that they operate a DSM program. And of the 1,194 utilities with sales greater than 120 gigawatt-hours (GWh), some 363 ran DSM programs in 1990, 30 percent of the total. These 363 utilities spent $1.2 billion on their DSM programs in 1990 (Table 1). (Table 1 omitted) Overall, utility DSM expenditures accounted for 0.7 percent of utility total revenues. For 1990, DSM plans cut energy and demand by 0.6 percent and 4.9 percent.
The investor-owned utilities (IOUs) accounted for 70 to 90 percent of these DSM totals, consistent with their national shares of total generating capacity, electricity sales, and revenues. The public utilities (sometimes called "customer-owned" utilities, which include federal, state, municipal, and cooperative utilities), recorded larger percentage reductions in peak demand and energy, but smaller DSM expenditures as a percentage of revenues.
This article examines potential, rather than actual, demand reductions. The demand and energy reductions are intended to reflect cumulative effects, which include the effects caused by all program participants from the program's inception through the present year, not just the participants in the current year.
It is tempting to compare utility costs with benefits, but the results obtained would be misleading. The DSM costs reflect utility expenditures in a particular year, whereas the energy savings and load reductions reflect the benefits of past as well as current program activities. Thus, there is an unavoidable temporal mismatch between the data on costs and benefits. The Tennessee Valley Authority (TVA) provides an interesting example of this phenomenon. TVA canceled its DSM programs in 1989, which accounted for its report to EIA of zero DSM-program expenditures in 1990. Nevertheless, TVA achieved substantial energy savings and load reductions by operating a DSM program...