Energy Sector

Under the present rate structures in U.S. energy markets, utilities' revenues depend on the amount of energy they produce and deliver to consumers. This type of system makes utilities averse to conservation and efficiency measures because their implementation ultimately cuts into profits by decreasing sales and therefore revenues. "Decoupling" removes the pressures placed on utilities to sell as much energy as possible by eliminating the relationship between revenues and sales volume. Under such a compensation scheme, revenues are "decoupled" from sales and are instead allowed to adjust so that utilities receive fair compensation regardless of fluctuations in sales. Decoupling policies are in place in many states for both electric and gas utilities. For more detailed information on revenue decoupling policies please click here.