Comments on: ‘Demand-side management: Reflections of an irreverent regulator’ by Myron Katz

Abstract

This paper discusses important issues that need to be addressed in demand-side management programs and evaluates how well Katz's proposal addresses these issues. The paper notes that under conservation programs the obligation of the utilities becomes providing minimum electric bills for consumers. In light of prices in excess of marginal costs, too much conservation may being done. The cited market imperfections are not pervasive enough to warrant special incentives. The paper lays out five issues that must be addressed by conservation programs including cost allocation, utility incentives and verification of energy saved among others. Katz's proposal is then analyzed in light of these issues. The overall conclusion is that Katz's scheme benefits the utility with little for consumers; however, it does relatively little damage and is superior to traditional conservation programs.