493 



GUEST EDITORIAL 



Maura O'Neill 



DSM — It's a Contact Sport 



Electric utilities are drama ti- 

 caUy accelerating their acqui- 

 sition of demand-side resources. 

 And as need for new power re- 

 sources has picked up, utilities are 

 finding many demand-side man- 

 agement programs to be competi- 

 tive with traditional supply op- 

 tions. At the same time, there is 

 growing awareness that DSM pro- 

 grams are not standard off-the- 

 shelf items but can vary markedly 

 in their cost and energy savings. 



Knowing this, our firm decided 

 to focus on the 1992 DSM pro- 

 gram results of a small number of 

 electric utilities to try to measure, 

 in the most fundamental way, 

 how they compared at the bottom 

 line: in cents per kWh saved. 



We were fortunate enough to 

 find a score or so of utilities will- 

 ing to work with us, on condition 

 that we not identify them by 

 name. After eliminating those 

 companies whose 1992 data were 

 not yet complete and tliose whose 



Maura O'Neill is president of O'Neill 



and Co., a Seattle-based consulting firm. 



She thanks Lisa Fitzhugh and 



Kari Nelson/br their work 



on this article. 



data did not include all direct and 

 indirect program costs, we ended 

 up with 12 utilities. They pro- 

 vided a good sampling of what's 

 out there — large systems and 

 small, public and private, peak- 

 constrained and energy<on- 

 strained. 



We sought only three data 

 points for each utility: its 1992 

 DSM program expenditures, its 

 annualized energy savings for 

 those measures installed in 1992, 

 and its retail residenfid rate. 



The essence of what we 

 found astonished us. 

 Trimmed to the core in Table 1, 

 the data say simply this: the cost 

 of energy saved in the first-year 

 varied by almost a factor of five — 

 as high as 56 cents per kWh at the 

 highest<ost utility and as low as 

 12 cents per kWh at the lowest. 

 Stated another way, for every 

 1000 GWh of DSM to be acquired 

 by utilities, this would indicate 

 that utility investment may vary 

 by nearly half a billion dollars. 

 Mulfiplied by the enormous DSM 

 investments expected in this coun- 

 try over the next decade, such dif- 

 ferences and their cost implica- 

 tions are staggering 



Since the cost of a compact fluo- 

 rescent bulb is roughly the same 



in Minneapolis as in Miami, what 

 was the cause for the nearly 5:1 

 spread? Was it the rebate level, 

 the program delivery mechanism, 

 or the mix of measures offered? 

 Clearly, factors unique to each 

 utility can help explain some such 

 differences, but can they account 

 for such a difference? 



Compare, for example, utili- 

 ties D and G. They share 

 similar residential rates, a similar 

 level of DSM expenditures, simi- 

 lar program selection and electric- 

 ity demand constraints, as well as 

 a similar regulatory climate. Yet 

 there is almost a 2:1 ratio in the 

 amount they spent to achieve 

 about the same amount of energy 

 savings Or look at utilities A, F, 

 and I. They also share similar 

 regulatory and social environ- 

 ments, yet their per-unit DSM ex- 

 penditures differ by over 3:1. 



From our own experience in 

 helping Pacific Northwest utili- 

 ties, we know there can be vastly 

 different results from one utility 

 to the next — even when they op- 

 erate exactly the same program, 

 offering exactly the same incen- 

 tives. These differences often 

 stem from variations in manage- 

 ment, marketing, and program de- 

 livery mechanisms 



Vie Ekaridly Journal 



