494 



Highlighting the utilities with 

 the lowest cost ratios may seem to 

 disparage the efforts of those 

 whose costs were much higher. 

 This is not our intention; 

 15e/kWh for first-year savings 

 (or, say, 2c/kWh in levelized an- 

 nual cost) is not the "right" level 

 of investment for each utility. For 

 many the number may be much 

 higher, depending on pjersistence 

 of savings, the customer's 

 avoided cost, environmental con- 

 straints and other factors. Insis- 

 tence on acquiring DSM at the 

 lowest cost doesn't have to lead 

 to cream-skinuning or poor in- 

 stallation; there's still a lot of 

 room for cost and quality im- 

 provements. 



Utilities today exist in a 

 world unlike any they 

 have ever known. Succeeding in 

 the still-new DSM arena may 

 prove to be the very thing that 

 gives tomorrow's utility a com- 

 petitive edge — with its customers, 

 by virtue of the range of services 

 it offers at costs that are attractive; 

 and mth shareholders, by earning a 

 suf>erior return from superior per- 

 formance. 



How can they do it? By being 

 aggresssive and sensibly experi- 

 mental in all their internal and ex- 

 ternal processes. 



Internal Improvements 

 1. Management. Program man- 

 agers and field staff have valuable 

 information on how to improve 

 DSM acquisition in ways small 

 and large. Companies need bet- 

 ter, more regular internal mecha- 

 nisms — formal or ir\formal — to 

 address the tou^ questions and 

 focus on improvement. 



2. Cost-Effectiveness. Utilities 

 must place more emphasis on ac- 

 quiring the least expensive re- 

 sources Jind less on customer eq- 

 uity objectives. Residential 

 programs should be those that 

 yield the greatest savings at the 

 lowest costs. If the industrial mar- 

 ket is the most cost-effective to 

 mine, put most of the resources 

 there. 



External Improvements 



1. Goal Setting. Many DSM fi- 

 nancial and savings targets have 

 emerged from a collaborative 

 process, which allows those in- 

 volved to sift through the informa- 

 tion and decide on a reasor\able 

 set of goals. Regulatory staff 

 should be part of this process so 

 they can "own" decisions when 

 they are made. 



These an IM tear costs on^ The anvitized cosK ol 

 savings woUd wely be rnxti snoler, dependrig en 

 te ffelme o( te pragtam and ffc penod (n«f Mhicti 

 ooGtsYierelncured 



** Capaoly<jLins> ailed utifes Suctiulifas can spend 

 a gteal deal on peali reducion rngrans. <i<u:Mray 

 yield foe orno conespondng enoyy saviigs 



2. Netivorks. Learning about 

 DSM practice is growing fast. 

 Utilities must avoid reinventing 

 the wheel and seek solid informa- 

 tion on what is and isn't working 

 by the many means available to 

 do so. 



3. Market Feedback. DSM re- 

 lies on a host of trade allies, ven- 

 dors and customers for its suc- 

 cess. Feedback from these 

 sources is critical, as is making the 

 indicated adjustments to pro- 

 grams relatively quickly. Too 

 often, an excellent review process 

 is allowed to drag on, causing un- 

 necessary delay. 



4. Benchmarks. Utilities should 

 comp^^re their own DSM perform- 

 ance and costs with those of oth- 

 ers, just as firms in more conipeti- 

 tive industries would. In 

 designing the Saturn, General Mo- 

 tors did not focus solely on the 

 new ctir's performance and cost to 

 the disregard of what its competi- 

 tion was doing. 



Two imperatives require a 

 much more vigilant, tuned-in ap- 

 proadi to utility DSM: (1) the 

 prospect of much greater regula- 

 tory scmtiny for DSM progrcuns, 

 pushed largely by industrial firms 

 who feel disadv«intaged by it, and 

 (2) growing competition at all lev- 

 els of the energy business. 



In an increasingly deregvdated 

 environment, utilities must focus 

 on becoming the Iowest<ost 

 provider. Keeping in mind the 

 wide differences embodied in the 

 Table 1 data, rough as it is, should 

 remind utility managers, regula- 

 tors and the public of whaf s at 

 stake and spur improved perform- 

 ance at the iiKreasingly important 

 bottom line. ■ 



