The NYT has done itself proud with not one but two op-eds this week pushing for energy efficiency — first Nic Kristof’s, and now the The Mustache of Understanding. I guess the idea is gaining traction.

The Mustache references a potentially revolutionary change being pushed by Duke Energy’s Jim Rogers. (On Rogers, the cynical should note this.) The idea, now before the North Carolina Utilities Commission, is as follows:

Because energy efficiency is, in effect, a resource … in order for utilities to use more of it, “efficiency should be treated as a production cost in the regulatory arena.” The utility would earn its money on the basis of the actual watts it saves through efficiency innovations. (California’s “decoupling” system goes partly in this direction.)

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At the end of the year, an independent body would determine how many watts of energy the utility has saved over a predetermined baseline and the utility would then be compensated by its customers accordingly.

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“Over time,” said Rogers, “the price of electricity per unit will go up, because there would be an incremental cost in adding efficiency equipment – although that cost would be less than the incremental cost of adding a new power plant. But your overall bills should go down, because your home will be more efficient and you will use less electricity.”

Once such a system is in place, Rogers added, “our engineers would wake up every day thinking about how to squeeze more productivity gains out of new technology for energy efficiency – rather than just how to build a bigger transmission or distribution network to meet the growing demands of customers.”

As Friedman says, "that is how you produce a more efficient energy infrastructure at scale." You’ve got to get the utilities in play. Utility sector regulations are vestigial, remnants of a time when the central imperative was to electrify the country. Now it’s electrified. We need the utilities to get in the demand reduction game.

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