IF CUSTOMERS SAVE ElECTRICITY, MUST RATES RISE?

The briefing examines the relationship between electricity efficiency and utility rates, arguing that 'fixed' costs are not static but decline through depreciation. It posits that as long as the rate of electricity saving does not exceed the combined rate of depreciation and demand growth, both rates and bills can decrease. The author contends that focusing on rates rather than total bills is economically inefficient, as efficiency measures reduce the need for costly new plant construction and allow utilities to retire expensive marginal plants first.

• Electricity rates do not necessarily rise when customers save energy because fixed costs decline over time through depreciation. If electricity is saved at a speed no greater than the depreciation rate, both bills and rates can decrease.
• The risk of rising rates is further mitigated by demand growth, which maintains revenue streams from new customers without requiring idled capacity, and by the ability to use saved operating costs to prepay debt and reduce fixed costs.
• Focusing on electricity rates rather than total customer bills is an economically inefficient practice because it ignores the fact that energy services are a joint product of electricity and efficiency. Even if rates were to rise, total bills would still decrease as long as consumption falls more than the price increases.
• Efficiency programs prevent the need for new plant construction, which would otherwise drive rates higher due to high marginal costs and risks associated with rising demand.

APA

RMI (n.d.). IF CUSTOMERS SAVE ElECTRICITY, MUST RATES RISE? https://rmi.org/app/uploads/2017/05/RMI_Document_Repository_Public-Reprts_U88-16_MustRatesRise.pdf

Chicago

RMI. IF CUSTOMERS SAVE ElECTRICITY, MUST RATES RISE? n.d. https://rmi.org/app/uploads/2017/05/RMI_Document_Repository_Public-Reprts_U88-16_MustRatesRise.pdf.

Wikipedia

{{cite report |author=RMI |title=IF CUSTOMERS SAVE ElECTRICITY, MUST RATES RISE? |url=https://rmi.org/app/uploads/2017/05/RMI_Document_Repository_Public-Reprts_U88-16_MustRatesRise.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{rmindcustomers, author = {{RMI}}, title = {{IF CUSTOMERS SAVE ElECTRICITY, MUST RATES RISE?}}, institution = {RMI}, url = {https://rmi.org/app/uploads/2017/05/RMI_Document_Repository_Public-Reprts_U88-16_MustRatesRise.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }