For 2,000 Utilities in US, Conservation Efforts Pay

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FOR the nation's electric utilities, conservation is no longer a dirty word. While they still prefer to call it "demand-side management," power companies from California to Maine have embraced conservation as profitable and environmentally sound.

"It is one-half as expensive to buy a 'negawatt' {eliminating demand for a watt of power} as it is to buy new generating capacity," says Paul Ward, a spokesman for Pacific Gas & Electric Company, based in San Francisco.

In 1991, PG&E convinced more than 500,000 residential customers, 20,000 commercial, 10,000 agricultural, and 1,200 industrial users to implement various aspects of its demand-side management program. The annual savings of 607 million kilowatt-hours is enough to power 100,000 homes for a year, Mr. Ward says.

Responding to state regulations, more than 2,000 utilities are spending from $2 billion to $2.5 billion a year on demand-side management programs, according to the Edison Electric Institute.

"We've seen a change over the past couple of years," says Rick Tempchin, EEI's manager of energy efficiency. Demand-side management is "part of the way companies do business now."

Utilities are giving homeowners rebates for the installation of efficient light bulbs, refrigerators, shower heads, and shade trees. In the case of PG&E, builders of new commercial and industrial buildings can receive up to 50 cents per square foot in rebates if the space exceeds California's efficiency standards. Businesses are encouraged to retrofit existing buildings with more-efficient lighting, ventilation, refrigerators, and transformers.

Regulators in 24 states have changed the incentive structure so that profits are earned for helping to cut demand for electricity as well as for normal electricity sales. An additional eight states are in the process of implementing regulatory changes.

States typically combine several incentives, according to the National Association of Regulatory Utility Commissioners. Regulators will, for example:

* Adjust rates to compensate a utility for lost revenues.

* Permit utilities to receive a markup on spending for demand-side management programs.

* Allow a utility a greater-than-normal return on equity for demand-side expenditures. …