Energy and Clean Technology Alert: Massachusetts Orders Revenue Decoupling by Distribution Companies

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On July 16, 2008, the Massachusetts Department of Public Utilities (“DPU” or “Department”) issued an Order calling for revenue “decoupling” by distribution companies in

Massachusetts. The Department’s Order, which results from a year-long investigation, follows closely on the heels of the “Green Communities Act,” the Commonwealth’s comprehensive energy reform bill.

See our Client Alert on the Green Communities Act from July 2, 2008.

The Order’s goal is to remove the disincentives that distribution companies face in fostering energy efficiency and demand-reduction programs. Currently, distribution companies’ revenues are tied to sales: the more electricity or gas customers use, the more revenues the companies earn. The Department’s new decoupling mechanism will separate (hence, “decouple”) electric and gas distribution company revenues from changes in consumption, i.e.‚ commodity sales‚ regardless of the underlying cause of the changes. Decoupling will align distribution companies’ financial interests with state policy objectives by promoting the deployment of demand-reducing resources, according to the Department. At the same time, it will ensure that companies are not harmed by decreases in sales associated with those deployments.

See alert for more information.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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