Empirical evidence of utility sponsored conservation programs

Utility sponsored conservation programs encourage participants to consume less energy. One of the most popular methods used to achieve this is to offer monetary rebates to purchasers of high-efficiency appliances. The costs of these conservation programs are then passed-on to all customers as increased energy prices. Economic theory predicts that the income and substitution affects should decrease the consumption of non-participants in the programs and may increase the consumption of participants.

Recent claims in the literature argue that the standard net benefit tests used to evaluate these programs fail to incorporate the full impact of the income and substitution affects. Relying on these theoretical arguments, new evaluation techniques, referred to as Net Economic Benefits (NEB) tests, are being introduced as solutions to this problem.

Using the actual experience of a natural gas utility, this thesis analyzed the need for NEB evaluations. The results show that the price of gas is not a significant factor in determining household gas consumption. Therefore, empirical evidence cannot support the NEB claims. The evidence does show that, on an average annual basis, participants are consuming less than non-participants.