ABSTRACT
Throughout the United States, most customers continue to receive service from their hometown utility companies, regardless of the status of retail competition in their state's electric industry. Turmoil within the industry has focused attention on a crucial responsibility of those utilities: electric-resource portfolio management. Effective portfolio management requires a fully integrated approach to identify customers' electric service needs and to select demand- and supply-side alternatives to meet those needs through a portfolio that minimizes the total cost and environmental impacts and has an acceptable level of risk. To enable effective portfolio management, regulators must align utilities' financial incentives with customers' interests. Traditional regulation creates a substantial financial disincentive for utilities to meet customers' energy service needs through cost-effective energy efficiency or other demand-side resources, but regulators and governing boards can and should eliminate this disincentive.
