860-027-0310 Cost-Effective Conservation Resources (1) As used in this rule: (a) “Conservation” means any reduction in electric power or natural gas consumption as the result of increases in efficiency of energy use, production, or distribution. Conservation also includes cost-effective fuel switching; (b) “Fuel switching” means any substitution of one type of energy or fuel for another; and (c) “Cost-effective” has the meaning given that term in OAR 860-030-0010. However, the cost-effective level for fuel switching shall not include the 10 percent cost advantage specified in OAR 860-030-0010(6)(b). (2) The Commission encourages energy utilities to acquire cost-effective conservation resources. Energy utilities may apply for Commission approval of programs designed to promote the acquisition of cost-effective conservation resources. Programs in this context consist of accounting and rate-making mechanisms designed to provide an energy utility with incentives, to remove disincentives, or to acquire such resources. The Commission adopts the following policies for evaluating programs proposed by energy utilities: (a) Incentive: (A) Least-Cost Resources: Acquisition of least-cost resources should be the energy utility’s most profitable course of action. An energy utility should have an incentive to acquire all least-cost resources, but it should not have an incentive to pursue conservation past the point at which it is no longer cost-effective. An energy utility should not be expected to pursue a course of action that involves an identifiable and sustained loss of profits. The most important criterion for evaluating an incentive program is its effect on the energy utility’s resource acquisition strategy. Incentive programs under which the energy utility can earn higher profits by acquiring resources which are not least-cost resources need not be considered, no matter how well they may suit the other criteria. (B) Cost Minimization: An energy utility should have the incentive to acquire any resource at the minimum total cost. The set of incentives given the energy utility should not merely influence the choice of which resource to acquire, but the manner of its acquisition as well. (C) Strategic Manipulation: An energy utility should not have incentives to manipulate the program strategically. (b) Predictability: Program impacts should be predictable to all participants. (c) Simplicity: (A) Administration: The program should be as simple as possible to administer, consistent with the need to determine actual results. (B) Implementation: The program should be understandable to affected parties. (d) Impact: (A) Balance: Risks and rewards should be distributed fairly between stockholders and customers. Fair treatment of these groups relative to each other may require a balancing of rewards with penalties; if shareholders are rewarded for good performance, they should also be penalized for poor performance. (B) Cross-subsidization: Cross-subsidization of participants by nonparticipants should be minimized. (C) Rate pressure: Incentive programs should be as consistent as possible with the Commission objective of promoting rate stability. (e) Tradeoffs: In developing cost-effective conservation programs, energy utilities may balance the emphasis given to each policy listed above. Greater focus on one policy may come at the expense of another policy, if the whole proposal is reasonable. Statutory/Other Authority: ORS 183, 756 & 757 Statutes/Other Implemented: ORS 756.040 & 757.262 History: PUC 9-1998, f. & cert. ef. 4-28-98 PUC 2-1994, f. & cert. ef. 1-14-94 (Order No. 94-075) PUC 14-1993(Temp), f. & cert. ef. 8-6-93 (Order No. 93-1105