The Results of Efficiency

The Las Vegas Sun reported today that the electric utility NV Energy is seeking a rate increase because efficiency programs are working and therefore people are using less energy and decreasing revenues. In any other commercial venture, a decrease in output means the supplier uses less raw material. They mistakenly overestimated demand and built too much supply (with taxpayer supported low cost financing). In a free market they suffer the consequences. Electric utilities are not like other companies though. They are a monopoly supplier and guaranteed a profit.

In any other business they would increase efficiency and create a long-term guaranteed supply (like wind). Should state officials grant them their request? I am torn.

As a businessperson, I believe they should increase their operational efficiency to match demand. On the other hand, the higher the energy prices the more we become even more efficient, creating a virtuous cycle that is only better for the commons in the long run.

Mental models and systems need to be updated to meet our new energy efficient economy. Simply giving the same model more money to burn more coal is more of the same. And that we for sure don't need. What should the electric utility and grid even look like in the future? Is our current system of regulated monopoly outdated?

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