In 21st-century energy markets, distribution systems are wrestling with tariff designs left over from the 19th century, when gas distributors manufactured their own gas, and electricity distributors generated their own power. For both, profits were “coupled” to the spinning gas and electricity meters that measured their customers’ energy consumption. This approach has prompted two widespread concerns: first, that the rising price of gas has made average gas use fall and spinning meters to slow down; and second, that tying financial performance to spinning meters may hurt wider energy conservation efforts. In this article from the Energy Law Journal, NERA Senior Vice President Dr. Jeff D. Makholm addresses recent “decoupling” efforts to change the way distributors collect their costs. Dr. Makholm describes the origins of the coupling of distribution tariffs, the reason why those practices have posed a new problem for gas distributors in particular, changes in tariff design for interstate pipelines that illustrate a remedy for spinning meters, and the public policy debate surrounding the implementation of decoupled distribution tariffs.

This article first appeared in the Energy Law Journal, Volume 29, No. 1 (2008).