Net lost revenue adjustment (NLRA) mechanisms for utility DSM programs

We examine the experiences that states and utilities are having the NLRA approach. Contrary to concerns raised by some industry analysts, our results indicate the NLRA is a feasible approach to the lost-revenue disincentive. Seven of the 10 states we studied report no substantial problems with their approach. We observed several conditions linked to effective NLRA implementation and, for those states reporting problems, conditions linked to implementation difficulties. Finally, observed changes in utility-investment behavior occur afer implementation of DSM rate reforms, which include deployment of NLRA mechanisms. We find that utilities in states with lost revenue recovery invest more than twice as much in DSM as do utilities in other states.