Decoupling essentially works like this: The profits a utility company receives are separated (un-coupled) from the amount of kilowatt hours produced. Right now in Maryland (and most states) power companies earn more money the more energy they produce (the more coal they burn, the more kilowatt hours they push onto the grid). Therefore, the companies make more money when more energy is consumed. Clearly, this is not going to usher in a new era of energy efficiency.

With Maryland energy bills hitting record-highs recently, it’s time for Maryland to consider something new. In 1999, lawmakers passed a degregulation bill. They capped utility rates for seven years at pre-1999 levels and hoped that competition among energy providers would drive down prices. But, when the caps expired last year, Constellation Energy (which owns Baltimore Gas and Electric) proposed a 74% increase- and the Maryland Public Services Commission approved it! And now, people are demanding action on energy policy like they never have before.

Recently, the Public Services Commission decided to try decoupling to increase Maryland’s energy efficiency. Decoupling would remove the disincentive for the utilities to pursue and encourage energy efficiency projects. Instead of having profits that are dependent upon total kilowatt hour produced, the power company rates profits of a certain amount are guaranteed by the state. If Maryland consumers use less energy, the power companies would make up the difference with a flat distribution charge. So, this means a few things: 1) Rates will not change much. Marylanders will not experience the 75% rate hikes- rates will remain relatively stable. 2) Efficiency projects, that in the past meant less kilowatt hours produced and therefore lower projects, can occur more readily without disrupting the profits of the company. In fact, power companies realizing that they can earn more by producing less may even embrace energy efficiency projects everywhere- saving homeowners and power companies money.

There are a lot of problems with the way our energy system is managed today. Can decoupling be part of the solution? O’Malley seems to think so. What do you think?

For more information and a more in depth analysis of the issue, see this daily kos post by A Siegel.

*NOTE* When writing Congress, also make a plug for higher CAFE standards. While 35 mpg by 2020 is a weak objective, it is an objective.