Least cost planning

The idea implicit to DSM is that consumers choose inefficient levels of efficiency and that the utility should correct for these market failures. For example, Eric Hirst (1992, p77) writes: “Thus energy markets do not operate properly and require utility involvement. Utilities can help overcome these barriers and do so at low cost.” Therefore, least cost planning or integrated resource planning should include DSM in order to allow for rate reductions, at least in principle. The purpose of this chapter is to investigate whether it is indeed economical for a utility to invest in conservation programs, even if the utility receives neither additional incentives nor subsidies for them.