For 2,000 Utilities in US, Conservation Efforts Pay

FOR the nation's electric utilities, conservation is no longer a dirty word. While they still prefer to call it "demand-side management," power companies from California to Maine have embraced conservation as profitable and environmentally sound.

"It is one-half as expensive to buy a 'negawatt' [eliminating demand for a watt of power] as it is to buy new generating capacity," says Paul Ward, a spokesman for Pacific Gas & Electric Company, based in San Francisco.

In 1991, PG&E convinced more than 500,000 residential customers, 20,000 commercial, 10,000 agricultural, and 1,200 industrial users to implement various aspects of its demand-side management program. The annual savings of 607 million kilowatt-hours is enough to power 100,000 homes for a year, Mr. Ward says.

Responding to state regulations, more than 2,000 utilities are spending from $2 billion to $2.5 billion a year on demand-side management programs, according to the Edison Electric Institute.

"We've seen a change over the past couple of years," says Rick Tempchin, EEI's manager of energy efficiency. Demand-side management is "part of the way companies do business now."

Utilities are giving homeowners rebates for the installation of efficient light bulbs, refrigerators, shower heads, and shade trees. In the case of PG&E, builders of new commercial and industrial buildings can receive up to 50 cents per square foot in rebates if the space exceeds California's efficiency standards. Businesses are encouraged to retrofit existing buildings with more-efficient lighting, ventilation, refrigerators, and transformers.

Regulators in 24 states have changed the incentive structure so that profits are earned for helping to cut demand for electricity as well as for normal electricity sales. An additional eight states are in the process of implementing regulatory changes.

States typically combine several incentives, according to the National Association of Regulatory Utility Commissioners. Regulators will, for example:

* Adjust rates to compensate a utility for lost revenues.

* Permit utilities to receive a markup on spending for demand-side management programs.

* Allow a utility a greater-than-normal return on equity for demand-side expenditures.

* Allow a utility to receive a share of the benefits attributable to a conservation program.

* Provide for a bonus amount for each kilowatt or kilowatt-hour saved. Many beneficiaries

The US General Accounting Office predicts that by the year 2000, demand-side management programs will cut 15 percent of the US electricity demand that would otherwise have existed.

This is a "win-win-win" game, according to Barry Abramson, senior utilities analyst for Prudential Securities Inc. Customers save money on their electric bills, utilities earn profits, and the environment is better off. Utilities also earn considerable goodwill by not having to build costly new generating facilities.

Demand-side management is part of "a fundamental transition from utilities being providers of electricity to utilities being providers of energy services," says Ted Flanigan, director of the Results Center. The center is a clearinghouse for demand-side management information that is funded by the MacArthur Foundation. Utilities are learning to help customers "use energy wisely from an economic and environmental standpoint," he says. Note of caution

"The movement is really in its infancy," says Veronika Rabl, of the Electric Power Research Institute. "Initial indications are that you can achieve kilowatt and kilowatt-hour reductions," she says.

"One of the things we don't know is how long will these reductions last. Some of them will dissipate over time. We also don't know if we could have achieved some of the reductions more efficiently," Ms. Rabl says.

From an engineering point of view, "reducing the amount of power that's being required is really nice," says Robert Dent, an expert with the Institute of Electrical and Electronics Engineers. To increase generating capacity, he says, "not only do you have to build the generating station and transmission lines, but then you have to reinforce all of the other existing equipment to make sure that the additional power can flow."

The New England Electric System, a utility based in Westborough, Mass., invested $77 million in its demand-side management program in 1991. NEES expects to reduce its overall power demand by about 850 megawatts in this decade.