In 1991, U.S. electric utilities spent $ 1·8 billion on demand-side management (DSM) programs. However, utility DSM efforts vary enormously across the country, concentrated in only a few stales. This concentration is partly a function of regulatory reforms that remove disincentives to utility shareholders for investments in DSM programs. A key component of these reforms is recovery of the net lost revenues caused by utility DSM programs. These lost revenues occur between rate cases when a utility encourages its customers to improve energy efficiency and cut demand. The reduction in sales means that the utility has less revenue to cover its fixed costs.