The environmental movement has long held as its basic tenet the conservation of natural resources, but conservationists traditionally have sought to protect only the more obvious components of our ecological heritage, such as wilderness and scenic areas, waterways, wetlands, coastlines, wildlife, and clean air. Energy-producing materials such as coal, oil, and gas have all too often been taken for granted as inexhaustible reservoirs predestined to feed the appetite of an ever-expanding technology. The recent collision between the demand for energy and the availability of facilities and resources to produce it, however, has changed this perception dramatically; energy has come to be seen as a manifestation of the irreplaceable natural resources in which it is stored. In addition, the connection between electrical energy and the environment has become more apparent as disputes have developed over proposals to strip mine public lands in the West for coal, site nuclear power plants in coastal areas, consign huge amounts of limited western water resources for thermal plant cooling, and allow utilities to burn high sulfur coal during periods of petroleum shortages. The unavoidable ecological damage linked to such schemes for increasing energy production has won grudging public acceptance for the principle of energy conservation as the fundamental and initial step in dealing with energy shortages, and indirectly with environmental degradation. The federal government itself has undertaken a rigorous program of energy conservation at federal facilities.

It is thus particularly anomalous that the typical electric utility's rate structure remains promotional in nature, that is, designed to foster increased consumption of electrical energy. Incentive toward greater use is provided by a declining block rate arrangement in which the price per unit of power is reduced as consumption increases. Whle this produces only a small differential for the average residential customer, low rates in the outer blocks of consumption cause substantial elasticity in the demand of large industrial users. It follows that restructuring rate design to increase the marginal cost of consumption could have a significant indirect environmental impact in the form of decreased use by these industrial customers.