State regulators have introduced stockholder incentives to induce investor-owned electric utilities to engage in more aggressive promotion of energy conservation. In PWP-005, Gilbert and Stoft examine and compare incentive mechanisms that have been adopted and show that they can be usefully classified as rewarding expenditures, savings, or net benefits. They describe the difficulties of estimating net social benefits and the informational conditions sufficient to justify different categories of incentive programs. They argue that the net benefit incentives currently in place offer significant expected total rewards for utility conservation activities, but provide only weak incentives for conservation on the margin. Under somewhat restrictive assumptions, they show that an optimal incentive program would pay 100% of net benefits and impose a fixed charge to reduce expected utility payments.