Many, but not all, rebate-type demand side management (DSM) programmes worldwide have met with success. The rebate rate offered is a critical factor to success but a rational rebate scale determination method that would help strike a proper balance between the incentive offered and the effectiveness of the programme is lacking. For the DSM programmes recently launched in Hong Kong, the rebate rates are disproportionate to the cost and performance of the promoted energy-saving measures, resulting in diverse participation rates among the programmes. This paper presents a conceptual framework for formulating the rebate scales for incentive-based DSM programmes for commercial buildings, which would attract participation of building owners and boost electricity saving. The establishment of the scale starts from developing a performance curve that relates the cost effectiveness and the long-term benefits of different energy-saving DSM measures. The rebate scale is set based on the premise that a proportionally higher rebate rate should be offered for the adoption of each additional measure, which would yield a diminished marginal rate of return. Analysis showed that replacing the current rebate scale by the proposed scale would lead to benefits, both to the building owners and the utility companies.