A new report by Innovation Electricity Efficiency, an institute of the Edison Foundation, “State Electric Efficiency Regulatory Frameworks (July 2013)”, shows that regulatory frameworks that support utility electric efficiency (EE) programs continue to grow.
“Supportive regulatory frameworks are the key to expanding the electric power industry’s already large commitment to electric efficiency even further,” says Lisa Wood, IEE executive director. “Through them, the power industry provides integrated programs to help customers manage energy use, more fully utilize flexible demand resources on the power grid making it more efficient, and serve as a consistent and comprehensive point of contact to support all customer energy needs.”
Spending and budgets for electric utility company EE programs continue to grow, due in large part to the evolution of state policies that allow utilities to pursue efficiency as a sustainable business. In fact, utility company EE budgets in 2012 totaled $6.9 billion—a 27 percent increase above 2010 levels. By 2025, IEE predicts that EE budgets will exceed $14 billion.
“For utilities to treat EE programs as equivalent to supply-side investments from a financial perspective, three types of regulatory mechanisms are critical: direct cost recovery, fixed-cost recovery and performance incentives,” Wood adds.
The report finds that all states with ratepayer-funded EE programs have direct cost recovery of program expenditures. Since its last update in July 2012, IEE found that 32 states have some type of fixed-cost recovery mechanism to align utility fixed costs with investments in energy efficiency programs, up from 27 states in 2012. Regarding performance incentives, 28 states currently have them in place, up from 23 states in 2012.
“We are very encouraged by the continued adoption of regulatory frameworks that support utility investments in energy efficiency by more and more states in the U.S.,” Wood says.