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Brief #4Models for Administering Ratepayer-Funded Energy Efficiency Programs

State Energy Efficiency PoliciesOptions and Lessons Learned

A Series of Briefs

Matthew Brown

Models for Administering Ratepayer-Funded Energy

Efficiency Programs

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Models for Administering Ratepayer-Funded Energy Efficiency Programs

Policy Description

States authorize their utilities to collect funds to support energy efficiency programs through a mecha-nism often referred to as a public benefit fund. This relatively common method of funding energy efficien-cy improvements allows utilities to charge all utility ratepayers a surcharge. The surcharges are pooled to create a fund to support energy efficiency measures on the premises of customers who participate in the program. These funds benefit the customers who take advantage of the energy efficiency measures on their own property, but they also benefit all customers be-cause the energy efficiency measures reduce and de-lay the need to build power plants and power lines – thus reducing the overall cost of service for all utility customers, whether or not they participate in the ef-ficiency program.

States use three structures to deliver these ratepay-er-funded energy efficiency services.1 This paper ad-dresses each of these three mechanisms.

1. State Agency Program Administrators: A state energy office or a state public utility commission serves as program administrator. A common ap-proach is for a state energy agency to develop pro-grams under a single- or multi-year strategic plan that the utility commission approves (thus provid-ing some oversight of these agency programs). In some cases the public utility commission is not in-volved in approving or otherwise overseeing the programs. State agencies may deliver the energy efficiency services themselves or hire contractors to perform some or all of the work.

2. Utility Program Administrators: Utilities deliver energy efficiency services to their customers. In

most cases, utilities collect funds from customers pursuant to state law and/or regulation, and spend the funds on energy efficiency services delivered to the customers that participate in the efficiency programs. The utilities design the programs and either deliver the services themselves, with utility employees, or hire contractors. The utility com-mission oversees and approves the program de-sign and budgets.

3. Third-Party Program Administrator: A third-party organization serves as a program administrator. This program administrator often, but not always, is selected through a competitive Request for Pro-posals (RFP) process, and operates according to the terms of a contract with specific performance metrics. Program delivery can be conducted by the third party, by contractors that the third party hires or through some combination of these methods.

It may not be possible to identify one structure that is appropriate for all situations. Some structures will work better in particular situations. In 1996 and 1998, a time when many states were considering significant changes to the way they regulated their energy utilities, researchers at Lawrence Berkeley National Laboratory concluded that it was possible to achieve cost-effective energy savings under each of the three different structures. The structure most ap-propriate for a state depends largely on the situation of the state, including the presence of other energy efficiency policies and structures to support energy efficiency (funding, efficiency goals), the interest and skill level of utilities in running energy efficiency programs, the availability of third-party entities that could assume administration duties, the presence or absence of procurement regulations that make

State Energy Efficiency Policies

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agency or contracted structures difficult to operate, and other factors such as political support for energy efficiency.2

According to a literature review performed by GDS

Associates,3 other major studies of program adminis-tration come to similar conclusions. The Regulatory Assistance Project concludes that the type of admin-istrative structure is less important than the clear and consistent commitment of policymakers to energy ef-ficiency.4 The Center for the Study of Energy Markets at the University of California, Berkeley concluded that “no single administrative structure has emerged in the U.S. that is convincingly superior to others.”5

Current Status and State Experience

Utility program administrators remain the most common structure, but third-party administrators and

agency administrators are attracting increasing atten-tion, and some states run hybrid programs. Illinois, for example, is moving away from an administrative structure that relies on a state agency to a combina-tion utility/agency structure. Vermont, which has had a third-party administrative structure called Efficiency Vermont in place since 2000, is considering changes to its structure that might create a regulated efficiency utility with a long-term franchise-like agreement (as opposed to the contract-based structure that it has had to this point). Such a new arrangement would ad-dress a number of issues that the state has faced with its short-term, three-year, competitively selected con-tract.6 These issues are discussed below.

Table 1 presents the 24 states, plus the District of Columbia, that have state-authorized rate-payer fund-ed mechanisms supporting energy efficiency, and lists the method each state uses to administer its program.

State EE Program Funds ($ mil-

lions)

Per kWh charge (in mils/kWh)

Low Income EE Funds ($

millions)

Per kWh charge for Low

Income

Administration for EE Programs

Administration for Low Income Programs

Arizona 18.2 0.47 2 0.05 Utility Utility

California 567 3 130 0.69 Utility Utility

Connecticut 94.42 3 Included in EE Funds

Utility and ECMB Utility and ECMB

Delaware - - 0.88 0.095 Third Party Dept. of Health and Social Services

District of Columbia

4.1 0.35 5.67 0.48 Agency DC Energy Office

Florida 105.6 0.61 0.2 - Utility

Idaho 16 0.84 - - Utility -

Iowa 32 1 Included in EE funds

Utility Utility

Illinois7 3 0.02 72 0.54 Agency/Utility Agency

Table 1: State Funded Efficiency and Low-Income Program Funding and Administration


Efficiency Programs

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Illinois $60 million, rising in 4 years to

$250 million

Determined annually in rates based on filings to

ICC.

Determined annually in rates based on filings to

ICC.

Determined annually in

rates based on filings to ICC.

Agency (state government and

low income)/Utility All Other

Programs

Agency

Maine 17.62 1.45 6.5 0.53 Agency Maine State Housing Authority

Maryland $80-140 million from RGGI auction

- - - Agency Agency

Massachusetts 123.01 2.5 10% of EE Funds Ear-

marked for LI

Utility with Agency over-sight/review

Utility-funded through SBC, delivered through existing weatherization networks

Michigan - - 60 0.61 Agency Agency

Minnesota 85.7 1.3 - - Utility -

Montana 8.9 0.71 3.3 0.26 Utility Utility

Nevada 36 1.25 12.02 0.39 Utility Welfare Division

New Hampshire

19.89 1.8 13.26 1.2 Utility Utility-funded through SBC, delivered through existing weatherization networks

New Jersey 81 1.02 5.1 0.06 Agency Utility

New Mexico 1 0.05 - - Utility -

New York 93 0.74 42 0.33 Agency Agency

N. Carolina 3.8 0.03 - - Third party -

Ohio 5.6 0.04 111.4 0.78 Agency Agency

Oregon 38.9 1.18 11.1 0.34 Third Party Housing and Community Ser-vice Department

Pennsylvania - - 120 0.83 - Utility

Rhode Island 15.99 2 Funding incorporated into rates – not broken

out as a line-item.

Utility Utility-funded through SBC, delivered through existing weatherization networks

Texas 80 0.32 164.05 0.65 Utility Agency Public Utility Commis-sion (PUC)

Vermont 24.75 4.21 Included in EE Funds

Third Party Third Party

Wisconsin 69 1.17 93.5 1.59 Third party WI Department of Administra-tion

Source: Final Report to the Connecticut Energy Advisory Board: Connecticut Electric Conservation Programs Study, GDS Associates, 2008. Also, American Council for an Energy Efficient Economy, http://www.aceee.org/briefs/mktabl.htm and InterEnergy Solutions, 2008.


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State Profiles

This section provides profiles of selected states, their energy efficiency administrative structures and a set of lessons learned from their experiences.

State Agency Administrators

Seven states and the District of Columbia use a state agency as their energy efficiency program administra-tor. An agency administrator refers either to an agency of state government – such as an energy office – or a state authority that operates under a state govern-ment charter and is typically funded through bond funds, but that may be exempt from some state pro-curement or other regulations.

Illinois

Illinois’ two energy efficiency programs have oper-ated in the past as hybrids of state agency and third-party programs. These programs have operated inde-pendently from one another in past years. The state is now transitioning to a new hybrid of utility/agency/third-party administrator.

Energy Efficiency Trust Fund:

The Energy Efficiency Trust Fund (EETF), established in 1997 and renewed in 2007, receives total funding of $3 million. Illinois utilities provide the funding pro-portionally, based on their share of prior-year kWh electricity sales. The Illinois Department of Commerce administers the EETF and is required by law to spend the fund on residential energy efficiency with an em-phasis on low-income programs. Its primary emphasis is on providing funding for energy-efficient affordable housing, some efficiency programs in school facilities and other residential programs including Home Perfor-mance with Energy Star.8

Illinois Clean Energy Community Trust:

The Illinois Clean Energy Community Trust acts much like a grant-making foundation for energy effi-ciency projects. It is administered by the Illinois Clean Energy Community Fund, a third-party administrator, and is run independently from the Energy Efficiency Trust Fund. The Clean Energy Community Board of Trustees consists of six voting members, one each ap-pointed by the Governor of Illinois, the Speaker and Minority Leader of the State House, the President and Minority Leader of the State Senate, and Common-wealth Edison.

Funding for the Clean Energy Community Trust comes from a one-time $250 million payment made as part of the Commonwealth Edison settlement agreement when the company merged with PECO En-ergy Company in 1999. This merged utility provides service to the Chicago area and is the largest utility in the state. The agreement to establish this fund came about during negotiations in the merger case; such an agreement is unusual in merger negotiations. $25 million of this fund is earmarked for clean coal funding and the remaining $225 million for energy efficiency, renewable energy, and natural habitat pro-tection projects. The bulk of the funding ($81 million out of the $128 million spent thus far) has gone to energy efficiency. Foundation grants have supported installation of 2,251 energy efficiency projects, in-cluding high-efficiency lighting in more than 3,000 buildings, 2,000 of which were K-12 schools. The Foundation also is funding the design of more than fifty energy-efficient new and remodeled facilities used for education, public safety, affordable hous-ing and other purposes. The Foundation’s work has focused primarily on lighting upgrades, and to some extent on building code adoption and training in local communities.9


Efficiency Programs

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New Utility and State-Run Efficiency Program:

A new energy efficiency program signed into law in September 2007 provides $60 million in funding in its first year, reaching $250 million in its fourth year. The funding for this program, which will be provided through electric rates, will be determined by the pro-gram’s annual budget needs, and approved by Illinois’ public utility commission. Some details of this program are yet to be worked out because it is very new. 75 percent of this program will be administered through utilities in the state, and 25 percent will be adminis-tered through the state’s energy office. Utilities will administer energy efficiency programs for residential, commercial and industrial customers. State efforts will focus on low-income programs and on programs to increase energy efficiency in government facilities.10

Maine

Maine’s energy efficiency program is called Efficien-cy Maine and is run by the state’s Public Utilities Com-mission (PUC). Until 2002, most of the energy efficien-cy programs in Maine were run by the state’s utilities. Due to concern on the part of the legislature that the utilities were not administering energy efficiency pro-grams efficiently or achieving the level of savings that might be possible through other structures, the legis-lature required that the Maine PUC assume responsi-bility for administering the efficiency programs now known as Efficiency Maine.11

Efficiency Maine is governed by tight statutory stan-dards that apply the same reporting and evaluation criteria to the Public Utilities Commission programs as would be applied to utilities or others if they were ad-ministering the program.12

Much of Efficiency Maine’s program delivery is con-tracted to third parties. The bids with these third-party

organizations include specific metrics for energy savings; however, the contracts are not designed with financial penalties for failure to meet these metrics because Ef-ficiency Maine wants to maintain flexibility to alter con-tract requirements based on changing market condi-tions. In this sense, Efficiency Maine’s programs differ from nearby Efficiency Vermont’s, and its contracts pro-vide a much smaller incentive for performance.

Efficiency Maine awarded three contracts – one each to a private sector company to conduct its residential and institutional programs and one to the Housing Fi-nance Agency to conduct the low-income programs.13

Maine requires that the Commission develop and review an energy efficiency program plan every three years. In practice, the review and development of new plans has been more frequent – on an annual basis. Ef-ficiency Maine contracts with outside energy efficien-cy program evaluators to conduct process and perfor-mance reviews of the programs.14

Efficiency Maine program staff make several obser-vations based on their experience.

• A state agency can be held to high performance-based standards, much as a utility would be under regulation.

• Use of specific metrics for contractors is important. • One state agency can contract with another state

entity when it makes sense to do so; contracts need not be awarded to private sector entities.

• Comprehensive energy efficiency plans that are re-viewed on a regular basis are important. 15

New York

The New York State Energy Research and Develop-ment Authority (NYSERDA) is a public authority that serves as program administrator for all of the state’s


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energy efficiency programs. Although Table 1 classi-fies New York as using an agency to administer its en-ergy efficiency programs, NYSERDA is more indepen-dent than a typical agency and has more flexibility in contracting and in pay scales than many state agen-cies. In part because of this flexibility, NYSERDA has focused on keeping its contractor selection processes public, competitive and transparent, and making the flow of funding to its contractors easy to track. Like other states, NYSERDA has developed performance metrics in its contracts that allow its staff to review pe-riodically an existing contract to decide whether or not to continue it.16

NYSERDA runs all of its energy efficiency programs (which serve the residential, industrial, commercial, and government sectors) on the basis of a five-year memorandum of understanding between NYSERDA and the state Public Service Commission (PSC). This memorandum specifies that NYSERDA will develop a multi-year operating program plan that the PSC ap-proves.17

NYSERDA staff note several lessons from their own experience:18

• Assure the transparency of contracting, financial controls, performance metrics, audits and internal controls.

• Use effective and quantitative metrics to mea-sure the success of programs. The specific metrics will vary according to the specific program being evaluated, but will include the energy and dollars saved by each program, the number of contractors trained in energy efficiency (for the Home Perfor-mance with ENERGY STAR program), or the num-ber of units served (for low income multi-family energy efficiency programs).

• Empower staff to run projects and make key deci-sions.

• Create an engaged and active oversight board, and report results of program evaluations to that Board. NYSERDA’s management reports to an un-paid board with members from the state’s utilities and major agencies, at-large members and a chair that is appointed by the Governor. The President of NYSERDA serves at the pleasure of the Board.

• Develop a strategic plan that covers all major NY-SERDA initiatives, to be approved by the Board, and revise it over time based on recent experience and program evaluations.

Utility Program Administrators

Eight states use utilities as their program adminis-trators. This section provides short profiles on the pro-grams in three of these states: California, Connecticut and Massachusetts.

California

California runs its energy efficiency programs through its investor-owned utilities (IOUs), with sub-stantial oversight and opportunity for public input; California’s non-investor-owned utilities operate and fund their own efficiency programs. Each year the IOUs submit plans to the California Public Utilities Commission (CPUC) for consideration and approval. The utilities contract out program delivery for a signifi-cant portion of their programs. The process in Califor-nia is as follows:

1. The Commission establishes overall policy guide-lines and energy-savings targets. These targets, or “Big, Bold Energy Efficiency Strategies,” were outlined in the September 2008 release of the California Long-Term Energy Efficiency Strate-gic Plan.19

The strategies are: a. All new residential construction in Califor-


Efficiency Programs

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nia will be zero net energy by 2020b. All new commercial construction will be

net zero energy by 2030c. The heating, ventilation and air condi-

tioning (HVAC) industry and market will be transformed to ensure that its energy performance is optimal for California’s climate

d. All eligible low-income customers will be given the opportunity to participate in low-income energy efficiency programs by 2020

2. With input from their own advisory groups and the broader public, the IOUs design a comprehen-sive portfolio of programs that meet the long-term needs of their resource portfolios, including specific localized needs, and that are consistent with the Commission’s overall policy guidelines and energy-savings targets.

3. During this design process, the IOUs identify the components of the portfolio that they plan to bid out to third parties (minimum 20 percent) for the purpose of soliciting innovative ideas and pro-posals for improved portfolio performance, and determine the criteria that they propose to use in evaluating bids. A Review Group reviews and provides feedback on the portion of the portfolio that the IOUs plan to bid out, as well as the evalu-ation criteria.

5. Upon receiving Commission approval of the applications, the IOUs complete the process of selecting programs and program implementers to design and deliver the programs. The utilities develop and issue RFPs using criteria approved by the Commission and select a set of bids. Review groups (including independent consultants from the Energy Division of the CPUC) observe the

IOUs’ bid selection process to ensure that the criteria are applied properly.

6. Before finalizing their selections, the IOUs discuss the proposed results of their bid review process with the review groups (and the Energy Division’s independent consultants).

7. After incorporating feedback, the IOUs make pub-lic all winning bids and submit compliance filings.20

California’s measurement and verification process creates a two-track method for selecting evaluators. The Energy Division selects program evaluators who substantiate program performance and program-re-lated impacts – this process is meant to create a clear separation between “those who evaluate actions” and “those who act.” The utilities are responsible for select-ing the program evaluators who will provide feedback on day-to-day management of the energy efficiency program portfolio, and for offering recommendations on improving that portfolio over time. The IOUs also must solicit public input into the program design eval-uation and market assessment studies as they are be-ing developed, and hold public meetings to discuss the findings.21

Connecticut

Connecticut created the Energy Conservation Man-agement Board (ECMB) to provide a forum for inter-ested parties to advise and assist the state’s utilities in their energy efficiency programs. The ECMB is made up of 14 members that represent groups including utilities, consumer advocates, environmental advo-cates and large consumers. The ECMB meets at least once each month and hires consultants to work on its behalf with utilities. The consultants propose rec-ommendations for energy efficiency programs to of-fer for the consideration of Connecticut’s PUC. The


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Board is charged with addressing the issues of power system reliability and low-income consumers as well as improving energy efficiency. This process has the advantage of providing a forum for different parties to discuss their priorities and points of agreement and disagreement before proposals are brought before the PUC.22

According to both staff and the chair of the ECMB, the Board has evolved since its founding. Initially, sev-eral members of the Board were not supportive of energy efficiency measures and programs because of concern that they might raise electric rates without providing a benefit – particularly to the largest en-ergy users. But as of 2008, Board members generally take a positive position on energy efficiency, and they generally consider the question of how best to imple-ment efficiency programs, rather than the question of whether or not to implement those programs. To a large degree, the broader support for energy efficiency on the Board may have resulted from the increasingly high electricity prices in Connecticut, according to the Board chair.23

According to one study, the structure of utility-run programs with independent board oversight has pro-vided a stable set of energy efficiency programs. The Connecticut structure has also been flexible enough to change its program emphasis in order to identify and respond to significant capacity and generation con-straints in the southwest part of the state.24

The Connecticut ECMB selects the efficiency pro-gram evaluator through use of a consultant. That consultant is responsible for planning the evaluation process, receiving and reviewing evaluator bids, and discussing them with the utilities. The ECMB consul-tant has the final say on bidder selection, but receives and considers input from the utilities. The utilities, ECMB and the PUC all receive the evaluation results

and the commission issues orders for programmatic changes based on those results.25 Connecticut recent-ly changed the way that it selects its measurement and verification contractors in order to give the ECMB con-trol over this process. Previously the utilities were in charge of contractor selection and oversight, but this selection process had created concerns that the evalu-ators would not be able to offer an independent as-sessment of the utility programs, since they were un-der contract to the utilities.26

Massachusetts

Massachusetts has had two agencies overseeing and performing different aspects of its energy ef-ficiency programs. In the Massachusetts model, the state’s energy office – the Division of Energy Resources (DOER) – is responsible for working with the state utili-ties to plan energy efficiency programs while the state Department of Public Utilities (DOPU) reviews and ap-proves programs for cost-effectiveness. Utilities con-duct the programs with oversight from the DOER. Pro-gram evaluation in Massachusetts is planned by the utilities with review by the DOER, and utilities select and contract with the program evaluators.27

New legislation, passed in mid-2008, has made sev-eral significant changes to energy efficiency program administration.28 Massachusetts will immediately es-tablish an energy efficiency advisory council similar to the Connecticut ECMB, consisting of 11 representatives of residential consumers, low-income weatherization providers, the environmental community, businesses, energy efficiency experts, the Department of Environ-mental Protection, the Attorney General, the Execu-tive Office of Housing and Economic Development and the DOER. The DOER will chair this group and the role of the Department of Public Utilities within this group is as yet unclear.29 The council will review and approve program plans and budgets; work with program ad-


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ministrators to prepare energy resource assessments; determine the economic, system reliability, climate, and air quality benefits of efficiency and load manage-ment resources; conduct and recommend relevant re-search; and recommend long-term efficiency and load management goals to maximize economic savings and achieve environmental benefits. The council itself may retain consultants and submit a budget for approval to the state’s public utilities commission; the council’s budget for consultants should not exceed 1 percent of the total electric and natural gas energy efficiency budgets in the state.30

It is still unknown how the new legislation will also affect program evaluation, but it likely will put pro-gram evaluation contractor selection and oversight under direct control of the new council or a separate entity – removing program evaluation oversight from the utilities’ direct control. Like California and Con-necticut, Massachusetts has been concerned by the conflict of interest that results if utilities let and over-see contracts with the companies that are evaluating the utility programs.31

Third-Party Administrators

Three states currently use a third-party energy ef-ficiency program administrator, and one more state plans to use one.

Delaware

Delaware passed legislation in 2007 to create a new Sustainable Energy Utility (SEU).32 This SEU will as-sume some responsibility for running energy efficien-cy programs now operated through the state’s energy office, and will use new bond funding to substantially expand those programs. The SEU did not exist as a for-mal organization as of mid-2008, although Delaware had released an RFP for a program administrator for

the organization.33 The SEU is modeled to some extent on Vermont’s energy efficiency utility, in that Delaware has created an independent entity to deliver energy efficiency services. However, the Delaware program has several characteristics that make it distinct from the efforts of Vermont and other states with third par-ty administrators.

1. Through various policy initiatives, Delaware’s SEU will develop programs to promote renewable trans-portation fuels as well as electric energy efficiency. These policy initiatives include: an increased Re-newable Portfolio Standard (20 percent by 2019), a doubling of the Green Energy Fund (GEF), an up-dated net metering standard, and authorization of a Sustainable Energy Bond.34

2. The SEU’s funding base will be different from that of other third-party energy efficiency program en-tities, which are funded by public benefit funds. While the Delaware program will rely to a small extent on a public benefit fund, it will also rely on bond funding. The interest and principal on the bonds will be paid through a combination of shared savings on energy efficiency projects and revenues from selling Renewable Energy Credits. In this respect, the Delaware SEU has the potential to be a financially self-sustaining energy efficiency organization.

3. The Delaware SEU concept is more complex than the traditional third-party administrator model in that it relies not only on a public benefit fund but also on bond funding. The long-term viability of that bond funding, and the cost of that funding, will be dependent upon the success of the shared savings programs that the SEU will use to generate funds to pay principal and interest on bonds. The SEU concept is also attempting to address a wider scope of programs, including transportation that will bring new challenges to the organization. In this sense, the SEU is as yet unproven, and it will


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inevitably encounter barriers that need to be ad-dressed.

The Delaware SEU was created in 2007 through state legislation but does not yet exist in any formal structure. The state is optimistic about its prospects, and it will be helpful to watch its development.35

Oregon

The Energy Trust of Oregon began operation in 2002 to administer energy savings programs. Like other third-party energy efficiency program administrators, it is a single-purpose organization with the goal of de-livering energy savings to the state. The Oregon Public Utilities Commission oversees the Energy Trust of Or-egon, which in the 2007 legislative session had its life extended through 2025. Previously, the Public Benefit Fund and the Trust were scheduled to cease operation in 2012.36 This long-term arrangement makes Oregon distinct from Wisconsin and Vermont, which both have shorter-term contracts with the third-party program administrator.37 The long-term arrangement offers some advantages, such as an ability to develop long-term plans and to participate in long-term planning processes, or to make investments in market transfor-mation activities that have longer payback periods. On the other hand, the long-term agreement exposes the Energy Trust to potential criticism that it may not be as accountable for its use of ratepayer funds as an or-ganization with shorter-term performance-based con-tracts that are subject to periodic review.38

The Oregon Public Utilities Commission (PUC) cre-ated the Energy Trust of Oregon as a result of state leg-islation that required the PUC to identify a third-party efficiency program administrator to conduct a suite of energy efficiency programs for residential, commer-cial, industrial, and institutional markets. Unlike third-party administrators in Vermont and Wisconsin, the

Oregon administrator was not selected through an RFP or a public bidding process, but was created as a new organization by the PUC. Because the Energy Trust was a new organization, some observers have reported ini-tial start-up hurdles. Three examples – each of which has, with time, been largely resolved– follow.39

• The Energy Trust had no name recognition and needed to spend considerable resources on creat-ing a brand name for itself.

• The Energy Trust needed to create an identity and a role for itself given that the Oregon Department of Energy was already offering some energy effi-ciency services. The overlap of roles created ten-sion between the two organizations and added some initial start-up costs for the new organization related to branding, name recognition and rela-tionship-building.

• The Energy Trust has also had to work out its re-lationship with a utility that had its own history of delivering energy efficiency programs. Some ten-sion between the utility and the Energy Trust de-veloped when the Energy Trust released an RFP for energy efficiency program delivery but did not se-lect local contractors, including the efficiency sub-sidiary of the utility; bringing a new entity into the mix of those already providing energy efficiency services may create such tensions.40

Oregon’s model has been to contract out much of its energy efficiency program delivery to outside contrac-tors but, with time, it is coming to conduct more of its work in-house with Energy Trust staff.

Vermont

Efficiency Vermont, which is a part of the non-profit Vermont Energy Investment Corporation, administers energy efficiency delivery services on a three-year con-tract with the state’s Public Service Board (PSB). Un-


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like the Energy Trust of Oregon, which was created as a new organization with the express purpose of serving as the Energy Trust, the Vermont model relied on an RFP to select a contractor; the Vermont Energy Invest-ment Corporation won the RFP on the basis of its back-ground and history of energy efficiency related work in Vermont. The Vermont Energy Investment Corpora-tion is now on its second contract with the PSB. The history of Vermont’s approach to energy efficiency ser-vice delivery is as follows:41

• Vermont’s 22 utilities each operated their own en-ergy efficiency programs prior to the creation of Efficiency Vermont. The programs operated with varying levels of success; some utilities maintained a much stronger interest in energy efficiency than others. The Department of Public Service (Ver-mont’s Energy Office) and the utilities regularly disagreed about the levels of investment and the kinds of programs in which the utilities should engage. In addition, there was no coordination among the utilities in their marketing or product procurement.

• The proposal to create a statewide efficiency util-ity came about in part to remedy a situation that many agreed was not working, because of dissat-isfaction with the results of the utility efficiency programs. With many small utilities operating in a small state, none of them were able to develop a strong expertise in energy efficiency technology, program marketing, financing or other areas. They were also unable to combine their efforts effec-tively in order to run state-wide energy efficiency outreach campaigns or to conduct negotiations with energy efficiency product suppliers and man-ufacturers. The new statewide utility also filled a gap that was forming as many utilities cut back on their own energy efficiency programs.

• The Department of Public Service leadership at the time felt that, while it could perform many energy

efficiency services, its state government procure-ment policies made it less nimble and less able to operate in a quickly changing marketplace. The Department continued to operate programs out-side of Efficiency Vermont, funded by the U.S. DOE State Energy Program, and the state Human Servic-es department operated the state’s weatherization programs. Additionally, the Department thought that it could be a good evaluator of energy efficien-cy programs, and thus is responsible for measuring the success of Efficiency Vermont.42

There are several important features of Vermont’s structure:43

• One of the contract’s most important features is that it required a certain level of energy savings by the year 2008. If Efficiency Vermont delivered on that savings it would receive a performance re-ward equal to approximately two to three percent of the total value of the contract, or $1.5 million.

• The three-year contract between the state and Ef-ficiency Vermont is structured such that it specifies a funding level (set at $65 million for the three-year period from 2006-2008). Efficiency Vermont commits to deliver energy savings of 270,000 MWh annually and40 MW of summer and win-ter peak demand reduction, while meeting a set of quantifiable market impact goals such as a 1.2 ratio of gross electric benefits to spending, a speci-fied spending level for residential ($19.7 million) and for low-income ($6.3 million) customers and a specified number (700) of small business custom-ers served.44

• Efficiency Vermont is a single-purpose organiza-tion; its financial survival is based on whether it meets the energy savings goals that it proposes in its contract.

• Efficiency Vermont uses some outside contractors, but performs much of its work with its own staff.


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It has approximately 120 staff devoted to program delivery.

• The Public Service Board has hired a separate con-tract administrator to handle the day-to-day ad-ministration of the contract. The Board is involved only at the key decision points.

• The funding for Efficiency Vermont comes from a system benefit fund - ratepayers pay to their utili-ties a bill surcharge of 4.21 mils/kWh, and the utili-ties pass those funds to a third-party fiscal agent. That fiscal agent then pays Efficiency Vermont. The funds do not enter the state budget and are not appropriated by the legislature. In this sense, Vermont’s structure differs from, for example, Wis-consin’s structure, through which the legislature appropriated funds to the efficiency program ad-ministrator (and, during a period of budget short-fall, re-directed those funds to non-energy efficien-cy-related purposes).

• As the Vermont model has matured, Efficiency Vermont has begun to identify some areas for im-provement related to the three-year contract cycle.• Efficiency Vermont has less incentive to begin

new energy efficiency projects as it nears the end of the project – for example, there is a dis-incentive to begin to work with a large new in-dustrial customer on a multi-year project when only six months remain in the contract.

• Efficiency Vermont has knowledge and exper-tise that it can use to provide input into energy resource planning in the state. The state’s utili-ties now conduct a 20-year transmission plan, for example, and Efficiency Vermont provides input to the process. As an entity with a three-year contract, however, its own investment and time horizons are mismatched with that of a 20-year planning horizon.

• New England’s Independent System Opera-tor now allows energy efficiency to sell into the forward capacity market – a market that

allows both generators and energy efficiency providers to earn payments for delivering guar-anteed capacity to the New England market. This capacity market requires future, firm com-mitments to reduce demand over a period of multiple years in order to earn these capacity payments. Although Efficiency Vermont is able to participate in this market, it is somewhat hamstrung by the shorter time horizon im-posed by the contract.

Observations:

The Efficiency Vermont experience leads to a num-ber of observations about this energy efficiency pro-gram delivery structure.45

• Start-up costs were built into the first contract, and are important to take into account – these one-time costs related to starting a new organization (acquisition of capital office equipment, for exam-ple) are necessary in order for an organization to begin functioning.

• A coordinated and comprehensive statewide plan for all energy efficiency sectors is important. Piece-meal programs that are divided strictly by energy consuming sector (residential, commercial, indus-trial) are less effective than those that are well-co-ordinated. For instance, Vermont ski areas have op-erations that look a great deal like industrial sector processes (snow making or construction) and at the same time have other operations that look a great deal like typical residential sector measures (ski lodges, for instance). Efficiency Vermont learned to develop a client and market-based approach that allowed a single representative to provide a suite of options that were customized to that client.

• The structure of these incentives is important. Ver-mont found that, in order for regulators to achieve the state’s resource acquisition and policy goals, it


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was best to rely on several performance measures, including: short-term energy savings (MWh and MW), “total resource benefits” (present value of lifetime savings for all resources), and other mar-ket effects indicators such as increasing market shares for a particular efficiency technology.

• The use of a competitively bid contract was also helpful for Vermont. The RFP and contract struc-ture allowed the state to specify goals and give the contractor flexibility in how it would achieve those goals. One of the key benefits that the state saw in this process was the fact that its administrative costs fell; regulators no longer needed to examine each program for its cost-effectiveness, but could look to whether or not Efficiency Vermont met its overall energy efficiency goals.

• An organization with the sole mission of acquiring energy efficiency resources can be highly effective. In general, such an organization can operate with-out any conflict of interest; utilities under most reg-ulatory structures earn profits by selling electricity or gas, so they often conclude that energy efficien-cy measures are opposed to their financial interest.

• The success of the effort is highly dependent on the contract. One weakness in the current contract structure in Vermont may be the fact that a three-year period is not long. The state is now consider-ing options that would extend this contract length considerably. Among the possibilities, as laid out in a bill that passed the State Senate but not the House in 2007, is the award of a franchise to an entity to deliver energy efficiency services.46

Wisconsin

The Wisconsin Energy Conservation Corporation (WECC) manages the state’s energy efficiency pro-grams, known as Focus on Energy, under a joint con-tract with the state’s electric utilities. Energy efficiency program delivery history in Wisconsin is as follows: 47

• In the 1990s, with discussion of electricity restruc-turing taking place in Wisconsin, the state legisla-ture and utility commission began to investigate different models for energy efficiency program de-livery. Electricity restructuring had prompted elec-tric utilities to shift their focus away from many energy efficiency programs (which relied heavily on longer-term commitments of funds and on reg-ulatory approvals of efficiency program costs) to shorter-term contracts focused solely on procure-ment of energy.

• The state initially moved all of its energy effi-ciency programs to the energy office within the Department of Administration. The Department then contracted out administration of those pro-grams through a competitively bid RFP process. State procurement rules proved to be a difficult barrier to this system because, according to state procurement regulations, the program delivery contracts passed along all the state procurement rules to any procurement that the contractors performed.

• During the budget difficulties of the early 2000s, the state legislature redirected the money in the system benefit fund to other purposes in order to close a budget gap.

• Through new legislation that went into effect in 2007, the legislature required utilities to collect energy efficiency program funds as a surcharge on rates, and to administer the program through a contract with a third-party program administrator. The Public Service Commission is required to per-form a review of the programs every four years. WECC, which had been the program administra-tor under the former system, is now administer-ing the Focus on Energy programs under the new system.

• The Department of Administration manages low-income energy efficiency programs – Focus on En-ergy does not manage these programs.


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WECC’s contract with the utilities is set up so that it receives an incentive payment if its programs achieve 120 percent or more of their energy savings goals.

WECC develops energy efficiency goals and coordi-nated program plans that it submits to the PSC and the utilities. This planning process has been difficult in re-cent years because of continual uncertainty over the budget for the Focus on Energy program.

Observations:48

• It is an advantage to have a local organization that can assume the responsibilities of the energy ef-ficiency program administrator; such a local orga-nization can build upon established relationships and contacts, and it knows the players and many of the idiosyncrasies of a market.

• Goal-setting and strategic planning are important elements of successful programs.

Measuring the Effectiveness of the Energy Efficiency Program Delivery Options

It is difficult to isolate the effects of administrative structures from a variety of other factors that affect energy efficiency programs – budgets, political sup-port, energy prices, etc. However, one study by a con-sultant, GDS Associates, attempted to quantity the ef-fects of several energy efficiency programs based on several different measures. The GDS study was per-formed for the Connecticut Energy Advisory Board, so its emphasis was on energy efficiency programs in the Northeast.

Chart 1 illustrates the proportional spending of sev-eral utilities on energy efficiency programs, focusing on program administration as a percentage of annual utility revenues. This approach normalizes for the siz-es of the utilities and the markets that they serve. For

example, the New York Power Authority spent more than six percent of its electric revenues on energy effi-ciency, while most other efficiency providers spent be-tween one and two percent of their electric revenues on energy efficiency.

Another important measure of energy efficiency programs is the level of program administrator costs per kWh saved. In general, a low administrative cost can indicate a program that has found ways to save energy at lower costs. This measure is not al-ways accurate because it does not normalize for the costs of doing business in different regions. Such a measure does not account well for certain types of longer-term programs; some market transformation programs may be heavy on administrative costs in their early years and not begin to show results for several years. Chart 2 illustrates program administra-

Chart 1: 2006 Annual Energy Efficiency Expenditures as a Percent of Electric Revenues

Source: “Connecticut Electric Conservation Programs Study,” Final Report to the Connecticut Energy Advisory Board. GDS Associates, 2008.


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Chart 2: Program Administrator Costs per Lifetime kWh Saved

Source: “Connecticut Electric Conservation Programs Study,” Final Report to the Connecticut Energy Advisory Board, GDS Associates, 2008.

Chart 3: EE Program kWh Savings as a Percent of 2006 kWh Sales

Source: “Connecticut Electric Conservation Programs Study,” Final Report to the Connecticut Energy Advisory Board, GDS Associates, 2008.

tion costs per lifetime kWh of electricity saved – al-though it does not attempt to normalize for the dif-ferent costs of doing business in the different regions that it examines.

Finally, another measure shows kWh savings as a percent of kWh sales (chart 3).

The point of the three charts in this context is not to demonstrate the success or lack thereof of differ-ent programs. Instead, the three charts indicate that each of the three models for program administration can produce large cost-effective efficiency savings. Ef-ficiency Vermont, which is a third-party-administrator-run program, performs well according to the each of the measures above. Massachusetts Electric Company, a utility-run program, shows efficiency savings as a percent of total sales that are significantly higher than those of most other utilities in the region. Efficiency Maine, an agency-run program, shows the lowest costs of program administration per kWh saved.

Complementary Policies to Program Ad-ministration

Especially in cases in which utilities oversee and operate energy efficiency programs, regulatory poli-cies that enhance utilities’ financial incentives to in-vest in energy efficiency are important. These include such measures as regulatory policies that address cost recovery for energy efficiency investments or that address the throughput incentive for utilities. The throughput incentive results from the fact that many utilities under current regulations can increase their earnings between rate cases only by selling more en-ergy; therefore, measures that reduce sales, such as energy efficiency, run counter to the utilities’ financial interest. Mechanisms to address this throughput in-centive have the potential to make energy efficiency more attractive to utilities.


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Ideal Applications of Different Administrative Structures

Table 2 provides a summary of how different administrative structures may meet a variety of state policy ob-jectives.

Table 2: Comparative Strengths of Program Delivery Structures49

*** = Strongly supports stated goal ** = Moderately supports state goal* = Weakly supports stated goal

State Agencies Utilities Third Parties

Ability to align efficiency program goals and strate-gies with statewide policy goals

***Because state agency officials are a part of the government, they are best able to offer pro-grams that respond to nuances of policy objectives. State agencies may also be able to design programs that are well-integrated with other govern-ment efficiency efforts such as low-income weatherization programs.

**Utilities will respond to regu-latory and financial incen-tives that state regulators or legislatures set out, but their interests may not be aligned with those of the legislature or governor.

** Third-party administrators respond to the nuances of the contract that lays out their duties and performance incen-tives. That contract is typically overseen by a government agency and can be altered, at pre-specified periods, accord-ing to state policy objectives.

Ability to subject administrator to public oversight, in cases where public funds are used to support the admin-istrator.

***State agencies and agency of-ficials are directly accountable to the governor and respond directly to policy goals of the legislature.

**Utilities operate under regu-latory oversight of a utility commission, and must account for expenditures and program results.

**Third-party administrators operate under a contract or under an agreement with the state. In order to receive payment for services, they must show that they have met program objectives.

Ability to develop programs and select contractors despite political pressures that may influence selection of projects, hir-ing of contractors or other program design features.

*State agencies are most sub-ject to political pressures in designing programs, although this will vary depending on the structure; some, like NYSERDA, have a less enmeshed relation-ship.

***Utilities are less subject to political pressures in program design, although they must re-spond to priorities set out for them by their regulatory body or through state law.

**Third-party administrators are less subject to political pres-sures because they operate under contracts, which provide distance from state govern-ments. They will, however, re-spond to state government pri-orities as set out in contracts or operating agreements.


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Ability to set goals and operate with a single focus on energy efficiency.

** State agencies are one part of state government; in some cas-es their agency mission may be highly focused on delivering ef-ficiency services (NYSERDA, for example),and in other cases a state agency may face com-peting priorities for resources that may make a concerted focus on efficiency difficult to achieve. State agencies are a part of a large, multi-purpose organization that performs far more than energy efficiency services.

* or ***Utilities will have a greater focus on providing effective ef-ficiency services if rate struc-tures are established that do not penalize them for reducing electricity sales, and perhaps reward them for reducing sales. Even with those incen-tives, however, utilities remain multi-purpose organizations that provide far more than energy efficiency services. Absent those regulatory struc-tures, utilities often find that reducing sales through energy efficiency is not in their finan-cial interest.

***Third-party efficiency provid-ers that do nothing but deliver energy efficiency services and earn all compensation based on successful delivery of such services are in the best posi-tion to provide a singular focus on energy efficiency without conflicting goals.

Ability to attract and compensate highly qualified staff and contrac-tors.

*Government pay scales are typically lower and less flex-ible than those in the private sector, and their ability to provide bonuses to employees is limited as well.

***Utility pay scales can be higher than those of government sector entities, and employees can be offered incentives for good performance.

***Third-party pay scales can be higher than those of govern-ment sector entities, and em-ployees can be offered incen-tives for good performance.

Ability to select most-qualified con-tractors

*State agency procurement rules may hamstring the state agency, making it difficult to select the best contractors.

***Utility procurement rules are generally less restrictive than state government procure-ment rules.

***Third party procurement rules are generally less restrictive than state government pro-curement rules.

Ability to structure incentives and bo-nuses to program administrator for quality results.

* State agencies that act as program administrators cannot accept incentive payments in their budget; however, if they bid out the performance of services they can provide incentives to the contractors (as in New Jersey).

*** Utilities can receive incentive payments for successful energy efficiency programs through rate design.

***Third-party contracts can be set up with incentives and bo-nus payments (as in Vermont).


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Ability to begin delivering effective energy efficiency programs with the lowest start-up costs.

* to ***Some state agencies have experience in delivering energy efficiency programs, or have staff skilled in these programs. Others are not as well-posi-tioned. States will need to assess their own resources in this area.

* to ***As with state agencies, some utilities have a history of deliv-ering energy efficiency pro-grams, or have well-qualified staff. Others are not as well-positioned. Utilities will need to assess their own resources in this area.Because utilities are well-known in the community, marketing, branding and name recognition do not represent a significant expense. If the util-ity has a positive image in the community, this name recogni-tion is helpful.

* to ***Some states, like Vermont, have a local third party with a history of delivering energy efficiency programs. Other states may find that start-up costs related to building name recognition and establishing a new organization would be sig-nificant, as initially happened in Oregon.

Ability to access information about customers.

**State agencies rely on utilities to provide data on customer energy usage and other profile data, and will need to establish protocols with the utility for requesting such data, the pri-vacy of such data, the format in which it will be provided and the timing for delivery.

***Utilities typically have a long-standing relationship with customers, know their energy consumption patterns and have a regular relationship with customers through bill payment.

**Third parties rely on utilities to provide data on customer energy usage and other profile data, and will need to establish protocols with the utility for requesting such data, the pri-vacy of such data, the format in which it will be provided and the timing for delivery.

Ability to take advantage of economies of scale in program deliv-ery (equipment bulk purchase, for example)

***Statewide programs run by state agencies represent the largest possible market within the state and, if procurement regulations permit, may be able to take advantage of bulk purchasing, or may be able to offer cost-efficient statewide marketing campaigns.

* to ***Utilities’ economy-of-scale advantages depend on the size of the utility; smaller utilities are less able to take advantage of such economies than large or multi-state utilities.

***Third-party administrators that operate statewide are similar to state agencies in their ability to take advantage of econo-mies of scale in purchasing or marketing In contrast to state-run programs, they do not face the barrier of potentially burdensome procurement regulations.


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Observations on Energy Efficiency Pro-gram Administration

There is no single structure that works for all states.

Structure does not guarantee performance; this re-view reveals examples of third-party, utility and agen-cy energy efficiency program administrators that work well and others that do not work particularly well. The important actions of high-performing energy efficien-cy program administrators include:

• Structuring the programs and organization so that they are accountable to the public as a result of being subject to evaluation based upon widely agreed-up metrics and often through review, advi-sory and oversight boards.

• Programs should also be flexible and responsive to the market. Programs, for example, should be able to react to changing needs for subsidies that result from rising energy prices or greater acceptance of energy-efficient products.

Ability to plan en-ergy efficiency pro-grams to respond to specific electric system needs

**State agencies can be well-equipped to design their pro-grams to meet specific system needs – for instance, NYSERDA has designed programs to reduce peak load in New York City. They are nonetheless un-able to integrate the efficiency planning that they do into broader integrated resource planning for generation and transmission.

***Utilities are usually well-equipped to design efficiency programs to meet specific system needs– for instance, Connecticut utilities, with input from the ECMB, designed programs to meet the needs of resource-constrained areas in southwestern Connecticut. Integrated utilities, if they design and plan their entire electric systems, can integrate efficiency planning into all of their resource planning.

**Third parties can also design their programs to meet specific system needs – for instance, Efficiency Vermont has intro-duced geographically targeted programs to reduce load in specific parts of the state. If they operate on short-term contracts, however, they may find it difficult to integrate ef-ficiency planning into long-term integrated resource planning for generation and transmission – although Vermont has begun attempts to integrate Efficiency Vermont into this process.50

• Making sure the objectives of the organization are supported with strong and consistent energy effi-ciency policies and aligned with the mission of im-proving energy efficiency.

• Hiring well-qualified and motivated people

The success of different structures is heavily influenced by the unique circumstances of individual states.

A review of the reasons that particular energy effi-ciency program delivery structures developed in differ-ent states reveals that each state has created a system that is based on its unique circumstances. Vermont created a state-wide, independent entity after years of dissatisfaction with the way its 22 utilities ran their efficiency programs and after the state’s energy office asserted that it was in a better position to evaluate a third-party efficiency program administrator than to be the administrator itself. California seriously considered creating a separate program administra-tor but was stymied by complex state procurement regulations.51


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tional equipment to ENERGY STAR equipment. Multi-year funding cycles that allow program implementers to plan programs in a way that incorporates start-up time, steady and predictable subsidies, and ongoing program support of at least five years, can be critical to this process.52

A multi-stakeholder oversight board adds credibility and improves accountability.

Most energy efficiency program administrators re-port to an independent, multi-stakeholder board that approves the administrator’s strategic plan and pro-grams. Connecticut has had success with its Energy Conservation Management Board and Massachusetts has recently imitated Connecticut’s structure. This board consists of representatives from the large- and small-consumer sectors, energy efficiency experts, low-income advocates, environmental organizations and the state utilities. In some cases, such as in Con-necticut, the board makes rules on the full set of effi-ciency programs and makes a recommendation to the utility commission to approve program funding.

Development of credible metrics that can be used to measure the program’s success is critical.

Every program examined for this report devotes sig-nificant time to developing metrics that are well-ac-cepted and appropriate to the programs. These met-rics often include energy savings, but also often are oriented towards market transformation goals. These might include the number of stores that stock energy-efficient products, the number of new energy-efficient homes constructed, and the number of contractors who are trained in delivering energy efficiency servic-es. These program metrics are then used to measure the success of the programs and to decide whether to continue a program, change it, or terminate it.53

Often, the decision about how to design the pro-gram administrator function comes down to a combi-nation of several factors, including:

• Interest in energy efficiency on the part of the util-ity, and the level of satisfaction among policymak-ers with the utility’s performance.

• Desire and capacity within the state energy office or public utility commission to serve as a program administrator.

• Availability of local talent and organizations, such as was available in Vermont, to provide energy ef-ficiency services.

A multi-year strategic planning process that plans for and funds all energy efficiency programs as one integrated unit is important.

A regular strategic planning process involving mul-tiple stakeholders can be helpful to creating a success-ful administrative structure. Such a strategic planning process can be integrated into any of the three major structures. New York has used this process in its agency structure, while California and Connecticut have used it in their utility-run structures. This process should examine all energy efficiency programs in order to de-velop a comprehensive review of the goals of all pro-grams. Planners should focus on coordination among programs and methods to integrate new features into existing programs, rather than creating many new pro-grams that have significant start-up costs.

Multi-year funding for energy efficiency programs is important.

Many energy efficiency programs can take years to implement and show results – especially those pro-grams designed to transform markets, for instance, to shift commercial markets from reliance on conven-


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Performance incentives to attain or ex-ceed the savings goals set for the program are an effective way to motivate the pro-gram administrator or the contractors that work for the program administrator.

Performance incentives and metrics can be built into any of the three models, although they are eas-ier to build into a third-party model or utility model than a state agency model; third-party structures can be set up with contractual rewards for performance, and utility structures can be set up with performance incentives built into the ratemaking process. Agency-run structures have no contractual or regulatory mechanism to provide performance incentives to the state agencies. The Maine or New York examples show that a state agency can, however, be held to high performance-based standards and subjected to program evaluations, much as a utility would be. Program delivery contractors can be engaged with performance-based contracts in any of the three models. Each of these should have effective financial controls, performance metrics, audits and internal controls.

Consider the long-term direction of energy markets and ways to create an organization that can effectively participate in those markets.

Energy and energy efficiency markets are changing, with new opportunities emerging to finance efficien-cy. Delaware has developed a financing structure that

relies on a combination of a system benefit fund and bond funding. Bond interest is paid through a com-bination of revenue from selling renewable energy credits and shared savings on energy efficiency invest-ments. Vermont’s third-party administrator is now earning revenue by selling energy efficiency into the forward market at the New England Independent Sys-tem Operator. Although, for example, the equivalent power market in the Pennsylvania/New Jersey/Mary-land area, PJM, does not now have a forward market for energy efficiency, it is possible that it might have one in the future, and any new structures should con-sider whether that structure will be able to sell into such a market. Energy efficiency program adminis-trative structure should be set up so that they have the proper authority to be able to participate in these emerging markets for energy efficiency.54

Structures should take into account the involvement of the utility.

Although utilities evinced little interest in partici-pating in energy efficiency programs during the late 1990s, they are showing more interest now. Effective programs must consider how best to integrate utilities into their efforts. Regulators and policymakers must consider how to structure utility rates so that they can provide a financial incentive for the utilities to support energy efficiency programs. For utility-operated effi-ciency programs, such a rate structure will need to ad-dress cost recovery for energy efficiency investments. In other cases, the rate structures may need to address the throughput incentive.


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Further Resources on the Energy Efficiency Program Delivery Options

“Connecticut Electric Conservation Programs Study,” Final Report to the Connecticut Energy Advisory Board, GDS Associates, 2008.

“Five Years In: An Examination of the First Half-Decade of Public Benefits Energy Efficiency Policies,” American Council for an Energy Efficient Economy, April 2004 (Report number U041).

“Ratepayer-Funded Energy-Efficiency Programs in a Restructured Electricity Industry: Issues, Options, and Un-answered Questions,” Joseph Eto, Charles Goldman, and Suzie Kito, LBNL-40026. Berkeley, CA: Lawrence Berke-ley National Laboratory, 1996. Available at http://eetd.lbl.gov/EA/EMP.

“Who Should Administer Energy Efficiency Programs?” Carl Blumstein, Charles Goldman, Galen Barbose, Cen-ter for the Study of Energy Markets WP 115, a program of the University of California, Energy Institute, 2003.

“Who Should Deliver Ratepayer Funded Energy Efficiency: A Survey and Discussion Paper,” Cheryl Harrington and C. Murray, Regulatory Assistance Project, 2003.


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1 “Ratepayer-Funded Energy-Efficiency Programs in a Restructured Electricity Industry: Issues and Op-tions for Regulators and Legislators,” Joseph Eto and Charles Goldman (Lawrence Berkeley National Laboratory) and Steven Nadel (ACEEE), Lawrence Berkeley National Laboratory, 1998.

2 Ibid and “Ratepayer-Funded Energy-Efficiency Pro-grams in a Restructured Electricity Industry: Issues, Options, and Unanswered Questions,” Joseph Eto, Charles Goldman, and Suzie Kito, LBNL-40026. Berkeley, CA: Lawrence Berkeley National Labora-tory, 1996.

3 Final report to the Connecticut Energy Advisory Board, 2008.

4 “Who Should Deliver Ratepayer Funded Energy Ef-ficiency: A Survey and Discussion Paper,” Cheryl Harrington and C. Murray Regulatory Assistance Project, 2003.

5 “Who Should Administer Energy-Efficiency Pro-grams?” Carl Blumstein, Charles Goldman, Galen Barbose, CSEM WP 115. Berkeley, CA: University of California Energy Institute, 2003.

6 Personal communication with Blair Hamilton (Execu-tive Director, Efficiency Vermont), April 2008.

7 Illinois also runs a program, which provides fund-ing to energy efficiency, clean coal renewable en-ergy and certain agricultural-related projects, that was funded with initial one-time funding of $250 million as a result of a settlement agreement in a merger case. See below for details.

8 “Energy Efficiency Trust Fund Program Report, Jan-

uary 2006-December 2006,” Illinois Department of Commerce and Economic Development, 2006.

9 Illinois Clean Energy Community Foundation. 2009. http://www.illinoiscleanenergy.org/.

10 Ilinois SB 1592 of 2007. Available at http://www.ilga.gov/legislation/publicacts/95/095-0481.htm.

11 Conclusions in this section based on personal com-munication with Denis Bergeron (Efficiency Maine Director, Maine Public Utilities Commission).

12 Ibid.

13 Ibid.

14 Ibid.

15 Ibid.

16 Personal communication with Peter Smith (former President, NYSERDA), March 2008.

17 Personal communication with Peter Smith.

18 Personal Communication with Peter Smith. Note that these points are based on discussions with NYSERDA staff. An overall process evaluation of NYSERDA’s operations was not available for this study.

19 “California Long Term Energy Efficiency Strategic Plan,” California Public Utilities Commission, Sep-tember 2008.

20 “Order Instituting Rulemaking to Examine the Commission’s Future Energy Efficiency Policies,

Endnotes


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Administration and Programs, Interim Order on the Administrative Structure for Energy Efficiency: Threshold Issues,” Decision 05-01-055, 2005.

21 Ibid.

22 Personal communication with Joel Gordes (consul-tant to the Connecticut Energy Conservation Man-agement Board) April 2008.

23 Personal communications with Richard Steeves (chair of the ECMB) and Joel Gordes (lead techni-cal consultant to the ECMB).

24 “State and Regional Policies that Promote Energy Efficiency Programs Carried Out by Electric and Gas Utilities, A Report to the United States Congress Pursuant to Section 139 of the Energy Policy Act of 2005,” U.S. Department of Energy, 2007.

25 Personal Communication, Kim Oswald (consultant to the ECMB on energy efficiency program evalua-tion) June 2008. Also “C&LM Program Evaluation Process, Including the Selection of Independent Contractors to Conduct the Evaluation,” Memo-randum from Energy Conservation Management Board, May 2005 and revised September 2006.

26 Personal communication with Joel Gordes, June 2008.

27 Personal communication with Mike Sherman (DOER), June 2008.

28 Massachussetts SB 2768 of 2008. Available at http://www.mass.gov/legis/bills/senate/185/st02/st02768.htm.

29 Personal communication with Marilyn Ross (Massa-chusetts Department of Public Utilities). June 2008.

30 Ibid.

31 Personal communication with Mike Sherman, June 2008.

32 2007, Delaware State Senate Substitute 1 for SB 18 and 2008 Senate Amendment 1 to SB 228. Avail-able at http://www.seu-de.org/legislation.html.

33 Personal communication with Kevin Yingling (Dela-ware Energy Office) July 2008.

34 “Sustainable Energy Utility: Its Goals, Organization, and Estimated Economic and Environmental Bene-fits,” a presentation by Senator Harris B. McDowell to the Taskforce, February 2007.

35 Personal communication with Harris McDowell (Delaware Senate Majority Leader) December 2007.

36 Energy Trust of Oregon. 2009. Available at http://www.energytrust.org/who/index.html.

37 Vermont is changing its structure to a long-term agreement as well.

38 Personal communication with Bill Nesmith (former staff, Oregon Department of Energy, and Energy Trust Board member), December 2007.

39 Personal Communication with Bill Nesmith. March 2008.

40 Ibid.

41 Personal Communications with Blair Hamilton (Ex-ecutive Director, Efficiency Vermont), and Richard Sedano (Regulatory Assistance Project).


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42 Personal Communication, Rich Sedano (former Commissioner, Vermont Department of Public Ser-vice and current Director, Regulatory Assistance Project).

43 “The Efficiency Utility: A Model for Replication,” L. Blair Hamilton (Director, Efficiency Vermont), Michael Dworkin (Vermont Public Service Board), and Beth Sachs (Executive Director, Vermont En-ergy Investment Corporation). Presented at the Conference of the European Council for an Energy Efficient Economy, June 2005. Also, personal communication with Blair Hamilton, Executive Director, Efficiency Vermont.

44 Personal Communication with Blair Hamilton, April 2008, and presentation provided by Blair Hamil-ton, “Two Efficiency Utility Models,” March 2008.

45 Ibid.

46 Vermont S 94 of 2007-2008. Available at http://www.leg.state.vt.us/docs/legdoc.cfm?URL=/docs/2008/bills/senate/S-094.HTM.

47 Personal communication with Janet Brandt (Wis-

consin Energy Conservation Corporation), 2007-2008.

48 Personal Communication, Janet Brandt.

49 This table benefited from insights and discussion with numerous experts, notably Charles Goldman (LBNL), Blair Hamilton (Efficiency Vermont), and Richard Sedano (Regulatory Assistance Project).

50 Personal Communication, Blair Hamilton.

51 “Ratepayer-Funded Energy-Efficiency Programs in a Restructured Electricity Industry: Issues and Op-tions for Regulators and Legislators,” Joseph Eto, Charles Goldman and Steven Nadel, May 1998. Available at http://eetd.lbl.gov/EA/EMP.

52 Ibid.

53 For a more detailed discussion of many program metrics that states use and the evaluations that states use for their programs, see “Rebate and Grant Programs for Energy Efficiency” in this series.

54 Maryland SB 268 of 2008. Available at http://mlis.state.md.us/2008rs/billfile/Sb0268.htm.


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About the Alliance to Save Energy

The Alliance to Save Energy is a coalition of prominent business, government, environmental and consumer leaders who promote the efficient and clean use of energy worldwide to benefit consumers, the environment, the economy and national security. The Alliance advances energy efficiency policies, conducts research on vari-ous energy-related topics, and increases awareness and knowledge about the many ways that energy consump-tion can be reduced in the United States and throughout the world. For more information about the Alliance and its activities, please visit www.ase.org.

Acknowledgements

This series is made possible by support from Oak Ridge National Laboratory, the US Department of Energy and the Corporate Associates of the Alliance to Save Energy.

Author: Matthew Brown

Matthew Brown is a Partner with ConoverBrown LLC, a consulting firm that focuses on clean energy policy and finance. He provides a combination of (1) analytical and project management services on clean energy for state, federal and local government clients and (2) financial design for clean energy programs for private and public sector clients. He has performed work for a variety of domestic and international clients, including the U.S. Agency for International Development, for which he assisted in the development of clean energy policy in Liberia; SEEDCo, a community development financial institution seeking to build new energy efficiency lending programs in Colorado; and state governments and national associations seeking assistance in the clean energy arena. Prior to founding InterEnergy Solutions, Mr. Brown was the Energy Program Director for the National Conference of State Legislatures (NCSL), where he managed programs that advised high-level state officials on energy regulation, energy policy, energy efficiency, renewable energy, energy/air issues and energy security. He has advised state legislatures, provided expert testimony in over 35 states and for the Federal Energy Regulatory Commission on energy policy and regulation, and written extensively on the subject. Mr. Brown also served as the Director of Special Projects for the New York City Department of Telecommunications and Energy, where he was responsible for establishing several public-private partnerships to build alternative fuel vehicle infrastruc-ture and for intervention with the State’s Public Service Commission on renewable energy issues. Prior to this he worked with the accounting and consulting firm of KPMG Peat Marwick. Mr. Brown holds an MBA from New York University and a BA from Brown University.

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