Energy Efficiency Resource Standard

Summary

In December 2018, the PSC adopted an accelerated energy efficiency goal of 31 trillion British Thermal Units (BTu) of customer level energy reduction by 2025. This target is inclusive of annual reduction of 3% electricity sales by 2025, as well a subsidiary target of at least 5 trillion BTU in reduction through heat pump deployment. 

As of September 2023, utilities are in the process of developing post-2025 ratepayer funded portfolios as required by the July 2023 order.

Program Description

Program Administration and Design

Utility energy efficiency programs under previous EEPS (2008- 2015) were oriented towards providing direct rebates and subsidies to encourage individual customers to employ more efficient end-use equipment and systems. The Commission noted that while these programs have been successful to acquire energy savings as a resource, it envisioned the post 2015 utility efficiency programs to be focused on market transformation efforts which would allow wide scale penetration and market acceptance of efficiency measures which would eventually eliminate the need for customer funded subsidies. 

The Commission provided increased responsibility and flexibility to the utilities to design and implement the programs. Beginning 2016, utilities are required to develop more innovative approaches to energy efficiency programs, which may include rebates, but are more focused on market transformational efforts.

Cost Effectiveness and Program Evaluation

While implementing the energy efficiency programs, utilities must track their MWh and Btu savings targets, but will also track CO2 emission reductions, customer bill reductions, reductions, and private investment in energy efficiency technology and solutions as to measure the success of the program in terms of broad statewide energy policy goals provided in the Clean Energy Fund (CEF). The NY Technical Resource Manual (TRM) provides a standardized and transparent approach for calculating energy and demand savings from the energy efficiency programs. 

In January 2016, the PSC provided a framework to develop new Benefit Cost Analysis (BCA) as a part of REV that would be applied to energy efficiency and distributed energy resources, however, the PSC has retained that the total resource cost (TRC) test be the primary cost effectiveness test for energy efficiency. While the TRC can be applied to varying levels of granularity, the Commission requires the TRC to exceed 1.0 at a portfolio level analysis.

Utility Cost Recovery Provisions

The costs for the programs are recovered through Energy Efficiency Tracker (EE Tracker) system benefit surcharge. However, a transition in cost recovery is included in the 2015 REV Order, so that rather than being recovered through a surcharge, efficiency programs will be integrated into the utilities’ businesses and costs will be recovered through rates like other ordinary components of the revenue requirement. In more recent rate orders, the Commission has approved expanded energy efficiency activities by several utilities and provided for alternative cost recovery mechanisms for spending. For example, the Commission approved increased energy efficiency levels for Niagara Mohawk and Central Hudson, including recovery of associated costs through base delivery rates as opposed to the EE Tracker surcharge.

The utilities in the previous EEPS program (2008-2015) were allowed a two-step utility performance incentive for reaching energy efficiency targets. The first portion of the incentive was based on the achievement of the utilities’ specific goals, and the second was based on collective utilities and NYSERDA’s achievement of reaching statewide efficiency targets.

Self Direct Programs

In its February 2015 NY REV order, the PSC required the utilities to implement a “Self-Direct” Program for large commercial and industrial customers that allows large customers to self direct funds that would otherwise support the utility’s energy efficiency programs. In August 2015, the Commission approved the Self-Direct Program Guidance document which provides a framework for utilities to develop their Self-Direct programs for qualifying customers. 

To be eligible for the Self-Direct Program, the customer must have a 36 month average demand of 2 MW or greater. Customers with an aggregated 36 month average demand of 4 MW or greater are also eligible, as long as one or more of the accounts being aggregated has at least a 36 month average demand of 1 MW.

Qualifying large industrial and commercial customers who pay the Energy Efficiency (EE) Tracker surcharge will have the opportunity to self-direct a majority of their contributions to qualifying projects, with up to 15% allocated to support program administrative and evaluation, measurement and verification expenses. The utility must allocate at least 50% of the three-year average annual of EE Tracker surcharges from qualifying customers for each year of the three-year cycle. All projects implemented within the Self-Direct Program must be cost-effective, utilities may count the energy savings towards their savings goals. The MWh target for this program should be calculated based on a program-only dollar per MWh that is at least 7.5% lower than the total authorized program-only dollar per MWh of the company’s energy efficiency portfolio, excluding the Self-Direct Program.

Low Income Programs

Energy efficiency programs for low income customers are administered by NYSERDA through the EmPower program, funded by the Systems Benefits Charge. While NYSERDA is the default provider of low income programs, utilities may also have programs that provide energy efficiency services to low income communities in concert with NYSERDA programs.

*The PUC initiated the REV proceedings on April 2015 following Governor Cuomo’s vision towards a comprehensive reform in the State’s power industry with a broad goal to align electric utility practice and the regulatory paradigm with the technological advances. The REV initiative seeks to create next generation of utility business models that is customer centric and is driven by technological innovation and private investments to provide resilient, affordable, and clean energy in the State. Other initiatives that are part of the REV include the Green Bank, NY Sun, and BuildSmart NY.