The American Council for an Energy-Efficient Economy released a report Jan. 29 highlighting the success of states that have adopted “energy efficiency resource standards” (EERS), which require utilities to achieve multiyear energy savings targets.
Twenty-six states and D.C. have adopted such standards. They make up about 59% of the U.S. population but 82% of the savings from utility energy efficiency programs, according to the report, “Next Generation Energy Efficiency Resource Standards Update.” EERS policies set long-term or multiyear targets for electric or natural gas savings, make the targets mandatory and include funding to meet the goals.
“On average, in 2023, utilities achieved 99% of their EERS goals, with some utilities exceeding goals and others falling a little short,” the report says. “Utilities exceeding goals were often aided by performance incentives that reward utilities for exceeding EERS minimums.”
If just savings targets are set, the tendency will be to implement low-cost programs that achieve targets for the lowest price. But other objectives, such as emissions targets or low-income requirements, can help make the programs more beneficial.
The study examined four next generation elements for EERS policies: mandatory emissions-reduction targets; electrification; minimum targets for underserved customers such as low-income households; and energy burden maximums or affordability provisions. A few states have other options, like Texas’ peak demand savings, but because they are infrequent, the study does not go into depth on them.
Instead, the study examines the programs in Illinois, Massachusetts, Michigan, Minnesota and New York, for which those next generation elements are increasing low-income and electrification activity.
“Next generation policies are also contributing to complementary policies such as new construction requirements in Massachusetts and New York, electric rate redesign efforts in Massachusetts and low-income rates in Illinois and Minnesota,” the report says. “More impacts are likely to become apparent in the next few years after new programs and policies triggered by recent legislation and commission orders take effect.”
The paper recommends that the 24 states that do not have EERS policies adopt them either through new legislation or by an order from the utility commissions. Four states — Arizona, Arkansas, North Carolina and Wisconsin — have EERS policies with no “next generation policies,” and the paper suggests adding emissions targets, electrification goals or low-income provisions.
But even the states that have EERS programs with next generation provisions, including D.C., could add ones that they lack or expand existing programs.
“States with next generation components should regularly review and refine those components, such as New York did with its 2022-2023 interim review; Massachusetts is doing with its new three-year plan covering 2025-2027; and Minnesota and Illinois have been doing with new legislation,” the report says. “These reviews should be publicized so other states can learn from them.”
Low-income requirements are the most common next generation policy, and also the only one adopted in enough states to permit analysis of their effect.
“Many EERS states encourage or require explicit programs to serve low-income customers, as these customers often live in inefficient homes and apartments but can least afford high energy bills,” the report says. “Of the 26 states plus D.C., 21 have the next generation feature of specific targets for serving low-income customers.”
Across all states, low-income program spending averaged $14, but in EERS states, the customer class got an average of $26.
“Going forward, states should consider requiring utilities to account for multiple factors when setting a spending target for low-income customers,” the report says. “Some examples include socioeconomic characteristics of their service territories, percentage of income-qualified customers to total participants and the total amount of the utility’s portfolio investments.”
Carbon policies increasingly have been added to efficiency standards in recent years, but only 16 of the 26 EERS states have explicit decarbonization targets.
