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Extreme Efficiency

Performance standards are a valid idea—if targets are achievable.

Fortnightly Magazine - September 2010

their customers. The U.S. Department of Energy would set uniform national energy savings measurement protocols to verify and report the energy savings, and state regulators or other governing boards would be responsible for enforcing them. Under the ACEEE proposal, electricity retailers also could meet the savings goal by purchasing energy savings credits from other retailers achieving greater savings than required. This market-based approach would give retailers flexibility and spur efficiency innovation. At the time the proposal was made, the idea seemed far-fetched. Judging by how states have gone about setting standards, the idea is beginning to seem quite reasonable.



1. Energy-efficiency performance standards were adopted in several European countries in the late 1990s, including the United Kingdom, France, and Italy. For example, the United Kingdom instituted energy-efficiency performance standards targeting the residential sector as early as 1998. The standard included a trading scheme, known as the Energy-Efficiency Commitment (EEC), which currently runs in three-year cycles. The structure and terms of the standard are described in the Energy Efficiency Standards of Performance for Electricity Suppliers 1998-2000, United Kingdom Office of Electricity Regulation, or the Director General of Electricity Supply, April 1998.

2. On June 15, 2007, the Texas HB 3693, an omnibus energy efficiency bill, was signed into law, increasing this standard to 15 percent of load growth by Dec. 31, 2008 and 20 percent of load growth by Dec. 31, 2009. HB 3693 also required that a study determine the potential to increase savings targets to 30 percent by 2010 and 50 percent by 2015.

3. “State Energy Efficiency Resource Standards,” is a chronological list of standards adopted by states, updated annually. The latest update was published by ACEEE in January 2010. A similar list is also published by the PEW Center for Climate Change.

4. Proposed Rulemaking on Energy Efficiency , Decision No. 71436, RE-00000C-09-0427, The Arizona Corporation Commission.

5. The data for Pacific Gas and Electric in 2008 indicated savings of 3.5 percent of the utility’s annual load. This record appeared to be an outlier and was removed.

6. Electric utility reports on sales, revenues, and energy efficiency activities are available through the Energy Information Administration (EIA), the Federal Energy Regulatory Commission (FERC) form 861.

7. ACEEE, “Shaping Ohio’s Energy Efficiency Future: Energy Efficiency Works,” ACEEE Report Number E-092, March 2009.

8. Achievable Potential from Energy Efficiency and Demand Response Programs in the U.S. (2010–2030) , Electric Power Research Institute 1018363, January 2009.

9. This elasticity measures the percent of change in the first-year cost of conserved energy, measured as $/first-year kWh saved, as a result of a one percent change in savings, measured as percent of annual sales for the 2006-2008 EIA data. The elasticity was estimated using several specifications of a general equation with the following general formulation: log ($/kWh) = f (log (percent Sales Saved)). The results generally showed consistency with various models with statistically significant elasticity estimates, ranging from 0.28 to 0.35 percent.

10. There are seven electric distribution companies (EDCs) in Pennsylvania that meet the threshold: PECO Energy, Allegheny Power, Duquesne Light, Metropolitan