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Incentives/Policies for Energy Efficiency

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Energy Efficiency and Conservation Requirements for Utilities   

Last DSIRE Review: 01/05/2015
Program Overview:
State: Pennsylvania
Incentive Type: Energy Efficiency Resource Standard
Eligible Efficiency Technologies: Unspecified Technologies
Eligible Renewable/Other Technologies: Solar Water Heat, Solar Space Heat, Photovoltaics, Geothermal Heat Pumps, Geothermal Direct-Use
Applicable Sectors: Investor-Owned Utility, With 100,000 Customers or More
Electric Sales ReductionPhase I: Electricity savings equivalent to 3% of projected June 2009 - May 2010 electricity consumption by May 31, 2013
Phase II: Varies by utility. Electricity savings equivalent to between 1.6% and 2.9% of June 2009 - May 2010 sales by May 31, 2016
Electric Peak Demand ReductionElectricity savings equivalent to 4.5% of measured June 2007 - May 2008 peak demand by May 31, 2013
Natural Gas Sales ReductionN/A
Rate Impact ParametersCosts may not exceed 2% of annual utility revenue as of December 31, 2006
Web Site:
Authority 1:
Date Enacted:
Date Effective:
66 Pa C.S. ยง 2806.1
Authority 2:
Date Enacted:
PUC Order Docket No. M-2008-2069887
Authority 3:
Date Enacted:
PUC Order Docket No. M-2008-2069887
Authority 4:
Date Enacted:
PUC Order Docket No. M-2012-2289411 (Phase II Final Order)
Authority 5:
Date Enacted:
PUC Order Docket M-2012-2300653 (Use of the Total Resource Cost Test in Phase II)

Note: On October 23rd, 2014, the Pennsylvania Public Utility Commission (PUC) began soliciting comments from stakeholders on several issues related to a set of future Phase III requirements (which, by law, would likely take effect on June 1, 2016) under Act 129. To follow the proceeding to develop Phase III requirements, please feel free to visit the consolidated case page for Docket M-2014-2424864.


In October 2008 Pennsylvania adopted Act 129, creating energy efficiency and conservation requirements for the state’s investor owned utilities with at least 100,000 customers. 

With this limitation on applicability, the standards apply only to the following utilities: PECO Energy, PPL Electric Utilities, West Penn Power, Pennsylvania Electric (Penelec), Metropolitan Edison (Met-Ed), and Duquesne Light. 

Electric Energy and Demand Reduction Standard

Under Act 129, the standards have functionally been broken into Phases I and II. Phase I lasted from June 1, 2010 to May 31, 2013, and Phase II will last from June 1, 2013 to May 31, 2013. As noted above, a proposed Phase III is currently under discussion and development, and by law would last from June 1, 2016 to May 31, 2019.

Every five years, the PUC is required to evaluate the costs and benefits of the utility programs intended to meet the standards, and consider developing requirements for additional incremental consumption reductions. A similar review is required for the peak demand reduction requirements. 

Phase I Standards Summary (Electric Demand and Energy Savings)

Phase I of the standard required obligated utilities to develop plans to provide expected electricity savings of 1% by May 31, 2011 and 3% by May 31, 2013, measured against projected electricity consumption for the period from June 2009 – May 2010. The utilities are also required to develop plans that provide for peak demand savings of 4.5% by May 31, 2013, measured against actual peak demand from June 2007 – May 2008.*

Utility plans to meet the standards also had to be designed to provide minimum of 10% of the requirements from units of Federal, State and local government, including municipalities, school, districts, institutions of higher education and nonprofit entities.

Phase II Standards Summary (Electric Energy Savings Only)

The Phase II standards are the current standards affected utilities must design programs to meet. Phase II runs from June 1, 2013 to May 31, 2016, and requires energy savings that vary by utility from 1.6% to 2.9% of June 2009 - May 2010 electricity consumption. These targets are expected to result in collective savings of 3.3 million megawatt-hours (MWh) over the three-year period. Any savings in excess of the Phase I 3% target may be applied to the Phase II targets. The applicable utilities were also required to include specific measures for households at or below 150% of the federal poverty income guidelines.

In the Phase II Order, the "carve-out" for governmental entities and non-profits was maintained, and the PUC also elected to adopt a goal that 4.5% of each utility's target be met with savings in the low-income sector.

The Phase II standards are summarized in the table below, as found in the Phase II order (by applicable utility). 

Applicable Utility Phase II Cumulative Requirement (MWh) % of Baseline
PECO (Exelon) 1,125,851 2.9%
PPL 821,072 2.1%
Met-Ed (FirstEnergy) 337,753 2.3%
West Penn (FirstEnergy) 337,533 1.6%
Penelec (FirstEnergy) 318,813 2.2%
Duquesne Light 276,722 2.0%
Penn Power (FirstEnergy) 95,502 2.0%

In the Phase II Order, the PUC chose to not establish additional peak demand reduction targets beyond those in Phase I, pending further study and evaluation, citing a lack of verified demand savings reduction information from Phase I at the time of the order. However, the PUC permitted the utilities to continue existing residential demand response programs and file petitions to develop new programs.

Notably, energy efficiency measures may potentially include customer-sited solar and geothermal technologies.

Program Administrator Type

Pennsylvania’s electric distribution companies are responsible for administration of the programs required to meet the standards.

Cost-Effectiveness and Program Evaluation

To evaluate the cost effectiveness of its utilities' efficiency and demand reduction activities, Pennsylvania utilizes the Total Resource Cost test (TRC) (one of the five "California tests" from the California Standard Practice Manual) as its primary test for measuring the cost-effectiveness of energy efficiency programs.

Utility Cost Recovery Provisions

Utilities are permitted to recover all reasonable and prudent costs associated with their program offerings through a reconcilable adjustment clause. Related costs associated with decreased revenue and retail sales may not be included under this adjustment, but may be reflected in future utility rate-making proceedings.

Special Provisions (Program Spending Limitation and Penalties for Noncompliance)

The total cost associated with an electric utility’s energy efficiency and peak demand reduction plan may not exceed 2% of the utility’s total annual revenue as of December 31, 2006. The PUC has found that the cost should be determined as an average annual amount rather than as the full cost of the multi-year plan as a whole. Failure to achieve the requisite reductions in electricity consumption and peak demand is punishable by fines from $1 million to $20 million. (Failure to file a plan with the PUC is also punishable by a fine of $100,000 per day). Costs associated with any such fines are not recoverable from ratepayers.

For further information on how the standard is being implemented, including information on utility reporting and program offerings, please visit the PUC’s Act 129 web site listed at the top of this page.

  Scott Gebhardt
Pennsylvania Public Utility Commission
P.O. Box 3265
Harrisburg, PA 17105-3265
Phone: (717) 425-7584
Fax: (717) 787-2545
Web Site:
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