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Incentives/Policies for Renewables & Efficiency

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Energy Efficiency and Conservation Requirements for Utilities   

Last DSIRE Review: 12/13/2012
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 (tentative): Varies by utility. Electricity savings equivalent to between 1.6% and 2.9% of June 2009 - May 2010 electricity consumption 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-2008-2069887

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. The standard requires 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.* Notably, energy efficiency measures may potentially include solar and geothermal technologies. In January 2009 the Pennsylvania Public Utilities Commission issued an order defining how these requirements, referred to as Phase I requirements, are to be implemented.

By November 30, 2013 and every five years thereafter, the PUC is required to evaluate the costs and benefits of the energy consumption reduction program, and consider developing requirements for additional incremental consumption reductions. A similar review is required for the peak demand reduction requirements. The PUC completed its first review in August 2012, determining that the benefits of the programs exceed their costs, and initiating Phase II of the standard. Phase II will run from June 1, 2013 - May 31, 2016 and requires (tentatively) 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 Phase II order provided a specific process for utilities to challenge the revised targets by requesting an evidentiary hearing. With the exception of Duquesne Light Company, it appears that all of the utilities have chosen to make such a challenge. In the Phase II Order, the PUC chose to not establish additional peak demand reduction targets pending further study and evaluation, but permitted the utilities to continue existing residential demand response programs and file petitions to develop new programs.

Under Phase I of the standard, utilities were required to develop plans for achieving these targets and submit them to the PUC for review by July 1, 2009. Among other required details, the plans 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. They 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.

All Phase I utility plans had been approved by the PUC by the end of 2009 and the obligated utilities are all now offering various energy programs for their customers. In June 2011 the PUC issued an order establishing an expedited process by which utilities may make minor changes to their energy efficiency and conservation plans outside of the potentially time consuming process defined in the original January 2009 Act 129 Implementation Order. The Phase II Order adopted a similar approval process and required utilities to file new plans by November 1, 2012, though these filings have now been delayed by utility challenges to the Phase II targets.

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. 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.

*The actual language of the enacted law could have also been interpreted slightly differently, requiring absolute reductions in electricity consumption and peak demand relative to annual references, adjusted for weather variations and extraordinary loads. The PUC has interpreted the law instead as an equivalent savings requirement, as described above, noting that this interpretation will lead to simpler implementation and avoids the need to perform weather normalization calculations or define what qualifies as an extraordinary load.

  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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