An Energy Efficiency Resource Standard (EERS) is a requirement that utilities within a state invest in energy efficiency to meet a portion of their customers' energy needs rather than through supplied energy. The use of an EERS to mandate energy efficiency provides a stable funding base for energy efficiency programs, and can fuel long-term energy savings within a state.
Successful energy efficiency programs require stable, multi-year funding. An early trend in energy efficiency funding was to require utilities to fund energy efficiency at an amount equal to a percentage (2-3% in leading states) of utility revenue, a practice known as a Public Benefit Fund (PBF); more recent policy adoptions have changed from the PBF 'revenue mandate' model to the EERS 'savings mandate' model that requires utilities to achieve a percentage of energy needs (2% in leading states) through energy efficiency, which provides the utility the opportunity to achieve these savings in an economically cost-effective manner without having to reach a specified spending level.
Energy efficiency funding is critical. It is the first step in order to:
- Avoid or delay the construction of expensive power plants
- Reduce customer energy use to better manage peak load
- Help alleviate transmission and distribution issues, thus increasing reliability of the grid
- Reduce the introduction of regulated air pollutants and greenhouse gases into the environment
- Create better-informed, more aware and empowered consumers
- Help to revitalize the economy by investing in manufacturing of energy efficient products and energy efficiency services
Our current funding estimates, from Fall 2009, are that the thirteen state in MEEA's footprint will spend approximately $714 million on energy efficiency in 2010 and reach almost a billion dollars by 2012. Leaders include Illinois, Iowa, Michigan, Minnesota, Ohio, and Wisconsin, all of which will be spending over $100 million annually on electric and natural gas energy efficiency by 2012. (Wisconsin uses the Public Benefit Fund model for energy efficiency funding, rather than a Resource Standard.)
The states in the Midwest spend $44.5 billion annually for imported coal and natural gas, money which could be retained in the states' economies to benefit their citizens, ratepayers, and businesses through bill savings, reduction in wholesale energy costs through reduced demand pressure, and through the economic growth from savings being invested in the state economy.
Decoupling
A complimentary policy to an EERS is known as Decoupling. Decoupling is a means for removing utilities' disincentive to save their customers energy because of the subsequently loss of revenue, by providing commissions the authority to approve alternative utility rate structures that allow the utility to be made whole for its efficiency investments including lost income.
Learn More about Midwest Policies
Learn more about the EERS policies of individual Midwestern states from our Midwest Policies page.
