With this October edition, MEEA is proud to have reached the 100th issue of the Policy Insider. The Midwest energy efficiency industry has experienced both meaningful policy advancements and unfortunate rollbacks over the last 100 months. Many of these advancements have taken place over the last few years, hopefully signaling that lawmakers and regulators better understand energy efficiency’s role in decarbonization. Take a look at this list of the region’s biggest stories over the last eight-plus years.
Illinois’s Clean and Equitable Jobs Act
After years of negotiation, Illinois enacted the Climate and Equitable Jobs Act (CEJA) in 2021. The nearly 1,000-page law touches on many elements of the energy sector, notably extending electric energy efficiency savings mandates, creating equitable clean energy workforce development pathways, enabling electrification programs and allowing building energy stretch codes.
Minnesota’s Energy Conservation and Optimization Act
Also in 2021, Minnesota passed the Energy Conservation and Optimization (ECO) Act, which expanded and modernized the state’s conservation improvement program (CIP). Among other provisions, ECO increased the energy efficiency standard for electric investor-owned utilities (IOUs), streamlined municipal utility requirements and enabled efficient fuel-switching in the energy efficiency program.
The Midwest has followed the national trend in adopting clean energy goals. The region first saw these standards in gubernatorial executive orders in states like Michigan, Minnesota and Wisconsin. Illinois became the first Midwestern state to enact a 100% clean energy standard into law with the passage of CEJA in 2021. In 2023, Minnesota became the second, with the passage of HF7/SF4, which mandates electric utilities generate or procure 100% carbon-free resources by 2040. We expect this trend to continue, with Michigan working on a carbon-free standard this legislative term.
Growth of EE in Missouri and Kansas
While the passage of the Kansas Energy Efficiency Investment Act (2014) and the Missouri Energy Efficiency Investment Act (2009) happened before the first edition of the Policy Insider, the growth of energy efficiency in Missouri and Kansas over the past eight years is a notable development. Utilities in Missouri are not required to offer energy efficiency programs, yet the state has jumped up to fourth in our 13-state region for energy savings, trailing only Illinois, Michigan and Minnesota. The state also became the first in the nation to have all its IOUs offer Pay As You Save(R), greatly expanding access to on-bill financing for Missourians. Kansas has historically ranked last in our region for efficiency. This is set to change, with the recent Kansas Corporation Commission approval of Evergy’s efficiency filing. Evergy plans to spend $96 million on efficiency over four years, which should help the state leapfrog over Ohio, North Dakota, South Dakota, Nebraska and Kentucky in our region.
Low-Income Spend Boosts
Since 2014, many states and utilities have expanded energy efficiency program access for low-income households. Both CEJA and ECO increased the required amount that utilities must spend on low-income programs. Additionally, both laws require utilities to spend on health and safety (pre-weatherization) measures. And in Michigan, the state’s utilities have greatly increased their low-income program spending, in part through portfolio settlements. There is still work to be done in this realm, but the region has made meaningful progress over the last few years in improving access for low-income customers.
The region’s most consequential energy efficiency rollback over the last few years came from the passage of House Bill 6 in Ohio in 2019. HB6 terminated the state’s energy efficiency resource standard, effectively ending electric energy efficiency. Soon after its passage, the bill was connected to a massive bribery scandal that eventually led to the then-Speaker of the House Larry Householder’s arrest and conviction. Despite the controversy, all legislative attempts to revive energy efficiency have failed to date. MEEA is currently monitoring legislation that would restore limited efficiency—most notably HB379, which has a chance to pass this session.
Iowa’s EE Spending Caps
Despite seeing substantial cost-effective energy savings over the last several years, the Iowa legislature decided to greatly curtail the state’s energy efficiency standard with the passage of SF2311 in 2018 and SF638 in 2019. Collectively, the legislation capped the amount of money utilities could spend on efficiency, with electric utilities limited to spending no more than 2% of their rate revenue on efficiency and gas utilities limited to 1.5%. This restriction, along with the removal of the requirement that municipal and cooperative utilities must offer energy efficiency, greatly reduced energy efficiency opportunities for Iowans.
Indiana’s EERS Repeal
After several states adopted energy efficiency resource standards (EERS) in the late 2000s and early 2010s, Indiana was the first to drastically roll its back. In 2014, the legislature overturned the Indiana Utility Regulatory Commission’s 2008 order creating a mandatory energy efficiency standard. In the ensuing years, Indiana utilities have established fairly strong voluntary energy efficiency portfolios, helping the industry recover and stabilize. However, energy efficiency remains at a level considerably below potential.
The Midwest’s industrial sector has great potential for energy savings. However, many of our states still exempt or opt-out industrial customers from energy efficiency standards. The region’s largest industrial energy consumer, Indiana, unfortunately has the lowest opt-out threshold, allowing industrial users with just a single site using 1 MW to opt out. Further, despite passing progressive energy legislation, Illinois and Minnesota still have industrial opt-out policies on the books. Regrettably, this means the region continues to miss out on meaningful industrial energy savings.
The Federal (also good!)
Infrastructure Investment and Jobs Act
With the country still reeling economically in the wake of the COVID-19 pandemic, the passage of the Infrastructure Investment and Jobs Act (IIJA) in 2021 sought to support the American economy while tackling the nation’s failing infrastructure. The bipartisan law brought significant funds for many energy-related programs, including industrial decarbonization, building energy code advancement, onsite energy technical assistance partnerships and more. The law has led to restructuring at the U.S. Department of Energy, including the formation of the Office of State and Community Energy Programs, which is tasked with coordinating many of the funds flowing to state energy offices.
Inflation Reduction Act
Over 2021 and 2022, it appeared that Senators would not be able to find a compromise on the expansive Build Back Better plan. Somewhat surprisingly, Democratic Senators came to agreement on the scaled-back Inflation Reduction Act (IRA), which was signed into law in August 2022. This landmark piece of legislation dedicates unprecedented levels of funding to the energy sector by providing tax credits and grants for energy efficient technologies, whole-home retrofits, renewable energy deployment and the advancement of stronger building energy codes. The IRA is aimed at helping the country reach President Biden’s goal of reducing economy-wide greenhouse gas emissions 40% below 2005 levels by 2030.
Soon after taking office, President Biden signed an executive order establishing a goal for 40% of the benefits of certain federal programs and investments to flow to disadvantaged communities. Many of the targeted programs are in the energy and environment sectors, including significant elements of the IIJA and IRA. The Biden administration has since released guidance and mapping tools to help identify these communities, including the Climate and Economic Justice Screening Tool. With the passage of IIJA and IRA, it is the goal of the Biden administration that environmental justice communities see much of the benefits and repair past harms as the nation works toward mid-century decarbonization.
A lot has happened over the last 100 months, and we look forward to reporting on the EE industry's policy developments in future issues. Thanks for reading MEEA’s Policy Insider!