Massachusetts is a leading state with a long, successful record of implementing energy efficiency programs for all customer sectors.
The state created an aggressive funding mechanism and required electric utilities to provide energy efficiency programs during its restructuring of the industry in 1997. The natural gas utilities in the state have offered energy efficiency programs to customers since the late 1980s. Reported budgets for energy efficiency programs for 2011, and electricity savings for 2010, are in the State Spending and Savings Tables.
On July 2, 2008, the governor signed Chapter 169 of the Acts of 2008, An Act Relative to Green Communities. The new law altered the approval process and timeline for electric and natural gas utility energy efficiency plans and required the utilities to file the plans every three years. The law required the state’s regulatory authority, the Department of Public Utilities, to ensure that energy efficiency programs “are delivered in a cost-effective manner capturing all available efficiency opportunities, minimizing administrative costs to the fullest extent practicable, and utilizing competitive procurement processes to the fullest extent practicable.” In addition, the law directed the DPU to appoint and convene an Energy Efficiency Advisory Council (EEAC), whose members play a key role in designing, approving, and monitoring the energy efficiency programs of Massachusetts' investor-owned utilities. The EEAC’s primary mandate is achieving the goals outlined in the Green Communities Act and developing long-term vision, including recommendations concerning studies and research to achieve the goals of acquiring all cost-effective efficiency that is less than the cost of generation, and maximizing economic and environmental benefits that can be realized through increased energy efficiency.
According to a July 2012 draft of the second Three-Year Energy Efficiency Plan, required by the Green Communities Act, Massachusetts utilities expect to invest $2.2 billion in energy efficiency resources between 2013 and 2015. Massachusetts' approach has resulted in one of the most ambitious fully-funded state savings targets, with a 2012 goal of 2.4% annual electric savings, increasing to 2.5% per year from 2013-2015. The draft plan also proposes natural gas savings of 1.1% of retail sales starting in 2013 and increasing in subsequent years.
Utility companies in the state manage and implement the programs. The low-income residential demand-side management and education programs are implemented through the state’s low-income weatherization and fuel assistance program.
Massachusetts has decoupling in place for all of its gas and electric utilities. Utility companies can earn a shareholder incentive of approximately 5% of energy efficiency program costs for meeting energy saving, benefit-cost, and market transformation goals.
Massachusetts has a restructured utility industry with competitive generation and retail markets. The distribution companies remain regulated and are required to offer energy efficiency and other demand-side management programs. The law governing these programs is Massachusetts General Law, Chapter 25 §19. The distribution utilities administer their own energy efficiency programs with collaborative input and oversight from the state Division of Energy Resources (DOER) and Department of Public Utilities.
Under the Green Communities Act, a new process has been put in place for design and approval of utility-administered efficiency programs. The Act created an Energy Efficiency Advisory Council (EEAC) that works with the program administrators (utilities) to establish statewide plans for gas and electric utilities for 3 years into the future. In the course of this process, the utilities work with independent consultants hired to advise the EEAC in establishing appropriately ambitious targets to meet the Act’s mandate that utilities plans “shall provide for the acquisition of all available energy efficiency and demand reduction resources that are cost effective or less expensive than supply and shall be prepared in coordination with the energy efficiency advisory council.” After these statewide three-year plans have been made, each individual utility designs its 3-year energy efficiency plan and submits to the Department of Public Utilities for approval. This process is open to the public.
Massachusetts utilities offer customers The HEAT Loan Program, which provides customers with a loan from participating lenders to assist with the installation of qualified energy-efficient improvements in their homes. More information on the program can be found in the ACEEE report, Energy Efficiency Financing Programs.
Large electric customers in Massachusetts can access a self-direct program called the Accelerated Application Process. Customers still pay their cost-recovery mechanism fees, but then have access to 85% of those fees over the course of two years to fund energy efficiency investments. The remaining 15% is retained to fund the administration of the program. Customers develop the projects on their own, and must adhere to some measurement and verification process and protocols. Large gas customers do not pay any CRM fees, but are currently pursuing a self-direct-styled program. More information on large customer self-direct programs can be found in the ACEEE report, Follow the Leaders: Improving Large Customer Self-Direct Programs.
Massachusetts’ utilities have a long history of offering electric and natural gas efficiency programs to their customers. Funding for the programs is expected to increase with the implementation of Chapter 169 of the Acts of 2008. The Green Communities Act is expected to lead to an investment of $2 billion in energy efficiency between 2013 and 2015.
Reported budgets for energy efficiency programs for 2011 are in the State Spending and Savings Tables.
The electric energy efficiency and low-income programs are funded by a monthly charge (system benefits charge) on customers' electric bills (approximately .25 cents/kWh). The distribution utilities collect the charges, which go into a trust fund for administration. The Green Communities Act provides for additional funding to be allocated to energy efficiency programs. It specifically expands funding to include (1) proceeds from the Forward Capacity Market, (2) not less than 80% of the proceeds from the Regional Greenhouse Gas Initiative (RGGI) auction: the Department of Energy Resources (DOER) has indicated that it will allocate 100% of the RGGI funds to EE programs, and (3) an adjustment to distribution charges to the extent that it is necessary to procure all cost-effective energy efficiency and demand resources. Utilities have filed proposals for Energy Efficiency Reconciling Mechanisms which have been approved by the DPU.
The distribution utilities develop estimated budgets and associated plans for energy efficiency programs. Each company submits annual energy efficiency program proposals to the EEAC. DOER is represented on the EEAC. The utilities work with a group of stakeholders (a “collaborative”) in developing these plans. EEAC is responsible for assisting with the design of the statewide plans and allocating monies to the various customer sectors. The plan is then reviewed for cost-effectiveness and approved by the state’s utility regulatory authority, DPU. After the statewide 3-year plans are complete, each individual utility designs its 3-year energy efficiency plan and submits it to the DPU for approval. The DPU may also approve and fund energy efficiency programs proposed by gas distribution companies (including demand-side management programs).
Energy efficiency program funds must be allocated to customer classes, including the low-income residential subclass, in proportion to these customers’ contributions to those funds. At least 10% of the funding for electric energy efficiency programs and at least 20% of the funding for gas energy efficiency programs must be spent on low-income residential demand-side management and education programs.
Summary: Electric: 1.4% in 2010, 2.0% in 2011; 2.4% in 2012, and 2.5% from 2013-2015 (proposed). Natural Gas: 0.63% in 2010, 0.83% in 2011; ramping up to 1% by 2013 (proposed).
The Green Communities Act requires that electric and gas utilities procure all cost-effective energy efficiency before more expense supply resources, requiring a three year planning cycle. On January 28th, 2010 the DPU approved the first 3-year (2010-2012) electric and gas energy efficiency plans under the Green Communities Act, paving the way for the realization of the goals and efficiency procurement requirement established in the Act. The electric efficiency procurement plan is fully funded and ramps up savings each year, from a starting point of 1.0% in 2009, to 1.4% in 2010, 2.0% in 2011, and 2.4% in 2012. 2.4% electricity savings is equivalent to a first year savings of 1,103 GWh in 2012. The energy efficiency investments in 2010-2102 are expected to save 2,625 gigawatt-hours (GWh) of electricity in 2012 (the cumulative annual impact in 2012). The statewide totals are comprised entirely of the individual program administrator savings (DPU 09-116 through DPU 09-120).
Massachusetts' approach has resulted in one of the most ambitious fully-funded state savings targets. With annual electricity savings of 2.4 percent per year in 2012, the Massachusetts programs would achieve cumulative annual energy savings equivalent to 30 percent of retail electricity sales in 2020.
The natural gas plan will save 24.7 million therms in 2012, equivalent to 1.15 percent of retail natural gas sales in 2012. The fully funded energy efficiency investments in 2010-2102 will save over 57.3 million therms of natural gas in 2012 (the cumulative annual impact in 2012). The lifetime energy savings for the gas three-year plan will be almost 897 million therms (DPU 09-121 through DPU 09-128). Overall, the fully funded 2010-2012 electric and natural gas efficiency procurement plans will yield net consumer savings of more than $3.9 billion, reduce statewide carbon dioxide emissions by nearly 15 million short tons, and create more than 3,800 local jobs (ENE 2010).
A July 2012 draft of the second Three-Year Plan proposes to further increase annual electric savings to 2.5% from 2013-2015, and gas savings to 1.1% in 2013, with increases in subsequent years.
Massachusetts is currently implementing decoupling for all of its gas and electric utilities pursuant to DPU Docket 07-50-A (July 2008). Target revenues are determined on a utility-wide basis, and can be adjusted for inflation or capital spending requirements if necessary. The Massachusetts DPU has approved decoupling plans for National Grid Electric Company (DPU 09-39), National Grid Gas Company (DPU 10-55), Bay State Gas Company (DPU 09-30) and Western Massachusetts Electric Company (DPU 10-70).
Department of Public Utilities docket search.
Shareholder incentives are in place for electric and gas utilities. The shareholder incentive provides an opportunity for companies to earn about 5% of program costs as an incentive for meeting program goals. The incentive is based on a combination of elements including energy savings, benefit-cost, and market transformation results. The order that approved the incentive is DTE Order 98-100 (DTE is now DPU). The incentive structure is developed on a program-by-program basis.
Department of Public Utilities docket search.
The Green Communities Act requires that electric and gas utilities make acquiring all cost-effective energy efficiency a higher priority than using other resources. Utilities prepare plans for the DPU that establish annual budgets and goals over a period of three years.
The evaluation of ratepayer-funded energy efficiency programs in Massachusetts relies on both legislative mandates (Green Communities Act of 2008) and regulatory orders (DPU 8-50-A). The order follows the legislation. Evaluations are mainly administered by the utilities. However, the Massachusetts’s Energy Advisory Council and the Energy Efficiency Program Administrators also assist in the administration of evaluations. Statewide evaluations are conducted. There are no specific legal requirements for these evaluations. Massachusetts uses benefit-cost tests in connection with their ratepayer-funded energy efficiency programs. Massachusetts relies on the Total Resource Cost (TRC) test and considers it to be its primary test for decision making. The rules for benefit-cost tests are stated in the Green Communities Act of 2008and DPU 8-50-A. Benefit-cost tests are required at the overall portfolio and total program levels screening.