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State Energy Efficiency Policy Database

Texas

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Summary

Since 1999, Texas law has required electric utilities to meet energy efficiency goals, which became the nation's first EERS.  In 2010, the Public Utilities Commission of Texas (PUCT) increased the goals from 20% of electric demand growth to 25% growth in demand in 2012 and 30% in 2013 and beyond, and later adopted S.B. 1125, which will eventually require utilities to meet EERS targets based on peak demand rather than growth in demand. While the goals have increased modestly in recent years, they are still far below most other EERS policies and as a result, utility energy efficiency program investments and savings in Texas are below the national average. 

To meet the efficiency goals, utilities administer incentive programs, which retail electric providers and energy efficiency service providers implement. Programs are typically funded through the utilities’ tariff or base rate. Utilities submit plans for the forthcoming year and reports on energy and capacity savings from the previous year to the PUCT. The PUCT approves the plans. Utilities receive performance bonuses based on their energy savings.

The most recent budgets for energy efficiency programs and electricity and natural gas savings can be found in the State Spending and Savings Tables on the left.

In 2007, as part of its State Clean Energy Resource Project, ACEEE completed the following reports about energy efficiency in Texas: 

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November 8, 2013


Customer Energy Efficiency Programs

Texas law requires all electric transmission and distribution utilities (TDUs) to meet energy efficiency goals — currently, 30 percent of load growth (see information below on Energy Efficiency Resource Standards for more information). To meet these goals, utilities administer incentive programs. Retail electric providers and energy efficiency service providers implement the programs. All programs are designed to reduce system peak demand, energy consumption, and/or energy costs and are available to customers in all customer classes. 

An Energy Efficiency Cost Recovery Factor (EECRF) rate schedule is included in tariffs and permits utilities to recover the costs of providing energy efficiency programs. Alternatively, a commission order establishing a utility’s base rate may also include an amount to offset energy efficiency program costs. The commission also has the option of approving an energy charge or a monthly customer charge for the EECRF.

The most recent budgets for energy efficiency programs and electricity and natural gas savings can be found in the State Spending and Savings Tables on the left.

In Texas, for-profit customers that take electric service at the transmission level are not allowed to participate in utilities' energy efficiency programming and therefore do not pay for it.  Instead industrial customers develop their own energy efficiency plans if desired and work with third-party providers to implement and finance energy efficiency investments.  There is no measurement or monitoring of the investments these large customers do or do not make.  More information on large customer self-direct programs can be found in the ACEEE report, Follow the Leaders: Improving Large Customer Self-Direct Programs.

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November 8, 2013


Energy Efficiency Resource Standards

Summary: 20% Incremental Load Growth in 2011 (equivalent to ~0.10% annual savings); 25% in 2012, 30% in 2013 and onward

In 1999, Texas became the first state to establish an energy efficiency resource standard, requiring electric utilities to offset 10% of load growth through end-use energy efficiency (Texas Senate Bill 7). Demand growth is the average growth of the five previous weather adjusted peak demands for each utility. In 2007, after several years of meeting this goal at low costs, the legislature increased the standard to 15% of load growth by December 31, 2008 and 20% of load growth by December 31, 2009 (Texas House Bill 3693).  The legislation also required utilities to submit energy savings goals. The Public Utility Commission of Texas (PUCT) approved these rules in March 2008.

While the 2007 legislation required utilities to submit GWh savings goals to ensure they did not overly focus on load management, the PUCT determined that utilities could convert their demand savings goals into corresponding energy savings goals. In practice, however, the energy savings (MWh) resulting from Texas utility demand response and energy efficiency programs are about twice the amount of the energy saving goals.

In 2010, the PUCT approved Substantive Rule § 25.181, which increased the goals from 20% of electric demand growth to 25% growth in demand in 2012 and 30% in 2013 and beyond. The rule also establishes customer cost caps to limit efficiency expenditures. The cost caps may not affect every utility, but some have already hit the caps, which are inhibiting investment in cost-effective energy efficiency programs.

In the 2011 legislative session, Texas adopted Senate Bill 1125, which amends the EERS policy by requiring utilities to eventually achieve savings of 0.4% of each company’s peak demand. As a result, utilities with declining or rapidly growing load growth will have more predictable and consistent goals than those that were set based on load growth. The Bill also added focus on reducing demand in the winter, which is more likely to result in real energy efficiency savings than summer demand response programs, which simply shift load and reduce peak demand. The Bill does not remove the cost caps adopted in 2010.

Texas has no natural gas EERS.


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August 9, 2013


Alternative Business Models

Texas does not decouple utilities’ profits from their sales. In 2009, the state considered a bill on decoupling, but the legislation did not pass (SB 1972).


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August 9, 2013


Reward Structures for Successful Energy Efficiency Programs

All investor-owned utilities have a shared benefit incentive in place. When a utility exceeds its demand reduction goal within the prescribed cost limit it is awarded a performance bonus. The performance bonus is based on the utility’s energy efficiency achievements for programs implemented in the previous year (PUCT Substantive Rule §25.181).

A utility that exceeds its demand reduction goal receives a bonus equal to 1% of the net benefits for every 2% that the utility exceeds its goal. The maximum bonus is equal to 20% of the utility’s program costs. Additionally, a utility that meets at least 120% of its demand reduction goal with at least 10% of its savings achieved through Hard-to-Reach programs (which benefit customers with an annual household income at or below 200% of the federal poverty guidelines) can receive an additional bonus equal to 10% of the regular performance bonus.

The energy efficiency rule proposed in 2010 also includes provisions to increase the bonus given to utilities for reaching the energy savings goals. The new rule would increase the 20% maximum bonus to 30% for 2012-2013 and 40% for 2014-2015.


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August 9, 2013


Energy Efficiency as a Resource

While Texas has no integrated resource planning rules, the state does have a filing requirement for long-term energy plans.


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August 11, 2013


Evaluation, Measurement & Verification

The evaluation of ratepayer-funded energy efficiency programs in Texas relies on both legislative mandates (Senate Bill 1125) and regulatory orders (Rule 25. 181). Evaluations are administered by each utility. Texas has formal requirements for evaluation articulated in PURA §39.905 and Rule 25. 181. The Utility/Program Administrator Cost Test (UCT) is the only benefit-cost test and is considered to be the primary test for decision making. The rules for benefit-cost tests are stated in Rule 25. 181. Such tests are required at customer energy efficiency program level screening. A new Texas TRM will be issued at the end of 2013. 


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August 21, 2013