Blog Post

Pennsylvania’s large utility customers shouldn’t opt out of paying their fair share to reduce energy waste

June 28, 2016

Currently there is an attempt in Pennsylvania’s statehouse to allow large utility customers to shirk their responsibility to reduce their energy waste. Senate Bill 805 would allow large industrial and commercial companies to opt out of Act 129, the Pennsylvanian statewide initiative to create a more energy-efficient economy. Similar ideas have been floated in the state before, but now things are moving fast and this week may see a decision on whether large customers are relieved of their responsibility to pay their fair share for energy efficiency investments that benefit the entire state.

Huge benefits could be endangered

Energy efficiency programs are largely paid for by ratepayers in the form of a small fee on their bills or a small amount embedded in their rates. These fees are then aggregated to fund cost-effective energy efficiency programs and projects across all sectors. These programs lead to huge benefits, especially when everyone participates. To date, Pennsylvania’s energy efficiency programs have created about 57,000 jobs within the state, and saved customers at all sizes more than $750 million on their electricity bills. Energy efficiency has significantly lowered the costs of electricity in Pennsylvania, and it is in the interest of all customers, large and small, to ensure that these investments continue.

But reaping the full benefits of energy efficiency could be in doubt if Senate Bill 805 goes through. When large utility customers opt out of efficiency programs, it affects everyone. Large customers represent a singular opportunity for low-cost energy savings for ratepayer-funded energy efficiency programs. This opt-out legislation allows large customers to fully opt out of paying their energy efficiency fees with no corresponding obligation to make energy efficiency investments on their own. That means other customer classes will have to carry the full burden of meeting state efficiency targets, or if the targets are lowered, pay for the generation and transmission that will be needed to serve a less energy-efficient economy.

Opting out will decrease Pennsylvania’s expertise and knowledge base

An opt-out also means that large customers are ignoring an important opportunity. In general, investments in energy efficiency lower operating costs for manufacturers, which increases their productivity and improves competitiveness. When these investments are made through utility programs, businesses get the added value of access to technical expertise, project implementation support, and financial incentives that reduce initial costs. In effect, they invest in projects that they would not do on their own.

Supporters of such legislation may claim otherwise, but on multiple occasions we have debunked the reasons they give—myths if you will—for exempting large customers from contributing their share. Most recently in a series of fact sheets that describe the value of including industrial energy efficiency programs to a state’s efficiency and economic development efforts, and how to design effective energy efficiency programs for large customers. Over the years, our analysis has proven the cost effectiveness of energy efficiency in comparison to conventional resources.

Everyone should pay their fair share for benefits they enjoy

Pennsylvania currently ranks 17th in ACEEE’s 2015 State Energy Efficiency Scorecard, rising three positions from 2014, a notable achievement. The state should be looking to advance, not backslide on its progress to deliver benefits to all residents by reducing energy waste. It is important for everyone who benefits to participate in making the Pennsylvania economy more energy-efficient. Allowing large customers to opt out will transfer their responsibility to other consumers and may increase the cost of electricity and decrease the number of jobs that could be created in the Keystone State.

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Utility Business Models Energy Efficiency as a Resource 


Ethan Rogers
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