Next Generation Energy Efficiency Resource Standards Update

Presently, 26 states plus the District of Columbia have EERS policies in place. These states accounted for over 80% of utility energy efficiency program savings in 2023, making EERS policies a critical part of utility energy efficiency programs. On average, in 2023, utilities achieved 99% of their EERS goals, with some utilities exceeding goals and others falling a little short. Utilities exceeding goals were often aided by performance incentives that reward utilities for exceeding EERS minimums.

In this study, we examined four specific next generation elements:

1. Mandatory emissions reduction targets or a decarbonization goal

2. Electrification, including enabling and encouragement policies and sometimes explicit targets

3. Minimum targets for underserved customers, such as low-income households 

4. Energy burden maximums or affordability provisions

In addition, a few states have additional EERS provisions, such as peak demand savings (a key feature of the Texas EERS) and requirements for measures with long-term savings (e.g., a provision in the Illinois EERS). Only a few states have these provisions, so while we note them where relevant, we do not cover them in depth because they are infrequent.

Of the EERS states, we identified at least one next generation element in 23 (including DC). The number of states with each of these elements is illustrated in figure ES-1.

Figure ES-1. Number of states with specific next-generation EERS elements

In many of our case study states, these next generation elements are resulting in increasing low-income and electrification program activity, particularly for low-income programs in all our case study states (Illinois, Massachusetts, Michigan, Minnesota, and New York) and electrification programs in Massachusetts and New York. Next generation policies are also contributing to complementary policies such as new construction requirements in Massachusetts and New York, electric rate redesign efforts in Massachusetts, and low-income rates in Illinois and Minnesota. More impacts are likely to become apparent in the next few years after new programs and policies triggered by recent legislation and commission orders take effect.

Based on these findings, we recommend that:

1. The 24 states without EERS policies consider adopting an EERS, either by action of their legislatures or utility commissions. We find that EERSs drive much higher savings than more general policies without savings targets.

2. The four states with EERS policies that currently contain no next generation provisions (Arizona, Arkansas, North Carolina, and Wisconsin) should consider expanding these policies to include next generation elements such as GHG and British thermal unit (Btu) savings metrics, and low-income and electrification targets.

3. The 23 states (including DC) with some next generation aspects should consider additional next generation components. Specific items to include are:

• Savings targets tied to GHG reductions, such as Maryland and Massachusetts have done and/or to Btu energy savings as Massachusetts and New York have done. Btu savings targets enable programs to tackle fuel oil and propane savings, both high-GHG fuels, and also to promote fuel switching that reduces energy use and emissions.

• Low-income savings and/or spending targets, as 21 EERS states have done. Targets should be substantial—six states require that at least 25% of program spending serve low-income households. Ideally, special efforts should be made to identify and target households with high energy burdens, as Eversource in Massachusetts is doing

• Complementary expanded low-income energy efficiency programs and low-income rates, energy burden maximums, or affordability provisions, such as percentage of income payment plans. These provisions reduce high household energy burdens. The new Xcel rate that seeks to limit energy burdens to 4% is particularly notable. Illinois and Massachusetts are other states with new low-income rates that could serve as models.

• Provisions that enable and encourage utilities to electrify end-uses where this will save energy and reduce emissions. Illinois, Michigan, and Minnesota have recently taken such steps, and Massachusetts and New York have gone so far as to set electrification targets that are helping to drive growth in heat pump sales. 

Such efforts can be led by legislators, regulators, or other key parties, such as state energy offices and energy efficiency organizations.

States with next generation components should regularly review and refine those components, such as New York did with its 2022–2023 interim review, Massachusetts is doing with its new three-year plan covering 2025–2027, and Minnesota and Illinois have been doing with new legislation. These reviews should be publicized so other states can learn from them.