tk
National Action Plan
for Energy Efficiency
A PLAN DEVELOPED BY MORE THAN 50 LEADING
ORGANIZATIONS IN PURSUIT OF ENERGY SAVINGS
AND ENVIRONMENTAL BENEFITS THROUGH
ELECTRIC AND NATURAL GAS ENERGY EFFICIENCY
JULY 2006
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The goal is to create a sustainable,
aggressive national commitment
to energy efficiency through gas and
electric utilities, utility regulators,
and partner organizations.
Improving energy efficiency in our homes, businesses, schools, governments, and
industries—which consume more than 70 percent of the natural gas and electricity used
in the country—is one of the most constructive, cost-effective ways to address the
challenges of high energy prices, energy security and independence, air pollution, and
global climate change.
The U.S. Department of Energy and U.S. Environmental Protection Agency facilitate the
work of the Leadership Group and the National Action Plan for Energy Efficiency.
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Executive Summary
This National Action Plan for Energy Efficiency (Action Plan) presents policy recommendations for creating
a sustainable, aggressive national commitment to energy efficiency through gas and electric utilities,
utility regulators, and partner organizations. Such a commitment could save Americans many billions of
dollars on energy bills over the next 10 to 15 years, contribute to energy security, and improve our
environment. The Action Plan was developed by more than 50 leading organizations representing key
stakeholder perspectives. These organizations pledge to take specific actions to make the Action Plan a reality.
A National Action Plan
for Energy Efficiency
We currently face a set of serious challenges with regard
to the U.S. energy system. Energy demand continues to
grow despite historically high energy prices and mount-
ing concerns over energy security and independence as
well as air pollution and global climate change. The deci-
sions we make now regarding our energy supply and
demand can either help us deal with these challenges
more effectively or complicate our ability to secure a
more stable, economical energy future.
Improving the energy efficiency1 of our homes, business-
es, schools, governments, and industries—which
consume more than 70 percent of the natural gas and
electricity used in the country—is one of the most
constructive, cost-effective ways to address these chal-
lenges.2 Increased investment in energy efficiency in our
homes, buildings, and industries can lower energy bills,
reduce demand for fossil fuels, help stabilize energy
prices, enhance electric and natural gas system reliabili-
ty, and help reduce air pollutants and greenhouse gases.
Despite these benefits and the success of energy effi-
ciency programs in some regions of the country, energy
efficiency remains critically underutilized in the nation's
energy portfolio.3 Now we simultaneously face the chal-
lenges of high prices, the need for large investments in
new energy infrastructure, environmental concerns, and
security issues. It is time to take advantage of more than
two decades of experience with successful energy effi-
ciency programs, broaden and expand these efforts, and
capture the savings that energy efficiency offers. Much
more can be achieved in concert with ongoing efforts to
advance building codes and appliance standards, provide
tax incentives for efficient products and buildings, and
promote savings opportunities through programs such
as ENERGY STAR®. Efficiency of new buildings and those
already in place are both important. Many homeowners,
businesses, and others in buildings and facilities already
standing today—which will represent the vast majority
of the nation's buildings and facilities for years to
come—can realize significant savings from proven energy
efficiency programs.
Bringing more energy efficiency into the nation's energy
mix to slow demand growth in a wise, cost-effective
manner—one that balances energy efficiency with new
generation and supply options—will take concerted
efforts by all energy market participants: customers, util-
ities, regulators, states, consumer advocates, energy
service companies (ESCOs), and others. It will require
education on the opportunities, review of existing poli-
cies, identification of barriers and their solutions, assess-
ment of new technologies, and modification and adop-
tion of policies, as appropriate. Utilities,4 regulators, and
partner organizations need to improve customer access
to energy efficiency programs to help them control their
own energy costs, provide the funding necessary to
To create a sustainable, aggressive national commitment to energy efficiency
ES-1
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deliver these programs, and examine policies governing
energy companies to ensure that these policies facili-
tate—not impede—cost-effective programs for energy
efficiency. Historically, the regulatory structure has
rewarded utilities for building infrastructure (e.g., power
plants, transmission lines, pipelines) and selling energy,
while discouraging energy efficiency, even when the
energy-saving measures cost less than constructing new
infrastructure.5 And, it has been difficult to establish the
funding necessary to capture the potential benefits that
cost-effective energy efficiency offers.
This National Action Plan for Energy Efficiency is a call to
action to bring diverse stakeholders together at the
national, regional, state, or utility level, as appropriate,
and foster the discussions, decision-making, and commit-
ments necessary to take investment in energy efficiency to
a new level. The overall goal is to create a sustainable,
aggressive national commitment to energy efficiency
through gas and electric utilities, utility regulators, and
partner organizations.
The Action Plan was developed by a Leadership Group
composed of more than 50 leading organizations repre-
senting diverse stakeholder perspectives. Based upon the
policies, practices, and efforts of many organizations
across the country, the Leadership Group offers five
recommendations as ways to overcome many of the
barriers that have limited greater investment in programs
to deliver energy efficiency to customers of electric and
gas utilities (Figure ES-1). These recommendations may
be pursued through a number of different options,
depending upon state and utility circumstances.
As part of the Action Plan, leading organizations are com-
mitting to aggressively pursue energy efficiency opportu-
nities in their organizations and assist others who want to
increase the use of energy efficiency in their regions.
Because greater investment in energy efficiency cannot
happen based on the work of one individual or organiza-
tion alone, the Action Plan is a commitment to bring the
appropriate stakeholders together—including utilities,
state policy-makers, consumers, consumer advocates,
businesses, ESCOs, and others—to be part of a collabora-
tive effort to take energy efficiency to a new level. As
energy experts, utilities may be in a unique position to play
a leading role.
The reasons behind the National Action Plan for Energy
Efficiency, the process for developing the Action Plan,
and the final recommendations are summarized in
greater detail as follows.
Figure ES-1. National Action Plan for Energy Efficiency Recommendations
• Recognize energy efficiency as a high-priority energy resource.
• Make a strong, long-term commitment to implement cost-effective energy efficiency as a resource.
• Broadly communicate the benefits of and opportunities for energy efficiency.
• Promote sufficient, timely, and stable program funding to deliver energy efficiency where cost-effective.
• Modify policies to align utility incentives with the delivery of cost-effective energy efficiency and
modify ratemaking practices to promote energy efficiency investments.
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The United States Faces Large and
Complex Energy Challenges
Our expanding economy, growing population, and rising
standard of living all depend on energy services. Current
projections anticipate U.S. energy demands to increase
by more than one-third by 2030, with electricity demand
alone rising by more than 40 percent (EIA, 2006). At
work and at home, we continue to rely on more and
more energy-consuming devices. At the same time, the
country has entered a period of higher energy costs and
limited supplies of natural gas, heating oil, and other
fuels. These issues present many challenges:
Growing energy demand stresses current systems,
drives up energy costs, and requires new investments.
Events such as the Northeast electricity blackout of
August 2003 and Hurricanes Katrina and Rita in 2005
increased focus on energy reliability and its economic
and human impacts. Transmission and pipeline systems
are becoming overburdened in places. Overburdened
systems limit the availability of low-cost electricity and
fossil fuels, raise energy prices in or near congested
areas, and potentially compromise energy system relia-
bility. High fuel prices also contribute to higher electrici-
ty prices. In addition, our demand for natural gas to heat
our homes, for industrial and business use, and for
power generation is straining the available gas supply in
North America and putting upward pressure on natural
gas prices. Addressing these issues will require billions of
dollars in investments in energy efficiency, new power
plants, gas rigs, transmission lines, pipelines, and other
infrastructure, notwithstanding the difficulty of building
new energy infrastructure in dense urban and suburban
areas. In the absence of investments in new or expand-
ed capacity, existing facilities are being stretched to the
point where system reliability is steadily eroding, and the
ability to import lower cost energy into high-growth load
areas is inhibited, potentially limiting economic expansion.
High fuel prices increase financial burdens on house-
holds and businesses and slow our economy. Many
household budgets are being strained by higher energy
costs, leaving less money available for other household
purchases and needs. This burden is particularly harmful
for low-income households. Higher energy bills for
industry can reduce the nation's economic competitive-
ness and place U.S. jobs at risk.
Growing energy demand challenges attainment of
clean air and other public health and environmental
goals. Energy demand continues to grow at the same
time that national and state regulations are being imple-
mented to limit the emission of air pollutants, such as sul-
fur dioxide (S02), nitrogen oxides (NOx), and mercury, to
protect public health and the environment. In addition,
emissions of greenhouse gases continue to increase.
Uncertainties in future prices and regulations raise
questions about new investments. New infrastructure
is being planned in the face of uncertainties about future
energy prices. For example, high natural gas prices and
uncertainty about greenhouse gas and other environ-
mental regulations, impede investment decisions on new
energy supply options.
Our energy system is vulnerable to disruptions in
energy supply and delivery. Natural disasters such as
the hurricanes of 2005 exposed the vulnerability of the
U.S. energy system to major disruptions, which have sig-
nificant impacts on energy prices and service reliability. In
response, national security concerns suggest that we
should use fossil fuel energy more efficiently, increase
supply diversity, and decrease the vulnerability of domes-
tic infrastructure to natural disasters.
Energy Efficiency Can Be a Beneficial
Resource in Our Energy Systems
Greater investment in energy efficiency can help us tack-
le these challenges. Energy efficiency is already a key
component in the nation's energy resource mix in many
parts of the country. Utilities, states, and others across
the United States have decades of experience in deliver-
ing energy efficiency to their customers. These programs
can provide valuable models, upon which more states,
To create a sustainable, aggressive national commitment to energy efficiency
ES-3
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Benefits of Energy Efficiency
Lower energy bills, greater customer control, and
greater customer satisfaction. Well-designed energy
efficiency programs can provide opportunities for cus-
tomers of all types to adopt energy savings measures
that can improve their comfort and level of service,
while reducing their energy bills.6 These programs can
help customers make sound energy use decisions,
increase control over their energy bills, and empower
them to manage their energy usage. Customers are
experiencing savings of 5, 10, 20, or 30 percent,
depending upon the customer, program, and average
bill. Offering these programs can also lead to greater
customer satisfaction with the service provider.
Lower cost than supplying new generation only
from new power plants. In some states, well-
designed energy efficiency programs are saving ener-
gy at an average cost of about one-half of the typical
cost of new power sources and about one-third of the
cost of natural gas supply (EIA, 2006).7 When inte-
grated into a long-term energy resource plan, energy
efficiency programs could help defer investments
in new plants and lower the total cost of delivering
electricity.
Modular and quick to deploy. Energy efficiency pro-
grams can be ramped up over a period of one to three
years to deliver sizable savings. These programs can
also be targeted to congested areas with high prices
to bring relief where it might be difficult to deliver
new supply in the near term.
Significant energy savings. Well-designed energy
efficiency programs are delivering annual energy sav-
ings on the order of 1 percent of electricity and natu-
ral gas sales.8 These programs are helping to offset 20
to 50 percent of expected growth in energy demand
in some areas without compromising the end users'
activities and economic well-being (Nadel et al., 2004;
EIA, 2006).
Environmental benefits. While reducing customers'
energy bills, cost-effective energy efficiency offers
environmental benefits related to reduced demand
such as lower air pollution, reduced greenhouse gas
emissions, lower water use, and less environmental
damage from fossil fuel extraction. Energy efficiency
can be an attractive option for utilities in advance of
requirements to reduce greenhouse gas emissions.
Economic development. Greater investment in ener-
gy efficiency helps build jobs and improve state
economies. Energy efficiency users often redirect their
bill savings toward other activities that increase local
and national employment, with a higher employment
impact than if the money had been spent to purchase
energy (Kushler et al., 2005; NYSERDA, 2004). Many
energy efficiency programs create construction and
installation jobs, with multiplier impacts on employ-
ment and local economies. Local investments in ener-
gy efficiency can offset imports from out-of-state,
improving the state balance of trade. Lastly, energy
efficiency investments usually create long-lasting
infrastructure changes to building, equipment and
appliance stocks, creating long-term property
improvements that deliver long-term economic value
(Innovest, 2002).
Energy security. Energy efficiency reduces the level of
U.S. per capita energy consumption, thus decreasing
the vulnerability of the economy and individual con-
sumers to energy price disruptions from natural disas-
ters and attacks on domestic and international energy
supplies and infrastructure. In addition, energy effi-
ciency can be used to reduce the overall system peak
demand or the peak demand in targeted load areas
with limited generating or transport capability.
Reducing peak demand improves system reliability
and reduces the potential for unplanned brown-
outs or black-outs, which can have large adverse
economic consequences.
ES-4 National Action Plan for Energy Efficiency
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utilities, and other organizations can build. Experience
shows that energy efficiency programs can lower
customer energy bills; cost less than, and help defer,
new energy infrastructure; provide energy savings to
consumers; improve the environment; and spur local
economic development (see box on Benefits of
Energy Efficiency). Significant opportunities for energy
efficiency are likely to continue to be available at low
costs in the future. State and regional studies have found
that adoption of economically attractive, but as yet
untapped, energy efficiency could yield more than 20
percent savings in total electricity demand nationwide by
2025. Depending on the underlying load growth, these
savings could help cut load growth by half or more com-
pared to current forecasts (Nadel et al., 2004; SWEEP,
2002; NEEP, 2005; NWPCC, 2005; WGA, 2006).
Similarly, savings from direct use of natural gas could
provide a 50 percent or greater reduction in natural gas
demand growth (Nadel et al., 2004).
Capturing this energy efficiency resource would offer
substantial economic and environmental benefits across
the country. Widespread application of energy efficiency
programs that already exist in some regions could deliv-
er a large part of these potential savings.9 Extrapolating
the results from existing programs to the entire country
would yield annual energy bill savings of nearly $20 bil-
lion, with net societal benefits of more than $250 billion
over the next 10 to 15 years. This scenario could defer
the need for 20,000 megawatts (MW), or 40 new 500-
MW power plants, as well as reduce U.S. emissions from
energy production and use by more than 200 million
tons of carbon dioxide (C02), 50,000 tons of S02, and
40,000 tons of NOx annually.10 These significant eco-
nomic and environmental benefits can be achieved rela-
tively quickly because energy efficiency programs can be
developed and implemented within several years.
Additional policies and programs are required to help
capture these potential benefits and address our sub-
stantial underinvestment in energy efficiency as a nation.
An important indicator of this underinvestment is that
the level of funding across the country for organized effi-
ciency programs is currently less than $2 billion per year
while it would require about 4 times today's funding lev-
els to achieve the economic and environment benefits
presented above.11< 12
The current underinvestment in energy efficiency is due
to a number of well-recognized barriers, including some
of the regulatory policies that govern electric and natu-
ral gas utilities. These barriers include:
• Market barriers, such as the well-known "split-
incentive" barrier, which limits home builders' and
commercial developers' motivation to invest in energy
efficiency for new buildings because they do not
pay the energy bill; and the transaction cost barrier,
which chronically affects individual consumer and
small business decision-making.
• Customer barriers, such as lack of information on
energy saving opportunities, lack of awareness of
how energy efficiency programs make investments
easier, and lack of funding to invest in energy
efficiency.
• Public policy barriers, which can present prohibitive
disincentives for utility support and investment in
energy efficiency in many cases.
• Utility, state, and regional planning barriers, which
do not allow energy efficiency to compete with
supply-side resources in energy planning.
• Energy efficiency program barriers, which limit
investment due to lack of knowledge about the
most effective and cost-effective energy efficiency
program portfolios, programs for overcoming
common marketplace barriers to energy efficiency,
or available technologies.
While a number of energy efficiency policies and programs
contribute to addressing these barriers, such as building
codes, appliance standards, and state government lead-
ership programs, organized energy efficiency programs
To create a sustainable, aggressive national commitment to energy efficiency
ES-5
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provide an important opportunity to deliver greater
energy efficiency in the homes, buildings, and facilities
that already exist today and that will consume the major-
ity of the energy used in these sectors for years to come.
The Leadership Group and National
Action Plan for Energy Efficiency
Recognizing that energy efficiency remains a critically
underutilized resource in the nation's energy portfolio,
more than 50 leading electric and gas utilities, state util-
ity commissioners, state air and energy agencies, energy
service providers, energy consumers, and energy effi-
ciency and consumer advocates have formed a
Leadership Group, together with the U.S. Department of
Energy (DOE) and the U.S. Environmental Protection
Agency (EPA), to address the issue. The goal of this
group is to create a sustainable, aggressive national com-
mitment to energy efficiency through gas and electric
utilities, utility regulators, and partner organizations. The
Leadership Group recognizes that utilities and regulators
play critical roles in bringing energy efficiency programs
to their communities and that success requires the joint
efforts of customers, utilities, regulators, states, and
other partner organizations.
Under co-chairs Diane Munns (Member of the Iowa
Utilities Board and President of the National Association
of Regulatory Utility Commissioners) and Jim Rogers
(President and Chief Executive Officer of Duke Energy),
the Leadership Group members (see Table ES-1) have
developed the National Action Plan for Energy Efficiency
Report, which:
• Identifies key barriers limiting greater investment in
energy efficiency.
• Reviews sound business practices for removing these
barriers and improving the acceptance and use of
energy efficiency relative to energy supply options.
•Outlines recommendations and options for
overcoming these barriers.
The members of the Leadership Group have agreed to
pursue these recommendations and consider these
options through their own actions, where appropriate,
and to support energy efficiency initiatives by other
industry members and stakeholders.
Recommendations
The National Action Plan for Energy Efficiency is a call to
action to utilities, state utility regulators, consumer advo-
cates, consumers, businesses, other state officials, and
other stakeholders to create an aggressive, sustainable
national commitment to energy efficiency.1 The Action
Plan offers the following recommendations as ways to
overcome barriers that have limited greater investment
in energy efficiency for customers of electric and gas util-
ities in many parts of the country. The following recom-
mendations are based on the policies, practices, and
efforts of leading organizations across the country. For
each recommendation, a number of options are avail-
able to be pursued based on regional, state, and utility
circumstances (see also Figure ES-2).
Recognize energy efficiency as a high-priority energy
resource. Energy efficiency has not been consistently
viewed as a meaningful or dependable resource com-
pared to new supply options, regardless of its demon-
strated contributions to meeting load growth.13
Recognizing energy efficiency as a high-priority energy
resource is an important step in efforts to capture the
benefits it offers and lower the overall cost of energy
services to customers. Based on jurisdictional objectives,
energy efficiency can be incorporated into resource plans
to account for the long-term benefits from energy sav-
ings, capacity savings, potential reductions of air pollu-
tants and greenhouse gases, as well as other benefits.
The explicit integration of energy efficiency resources
into the formalized resource planning processes that
exist at regional, state, and utility levels can help estab-
lish the rationale for energy efficiency funding levels and
for properly valuing and balancing the benefits. In some
jurisdictions, these existing planning processes might
need to be adapted or even created to meaningfully
ES-6 National Action Plan for Energy Efficiency
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incorporate energy efficiency resources into resource
planning. Some states have recognized energy efficiency
as the resource of first priority due to its broad benefits.
Make a strong, long-term commitment to implement
cost-effective energy efficiency as a resource. Energy
efficiency programs are most successful and provide the
greatest benefits to stakeholders when appropriate poli-
cies are established and maintained over the long-term.
Confidence in long-term stability of the program will
help maintain energy efficiency as a dependable
resource compared to supply-side resources, deferring or
even avoiding the need for other infrastructure invest-
ments, and maintain customer awareness and support.
Some steps might include assessing the long-term
potential for cost-effective energy efficiency within a
region (i.e., the energy efficiency that can be delivered
cost-effectively through proven programs for each cus-
tomer class within a planning horizon); examining the
role for cutting-edge initiatives and technologies; estab-
lishing the cost of supply-side options versus energy effi-
ciency; establishing robust measurement and verification
(M&V) procedures; and providing for routine updates to
information on energy efficiency potential and key costs.
Broadly communicate the benefits of and opportuni-
ties for energy efficiency. Experience shows that ener-
gy efficiency programs help customers save money and
contribute to lower cost energy systems. But these ben-
efits are not fully documented nor recognized by cus-
tomers, utilities, regulators, or policy-makers. More
effort is needed to establish the business case for ener-
gy efficiency for all decision-makers and to show how a
well-designed approach to energy efficiency can benefit
customers, utilities, and society by (1) reducing cus-
tomers' bills over time, (2) fostering financially healthy
utilities (e.g., return on equity, earnings per share, and
debt coverage ratios unaffected), and (3) contributing to
positive societal net benefits overall. Effort is also neces-
sary to educate key stakeholders that although energy
efficiency can be an important low-cost resource to inte-
grate into the energy mix, it does require funding just as
a new power plant requires funding. Further, education
is necessary on the impact that energy efficiency pro-
grams can have in concert with other energy efficiency
policies such as building codes, appliance standards, and
tax incentives.
Promote sufficient, timely, and stable program fund-
ing to deliver energy efficiency where cost-effective.
Energy efficiency programs require consistent and long-
term funding to effectively compete with energy supply
options. Efforts are necessary to establish this consistent
long-term funding. A variety of mechanisms have been,
and can be, used based on state, utility, and other stake-
holder interests. It is important to ensure that the effi-
ciency programs' providers have sufficient long-term
funding to recover program costs and implement the
energy efficiency measures that have been demonstrat-
ed to be available and cost effective. A number of states
are now linking program funding to the achievement of
energy savings.
Modify policies to align utility incentives with the
delivery of cost-effective energy efficiency and modify
ratemaking practices to promote energy efficiency
investments. Successful energy efficiency programs
would be promoted by aligning utility incentives in a
manner that encourages the delivery of energy efficien-
cy as part of a balanced portfolio of supply, demand, and
transmission investments. Historically, regulatory policies
governing utilities have more commonly compensated
utilities for building infrastructure (e.g., power plants,
transmission lines, pipelines) and selling energy, while
discouraging energy efficiency, even when the energy-
saving measures might cost less. Within the existing reg-
ulatory processes, utilities, regulators, and stakeholders
have a number of opportunities to create the incentives
for energy efficiency investments by utilities and cus-
tomers. A variety of mechanisms have already been
used. For example, parties can decide to provide incen-
tives for energy efficiency similar to utility incentives for
new infrastructure investments, provide rewards for pru-
dent management of energy efficiency programs, and
incorporate energy efficiency as an important area of
consideration within rate design. Rate design offers
To create a sustainable, aggressive national commitment to energy efficiency
ES-7
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Figure ES-2. National Action Plan for Energy Efficiency Recommendations & Options
Recognize energy efficiency as a high priority
energy resource.
Options to consider:
• Establishing policies to establish energy efficiency as
a priority resource.
• Integrating energy efficiency into utility, state, and
regional resource planning activities.
• Quantifying and establishing the value of energy
efficiency, considering energy savings, capacity sav-
ings, and environmental benefits, as appropriate.
Make a strong, long-term commitment to implement
cost-effective energy efficiency as a resource.
Options to consider:
• Establishing appropriate cost-effectiveness tests for
a portfolio of programs to reflect the long-term
benefits of energy efficiency.
• Establishing the potential for long-term, cost-
effective energy efficiency savings by customer class
through proven programs, innovative initiatives,
and cutting-edge technologies.
• Establishing funding requirements for delivering
long-term, cost-effective energy efficiency.
• Developing long-term energy saving goals as part
of energy planning processes.
• Developing robust measurement and verification
(M&V) procedures.
• Designating which organization(s) is responsible
for administering the energy efficiency programs.
• Providing for frequent updates to energy
resource plans to accommodate new information
and technology.
Broadly communicate the benefits of and
opportunities for energy efficiency.
Options to consider:
• Establishing and educating stakeholders on the
business case for energy efficiency at the state, util-
ity, and other appropriate level addressing relevant
customer, utility, and societal perspectives.
• Communicating the role of energy efficiency in
lowering customer energy bills and system costs
and risks over time.
• Communicating the role of building codes, appli-
ance standards, and tax and other incentives.
Provide sufficient, timely, and stable program funding
to deliver energy efficiency where cost-effective.
Options to consider:
• Deciding on and committing to a consistent
way for program administrators to recover energy
efficiency costs in a timely manner.
• Establishing funding mechanisms for energy
efficiency from among the available options such
as revenue requirement or resource procurement
funding, system benefits charges, rate-basing,
shared-savings, incentive mechanisms, etc.
• Establishing funding for multi-year periods.
Modify policies to align utility incentives with the
delivery of cost-effective energy efficiency and
modify ratemaking practices to promote energy
efficiency investments.
Options to consider:
•Addressing the typical utility throughput incentive
and removing other regulatory and management
disincentives to energy efficiency.
• Providing utility incentives for the successful
management of energy efficiency programs.
• Including the impact on adoption of energy
efficiency as one of the goals of retail rate design,
recognizing that it must be balanced with other
objectives.
• Eliminating rate designs that discourage energy
efficiency by not increasing costs as customers
consume more electricity or natural gas.
•Adopting rate designs that encourage energy
efficiency by considering the unique characteristics
of each customer class and including partnering
tariffs with other mechanisms that encourage
energy efficiency, such as benefit sharing programs
and on-bill financing.
ES-8 National Action Plan for Energy Efficiency
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opportunities to encourage customers to invest in
efficiency where they find it to be cost effective and
participate in new programs that provide innovative
technologies (e.g., smart meters) to help customers
control their energy costs.
National Action Plan for Energy
Efficiency: Next Steps
In summer 2006, members of the Leadership Group of
the National Action Plan on Energy Efficiency are
announcing a number of specific activities and initiatives
to formalize and reinforce their commitments to energy
efficiency as a resource. To assist the Leadership Group
and others in making and fulfilling their commitments, a
number of tools and resources have been developed:
National Action Plan for Energy Efficiency Report.
This report details the key barriers to energy efficiency in
resource planning, utility incentive mechanisms, rate
design, and the design and implementation of energy
efficiency programs. It also reviews and presents a vari-
ety of policy and program solutions that have been used
to overcome these barriers as well as the pros and cons
for many of these approaches.
Energy Efficiency Benefits Calculator. This calculator
can be used to help educate stakeholders on the broad
benefits of energy efficiency. It provides a simplified
framework to demonstrate the business case for energy
efficiency from the perspective of the consumer, the util-
ity, and society. It has been used to explore the benefits
of energy efficiency program investments under a range
of utility structures, policy mechanisms, and energy
growth scenarios. The calculator can be adapted and
applied to other scenarios.
Experts and Resource Materials on Energy Efficiency.
A number of educational presentations on the potential
for energy efficiency and various policies available for
pursuing the recommendations of the Action Plan will be
developed. In addition, lists of policy and program
experts in energy efficiency and the various policies avail-
able for pursuing the recommendations of the Action
Plan will be developed. These lists will be drawn from
utilities, state utility regulators, state energy offices,
third-party energy efficiency program administrators,
consumer advocacy organizations, ESCOs, and others.
These resources will be available in fall 2006.
DOE and EPA are continuing to facilitate the work of the
Leadership Group and the National Action Plan
for Energy Efficiency. During winter 2006-2007, the
Leadership Group plans to report on its progress and
identify next steps for the Action Plan.
To create a sustainable, aggressive national commitment to energy efficiency
ES-9
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Table ES-1. Members of the National Action Plan for Energy Efficiency
Co-Chairs
Diane Munns
Member
President
Iowa Utilities Board
National Association of Regulatory Utility Commissioners
Jim Rogers
President and Chief Executive Officer
Duke Energy
Leadership Group
Barry Abramson
Senior Vice President
Servidyne Systems, LLC
Angela S. Beehler
Director of Energy Regulation
Wal-Mart Stores, Inc.
Bruce Braine
Vice President, Strategic Policy Analysis
American Electric Power
Jeff Burks
Director of Environmental Sustainability
PNM Resources
Kateri Callahan
President
Alliance to Save Energy
Glenn Cannon
General Manager
Waverly Light and Power
Jorge Carrasco
Superintendent
Seattle City Light
Lonnie Carter
President and Chief Executive Officer
Santee Cooper
Mark Case
Vice President for Business Performance
Baltimore Gas and Electric
Gary Connett
Manager of Resource Planning and
Member Services
Great River Energy
Larry Downes
Chairman and Chief Executive Officer
New Jersey Natural Gas
(New Jersey Resources Corporation)
Roger Duncan
Deputy General Manager, Distributed Energy Services
Austin Energy
Angelo Esposito
Senior Vice President, Energy Services and Technology
New York Power Authority
William Flynn
Chairman
New York State Public Service Commission
Jeanne Fox
President
New Jersey Board of Public Utilities
Anne George
Commissioner
Connecticut Department of Public Utility Control
Dian Grueneich
Commissioner
California Public Utilities Commission
Blair Hamilton
Policy Director
Vermont Energy Investment Corporation
Leonard Haynes
Executive Vice President, Supply Technologies,
Renewables, and Demand Side Planning
Southern Company
Mary Healey
Consumer Counsel for the State of Connecticut
Connecticut Consumer Counsel
Helen Howes
Vice President, Environment, Health and Safety
Exelon
Chris James
Air Director
Connecticut Department of Environmental Protection
Ruth Kinzey
Director of Corporate Communications
Food Lion
Peter Lendrum
Vice President, Sales and Marketing
Entergy Corporation
Rick Leuthauser
Manager of Energy Efficiency
MidAmerican Energy Company
Mark McGahey
Manager
Tristate Generation and Transmission Association, Inc.
Janine Migden-
Ostrander
Consumers' Counsel
Office of the Ohio Consumers' Counsel
Richard Morgan
Commissioner
District of Columbia Public Service Commission
Brock Nicholson
Deputy Director, Division of Air Quality
North Carolina Air Office
Pat Oshie
Commissioner
Washington Utilities and Transportation Commission
Douglas Petitt
Vice President, Government Affairs
Vectren Corporation
ES-10 National Action Plan for Energy Efficiency
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Bill Prindle
Deputy Director
American Council for an Energy-Efficient Economy
Phyllis Reha
Commissioner
Minnesota Public Utilities Commission
Roland Risser
Director, Customer Energy Efficiency
Pacific Gas and Electric
Gene Rodrigues
Director, Energy Efficiency
Southern California Edison
Art Rosenfeld
Commissioner
California Energy Commission
Jan Schori
General Manager
Sacramento Municipal Utility District
Larry Shirley
Division Director
North Carolina Energy Office
Michael Shore
Senior Air Policy Analyst
Environmental Defense
Gordon Slack
Energy Business Director
The Dow Chemical Company
Deb Sundin
Director, Business Product Marketing
Xcel Energy
Dub Taylor
Director
Texas State Energy Conservation Office
Paul von
Paumgartten
Director, Energy and Environmental Affairs
Johnson Controls
Brenna Walraven
Executive Director, National Property Management
USAA Realty Company
Devra Wang
Director, California Energy Program
Natural Resources Defense Council
Steve Ward
Public Advocate
State of Maine
Mike Weedall
Vice President, Energy Efficiency
Bonneville Power Administration
Tom Welch
Vice President, External Affairs
PJM Interconnection
Jim West
Manager of energy right & Green Power Switch
Tennessee Valley Authority
Henry Yoshimura
Manager, Demand Response
ISO New England Inc.
Observers
James W. (Jay)
Brew
Counsel
Steel Manufacturers Association
Roger Cooper
Executive Vice President, Policy and Planning
American Gas Association
Dan Delurey
Executive Director
Demand Response Coordinating Committee
Roger Fragua
Deputy Director
Council of Energy Resource Tribes
Jeff Genzer
General Counsel
National Association of State Energy Officials
Donald Gilligan
President
National Association of Energy Service Companies
Chuck Gray
Executive Director
National Association of Regulatory Utility
Commissioners
John Holt
Senior Manager of Generation and Fuel
National Rural Electric Cooperative Association
Joseph Mattingly
Vice President, Secretary and General Counsel
Gas Appliance Manufacturers Association
Kenneth Mentzer
President and Chief Executive Officer
North American Insulation Manufacturers Associate
Christina Mudd
Executive Director
National Council on Electricity Policy
Ellen Petrill
Director, Public/Private Partnerships
Electric Power Research Institute
Alan Richardson
President and Chief Executive Officer
American Public Power Association
Steve Rosenstock
Manager, Energy Solutions
Edison Electric Institute
Diane Shea
Executive Director
National Association of State Energy Officials
Rick Tempchin
Director, Retail Distribution Policy
Edison Electric Institute
Mark Wolfe
Executive Director
Energy Programs Consortium
To create a sustainable, aggressive national commitment to energy efficiency
ES-11
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Notes
1 Energy efficiency refers to using less energy to pro-
vide the same or improved level of service to the
energy consumer in an economically efficient way.
The term energy efficiency as used here includes
using less energy at any time, including at times of
peak demand through demand response and peak
shaving efforts.
2 Addressing transportation-related energy use is also
an important challenge as energy demand in this
sector continues to increase and oil prices hit histor-
ical highs. However, transportation issues are out-
side the scope of this effort, which is focused only
on electricity and natural gas systems.
3 This effort is focused on energy efficiency for regu-
lated energy forms. Energy efficiency for unregulat-
ed energy forms, such as fuel oil for example, is
closely related in terms of actions in buildings, but is
quite different in terms of how policy can promote
investments.
4 A utility is broadly defined as an organization that
delivers electric and gas utility services to end users,
including, but not limited to, investor-owned, pub-
licly-owned, cooperatively-owned, and third-party
energy efficiency utilities.
5 Many energy efficiency programs have an average
life cycle cost of $0.03/kilowatt-hour (kWh) saved,
which is 50 to 75 percent of the typical cost of new
power sources (ACEEE, 2004; EIA, 2006). The cost
of energy efficiency programs varies by program and
can include higher cost programs and options with
lower costs to a utility such as modifying rate designs.
6 See Chapter 6: Energy Efficiency Program Best
Practices for more information on leading programs.
7 Data refer to EIA 2006 new power costs and gas
prices in 2015 compared to electric and gas pro-
gram costs based on leading energy efficiency pro-
grams, many of which are discussed in Chapter 6:
Energy Efficiency Program Best Practices.
8 Based on leading energy efficiency programs, many
of which are discussed in Chapter 6: Energy
Efficiency Program Best Practices.
9 These estimates are based on assumptions of aver-
age program spending levels by utilities or other
program administrators, with conservatively high
numbers for the cost of energy efficiency programs.
See highlights of some of these programs in Chapter
6: Energy Efficiency Program Best Practices, Tables
6-1 and 6-2.
10 These economic and environmental savings esti-
mates are extrapolations of the results from region-
al program to a national scope. Actual savings at the
regional level vary based on a number of factors. For
these estimates, avoided capacity value is based on
peak load reductions de-rated for reductions that do
not result in savings of capital investments.
Emissions savings are based on a marginal on-peak
generation fuel of natural gas and marginal off-
peak fuel of coal; with the on-peak period capacity
requirement double that of the annual average.
These assumptions vary by region based upon situa-
tion-specific variables. Reductions in capped emis-
sions might reduce the cost of compliance.
11 This estimate of the funding required assumes 2
percent of revenues across electric utilities and 0.5
percent across gas utilities. The estimate also
assumes that energy efficiency is delivered at a total
cost (utility and participant) of $0.04 per kWh and
$3 per million British thermal units (MMBtu), which
are higher than the costs of many of today's programs.
12 This estimate is provided as an indicator of underin-
vestment and is not intended to establish a national
funding target. Appropriate funding levels for pro-
grams should be established at the regional, state,
or utility level. In addition, energy efficiency invest-
ments by customers, businesses, industry, and gov-
ernment also contribute to the larger economic and
environment benefits of energy efficiency.
13 One example of energy efficiency's ability to meet
load growth is the Northwest Power Planning
Council's Fifth Power Plan which uses energy con-
servation and efficiency to meet a targeted 700 MW
of forecasted capacity between 2005 and 2009
(NWPCC, 2005).
ES-12 National Action Plan for Energy Efficiency
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References
For More Information
American Council for an Energy-Efficient Economy
[ACEEE] (2004). A Federal System Benefits Fund:
Assisting States to Establish Energy Efficiency and
Other System Benefit Programs. Washington, DC.
Innovest Strategic Value Advisors [Innovest] (2002,
October). Energy Management & Investor Returns:
The Real Estate Sector.
Kushler, M., Ph.D., York, D., Ph.D., and Witte, P., M.A.
(2005, January). Examining the Potential for Energy
Efficiency to Help Address the Natural Gas Crisis in
the Midwest. Washington, DC: American Council
for an Energy-Efficient Economy [ACEEE],
Nadel, S., Shipley, A., and Elliott, R.N. (2004). The
Technical, Economic and Achievable Potential for
Energy Efficiency in the U.S.—A Meta-Analysis of
Recent Studies. Washington, DC: American Council
for an Energy-Efficient Economy [ACEEE],
New York State Energy Research and Development
Authority [NYSERDA] (2004, May). New York
Energy $martSM Program Evaluation and Status
Report, Report to the System Benefits Charge
Advisory Group, Final Report. Albany.
Northeast Energy Efficiency Partnerships [NEEP] (2005,
May). Economically Achievable Energy Efficiency
Potential in New England. Optimal Energy.
Northwest Power and Conservation Council [NWPCC]
(2005, May). The 5th Northwest Electric Power and
Conservation Plan,
Southwest Energy Efficiency Project [SWEEP] (2002,
November). The New Mother Lode: The Potential
for More Efficient Electricity Use in the Southwest.
Report for the Hewlett Foundation Energy Series.
U.S. Energy Information Administration [EIA] (2006).
Annual Energy Outlook 2006. Washington, DC.
Western Governors' Association [WGA] (2006, June).
Clean Energy, a Strong Economy and a Healthy
Environment. A Report of the Clean and Diversified
Energy Advisory Committee.
Stacy Angel
U.S. Environmental Protection Agency
Office of Air and Radiation
Climate Protection Partnerships Division
Tel: (202) 343-9606
E-mail: angel.stacy@epa.gov
Larry Mansueti
U.S. Department of Energy
Office of Electricity Delivery and Energy Reliability
Tel: (202) 586-2588
E-mail: lawrence.mansueti@hq.doe.gov
Or visit www.epa.gov/cleanenergy/eeactionplan
To create a sustainable, aggressive national commitment to energy efficiency
ES-13
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Funding and printing for this report was provided by the U.S. Department of Energy and U.S. Environmental
Protection Agency in their capacity as co-sponsors for the National Action Plan for Energy Efficiency.
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