Energy Efficiency State Legislative Update: 2015

1/5/2016

Energy efficiency is becoming an increasingly significant resource in national and state energy portfolios.

According to the International Energy Agency, the growing global energy efficiency market is worth at least $310 billion per year. In the coming year, states may increasingly rely on efficiency as a least-cost resource and driver of economic growth, especially in light of the Environmental Protection Agency’s Clean Power Plan regulations for power plants.

In the 2015 session, states enacted legislation encouraging energy efficiency by bolstering state efficiency policies, strengthening building energy codes, increasing efficiency in public buildings and expanding access to financing for multiple demographic groups.

Legislatures considered nearly 600 bills on energy efficiency last year, with 38 states and Washington, D.C. ultimately enacting more than 90 bills.

This document provides an overview of the state energy efficiency policy landscape for the year. To view the 2014 Energy Efficiency State Legislative Update, click here.

Blue light bulbState Efficiency Policies

Numerous states considered broader energy efficiency programs or policies through Energy Efficiency Resource Standard (EERS), system benefits funds, tax credits, pilot programs or private investment in energy efficiency. Thirteen states enacted legislation, including California (Assembly Bill 793 and Senate Bill 350), Connecticut, Indiana, Louisiana, Montana, Nevada, New Hampshire (House Bill 382 and House Bill 614), New Jersey (Senate Bill 2016, Senate Bill 2458 and Senate Resolution 112), Oregon (House Bill 2448, House Bill 5030, Senate Bill 20 and Senate Bill 5510), Rhode Island, Utah, Virginia (House Bill 1345, House Bill 1843 and companion Senate Bill 1037) and Washington

Notable legislation includes:

  • California enacted legislation that, among other measures, required the State Energy Resources and Conservation and Development Commission to establish annual energy efficiency standards that result in a 50 percent increase in statewide electrical and natural gas efficiency by 2030. Prior legislation had subject investor-owned utilities in the state to energy efficiency standards and required to engage in all cost-effective energy efficiency.
  • Following the Indiana Legislature’s repeal of their EERS in 2014, the state enacted a new state energy efficiency policy. The bill requires utilities to submit energy efficiency plans to the Utility Regulatory Commission at least once every three years. Plans must include evaluation, measurement and verification provisions conducted by an independent agent. The bill authorizes rate recovery for efficiency programs.
  • A bill in Montana made changes to the state’s system benefit fund, increasing a public utility’s minimum funding level for low-income energy and weatherization assistance and clarifying that eligible projects can be located on tribal reservations.
  • New Hampshire legislation established a committee to facilitate greater private investment in energy efficiency and renewable energy. The committee was required to report on its findings and provide recommendations by November 2015.
  • A New Jersey resolution urged the Board of Public Utilities to expeditiously establish a state EERS. Currently, 24 states have an EERS for electrical energy efficiency and several states have non-binding targets for efficiency.
  • Legislation in Oregon allows the state Department of Energy to require recertification for up to three years of specific tax credits associated with energy conservation projects to ensure compliance with conservation targets.
  • An omnibus appropriations and energy bill in Rhode Island extended information and reporting requirements for the commissioner of the Office of Energy Resources, the Resources Management Council and electric and gas utilities on system reliability and energy efficiency procurement from 2017 to 2024.
  • Legislation in Virginia expanded the list of qualifying light bulbs that are exempt from sales and use tax during tax holidays to include all Energy Star light bulbs. More than 40 states incentivize the use of energy efficient lighting through rebate, loan or tax incentive programs.

Building Energy Codes

Energy efficient buildingStates are updating or strengthening building energy codes to help owners and renters reap the economic and comfort benefits of improved heating and cooling systems, insulation and ventilation. Lowering building energy consumption can reduce operating costs, lower emissions and energy demand, and have payback periods as short as two or three years. Currently, 44 states, Washington, D.C., and four territories have established state building energy codes for commercial buildings. Forty-three states, Washington, D.C., and four territories have state building energy codes for residential buildings.

In 2015, legislation on building energy codes was enacted in Arizona, California (Assembly Bill 802 and Assembly Bill 865), Florida, Georgia, Illinois, Maine, Maryland, Minnesota, Nebraska, Nevada, North Carolina, Texas and Washington (House Bill 1101 and Senate Bill 5024).

Examples of enacted legislation include:

  • Legislation enacted in Arizona restricted localities from requiring building energy audits and energy benchmarking. Building audits measure energy consumption and can be used to advise building owners on cost-effective energy investments, while benchmarking reports this data in comparison to energy use in similar building types. No localities in the state had previously adopted mandatory audit or benchmarking policies.
  • California also passed legislation concerning energy benchmarking, requiring utilities to maintain energy use data for buildings to which they have provided service for at least a year beginning in 2017 and share this data upon request. Legislation repeals a previous requirement for building owners to disclose energy use information to prospective buyers, lessees and lenders. The bill also included provisions on customer energy efficiency incentives. Another bill addressed energy efficiency education and outreach efforts on workshops, trainings and funding opportunities to women, minority, disable veterans and LGBT businesses or persons as potential grant and loan recipients and contractors.
  • Legislation in Georgia increased the certification requirements for qualified building inspectors to require certification from the Building Officials Association of Georgia in addition to all previous requirements for qualified inspectors.
  • Minnesota legislation requires the commissioner of labor and industry to review model building codes at least every six years, beginning in 2018, and adopt model codes for the state within two years of the release of new editions.
  • A bill in North Carolina revised various provisions on code development, enforcement and outreach. Revisions included defining misconduct by code officials, altering the state Building Council Code membership requirements and creating a residential code committee within the council.
  • Texas legislation adopted the energy efficiency chapter of the 2015 International Residential Code, and identical provisions of the 2015 International Energy Conservation Code, as the state building energy code, effective September 2016. The bill also prohibits the State Energy Conservation Office from adopting subsequent energy code revisions more often than once every six years.
  • Legislation in Washington revised the state’s climate zones by county for building energy code purposes and prohibited any changes to climate zones unless made through statute.

Energy Efficiency in Public Buildings

Energy efficient building

An increasing number of states are adopting energy efficiency mandates for public buildings, and 47 states have efficiency requirements specifically for state-owned or funded public buildings adopted through legislation or executive order. State policies can include percentage-based requirements or adherence to rating systems, such as the U.S. Green Building Council’s Leadership in Energy & Environmental Design (LEED), the American Society of Heating, Refrigerating and Air‑Conditioning Engineers’ (ASHRAE) standards, the Green Building Initiative’s Green Globes and the U.S. Environmental Protection Agency’s Energy Star.

Legislation concerning efficiency in public buildings was enacted in 13 states in 2015: Alabama, California, Connecticut (House Bill 7102, Senate Bill 1501 and Senate Bill 1502), Hawaii (House Bill 500 and House Bill 1509), Montana, Nebraska, Ohio, Oklahoma, Oregon, Rhode Island, South Dakota, Texas, Vermont and Wisconsin.

Notable legislation includes:

  • Legislation in Alabama places responsibility for energy efficiency efforts in state buildings under the Department of Finance and charges the department with developing a statewide maintenance plan for increasing energy efficiency in state buildings.
  • Connecticut legislation authorizes the commissioner of the Department of Energy and Environmental Protection to administer energy efficiency and conservation and renewable energy pilot programs at state agencies to determine the effectiveness of technology, products or processes. State agencies may apply for pilot programs or they may be required by the commissioner. The bill authorizes state agency commissioners to petition for expanded use of a specific technology, product or process if it is found to reduce energy usage and cost or reduce dependence on fossil fuels or greenhouse gas emissions.
  • A bill in Hawaii establishes a collective goal for the University of Hawaii system to be net-zero energy by 2035 and requires the university to complete annual progress reports. Schools and universities are popular state buildings for energy efficiency projects and another Hawaii bill encourages the Board of Education to permit individual schools to assume a greater role in efficiency efforts and electricity use.
  • Omnibus energy legislation in Rhode Island established an efficient buildings fund within the newly-established Rhode Island Infrastructure Bank (see “Financing Efficiency”) to provide technical, administrative and financial assistance to local governments for energy efficiency and renewable energy upgrades to public building and infrastructure. Legislation establishes a loan loss reserve fund to sustain the efficient buildings fund, which is supported through electric and gas demand-side charges.
  • South Dakota, which does not have a statewide building energy code, revised energy efficiency requirements for state buildings by updating standards to reflect more recent versions of the LEED Silver and two globes Green Globes rating systems, relaxing the standards for qualifying facilities and clarifying timelines for determining which rating system may apply to a project.
  • Texas legislation authorized an energy savings performance contracting pilot program that implements efficiency improvements in state-owned buildings that must generate at least 30 percent cost savings, based on the costs of the improvements.
  • A Vermont appropriations bill augmented the State Energy Management Program to allow Efficiency Vermont to provide support for cost-effective efficiency and conservation measures to state buildings and facilities for four years beginning in 2016. The bill provides specific savings targets that must be achieved in fiscal years 2016 and 2017.

Financing Efficiency

Energy savingsStates are using energy efficiency financing strategies to leverage limited budgets, overcome cost barriers, achieve energy savings goals and drive greater investment in the efficiency market. Financing can allow key demographics—such as small businesses and lower-income homeowners—access to capital and many states are encouraging financing strategies such as bonds, loans, credit enhancements, energy savings performance contracts (ESPCs), on-bill financing and repayment, Property Assessed Clean Energy (PACE), energy efficient mortgages and state energy banks.

Legislation was enacted in a number of states, including Alaska, Alabama, Arkansas (House Bill 1493 and Senate Bill 869), California (Senate Bill 83 and Senate Bill 350), Connecticut, Hawaii, Idaho (House Bill 91 and Senate Bill 1024), Kentucky, Maine, Minnesota, Montana, Nevada, New Hampshire, North Carolina, Oregon, Rhode Island, Texas and Virginia (House Bill 1446 and companion Senate Bill 801).

In 2015, a number of states—Alabama, California, Connecticut, Kentucky, New Hampshire, North Carolina, Oregon, Rhode Island, Texas and Virginia—enacted legislation related to PACE financing. PACE programs allow local governments to provide financing for energy efficiency, renewable energy and water efficiency projects that building owners pay back through property tax assessments. While 33 states and Washington, D.C. have enacted PACE legislation, not all states have active programs and many states have suspended or revised their residential programs over concerns expressed by the Federal Housing Finance Authority. More information on recent state activity is below.

Legislation of note includes:

  • Legislation in both Alabama and Kentucky authorized PACE financing for commercial properties or residences with more than five units. Eligible projects in Alabama include energy efficiency and community resilience to storm-related events, such as winds and flooding. Kentucky defines eligible projects to include energy and water efficiency and renewable energy projects.
  • Legislation in Arkansas enabled localities to issue energy efficiency project bonds for ESPCs and permits localities to adopt existing state agency rules for ESPCs. ESPCs allow energy services companies to install energy efficiency measures in buildings and guarantees a savings rate for customers; if the savings are not achieved, the company—not the customer—pays the difference. ESPCs are authorized in all 50 states, Puerto Rico and Washington, D.C.
  • Connecticut legislation authorized the participation of third-party capital providers in commercial PACE programs, allowing entities other than banks to provide loans directly to PACE participants. Connecticut has one of the nation’s largest and most sophisticated PACE programs, which is managed by the first state energy bank established, the Connecticut Green Bank. In 2014, the bank successfully achieved securitization of a portion of its commercial PACE loan portfolio.
  • Hawaii legislation exempted utilities as “pass through” billing and collecting agents for on-bill financing and repayment programs under state laws regulating financial institutions, clarifying that any money collected by utilities should not be considered revenue. On-bill financing and repayment programs give customers access to capital to complete energy efficiency and conservation and renewable energy projects on their property and repay costs over time through monthly charges on their utility bill. Hawaii had previously enacted legislation authorizing on-bill financing.
  • A Maine bill authorizes the issuance of bonds to leverage other private and public funding for the construction of new or retrofitted energy-efficient homes for low-income households headed by senior adults. A small portion of the bonds will also be used to match funds for home repair and weatherization projects for low-income seniors. The act must be submitted as a referendum to voters in November 2016.
  • Nevada legislation requires the energy committee to conduct an interim study on energy efficiency policies in the state and the viability of forming a state green energy bank to finance efficiency and renewable energy projects for residential and commercial buildings.
  • An omnibus energy bill in Rhode Island established a state infrastructure bank, partially from the state’s existing Clean Water Finance Agency, to facilitate energy efficiency and renewable energy projects in the state. The bank will centralize funding and financing initiatives, including the state’s PACE program. The bill also clarified that all residential PACE loans are subordinate to other liens on residential properties and established a PACE loan loss reserve fund.

Additional Legislation

States enacted additional legislation in the 2015 session, including appropriations for specific programs or efforts, technical revisions or updating statutes concerning energy efficiency.

In the coming year, states will continue to explore low-cost approaches to meeting energy needs and promoting economic growth through energy efficiency.

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