Energy Efficiency State Legislative Update: 2016 and 2017

Jocelyn Durkay and Megan Cleveland 3/15/2018

Introduction

Energy efficient insulation being installed.In the past few years, legislatures in nearly all states have considered a range of energy efficiency policies, ultimately enacting legislation on:

  • Building efficiency or reporting requirements.
  • Statewide efficiency targets or incentives.
  • Sales tax holidays for efficient appliances.
  • Education and outreach.
  • Financing and funding initiatives. 

While states have made significant progress in increasing energy efficiency, research indicates that there is still room to grow. A recent federal analysis found the additional cost-effective energy efficiency potential over the next 20 years is equivalent to 16 percent of electricity sales by 2035.

This opportunity for expansion is important for states, as energy efficiency is an economic driver. A 2017 report from the U.S. Department of Energy identified 2.2 million workers across the construction, manufacturing, wholesale trade, and professional and business service industries that spend some or all of their time working with energy-efficient technologies and services. States have found that investment in cost-effective energy efficiency yields economic development and workforce benefits, in addition to energy savings.

See NCSL’s Energy and Environmental Legislation Database for a complete listing of bills or NCSL’s publications database for previous legislative updates.

State Efficiency Policies

House under construction.Policymakers have encouraged statewide initiatives to streamline efficiency efforts, target specific sectors or demographics and encourage economic investments. In 2016, California, Illinois, Michigan, Minnesota, New Jersey, Oklahoma, Oregon, Utah, Virginia and Wisconsin adopted comprehensive efficiency policies. In 2017, these states also acted: Arkansas, California, Iowa, Maryland, Montana, Nevada, New Hampshire, New York, Vermont, Virginia, Washington and West Virginia.  

Examples of enacted bills include:
  • Arkansas House Bill 1421 (2017): Legislation revised the opt-out criteria from energy conservation programs for non-residential business customers, including the addition of public higher-education institutions.
  • California has enacted legislation in consecutive years to broadly encourage efficiency initiatives:
    • Assembly Bill 1330 (2016): Required the Public Utilities Commission to ensure there are sufficient funds available for electric and gas utilities to meet targets for statewide energy efficiency savings and demand reduction, which aim to achieve a cumulative doubling of statewide energy efficiency savings by 2030.
    • Senate Bill 338 (2017): Adopted new requirements for the Integrated Resource Planning process to include energy technology and energy efficiency tools be considered in reliability and energy planning needs.
  • Illinois Senate Bill 2814 (2016): The state enacted an energy reform package during a 2016 veto session that includes financial support for two nuclear plants, along with changes to the state renewable portfolio standard, an energy efficiency program and $25 million per year in low-income energy incentives. The energy efficiency provisions in the Future Energy Jobs Bill include efficiency standards for the state’s two largest utilities, incentives for efficiency improvements for low-income housing, a large customer (10 megawatts or greater) opt-out or self-directed provision, spending caps for utility investments in efficiency, an expansion of on-bill financing programs, local government energy efficiency and conservation requirements, and performance-based incentives for utilities to meet efficiency targets.
  • Michigan Senate Bill 438 (2016): This energy omnibus package includes a number of provisions, including a measure to retain the state’s energy optimization standard at 1 percent annual efficiency improvements through 2021 for electric utilities under the new name of an Energy Waste Reduction Program. Beginning in 2022, utilities will file two-year energy waste reduction plans with the Public Service Commission. The legislation also establishes a residential energy improvement program and allows for financing repayment to appear on a customer’s utility bill. Additionally, the bill included a voluntary target of 35 percent of electricity sales to derive from renewables and efficiency by 2025. Senate Bill 438 also encourages the Public Service Commission to promote demand response programs and regulated utilities to submit demand response programs to the commission.
  • Maryland House Bill 514 and Senate Bill 184 (2017): Require electric utilities to achieve 2 percent annual energy savings for the years of 2018 through 2023 (compared to 2016 levels). Energy savings should be cost-effective, using a total resource cost test as outlined in the bills. The Public Service Commission has the authority to determine whether these requirements are continued or modified in 2024 through 2026 years.
  • Montana Senate Joint Resolution 31 (2017): Creates a study on utility decoupling—a process that separates utility profits from total electricity or gas sales, eliminating the financial disincentive for utilities to invest in efficiency. As efficiency decreases sales, it can reduce utility profits in states without decoupling. 
  • New Hampshire House Bill 352 (2017): Changed the name of the state Energy Efficiency Fund to the Energy Fund. Previously, the fund received capital from the state’s demand response participation; legislation now allows utility and PUC program funds to be contributed. Funds can now be directed to renewable energy projects or contracts, in addition to efficiency investments.
  • New Jersey Senate Bill 1969 (2016): The bill requires that the state Clean Energy Program's Residential New Construction incentives, offered by the Board of Public Utilities, be made available statewide. These incentives provide builders with cash rebates for houses and multi-family homes that meet specified energy efficiency ratings. 

Building Codes and Appliance Standards

Artist rendering of building showing energy efficiency.States can update or strengthen building energy codes to help owners and renters realize the economic and comfort benefits of improved heating and cooling systems, insulation and ventilation. Lowering building energy consumption can decrease operating costs, reduce emissions and energy demand, and have payback periods as short as two or three years. Currently, 43 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.

Recent legislative action includes:
  • Arizona House Bill 2584 (2016): Amends tax incentives for data centers to include newly constructed facilities of a certain size that meet Energy Star, Green Globes, LEED or equivalent standards.
  • Vermont House Bill 411 (2017): The state adopted federal appliance and lighting efficiency standards in state statute, to the effect that any federal changes would be maintained at the state level.
  • Virginia Senate Bill 1018 (2017): Extended the annual four-day sales tax holiday for purchases of certain Energy Star-qualified products through 2022. 

States can also “lead by example” in adopting energy efficiency mandates for public buildings, such as state-owned buildings or specific facilities, like schools. 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’ standards, the Green Building Initiative’s Green Globes and the U.S. Environmental Protection Agency’s Energy Star.

Enacted legislation includes:

  • Hawaii House Bill 794 (2017): Adopted legislation to assist the University of Hawaii’s net-zero energy goal, creating a revolving loan fund for energy efficiency investments and requiring the university to submit annual reports on use of the fund.
  • New York Assembly Bill 5991 (2016): Legislation establishes a school energy efficiency collaborative program under the guidance of the New York State Energy and Research Development Authority to serve as a clearinghouse for schools interested in installing energy efficiency technologies.
  • Rhode Island House Bill 5427 and Senate Bill 952 (2017): These companion bills expand the state’s Green Building Act to include public real property, update LEED and U.S. Green Building Council standards, require state buildings to meet certain standards and establish an annual reporting requirement.
Additional legislation was enacted in:
  • 2016: Connecticut, Florida, Illinois, Maryland, Mississippi, New Jersey, North Carolina and Utah.
  • 2017: Arizona, Arkansas, California, Florida, North Carolina, Oregon, Vermont, Virginia, West Virginia and Wisconsin.

Energy Efficiency Financing

A bank sign on the outside of a building.Financing for energy efficiency can allow certain demographics—such as small businesses and lower-income homeowners—access to capital. 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. States consider a variety of energy efficiency financing strategies to leverage limited budgets, overcome cost barriers, achieve energy savings goals and drive greater investment in the efficiency market.

In 2016, legislation on energy efficiency financing was enacted in California, Colorado, Connecticut, Louisiana, Maryland, Massachusetts, Michigan, Nebraska and South Dakota.

In 2017, legislation was enacted in Alaska, California, Colorado, Connecticut, Illinois, Kentucky, Louisiana, Maryland, Michigan, Minnesota, Mississippi, Nebraska, Nevada, New York, North Dakota, Oregon, Rhode Island, Texas, Utah, Virginia and Wisconsin.

Recent enactments include:
  • Alaska House Bill 80 (2017): Legislation enabled commercial Property Assessed Clean Energy (PACE) financing.
  • California enacted three bills concerning residential PACE.
    • Assembly Bill 2693 (2016): Established a statewide consumer protection framework for residential PACE financing. The bill permits property owners to cancel their PACE contracts within three business days. Prior to signing any contractual paperwork, property owners must be provided with a document with financing estimates, similar to federal mortgage lending practices. The bill also restricts parties from declaring specific monetary or percentage estimates on property value changes.
    • Enacted in 2017, Assembly Bill 1284 requires PACE program administrators to make good faith determinations of a customer’s ability to repay financing before approving an assessment contract. The bill brings PACE program administrators under similar oversight as finance lenders and brokers, establishes new licensing requirements. The Department of Business Oversight would begin regulation of PACE providers, making this the first state to regulate the industry.
    • Senate Bill 242 (2017): This legislation builds on consumer protection provisions from 2016. Among its provisions, the bill requires program administrators to orally relay the contract terms to customers on a recorded call and ensure that homeowners understand that they repay financing through property tax bills. The bill also mandates that administrators offer this information in languages other than English. Legislation extended the three-day right to cancel to contractors (not just to a PACE contract) and prohibits any “kickbacks” or incentives paid to contractors for PACE referrals. Additionally, program administrators must report twice a year on the number and dollar amount of assessments funded, project and customer data, and the number of defaults and missed payments.
  • Michigan House Bill 6036 (2016):  Legislation authorizes localities to use tax-exempt lease-purchase agreements to acquire or finance energy conservation improvements through their general funds or utility bill savings. Agreements can occur as installment contracts, lease-purchase agreements or tax-limited obligation notes. Financing cannot exceed 20 years or the useful life of the improvement. The bill establishes reporting requirements for localities to the Public Service Commission on project data.
  • Mississippi Senate Bill 2402 (2017): Authorizes the Division of Energy of the Mississippi Development Authority to assemble a list of prequalified energy services providers for energy savings performance contract projects. Public sector entities that enter energy performance contracts or shared-savings contracts must report energy use or consumption biannually to the division.
  • Nevada Senate Bill 407 (2017): Established the Nevada Clean Energy Fund, which operates as a green bank and seeks to increase the speed and volume of financing available for clean energy projects.
  • New York Assembly Bill 7394 and Senate Bill 5990A (2017): These companion bills permit the use of private capital for commercial PACE programs. 
  • Oregon House Bill 2132 (2017): Legislation revised projects eligible for commercial PACE assessments to include energy storage, smart EV charging stations and water efficiency projects as well as renewable energy, energy efficiency and seismic upgrades.

Education, Outreach and Economic Development

Energy efficient light bulb.Education and outreach are crucial to a policy or program’s success, and legislatures enacted legislation working to ensure programs can be successfully implemented and reach the appropriate audience. Efficiency initiatives can also have a strong impact on state economies and legislatures are designing programs to have a positive impact in their communities.

Examples of enacted legislation in the 2016 and 2017 years include:
  • California Senate Bill 110 (2017): This bill established the Clean Energy Job Creation Program, which is designed to fund specified projects in public schools and community colleges that create jobs in California that improve energy efficiency and expand clean energy generation.
  • Illinois Senate Bill 2814 (The Future Energy Jobs Act, 2016): see State Efficiency Policies.
  • Illinois Senate 518 (2017): This bill annually appropriates funds from the Department of Commerce and Economic Opportunity for education and training grants on renewable energy and energy efficiency technology to the Illinois Green Economy Network.
  • Rhode Island Senate Bill 2326 (2016): Requests that the Department of Labor and Training include green industries in the Real Jobs Rhode Island Program. 
  • Virginia House Bill 1565 (2017): The state authorized localities to create green development zones, which provide tax incentives to businesses operating in energy-efficient buildings or businesses that produce energy efficient or environmentally friendly products.  

Additionally, bills were enacted in California, Rhode Island and Vermont in 2016, and Alabama, Maryland, New Jersey and New York in 2017.

Additional Legislation

States enacted legislation in the 2016 and 2017 sessions that fall into categories other than those listed above. Examples of additional areas include appropriations for specific programs or efforts, technical revisions or updating statutes concerning energy efficiency.

  • Efficiency for Lower Income Brackets
    • Maine House Paper 1061 (2016): Authorizes utilities, upon approval by the Public Utilities Commission, to develop and implement a program to increase customer access to efficient electric heat pumps. Utility programs must target low-income customers and other types customers including renters and small businesses. The bill also allows utilities to lease heat pumps and customers to purchase heat pumps from third parties.  
    • Nevada Assembly Bill 223 (2017): Includes new requirements for low-income customer efficiency programs in utility Integrated Resource Planning filings, requiring that at least 5 percent of efficiency proposals are directed to these customers. Efficiency proposals as a whole—not each specific offering—must remain cost-effective.
  • Consumer Protection
    • California enacted at least three bills in 2016 and 2017 establishing consumer protection provisions for PACE Financing—Assembly Bill 2693 (2016), Assembly Bill 1284 (2017) and Senate Bill 242 (2017): see Energy Efficiency Financing.
    • Minnesota Senate File 1456 (2017): Established the Residential PACE Consumer Protection Legislation Task Force. Among other requirements, the task force is directed to develop recommendations for consumer protection legislation for PACE financing programs for single-family residential dwellings. The task force was required to submit a report to the legislature by Jan. 15, 2018, after which the task force would be dissolved. The bill requires that, until consumer protection legislation is established, residential PACE financing programs are suspended.   
  • Energy efficiency in schools continues to be a topic of interests to states, with measures enacted in Hawaii and Illinois in 2016, and in Hawaii, Michigan and West Virginia in 2017. Georgia and Tennessee adopted resolutions related to energy efficiency in schools in 2016 and 2017, respectively.

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

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