State Energy Efficiency Policy Database

Texas law requires all electric transmission and distribution utilities (TDUs) to meet energy efficiency goals — currently, 20 percent of load growth (see information below on Energy Efficiency Resource Standards for more information). To meet these goals, utilities administer incentive programs. Retail electric providers and energy efficiency service providers implement the programs. All programs are designed to reduce system peak demand, energy consumption, and/or energy costs and are available to customers in all customer classes. Texas electric utilities reported approximately efficiency program savings of 750,628 MWh in 2009.

Reported budgets for energy efficiency programs for 2011, and electricity savings for 2010, are in the State Spending and Savings Tables.

The Texas LoanStar Program offers low-interest loans for Energy Cost Reduction Measures.   Funds can be used for retrofitting existing equipment or, in the case of new construction, to finance the difference between standard and high efficiency equipment.  More information on the program can be found in the ACEEE report, Energy Efficiency Financing Programs.

In Texas, for-profit customers that take electric service at the transmission level are not allowed to participate in utilities' energy efficiency programming and therefore do not pay for it.  Instead industrial customers develop their own energy efficiency plans if desired and work with third-party providers to implement and finance energy efficiency investments.  There is no measurement or monitoring of the investments these large customers do or do not make.  More information on large customer self-direct programs can be found in the ACEEE report, Follow the Leaders: Improving Large Customer Self-Direct Programs.

Links:

• Texas Energy Efficiency
• Database of State Incentives for Renewables and Efficiency

Summary: 20% Incremental Load Growth in 2011 (equivalent to ~0.10% annual savings); 25% in 2012, 30% in 2013+

In 1999, Texas became the first state to establish an energy efficiency resource standard, requiring electric utilities to offset 10% of load growth through end-use energy efficiency (Texas Senate Bill 7). Demand growth is the average growth of the five previous weather adjusted peak demands for each utility. In 2007, after several years of meeting this goal at low costs, the legislature increased the standard to 15% of load growth by December 31, 2008 and 20% of load growth by December 31, 2009 (Texas House Bill 3693).  The legislation also required utilities to submit energy savings goals. The Public Utility Commission of Texas (PUCT) approved these rules in March 2008.

While the 2007 legislation required utilities to submit GWh savings goals to ensure they did not overly focus on load management, the PUCT determined that utilities could convert their demand savings goals into corresponding energy savings goals. In practice, however, the energy savings (MWh) resulting from Texas utility demand response and energy efficiency programs are about twice the amount of the energy saving goals.

In 2010, the PUCT approved Substantive Rule § 25.181, which increased the goals from 20% of electric demand growth to 25% growth in demand in 2012 and 30% in 2013 and beyond. The rule also establishes customer cost caps to contain costs. The cost caps may not affect every utility, but some have already hit the caps, which are inhibiting investment in cost-effective energy efficiency programs.

In the 2011 legislative session, Texas adopted Senate Bill 1125, which amends the EERS policy by requiring utilities to eventually achieve savings of 0.4% of each company’s peak demand. As a result, utilities with declining or rapidly growing load growth will have more predictable and consistent goals than those that were set based on load growth. The Bill also added focus on reducing demand in the winter, which is more likely to result in real energy efficiency savings than summer demand response programs, which simply shift load and reduce peak demand. The Bill does not remove the cost caps adopted in 2010.

Texas has no natural gas EERS.

Links:

• Authority: Senate Bill 7, May 1999 (subsequently amended)
• Authority: House Bill 3693, May 2007
• Authority: Substantive Rule § 25.181
• Authority: Senate Bill 1125, June 2011

All investor-owned utilities have a shared benefit incentive in place. When a utility exceeds its demand reduction goal within the prescribed cost limit it is awarded a performance bonus. The performance bonus is based on the utility’s energy efficiency achievements for programs implemented in the previous year (PUCT Substantive Rule §25.181).

A utility that exceeds its demand reduction goal receives a bonus equal to 1% of the net benefits for every 2% that the utility exceeds its goal. The maximum bonus is equal to 20% of the utility’s program costs. Additionally, a utility that meets at least 120% of its demand reduction goal with at least 10% of its savings achieved through Hard-to-Reach programs (which benefit customers with an annual household income at or below 200% of the federal poverty guidelines) can receive an additional bonus equal to 10% of the regular performance bonus.

The energy efficiency rule proposed in 2010 also includes provisions to increase the bonus given to utilities for reaching the energy savings goals. The new rule would increase the 20% maximum bonus to 30% for 2012-2013 and 40% for 2014-2015.