New Jersey took an exciting step toward a cleaner, brighter future last May when it passed the Clean Energy Act, which outlined the pathway for the state to transition its economy to a carbon-free future. NRDC, Environmental Defense Fund, and the New Jersey League of Conservation Voters joined together in providing recommendations to the state on how to design an energy efficiency framework capable of achieving the significant scale up in deployment required by the Act, in order to effectively deliver lower electricity bills to New Jerseyans while reducing pollution and creating good local jobs.

To do so, the New Jersey Board of Public Utilities (BPU) should assume its natural role in program oversight, as well as working to coordinate programs designed and administered by the state’s utilities. To complement this program structure, the state should remove disincentives from energy efficiency projects by “decoupling” utilities’ revenue from the amount of energy sold, and instead reward energy saving performance.

Fulfilling the Clean Energy Act’s efficiency mandates

The BPU—the state agency charged with implementing the mandates of the Clean Energy Act—should seize the opportunity to design a framework that will make energy efficiency the cornerstone of Clean Energy Act implementation. To do so, BPU needs to leverage the significant resources of the state’s utilities, by making them responsible for implementing efficiency programs to achieve the targets set forth in the Act. This division of responsibility will allow BPU to use its expertise to provide oversight and coordination of the utilities’ administration of energy saving programs to channel private sector investment to deliver building improvements like more efficient heating and cooling, lighting, and insulation to New Jersey’s homes and businesses. Our written comments echo a chorus of stakeholder voices including other environmental groups, energy efficiency providers, business coalitions, and the utilities that all called for a coordinated, inclusive approach to efficiency improvements at a public meeting in early February.

A well-designed energy efficiency framework will make the other components of New Jersey’s clean energy plan—like impressive amounts of solar and offshore wind energy—more affordable for everyone, while making the electricity grid run more smoothly and cutting greenhouse gas emissions.

Achieving cost-effective energy efficiency for all

The Clean Energy Act specifically instructs electric utilities to achieve an annual energy savings target of two percent and gas utilities to achieve an annual savings of 0.75 percent. Our comments outlined the following design elements as priorities to achieve and surpass these minimums while ensuring that all cost-effective energy efficiency is procured:

The Board of Public Utilities should oversee efficiency programs and provide guidance and coordination as it delegates program design and implementation to utility companies. New Jersey should embrace revenue decoupling paired with carefully designed incentive structures and rates that are based on actual achievement of energy efficiency improvements to encourage maximum savings. The energy efficiency program should value the wide range of benefits from energy efficiency projects, including better grid performance, avoided greenhouse gas emissions and health and quality of life improvements in low-income households in addition to volumetric energy savings.

With its depth of expertise and statewide perspective, BPU is well positioned to guide the state’s utilities as they work to meet their mandated energy savings. And in delegating program design and implementation to the utilities, the state would wisely capitalize on existing customer relationships and staffing resources, as well as individualized knowledge of local needs in different utility service territories.

Customers would benefit the most if these goals are achieved as efficiently as possible—and to encourage this outcome, the state has an opportunity to match the achievement of legal mandates with performance-based incentives (and first, the removal of financial disincentives to energy efficiency). New Jersey should follow the lead of all top-ten energy efficiency states in separating utilities’ profits from how much energy they sell (this practice is known as decoupling)—and instead design rates that better align interests, meaning that what saves the customer money and protects the environment also makes the best business sense for utilities.

Finally, the energy efficiency mandates should be met in a manner that prioritizes the overall health and welfare of New Jersey’s citizens. The BPU shouldn’t forget that the ultimate purpose of the Clean Energy Act is to improve people’s lives by reducing dangerous pollution that causes health problems and climate change, while channeling new investment to create economic prosperity. To uphold this purpose, the BPU should account for all of energy efficiency’s societal benefits when determining what particular programs the utilities should invest in. The clearest benefit of energy efficiency is that customers don’t have to pay for wasted, unneeded energy. But societal benefits also include “grid benefits” like reduced transmission and distribution costs and environmental and health benefits from decreased emissions.

The costs of dirty and wasted energy stack up to hurt everyone, but lower income families that spend higher portions of their income on energy and may live in leaky, poorly-insulated homes are often the most affected. That’s why the BPU must also prioritize developing a range of programs to serve all New Jerseyans, such as initiatives to improve the efficiency of multi-family affordable housing.

The BPU has the opportunity to steer New Jersey down a path that evaluates cost-effectiveness of energy efficiency program portfolios through a broad, inclusive lens—building on the groundwork of the Clean Energy Act to make New Jersey an energy leader in theory and in practice.

NRDC Expert Blog by Ada Statler

Republished with permission from the Natural Resources Defense Council's expert blogs.