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

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. 
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 mounting concerns over energy security and independence as 

well as air pollution and global climate change. The decisions 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, 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 these challenges.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 reliability, and help reduce air pollutants and greenhouse gases. 

Despite these benefits and the success of energy efficiency programs in some regions of the country, energy 

efficiency remains critically underutilized in the nation’s 

energy portfolio.3 Now we simultaneously face the challenges 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 efficiency 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, utilities, regulators, states, consumer advocates, energy 

service companies (ESCOs), and others. It will require 

education on the opportunities, review of existing policies, identification of barriers and their solutions, assessment of new technologies, and modification and adoption 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
deliver these programs, and examine policies governing 

energy companies to ensure that these policies facilitate—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 commitments 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 representing 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 committing to aggressively pursue energy efficiency opportunities 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 organization 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 collaborative 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. 

ES-2 National Action Plan for Energy Efficiency 
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 reliability. High fuel prices also contribute to higher electricity 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 expanded 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 households 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 competitiveness 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 implemented to limit the emission of air pollutants, such as sulfur dioxide (SO2), 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 environmental 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 significant 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 domestic infrastructure to natural disasters. 

Energy Efficiency Can Be a Beneficial 

Resource in Our Energy Systems 

Greater investment in energy efficiency can help us tackle 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 delivering 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
Benefits of Energy Efficiency 

Lower energy bills, greater customer control, and 

greater customer satisfaction. Well-designed energy 

efficiency programs can provide opportunities for customers 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, welldesigned energy efficiency programs are saving energy 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 integrated 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 programs 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 savings on the order of 1 percent of electricity and natural 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 energy 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 employment and local economies. Local investments in energy 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 consumers to energy price disruptions from natural disasters and attacks on domestic and international energy 

supplies and infrastructure. In addition, energy efficiency 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 brownouts or black-outs, which can have large adverse 

economic consequences. 

ES-4 National Action Plan for Energy Efficiency 
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 compared 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 deliver 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 billion, 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 (CO2), 50,000 tons of SO2, and 

40,000 tons of NOx annually.

10 These significant economic and environmental benefits can be achieved relatively 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 substantial underinvestment in energy efficiency as a nation. 

An important indicator of this underinvestment is that 

the level of funding across the country for organized efficiency programs is currently less than $2 billion per year 

while it would require about 4 times today’s funding levels 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 natural gas utilities. These barriers include: 

• Market barriers, such as the well-known “splitincentive” 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 leadership programs, organized energy efficiency programs 

To create a sustainable, aggressive national commitment to energy efficiency ES-5
provide an important opportunity to deliver greater 

energy efficiency in the homes, buildings, and facilities 

that already exist today and that will consume the majority 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 utility commissioners, state air and energy agencies, energy 

service providers, energy consumers, and energy efficiency 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 commitment 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 advocates, 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 utilities in many parts of the country. The following recommendations are based on the policies, practices, and 

efforts of leading organizations across the country. For 

each recommendation, a number of options are available 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 compared to new supply options, regardless of its demonstrated 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 savings, capacity savings, potential reductions of air pollutants 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 establish 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 
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 policies 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 investments, 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 customer class within a planning horizon); examining the 

role for cutting-edge initiatives and technologies; establishing the cost of supply-side options versus energy efficiency; 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 opportunities for energy efficiency. Experience shows that energy efficiency programs help customers save money and 

contribute to lower cost energy systems. But these benefits are not fully documented nor recognized by customers, utilities, regulators, or policy-makers. More 

effort is needed to establish the business case for energy 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 customers’ 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 necessary to educate key stakeholders that although energy 

efficiency can be an important low-cost resource to integrate 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 programs can have in concert with other energy efficiency 

policies such as building codes, appliance standards, and 

tax incentives. 

Promote sufficient, timely, and stable program funding to deliver energy efficiency where cost-effective. 

Energy efficiency programs require consistent and longterm 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 stakeholder interests. It is important to ensure that the efficiency programs’ providers have sufficient long-term 

funding to recover program costs and implement the 

energy efficiency measures that have been demonstrated 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 efficiency 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 energysaving measures might cost less. Within the existing regulatory processes, utilities, regulators, and stakeholders 

have a number of opportunities to create the incentives 

for energy efficiency investments by utilities and customers. A variety of mechanisms have already been 

used. For example, parties can decide to provide incentives for energy efficiency similar to utility incentives for 

new infrastructure investments, provide rewards for prudent 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
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 savings, 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, costeffective 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, utility, 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, appliance 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 
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 variety 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 utility, 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 available 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
Table ES-1. Members of the National Action Plan for Energy Efficiency 

Co-Chairs 

Diane Munns Member Iowa Utilities Board 

President 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 Great River Energy 

Member Services 

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, Southern Company 

Renewables, and Demand Side Planning 

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- Consumers’ Counsel Office of the Ohio Consumers’ Counsel 

Ostrander 

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 
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 Director, Energy and Environmental Affairs Johnson Controls 

Paumgartten 

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) Counsel Steel Manufacturers Association 

Brew 

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 Association 

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
Notes 

1 Energy efficiency refers to using less energy to pro- See highlights of some of these programs in Chapter 

vide the same or improved level of service to the 6: Energy Efficiency Program Best Practices, Tables 

energy consumer in an economically efficient way. 6-1 and 6-2. 

The term energy efficiency as used here includes 10 These economic and environmental savings estiusing less energy at any time, including at times of mates are extrapolations of the results from regionpeak demand through demand response and peak al program to a national scope. Actual savings at the 

shaving efforts. regional level vary based on a number of factors. For 

2 Addressing transportation-related energy use is also these estimates, avoided capacity value is based on 

an important challenge as energy demand in this peak load reductions de-rated for reductions that do 

sector continues to increase and oil prices hit histor­ not result in savings of capital investments. 

ical highs. However, transportation issues are out- Emissions savings are based on a marginal on-peak 

side the scope of this effort, which is focused only generation fuel of natural gas and marginal offon electricity and natural gas systems. peak fuel of coal; with the on-peak period capacity 

3 This effort is focused on energy efficiency for regu­ requirement double that of the annual average. 

lated energy forms. Energy efficiency for unregulat- These assumptions vary by region based upon situaed energy forms, such as fuel oil for example, is tion-specific variables. Reductions in capped emisclosely related in terms of actions in buildings, but is sions might reduce the cost of compliance. 

quite different in terms of how policy can promote 11 This estimate of the funding required assumes 2 

investments. percent of revenues across electric utilities and 0.5 

4 A utility is broadly defined as an organization that percent across gas utilities. The estimate also 

delivers electric and gas utility services to end users, assumes that energy efficiency is delivered at a total 

including, but not limited to, investor-owned, pub- cost (utility and participant) of $0.04 per kWh and 

licly-owned, cooperatively-owned, and third-party $3 per million British thermal units (MMBtu), which 

energy efficiency utilities. are higher than the costs of many of today’s programs. 

5 Many energy efficiency programs have an average 12 This estimate is provided as an indicator of underinlife cycle cost of $0.03/kilowatt-hour (kWh) saved, vestment and is not intended to establish a national 

which is 50 to 75 percent of the typical cost of new funding target. Appropriate funding levels for propower sources (ACEEE, 2004; EIA, 2006). The cost grams should be established at the regional, state, 

of energy efficiency programs varies by program and or utility level. In addition, energy efficiency investcan include higher cost programs and options with ments by customers, businesses, industry, and govlower costs to a utility such as modifying rate designs. ernment also contribute to the larger economic and 

6 See Chapter 6: Energy Efficiency Program Best environment benefits of energy efficiency. 

Practices for more information on leading programs. 13 One example of energy efficiency’s ability to meet 

7 Data refer to EIA 2006 new power costs and gas load growth is the Northwest Power Planning 

prices in 2015 compared to electric and gas pro- Council’s Fifth Power Plan which uses energy congram costs based on leading energy efficiency pro­ servation and efficiency to meet a targeted 700 MW 

grams, many of which are discussed in Chapter 6: of forecasted capacity between 2005 and 2009 

Energy Efficiency Program Best Practices. (NWPCC, 2005). 

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 average program spending levels by utilities or other 

program administrators, with conservatively high 

numbers for the cost of energy efficiency programs. 

ES-12 National Action Plan for Energy Efficiency 
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. <http://www.nwcouncil.org/ 

energy/powerplan/default.htm> 

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
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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