STATE ELECTRIC

EFFICIENCY REGULATORY 

FRAMEWORKS

IEI Report

December 2014

www.edisonfoundation.net 1

STATE ELECTRIC EFFICIENCY REGULATORY FRAMEWORKS

This annual update summarizes ongoing and recent policy developments that support utility investments 

in electric efficiency programs, including program direct cost recovery, fixed cost recovery, and performance incentives for electric utilities on a state-by-state basis. 

It is widely recognized that supportive regulatory frameworks are key to expanding the electric power 

industry’s already large commitment to energy efficiency even further. Through them, the power industry can fully and seamlessly integrate electric efficiency programs into their long-term financial and 

system planning. And, through these state regulatory frameworks, the nation’s homes and businesses 

are able to continue to benefit from electric efficiency today and into the future. 

Since the last IEI update (July 2013), several states have updated their existing regulatory frameworks 

for energy efficiency. One state – Mississippi – has significantly expanded the business environment to 

support investments in efficiency programs by electric utilities.

• In total, 32 states have approved fixed cost recovery mechanisms – 14 with revenue decoupling and 

19 with lost revenue adjustment mechanisms. This includes two states – Connecticut and Ohio – 

with both revenue decoupling and lost revenue adjustment mechanisms.

• Nineteen states have lost revenue adjustment mechanisms, including Mississippi, which received approval recently. 

• Fourteen states have electric decoupling mechanisms, including Wisconsin and Connecticut, 

which recently updated their existing decoupling mechanisms. One additional state – Delaware – is evaluating revenue decoupling, but currently has no specific mechanism proposed 

for regulatory approval.

• In total, 29 states currently have performance incentives in place. This is up from 28 states in 2013. 

Mississippi recently approved performance incentives, and California, Colorado, Georgia, New 

Hampshire, and New Mexico have all updated their existing mechanisms. An additional two states 

– Montana and West Virginia – are evaluating performance incentives.

• Georgia’s lost revenue status has been dropped and Virginia’s pending lost revenue status has been 

dropped.

Table 1. Summary of State Regulatory Frameworks: December 2014*

Summary of State Regulatory Frameworks: December 2014*

Energy Efficiency Incentive Mechanism Number 

of States Pending

Fixed-Cost Recovery 

Mechanisms

Lost Revenue Recovery 19 0

Revenue Decoupling 14 1

Performance Incentives 29 2

* To avoid double-counting, Connecticut and Ohio are included as approved decoupling states.
2 www.edisonfoundation.net

Figure 1. U.S. Electric Efficiency Budgets (2007-2013) and 2025 Forecast

Source: IEI, Summary of Electric Utility Customer-Funded Electric Efficiency Savings, Expenditures,

and Budgets, March 2014. 

Spending and budgets for customer-funded, utility electric efficiency programs continue to grow, due 

in part to state policies that allow utilities to pursue efficiency as a sustainable business as well as 

state mandates for energy efficiency. In fact, according to a recent IEI report, utility company electric 

efficiency budgets in 2013 totaled $7 billion, a 30 percent increase above 2010 levels. By 2025, IEI 

predicts that electric efficiency budgets will exceed $14 billion. The remainder of this report provides 

detailed state-by-state information on regulatory decisions that support electric efficiency, current as of

December 2014.

Aligning Utility Incentives with Investments in Energy Efficiency

It is well understood that aligning incentives for utilities to treat electric efficiency programs as equivalent to supply-side 

investments from a financial perspective, three regulatory mechanisms are critical: direct cost recovery, fixed cost recovery, 

and performance incentives. 

• Direct Cost Recovery refers to regulator-approved mechanisms for the recovery of costs related to the administration 

of the efficiency program by the administrator, implementation costs such as marketing, and the actual cost of product 

rebates and mid-stream product buy-downs. Such costs are recovered through rate cases, system benefits charges, and 

tariff rider/surcharges. 

• Fixed Cost Recovery refers to decoupling and lost revenue adjustment mechanisms that assist the utility in recovering the 

marginal revenue associated with fixed operating costs. Rate making practices tie the recovery of fixed costs to volumetric 

consumption charges with rates set based on an assumed level of energy sales. The purpose of electric efficiency programs 

is to reduce the consumption of electricity; decoupling and lost revenue adjustment mechanisms allow for timely recovery 

of fixed costs. 

• Performance Incentives are mechanisms that reward utilities for reaching certain electric efficiency program goals, and 

impose a penalty for performance below the agreed-upon goals. Performance incentives allow utilities to earn a return 

on their investment in electric efficiency, typically similar to the return on supply-side investments.
DECEMBER 2014

www.edisonfoundation.net 3

State

Direct Cost Recovery Fixed Cost Recovery

Performance 

Rate Case Incentives

System 

Benefits 

Charge

Tariff Rider/ 

Surcharge Decoupling

Lost Revenue 

Adjustment 

Mechanism

Alabama Yes Yes Yes Yes

Alaska

Arizona Yes Yes Yes Yes

Arkansas Yes Yes Yes

California Yes Yes Yes Yes Yes

Colorado Yes Yes Yes Yes

Connecticut Yes Yes Yes Yes

Delaware Yes Yes Pending

District of 

Columbia Yes Yes Yes Yes

Florida Yes

Georgia Yes Yes Yes

Hawaii Yes Yes Yes Yes

Idaho Yes Yes

Illinois Yes

Indiana Yes Yes Yes

Iowa Yes

Kansas Yes Yes

Kentucky Yes Yes Yes

Louisiana Yes Yes Yes

Maine Yes

Maryland Yes Yes

Massachusetts Yes Yes Yes

Michigan Yes Yes

Minnesota Yes Yes Yes

Mississippi Yes Yes Yes Yes

Missouri Yes Yes Yes

Montana Yes Yes Yes Pending

Nebraska

Nevada Yes Yes

New Hampshire Yes Yes Yes

New Jersey Yes Yes Yes

State Regulatory Framework Summary Table
IEI STATE ELECTRIC EFFICIENCY REGULATORY FRAMEWORKS

4 www.edisonfoundation.net

State

Direct Cost Recovery Fixed Cost Recovery

Performance 

Rate Case Incentives

System 

Benefits 

Charge

Tariff Rider/ 

Surcharge Decoupling

Lost Revenue 

Adjustment 

Mechanism

New Mexico Yes Yes Yes

New York Yes Yes Yes

North Carolina Yes Yes Yes

North Dakota

Ohio Yes Yes Yes Yes

Oklahoma Yes Yes Yes

Oregon Yes Yes

Pennsylvania Yes Yes

Rhode Island Yes Yes Yes

South Carolina Yes Yes Yes

South Dakota Yes Yes Yes

Tennessee

Texas Yes Yes Yes

Utah Yes Yes

Vermont Yes Yes Yes

Virginia Yes

Washington Yes Yes Yes

West Virginia Pending

Wisconsin Yes Yes Yes Yes

Wyoming Yes Yes 

Please note that although information in this document was compiled from primary sources, readers are encouraged 

to verify the most recent developments by contacting the appropriate commission or regulatory agency. 

For inquiries, please contact Adam Cooper at acooper@edisonfoundation.net. For further information, please visit www.

edisonfoundation.net.

Summary of State Regulatory Frameworks: December 2014*

Energy Efficiency Incentive Mechanism Number 

of States Pending

Fixed-Cost Recovery 

Mechanisms

Lost Revenue Recovery 19 0

Revenue Decoupling 14 1

Performance Incentives 29 2

* To avoid double-counting, Connecticut and Ohio are included as approved decoupling states.
DECEMBER 2014

www.edisonfoundation.net 5

State Lost Revenue and Decoupling Description Status Codes, Orders 

& Resources

Alabama (LR) Lost revenue due to efficiency programs can be recovered 

through a rate rider. Rates can also be set annually to allow for 

recovery of energy efficiency, through a Rate RSE.

Approved Docket 31045

Arizona (LR) In May 2012, a lost-fixed-cost recovery (LFCR) was approved, 

as part of a rate case filed by APS. Lost revenues can be 

recovered starting July 1, 2012. Utilities can recover a portion 

of transmission and distribution costs related to sales reduced 

by efficiency or distributed generation. Recovered revenue 

can be adjusted annually. The LFCR can be modified by the 

Commission up to the next APS rate case in 2015. There is a 

residential opt-out clause to the LFCR, if residents choose the 

optional Basic Service Charge (BSC) instead.

Approved 

(2012)

Dockets E01345A-11-0224; E01345A-12-0232; 

Decision #73183

Lost Revenue Adjustment & Revenue Decoupling Mechanisms 

for Electric Utilities by State
IEI STATE ELECTRIC EFFICIENCY REGULATORY FRAMEWORKS

6 www.edisonfoundation.net

State Lost Revenue and Decoupling Description Status Codes, Orders 

& Resources

Arkanasas (LR) In 2008 the Arkanasas Public Service Commission opened a 

docket “for the purpose of exploring and considering possible 

innovative approaches to traditional ratebase rate of return 

regulation”. This docket includes examination of decoupling/

lost revenues that result from decreases in power usage based 

on successful energy efficiency and demand response efforts. 

In December 2010, the Arkanasas Public Service Commission 

issued Order #14 in Docket 08-137-U approving a proposal 

by utilities, alllowing them to submit applications within the 

annual EE tariff filing process to collect “lost contributions 

to fixed costs” (LCFC) contemporaneously with program 

implementation. LCFC is based on the best available data, 

which may include deemed savings, to be followed by an 

annual EM&V true-up calculation. The LCFC is eligible to be 

collected upon starting in 2011. 

Approved 

(2010)

Docket 08-137-U, Order 

No. 14

California California has had some form of decoupling since 1982. The 

current “decoupling plus” program is a revenue decoupling 

program combined with performance incentives for meeting 

or exceeding energy efficiency targets (performance-based 

rates). Revenue requirements are adjusted for customer 

growth, productivity, weather, and inflation on an annual 

basis with rate cases every three or four years (varies by 

utility). The incentive structure caps penalties/earnings for 

energy efficiency programs at $450M.

Approved 

(Decoupling 

“Plus” approved 

in 2007)

Code Sec. 9 Section 739(3) 

and Sec. 10 Section 739.10 

as amended by A.B. XI 29; 

Decisions 98-03-063 & 07-

09-043

Colorado (LR) In May 2014, the Colorado Public Utilities Commission issued 

a decision order on Public Service Company of Colorado’s 

DSM plan, providing a “disincentive offset” pre-tax bonus 

of $5 million if Public Service meets or exceeds 100% of its 

electric energy savigs goals. No bonus will be rewarded at 

lesser achievement levels. The current $30 million cap on 

the combined bonus and performance incentive is retained 

to ensure ratepayers are protected from rate increases. Xcel 

propose to implement a revenue decoupling mechanism, under 

which the company would charge or credit customers based 

on changes to the weather-normalized use per customer of 

customers on the residetial (“R”) and Commercial service 

schedules. The company proposes to collect the revenue 

decoupling adjustment through the General Rate Schedule 

Adjustment (“GRSA”).

Approved Proceeding Number 13A0686EG, Decision Number 

C14-0731
DECEMBER 2014

www.edisonfoundation.net 7

State Lost Revenue and Decoupling Description Status Codes, Orders 

& Resources

Connecticut Pursuant to Conn. Gen. Stat. 16-245m, as amended in July 

2013 by Connecticut Public Act 13-298, every three years 

electric distribution companies in Connecticut must submit a 

comprehensive conservation & load management (C&LM) 

plan to the Energy Conservation Management Board of the 

CT Department of Energy and Environmental Protection 

(DEEP). In October 2013, DEEP approved a final C&LM plan 

for the 2013-2015 program cycle. Since 1998, electric C&LM 

programs have been primarily funded by a retail charge on 

electric ratepayers of three mills per kWh. Additionally, 

Act 13-298 provides for the Public Utilities Regulatory 

Authority to ensure that additional revenues required to fund 

the approved C&LM budgets are “provided through a fully 

reconciling conservation adjustment mechanism for each 

electric company” of not more than three mills per kWh. 

United Illuminating’s existing decoupling mechanism recovers 

revenues from lost sales. CT law requires Connecticut Light & 

Power (CL&P) to submit a similar decoupling mechanism in 

its next general rate case. Until then, CL&P will seek recovery 

of lost revenues through its Non Bypassable Federally 

Mandated Congestion Charge.

Approved 

(2013)

Public Act No. 13-298; 

Docket No. 12-08-11; 

Docket No. 13-03-02; 

CT DEEP 2013-2015

Conservation & Load 

Management Plan, Final 

Decision, October 2013

Delaware Under Delaware SB 150, signed August 2014, “The 

Commission shall approve cost recovery for cost-effective 

energy savings resulting from cost-effective programs 

and portfolios of Commission-regulated affected energy 

providers.” SB 150 also states that “the Commission shall 

utilize a process that achieves the efficient and timely recovery 

on an annual basis... of appropriate costs and associated rates 

of return related to implementing [energy efficiency] activities 

and programs.” As part of their last general rate case in 2012 

(Docket 11-528), Delmarva Power requested an alternative 

regulatory model which included a revenue decoupling 

mechanism, however the proposed decoupling mechanism was 

abandoned as part of a settlement with interveners and was not 

adopted in the final order.

Pending Docket No. 11-528;

Docket No. 09-276T;

SB 150

District of 

Columbia

The DC Public Service Commission approved PEPCO’s Bill 

Stabilization Adjustment (BSA) in October 2009. Like the 

BSA approved for Maryland, an RPC mechanism is employed 

which adjusts quarterly. 

Approved 

(2009)

PSC Order 1053-E-549

Hawaii The Hawaii PUC approved decoupling as a policy in 

February 2010, but a final order is pending. The utilities 

have submitted a proposed mechanism which allows for 

decoupling of revenues from sales, rate base adjustments for 

O&M costs and planned capital additions, and a mechanism 

for sharing earnings with rate payers should a company 

exceed their allowed ROE. True-ups occur annually.

Approved - 

Pending Final 

Order

Docket 2008-0274
IEI STATE ELECTRIC EFFICIENCY REGULATORY FRAMEWORKS

8 www.edisonfoundation.net

State Lost Revenue and Decoupling Description Status Codes, Orders 

& Resources

Idaho After a five year pilot the Commission approved Idaho Power 

Company’s request to convert Schedule 54, a fixed-cost 

adjustment (FCA) mechanism from a pilot to an ongoing, 

permanent schedule. The FCA uses a fixed cost per customer 

approach. Sales are adjusted for weather and the FCA rate 

increases are capped at 3% over the previous year. The 

mechanism is only applied to residential and small general 

service customers.

Approved 

(Pilot 2007-

2009,

extended 2010-

2011)

Case No. IPC-E-04-15, 

Order No. 30267; 

Case No. IPC-E-09-28, 

Order No. 31063; 

Case No. IPC-E-11-19, 

Order No. 32505, Order No. 

32731

Indiana (LR) The Utility Regulatory Commission approved Duke Energy 

Indiana and Indiana Michigan Power Company’s request to 

recover lost revenues due to the implementation of a DSM 

program. Northern Indiana Power & Light, and Indianapolis 

Power & Light have lost margin recovery mechanisms 

proposals pending before the Commission.

Approved Cause No. 43827; Cause 

No. 43955; Cause No. 

43912; Cause No. 43960

Kansas (LR) Kansas Corporate Commission allows lost revenue adjustment 

in certain cases. In Docket No: 10-WSEE-775-TAR, Westar 

was granted a shared savings mechanism, which is similar to 

lost revenue recovery. The Commission does not favor lost 

revenue recovery, but will consider it if it achieves established 

energy efficiency goals.

Approved Docket No: 10-WSEE775-TAR; Docket No: 

12-GIMX-337-GIV

Kentucky (LR) Lost revenue recovery mechanisms are determined on a 

case-by-case basis, but all electric utilities in Kentucky have 

DSM proposals in place that include similar lost revenue 

(LR) recovery due to DSM programs. For these utilities, LR 

is calculated using the marginal rate, net of variable costs, 

times the estimated kWh savings from a DSM measure over 

a three-year period.

Approved 

(2006)

Statute Ch. 278, Title 285; 

Docket 2007-00477; 2008-

00473; 2009-00444; 2010-

00445; 2011-00448

Louisiana (LR) In December 2012, the Louisiana Public Service Commission 

(PSC) approved a plan to give utilities a year to develop 

energy efficiency programs for their ratepayers. The 

Commission reversed its decision in February 2013, but 

again agreed to revisit the initiative in May 2013 after several 

consumer and environmental groups filed suit. In June 2013, 

the PSC voted to reinstate the initiative.

In its September 2013 order, the Louisiana Public Service 

Commission (LPSC) lifted the stay on the Commission’s 

Energy Efficiency Rules which sets a timeline and guidance 

on the implementation and recovery of costs associated with 

quick start energy efficiency programs by LPSC jurisdictional 

electric utilities. The formula for recovery of Lost 

Contributions to Fixed Costs (LCFC) is still being finalized. 

The amount of proposed recovery may be considered a 

regulatory asset by the utility and may be reconciled in a 

base rate or forumula rate proceeding, whichever comes first. 

Alternatively, utilities may use the EE Rate Rider to recover 

contemporaneously the amount of proposed recovery from 

participating customers subject to annual true-up.

Approved 

(2013)

Docket R-31106

Maryland A plan to employ revenue decoupling for Maryland utilities 

under an RPC mechanism was approved in 2007, which 

adjusts quarterly. The mechanism is similar to the BSA 

approved for Washington, DC.

Approved 

(2007)

PSC Case No. 9093; Order 

81518; Case No. 9154
DECEMBER 2014

www.edisonfoundation.net 9

State Lost Revenue and Decoupling Description Status Codes, Orders 

& Resources

Massachusetts Gas and electric utilities in Massachusetts must include a 

decoupling proposal in their next rate case. Target revenues 

are determined on a utility-wide basis (full decoupling) 

and can be adjusted for inflation or capital spending 

requirements if necessary. The Massachusetts DPU expects 

that all utilities will have fully operational decoupling plans 

by 2012. In May 2009, National Grid was the first utility to 

submit a revenue decoupling ratemaking plan (RDR), which 

proposes an RPC mechanism that adjusts annually.

Approved 

(2008), full 

implementation by 2012

Docket 07-50; Docket 

09-39

Mississippi (LR) In July 2013, the Mississippi Public Service Commission 

issued a final order in Docket No. 2010-AD-2, adding 

Rule 29, related to the Conservation and Energy Efficiency 

Programs. Section 106 in Rule 29 defines energy efficiency 

program costs as the incremental program costs that are not 

already included in the then-current utiity rates and the lost 

contribution to fixed costs associated with approved energy 

efficiency programs. Cost recovery shall include full and 

timely recovery of incremental program costs and the lost 

contribution to fixed cost.

A utility can recover energy efficiency program costs through 

a rider, the Energy Efficiency Cost Rate (EECR). In support 

of this re-determined rate, the utility shall file a schedule of 

actual program costs for the reporting period, actual amounts 

collected under the rider for the reporting period, actual 

and projected lost contributions to fixed costs and approved 

program budgets for the current calendar year. The EECR 

shall be adjusted to reflect a reconciliation of any over- or 

under-recovery for the prior year and the approved budget for 

the current program year.

Approved Docket No. 2010-AD-2

Missouri (LR) In 2011, the Missouri Energy Efficiency Investment Act 

authorized utilities to file plans to recover a portion of the net 

benefits of demand-side energy efficiency programs. Ameren 

Missouri and KCP&L GMO LR rate cases were approved 

in late 2012. Two other cases - Kansas City Power & Light 

Company and The Empire District Electric Company - were 

withdrawn in 2012, and is likely they will refile by 2014.

Approved 

(2012)

SB376; Case No. EO 

2012-0142; Case No. 

EO 2012-0166; Case No. 

EO-2012-0009; Case No. 

EO-2012-0175
IEI STATE ELECTRIC EFFICIENCY REGULATORY FRAMEWORKS

10 www.edisonfoundation.net

State Lost Revenue and Decoupling Description Status Codes, Orders 

& Resources

Montana (LR) In December 2005, the MT PSC approved Northwestern 

Energy’s petition for a lost transmission and distribution 

revenue recovery mechanism. 

Under the mechanism, lost revenues due to DSM 

acquisition efforts are factored into rates monthly as part of 

Northwestern’s default supply cost tracker. The estimated 

lost T&D revenue amount is then trued-up annually based on 

actual program activity following a comprehensive program 

evaluation and independent verification of actual savings, 

which must be filed with the Commission. NWE must consult 

with its advisory committee on the selection of an independent 

contractor to evaluate DSM programs and the scope of work.

In December 2010, the Commission granted NorthWestern 

Corp. a decoupling mechanism as part of its electric rate case. 

NorthWestern filed a motion for reconsideration, leaving the 

docket open and the implementation of decoupling pending 

further action.

Approved (LR, 

2005)

Dockets D2004.6.90 and 

D2010.5.50

Docket D2009.9.129

Nevada (LR) In June 2010, the Nevada PUC approved NV Energy’s 

proposal for a lost revenue recovery mechanism. Approved 

to implement the legislative directives of S.B. 358 (section 

11.3), the mechanism calls for monthly lost revenue trackers 

with an annual true-up subject to measurement and verification 

of effects on utility revenue caused or created by energy 

efficiency and conservation programs.

The Nevada Public Utilities Commission has opened an 

investigative docket to collect information, analysis, and 

recommendation consistent with Nevada Revised Statutes 

704.785 on alternatives to the lost revenue recovery 

mechanisms, including, but not limited to, an equity adder 

methodology and a general decoupling methodology. NV 

Energy has filed for consideration an annual cost recovery 

with a multiplier methodology that would be a very simpleto-administer replacement for the current LRAM process, 

using a calculation similar to the previous equity adder, 

wherein the multiplier of 10 percent would be applied to the 

total energy efficiency and conservation expenditures made 

each year. Other parties have filed a modified revenue-cap 

decoupling approach, revenue per customer decoupling, and 

full decoupling. The docket remains open. 

Approved 

(2010)

PUC Docket 12-12030
DECEMBER 2014

www.edisonfoundation.net 11

State Lost Revenue and Decoupling Description Status Codes, Orders 

& Resources

New Mexico In 2008, HB 305 was signed into law requiring that all utilities 

include cost-effective energy efficiency and load management 

programs and to remove regulatory disincentives for these 

programs. As a result, in 2010, the New Mexico Public 

Regulation Commission instituted an adder for all utilities. 

The adder comprised of a lost revenue adjustment and a 

performance premium, combined into a single payment. In 

July 2011, the New Mexico Supreme Court vacated the adder, 

stating that it must be cost-based and that each utility must file 

individually. In November, 2011, the NM Public Regulatory 

Commission determined that adders for PNM and El Paso 

Electric were utility-specific, cost-based, evidence-based, 

and properly balance the interests of the utility, its customers, 

and the public. In July, 2013, HB 267 ammended HB 305 

and included a provision for a fixed cost tariff rider of 3% 

of revenues to fund efficiency programs. Other substantive 

changes include using the Utility Cost test in place of the Total 

Resource Cost test to determine program cost-effectiveness, 

and reducing the requirement for energy savings by from 

10% to 8% of 2005 retail sales. In December, 2013, El Paso 

Electric reached a stipulated agreement and establlished an 

annual incentive for calendar years 2014-2016 that is equal 

to 7% of program expenditures. In November, 2013, PNM 

Ireceived an approved incentive of approximately 7.6% of 

program expenditures. In January 2014, Southwesten Public 

Service Company entered into an uncontested stipulation 

wherein its requests for recovery of financial incentives for 

2013, 2014, 2015 were approved. 

Approved Case No. 13-00286-UT; 

Case No. 13-00176-UT; 

Case No. 12-00317-UT

New York Following an April 2007 order, electric and gas utilities must 

file proposals for true-up based decoupling mechanisms in 

ongoing and new rate cases. Proposals have been approved for 

Consolidated Edison and Orange & Rockland utilities, both 

for revenue-per-class mechanisms. True-ups occur annually.

Approved 

(2007)

Cases 03-E-0640, 07-E0949, & 07-E-0523

North Carolina 

(LR)

The Commission approved a proposed lost revenue adjustment 

mechanism for Progress Energy Carolinas as part of their cost 

recovery mechanism. Net lost revenues for each annual period 

are recovered over 3 years and determined by multiplying 

lost sales by a net lost revenue rate, which is the difference 

between the average retail rate applicable to the customer class 

impacted by the measure and (1) the related customer charge 

component of that rate, (2) the fuel component of the rate, 

and (3) the incremental variable O&M rate. True-ups occur 

annually.

The Commission also approved a similar mechanism for Duke 

Energy Carolinas in December 2009 for energy efficiency 

measures only, coinciding with the approval of the utility’s 

virtual power plant mechanism.

Approved 

(2009)

Docket E-2, Sub 931; 

Docket E-7, Sub 831
IEI STATE ELECTRIC EFFICIENCY REGULATORY FRAMEWORKS

12 www.edisonfoundation.net

State Lost Revenue and Decoupling Description Status Codes, Orders 

& Resources

Ohio (D, LR) Lost revenue recovery mechanisms are determined on a 

case-by-case basis. Duke Energy Ohio recovers lost revenues 

resulting from their portfolio of EE programs through the 

DSM rider. LR is calculated as the amount of kWh sales 

lost due to the DSM programs times the energy charge for 

the applicable rate schedule, less variable costs, divided by 

the expected kilowatt-hour sales for the upcoming 12 month 

period. They are collected over a 36 month period.

The Commission ordered AEP Ohio to develop a 3 year 

decoupling pilot program for 2012-2014. In this pilot 

there shall be no cap of annual rate decreases to customers; 

however, annual increases attributable to the pilot shall be 

capped at 3 percent of the total annual distribution revenues 

for a customer class.

Duke Energy Ohio has a distribution revenue adjustment 

mechanism for large non-residential customers and 

distribution revenue decoupling for residential and small nonresidential customers.

Approved 

(2007)

ORC §4928.143(B)(2)(h); 

06-0091-EL-UNC;

Case No. 11-3549-EL-SSO

Case No. 11-0351-EL-AIR

Oklahoma (LR) OG&E has direct lost revenue adjustment (“Class Lost 

Revenue Factor”) built in to the approved demand program 

rider (DPR) structure, which includes a shared savings 

mechanism (see p. 15). As the name implies, LR amounts are 

examined by customer class.

Approved 

(2009)

Cause No. PUD 200800059, 

Order 556179

Oregon Portland General Electric was approved for a two year pilot 

employing an RPC decoupling mechanism. True-ups will 

occur annually.

Approved - 

Pilot (2009)

Order 09-020

Rhode Island May 2010, the Rhode Island passed the Decoupling Act 

(R.I.G.L. §39-1-27.7.1), mandating that Narragansett Electric 

Co., a subsidiary of National Grid Group Plc., decouple its 

revenues from sales. 

In October 2010, National Grid filed a request with the Rhode 

Island Public Utilities Commission to implement revenue 

decoupling mechansims for its electric and gas operations. 

In May 2012, order 20745 was issued approving National 

Grid’s RDM proposal. It is retroactive to April 2011 and an 

adjustment factor is to be annually.

Approved 

(2012)

(R.I.G.L. §39-1-27.7.1) 

Docket No. 4206, Order 

20745

South Carolina 

(LR)

The Commission approved a proposed lost revenue 

adjustment mechanism for Progress Energy Carolinas as part 

of their cost recovery mechanism. Net lost revenues for each 

annual period are recovered over 3 years and determined 

by multiplying lost sales by a net lost revenue rate, which 

is the difference between the average retail rate applicable 

to the customer class impacted by the measure and (1) the 

related customer charge component of that rate, (2) the fuel 

component of the rate, and (3) the incremental

variable O&M rate. True-ups occur annually.

Approved 

(2009)

Docket 200-251-E
DECEMBER 2014

www.edisonfoundation.net 13

State Lost Revenue and Decoupling Description Status Codes, Orders 

& Resources

South Dakota 

(LR)

Beginning in 2010, the SD utilities switched from receiving 

performance incentives to receiving a fixed percentage of lost 

revenues. MidAmerican and OtterTail Power converted in 

2010 and 2011, respectively. Black Hills and Xcel Energy 

began recovering in 2011 as well. NorthWestern Energy is 

expected to file a lost revenue mechanism in the near future. 

All programs are still in the pilot phase and have not been 

incorporated into the base rate cases yet. They all allow for 

riders with annual true-ups for the recovery of lost revenues.

Approved 

(2010)

Dockets EL11-012; GE10-

001; EL11-002; EL11-013; 

GE12-001

Vermont An RPC decoupling program was approved for Green 

Mountain Power under the Alternative Regulation Plan. 

Rates can be adjusted up to four times per year with an 

annual reconciliation on allowed earnings. Changes in base 

rates cannot exceed ~2% per year. CVPS was also approved 

for decoupling in 2008.

Approved 

(2007)

Dockets 7175, 7176 & 7336

Washington The Washington Utilities and Transportation Commission 

(WUTC) approved decoupling mechanisms for PSE on June 

25, 2013. The commission will allow PSE to increase rates by 

3.34% this year, and over the next 3-4 years, a maximum of 

3% of its revenue with any excess amounts above the 3% 

recovered in the following year.

Approved 

(2013)

Docket UE-121373

Wisconsin A 4-year decoupling pilot by Wisconsin Public Service 

Corporation (WPS) was initially approved in December 2008. 

In a rate case completed in December 2012, the pilot was 

extended with a modified Revenue Stabilization Mechanism 

(RSM). The new RSM is based on a Total Rate Case Margin 

instead of a Total Rate Case Margin per Customer, intending 

to remove the sensitivity related to sales per customer. Using 

a future test year to determine the revenue requirement, the 

utility compares the total target revenue with actual revenue 

and defers the difference, subject to carrying costs based 

on approved short-term debt rate. The margin equals the 

total revenue for each tariff, less the costs associated with 

the annual per-kWh value established for monitored fuel 

costs, and excluding any surcharges, credits, taxes, or similar 

charges. The formula for calculating an over-or-under 

collection is: actual margin minus ratecase forecasted margin 

established in the most recent rate proceeding. The new RPS 

will be in effect on a pilot basis until WPS’ next general rate 

order, expected for the 2014 and/or 2015 test years.

Approved Docket No. 6690-UR-121

Wyoming (LR) A tracking adjustment mechanism that includes direct lost 

revenue recovery was approved for a small service territory 

covered by Montana Dakota Utilities. The adjustment 

applies to all MDU customers to recover costs and lost 

revenues for load management programs only.

Approved 

(2007)

Docket No. 20004-65-ET06
IEI STATE ELECTRIC EFFICIENCY REGULATORY FRAMEWORKS

14 www.edisonfoundation.net

EE Performance Incentives for Electric Efficiency Providers by State

State Performance Incentive Description Status Relevant Statute, 

Code or Order

Alabama Alabama Power is able to recover a “reasonable rate of return” 

on efficiency program spending through a rate rider.

Approved Docket 31045

Arizona Arizona Public Service (APS), Tucson Electric Power (TEP), 

and UniSource all have have performance incentives in place 

under a shared savings mechanism, set at a percentage of DSM 

program net economic benefits and capped at a percentage 

of total DSM expenditures. The percentages are dependent on 

achievemnt relative to energy efficiency goals. Each incentive 

is independently determined based on the utility’s rate case. 

Approved (2005) Decision 67744, Docket 

E-01345A-05-0816, et al

Arkansas In 2010, the Commission issued Order No. 15, approving 

performance incentives through a shared savings of net benefits 

approach. 10% of net benefits will be awared to a utility for 

achievement above 80% of the savings goal. Total incentive 

rewards are capped at 5% of proposed budget for achievement 

between 80% and 100% of goal; 7% of budget for achievement 

between 100% and 110% of goal. Net benefits shall be based on 

a TRC test. EE program portfolio goals as a percentage of 2010 

energy sales are: 2011: 0.25%, 2012: 0.50%, 2013: 0.75% 

Approved (2010) Docket 08-137-U, Order 

No. 15
DECEMBER 2014

www.edisonfoundation.net 15

State Performance Incentive Description Status Relevant Statute, 

Code or Order

California California utilities are eligible to earn the Efficiency Savings 

and Performance Incentives (ESPI) mechanism on programs 

funded and implemented for the 2013-2014 program cycle and 

subsequent programs cycles, superseding the Risk/Reward 

Incentive Mechanism (RRIM). Potential EPSI earnings 

available over the 2013-2014 cycle is capped at $178 million. 

Performance incentive opportunities are divided as follows: A. 

Energy Efficiency Resource Savings paid as a combination of ex 

ante “locked down” and ex post verified units of savings results, 

according to the level of uncertainty of the measure for which 

savings are being claimed. Resource savings are measured based 

on net lifecycle savings. Incentives for EE resource savings 

are capped at 9% of resource program budgets, minus funding 

dedicated to administrative activities, codes and standards 

programs, EM&V, and community choice aggregator and 

regional energy networks programs. B. A performance award is 

available for implementing the lock down of ex ante parameters 

based on performance metrics scoring with the award capped 

at 3% of resource program expenditures. C. A management fee 

of 12% of approved codes and standard program expenditures. 

D. A management fee of 3% for implementing non-resource 

programs, which support savings based programs but in which 

there are no direct savings. EPSI award claims for the first 

program year will be made in the first following year for nonresource program management fee, codes and standards program 

management fee, ex ante performance award, preliminary ex ante 

locked down deemed measure savings award. Subsequently, 

in the second following year of the first program year, claims 

covering custom projects, ex post verified deemend measure 

savings, and true up of preliminary ex ante lockdown award 

based on verified counts shall be made.

Approved R.12-01-005; Decison 

13.09.023

Colorado In May 2014, the Colorado Public Utilities Commission issued a 

decision order on Public Service Company of Colorado’s DSM 

plan, providing a financial incentives of 5% of net dollar savings 

when energy savings are 100% or greater of goal. The cap on the 

percentage of net dollar savings earned has been removed as the 

approved incentive no longer contains an incremental adder for 

energy savings over 100% of goal. The current $30 million cap 

on the combined bonus and performance incentive is retained to 

ensure ratepayers are protected from rate increases.

Approved Proceeding Number 

13A-0686EG, Decision 

Number C14-0731

Connecticut The CT PUC requires annual hearings for utilities, where the 

past year’s results for energy savings are reviewed and a 

performance incentive is determined, which ranges from 1% to 

8% of program costs. The minimum threshold of 70% of goals 

earns the minimum (1%) incentive. Reaching 100% of goals 

earns 5%, and for reaching 130% of goals earns 8%. 

Approved (first in 

1988, mechanism 

changes over time)

Dockets 07-10-03; 08-

10-03; 09-10-03
IEI STATE ELECTRIC EFFICIENCY REGULATORY FRAMEWORKS

16 www.edisonfoundation.net

State Performance Incentive Description Status Relevant Statute, 

Code or Order

District of 

Columbia

Section 202 of the DC Clean and Affordable Energy Acot of 

2008 authorizes the District’s Department of the Environment 

to award “performanced based” and “financial” incentives to the 

operator of DC’s Sustainable Energy Utility, VEIC, for meeting 

or exceeding specific performance benchmarks established in its 

contract. The contract with the Department of the Environment 

also includes financial penalties should the utility fail to meet the 

performance benchmarks

Approved (2008) Section 202 of the DC 

Clean and Affordable 

Energy Act of 2008

Georgia As agreed to under the 2013 Integrated Resource Plan stipulation 

resolution, Georgia Power will receive an Additional Sum 

of 8.5% of the NPV of the actual net benefits of verified net 

kWh savings as determined by the Program Administrator test 

from the certified DSM programs, with no cap, provided that 

following the annual determination of verified net kWh savings. 

If the annual incremental kWh savings is less than 50% of that 

initially projected, the Additional Sum shall be 0.5% for demand 

response measures and 3% for energy efficiency measures. 

If the Additional Sum exceeds program costs, the portion of 

Additional Sum that exceeds the program cost shall be calculated 

based on 4% of actual net benefits of verified net kWh savings 

as determined by the Program Administrator test from certified 

DSM programs. Georgia Power will update all data relating to 

actual program participation, as well as the actual energy savings 

and actual programs costs when calculating the Additional Sum 

for 2014 and future years.

Approved Docket & Order 36499 

Hawaii As part of the state’s transition plan to establish a third-party 

administrator for efficiency programs, the HECO companies are 

responsible for administering their own DSM programs until 

the transition date. HECO may earn a shared percentage of 

savings of 1%-5% with an incentive cap of $2M. 

Approved (2008) Docket & Order 23258, 

Docket 2007-0323

Indiana The state statute allows for either shared savings or 

adjusted/bonus ROE mechanisms as DSM incentives. To 

meet mandatory energy efficiency goals, Indiana utilities 

have developed “Core Plus” DSM programs. Duke Energy, 

Indianapolis Power & Light and Southern Indiana Gas & Electric 

Company received approval for a tiered structure shareholder 

performance incentives, and Indiana Michigan Power Company 

received approval for a shared benefits approach. Other cases 

currently pending before the Commission related to energy 

efficiency programs and performance incentives include No. 

43938 (Vectren Energy Indiana), No. 43912 (Northern Indiana 

Public Service Company ), and No. 43960 (Indianapolis Power 

and Light).

Approved (2010) Administrative Code, 

Title 170, Art. 4; Cause 

No. 43374; Cause No. 

43427; Cause No. 

43618; Cause 43623; 

Cause No.43827; Cause 

No. 43938; Cause No. 

43912; Cause No. 

43960; Cause No. 43955

Kentucky Performance incentives can be collected for three types of 

energy efficiency programs: programs for those who have 

difficulty participating in energy efficiency due to financial 

circumstances, programs aimed at residential housing, 

programs with long-run potential reduction in energy use."

Approved (2007) Rev. Stat. 278.285(1)

(c); Docket 2008-00473; 

2007-00477
DECEMBER 2014

www.edisonfoundation.net 17

State Performance Incentive Description Status Relevant Statute, 

Code or Order

Louisiana In December 2012, the Louisiana Public Service Commission 

(PSC) approved a plan to give utilities a year to develop energy 

efficiency programs for their ratepayers. The Commission 

reversed its decision in February 2013, but again agreed to 

revisit the initiative in May 2013 after several consumer and 

environmental groups filed suit. In June 2013, the PSC voted 

to reinstate the initiative. The type of performance incentive 

mechanism has yet to be determined.

Approved (2013) Docket R-31106

Massachusetts The incentive allows utilities to earn about 5% of program 

costs for energy efficiency programs that meet established 

program goals. The incentive structure is determined on a 

program-by-program basis but generally utilizes a three-tiered 

structure. The first “design performance” level is defined as 

performance that a Program Administrator expects to achieve 

in implementing its energy efficiency programs. The second 

“threshold performance” level is 75% of the design level. The 

third “exemplary performance” level is 125% of the design 

level. Incentives are awarded only if a program achieves the 

threshold level or above.

Approved (2000) Docket 04-11; Order 

98-100

Michigan The Commission approved DTE’s energy optimization plan in 

2009, which includes an incentive mechanism that allows the 

utility to earn up to 15% of program spending (a cap mandated 

by PA 295) if they reach 125% of their savings goals. An 

incentive payment is applied only if DTE exceeds its savings 

goal.

PA 295 contains two provisions authorizing utilities to receive 

an economic incentive for energy efficiency programs. To be 

eligible, utilities must request that appropriate energy efficiency 

program costs be capitalized and earn a normal rate of return. 

Utilities can request a performance incentive mechanism to 

provide additional earnings to shareholders if they exceed the 

annual energy savings target. Incentives are capped at 15% of 

the total program cost.

Approved (2009) PA 295 (2008); U-15806 

Minnesota The PUC revised the performance incentive originally approved 

in 1999. Under the new agreement, utilities retain a portion of 

net benefits based on the level of achievement, measured as a 

percent of retail sales. The award scale for this modified shared 

savings mechanism is calibrated to award $0.09/kWh at 1.5% of 

sales (e.g. if a utility achieves savings equal to 1.5% of sales, it 

will receive $0.09 for every kWh saved. The order was approved 

in January 2010.

Approved 

(1999); Revised 

mechanism (2010)

Docket CI-08-133, Statute 216B.241
IEI STATE ELECTRIC EFFICIENCY REGULATORY FRAMEWORKS

18 www.edisonfoundation.net

State Performance Incentive Description Status Relevant Statute, 

Code or Order

Mississippi In July 2013, the Mississippi Public Service Commission issued 

a final order in Docket No. 2010-AD-2, adding Rule 29, related 

to the Conservation and Energy Efficiency Programs. Section 

106 in Rule 29 states that the utility may propose an approach to 

earn a return on energy efficiency investments through a shared 

savings or other performance based incentive mechanism to 

make these investments more like other investments on which 

utilities earn a return.

If the utility seeks Commission approval to earn a return on 

energy efficiency investments, it may file a return on investment 

caclulation through the Energy Efficiency Cost Rate (EECR) 

based on the its performance to meet or exceed specific reporting 

year energy savings targets expressed as percentages of energy 

sales.

Approved Docket No. 2010-AD-3

Missouri The Missouri PSC approved Ameren Missouri and KCP&L 

GMO's requests for performance incentives using a shared net 

benefits approach. The Ameren agreement allows $80 million in 

annual revenue requirement in Ameren Missouri’s recent general 

rate case (Case No. ER-2012-0166) for recovery of demand-side 

programs’ costs and recovery of fixed operating costs.

The KCP&L GMO agreement allows $18 million in annual 

revenue requirement in GMO’s recent general rate case (Case 

No. ER-2012-0175) for recovery of demand-side programs’ 

costs and recovery of fixed operating costs (to overcome the 

through-put disincentive) and which will allow the Company to 

earn a future performance incentive award based on after-the-fact 

verified 3-year program energy savings and demand savings.

Approved (2012) Case No. EO-2012-

0166; Case No. ER2012-0175

Montana MT statute allows for the Public Service Commission to add 2% 

to the authorized rate of return for DSM investments. It has not 

yet been approved for a specific utility.

Pending.

Passed into 

law, but not 

implemented by 

utility

Code 69-3-712
DECEMBER 2014

www.edisonfoundation.net 19

State Performance Incentive Description Status Relevant Statute, 

Code or Order

New 

Hampshire

The PUC is currently re-evaluating its performance incentive 

In September 2013, the New Hampshire Commission approved 

a new performance incentive mechanism for the state’s Core 

utilities, which took effect beginning with the 2014 program year. 

For Core electric utilities, the new mechanism applies “a new 

ratio of electric lifetime savings to total lifetime energy savings 

as they relate to the total portfolio of Core electric programs. 

Upon applying this ratio, if it is determined that electric lifetime 

savings are greater than or equal to 55% of total lifetime energy 

savings, a higher performance incentive would apply. If the 

electric lifetime savings fall below 55% of total lifetime energy 

savings, a lower incentive would apply.” 

The new mechanism preserves the same basic structure as the 

prior mechanism, “except that the baseline is lowered from 

8% to 7.5% at the 55% and up level, and to 6% at the under 

55% level.” Additionally, “the overall maximum performance 

incentive that can be achieved is lowered from 12% to 10% 

at the 55% and up level and to 8% at the under 55% level.” 

Under the new mechanism, the individual components used 

to calculate the performance incentive (the kWh savings and 

benefit-cost components) will be capped, with each component 

representing no more than half of the maximum incentive (i.e., 

the kWh component would be capped at 5% and the benefit-cost 

component would be capped at 5% at the 55% and up level), 

rather than capping the overall performance incentive amount for 

each sector (residential and commercial/industrial sectors). The 

minimum thresholds of 65% of planned kWh savings and 1.0 for 

benefit-cost remain unchanged.

Approved (2013) Docket DE 12-262; 

Order No. 25,569
IEI STATE ELECTRIC EFFICIENCY REGULATORY FRAMEWORKS

20 www.edisonfoundation.net

State Performance Incentive Description Status Relevant Statute, 

Code or Order

New Mexico In 2008, HB 305 was signed into law requiring that all utilities 

include cost-effective energy efficiency and load management 

programs and to remove regulatory disincentives for these 

programs. As a result, in 2010, the New Mexico Public 

Regulation Commission instituted an adder for all utilities. The 

adder comprised of a lost revenue adjustment and a performance 

premium, combined into a single payment. In July 2011, the 

New Mexico Supreme Court vacated the adder, stating that it 

must be cost-based and that each utility must file individually. 

In November, 2011, the NM Public Regulatory Commission 

determined that adders for PNM and El Paso Electric were 

utility-specific, cost-based, evidence-based, and properly balance 

the interests of the utility, its customers, and the public. In July, 

2013, HB 267 ammended HB 305 and included a provision for 

a fixed cost tariff rider of 3% of revenues to fund efficiency 

programs. Other substantive changes include using the Utility 

Cost test in place of the Total Resource Cost test to determine 

program cost-effectiveness, and reducing the requirement for 

energy savings by from 10% to 8% of 2005 retail sales. In 

December, 2013, El Paso Electric reached a stipulated agreement 

and establlished an annual incentive for calendar years 2014-

2016 that is equal to 7% of program expenditures. In November, 

2013, PNM Ireceived an approved incentive of approximately 

7.6% of program expenditures. In January 2014, Southwesten 

Public Service Company entered into an uncontested stipulation 

wherein its requests for recovery of financial incentives for 2013, 

2014, 2015 were approved.

Approved Case No. 13-00286-UT; 

Case No. 13-00176-UT; 

Case No. 12-00317-UT

New York The first phase of performance incentives were eligible to 

be collected for the 2011 year. The order caps the aggregate 

incentives at $40M per year statewide and target megawatthours will be set for each year at the time of review for the 

EE plans. Utilities could be rewarded or penalized for energy 

efficiency performance. As of June 2012, these incentives were 

being accounted for and will be paid out to the utilities upon 

completion. 

Phase 2 of the performance incentives will span 2012-2015. 

Incentives will total $36 million statewide over the three years 

- 2/3 of the amount can be earned by each utility independently, 

1/3 of the amount will be distributed if the utilities reach a 

statewide goal. Utilities can only be positively rewarded in 

Phase 2. The proposal is still awaiting finalization.

Approved (2011) Case 07-M-0548;

Commission Opinion 

No. 89-29
DECEMBER 2014

www.edisonfoundation.net 21

State Performance Incentive Description Status Relevant Statute, 

Code or Order

North

Carolina

North Carolina state law states that a utility may propose 

incentives for demand side management or energy efficiency 

programs to the Commission for consideration. The commission 

approved Progress Energy Carolina’s incentive mechanism that 

allows for an incentive of 8% of NPV of benefits from DSM 

programs and 13% of NPV from EE programs. The Commission 

is considering an avoided cost recovery mechanism submitted by 

Duke Energy. 

The Commission issued a notice of decision approving Duke 

Energy Carolinas’ Save-a-Watt program in December 2009 with 

a full decision to follow in January 2010. The program is similar 

to that in Ohio, where Duke will receive 50% of the net present 

value (NPV) of the avoided costs for conservation and 75% of 

the NPV for demand response. 

Approved - 

Progress Energy 

Carolinas (2009), 

Duke Energy 

(2009)

Docket E-2, sub 931; 

Docket E-7, Sub 831

Ohio Duke Energy received approval in December of 2008 for its 

proposed “Save-a-Watt” program, where the utility will receive 

50% of the NPV of the avoided costs for energy conservation 

and 75% of the NPV of the avoided costs for demand response. 

Demand response programs are viewed by the parties as 

having a useful life of 1 year, while energy conservation 

programs have useful lives of up to 15 years. This mechanism 

was approved through December 31, 2011. Duke Energy Ohio 

has filed for a new recovery mechanism of Shared Savings. This 

is at a tiered level dependent upon impacts achieved. Duke 

Energy Ohio has also filed a decoupling mechanism to account 

for LR.

Approved (2008) Docket 08-920-EL-SSO

Docket 11-4393-ELRDR

Oklahoma A shared savings program has been approved for Public Service 

Oklahoma (AEP) which allows for two different returns: an 

incentive of 25% of net savings for programs for which savings 

can be estimated and 15% of the costs for other programs (e.g. 

education and marketing programs). 

OG&E also has an incentive mechanism where they receive 

shared benefits for achieving savings goals, calculated on a 

measure-by-measure basis.

Approved - PSO 

(2008), OG&E 

(2009)

Cause No. PUD 

200700449, Order 

555302; Cause No. 

PUD 200800059, Order 

556179

Rhode Island The shareholder incentive mechanism includes two 

components: performance-based metrics for specific 

program achievements, and kWh savings targets by sector. 

The program performance metrics are established for each 

individual program, such as achieving specific savings or 

a certain market share for the targeted energy-efficient 

technology. If Narragansett (d/b/a National Grid) achieves 

the savings goal, it receives 4.4% of the eligible budget. The 

threshold performance level is 60% of the savings goal. Once 

the threshold level has been reached, the utility has the ability 

to earn an additional incentive per kWh saved up to 125% of 

target savings. Incentive rates change by customer class.

Approved (2005) Docket 3635, Order 

18152
IEI STATE ELECTRIC EFFICIENCY REGULATORY FRAMEWORKS

22 www.edisonfoundation.net

State Performance Incentive Description Status Relevant Statute, 

Code or Order

South

Carolina

South Carolina law stipulates that the PSC “may adopt 

procedures that encourage electrical utilities [...] to invest in costeffective energy efficient technologies and energy conservation 

programs.”

The Commission approved Progress Energy Carolina’s incentive 

mechanism that allows for an incentive of 8% of NPV of benefits 

from DSM programs and 13% of NPV from EE programs. 

The Commission issued a notice of decision approving Duke 

Energy Carolina’s Save-A-Watt program in December 2009 

with full decision to follow in January 2010. The program calls 

for Duke to receive 55% of the net present value (NPV) of the 

avoided costs for conservation and 75% of the NPV for demand 

response.

Approved for 

Progress Energy 

Carolinas (2009); 

Approved for Duke 

Energy (2010)

Title 58. Public Utilities, 

Services And Carriers, 

Chapter 37. Energy Supply And Efficiency;

Dockets 2008-251-E 

(Progress Energy), 

2007-358-E, & 2008-

251-E (Duke Energy)

South Dakota The South Dakota Commission approved performance 

incentives for OtterTail in 2008, and MidAmerican in 2010. 

OtterTail has a flat-rate bonus incentive, while MidAmerican 

has a straight return on the program’s budget. Montana-Dakota 

Utilities and Northwestern Energy also have performance 

incentives.

Approved (2008) Docket Nos. EL-07-015, 

GE10-001, NG09-001, 

and GE09-001

Texas Texas state code specifies that a utility may be awarded a 

performance bonus (a share of the net benefits) for exceeding 

established demand reduction goals that do not exceed specified 

cost limits. Net benefits are the total avoided cost of the eligible 

programs administered by the utility minus program costs. The 

performance bonus is based on the utility’s energy efficiency 

achievements for the previous calendar year.

If a utility exceeds 100% of its demand reduction goal, the bonus 

is equal to 1% of the net benefits for every 2% that the demand 

reduction goal has been exceeded, up to a maximum of 20% of 

the utility’s program costs. 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 receives an additional 

bonus of 10% of the bonus calculated. 

Approved (2008) PUC of Texas Substantial Rule §25.181(h); 

CenterPoint Energy 

Houston Electric 2008 

Energy Plan & Report, 

Project No. 35440 

Vermont The operator of Efficiency Vermont, VEIC, is eligible to receive 

a performance incentive for meeting or exceeding specific 

goals established in its contracts. There is also a holdback in 

the compensation received by VEIC, pending confirmation that 

contractual goals for savings and other performance indicators 

have been achieved. The initial contract (2000-2002) allowed 

incentives of up to 2% of the overall energy efficiency budget 

over the three-year contract period. Incentives increased to 

3.5% of the EE budget for the 2006-2008 period.

Approved (2000) Contract 0337956, 

Attachment C

West Virginia On April 1, 2013, AEP filed a proposal to the Public Service 

Commission seeking performance incentives for its energy 

efficiency programs. AEP’s proposal includes an incentive of 

5% of the pre-tax net benefits of their programs, up to 12% 

of overall program costs. The PSC is still reviewing AEP’s case 

(13-0462).

Pending Case No. 13-0462
DECEMBER 2014

www.edisonfoundation.net 23

State Performance Incentive Description Status Relevant Statute, 

Code or Order

Wisconsin As of 2008, Wisconsin Power & Light (Alliant Energy) may earn 

the same rate-of-return on its investments in energy efficiency 

made through its “shared savings” program for commercial and 

industrial customers as it earns on other capital investments. 

Utilities may propose incentives as part of their rate cases, but 

there have been no proposals from other utilities under the most 

recent version of performance incentives. [Note: Wisconsin 

dropped performance incentives in the 1990s.]

Approved (2008) Docket 6680-UR-114

Note: Information on fixed-cost recovery mechanisms and electric efficiency performance incentives for electric utilities was compiled using the latest public data available as of December 2014. Readers are encouraged to verify the most 

recent developments by contacting the appropriate commission or regulatory agency. Other resources used in the preparation of this report were ACEEE’s State Energy Efficiency Program Database, documents from EPA’s National Action Plan 

on Energy Efficiency, and resources from the Regulatory Assistance Project. 

For inquiries, please contact Adam Cooper at acooper@edisonfoundation.net. 

For further information, please visit http://www.edisonfoundation.net.
About the Institute for Electric Innovation

The Edison Foundation Institute for Electric Innovation (IEI) focuses 

on advancing the adoption and application of new technologies that 

will strengthen and transform the power grid. IEI’s members are the 

investor-owned electric utilities that represent about 70 percent of 

the U.S. electric power industry. The membership is committed to an 

affordable, reliable, secure, and clean energy future. 

IEI promotes the sharing of information, ideas, and experiences among 

regulators, policymakers, technology companies, thought leaders, and 

the electric power industry. IEI also identifies policies that support 

the business case for the adoption of cost-effective technologies. 

IEI is governed by a Management Committee of electric industry Chief 

Executive Officers. In addition, IEI has a Strategy Committee made 

up of senior electric industry executives and more than 30 smart grid 

technology company partners.

Visit us at: www.edisonfoundation.net

About The Edison Foundation

The Edison Foundation is a 501(c)(3) charitable organization dedicated to bringing the benefits of electricity to families, businesses, and 

industries worldwide. Furthering Thomas Alva Edison’s spirit of invention, the Foundation works to encourage a greater understanding of 

the production, delivery, and use of electric power to foster economic 

progress; to ensure a safe and clean environment; and to improve the 

quality of life for all people. The Edison Foundation provides knowledge, insight, and leadership to achieve its goals through research, 

conferences, grants, and other outreach activities.

For more information contact:

Adam Cooper

Senior Manager, Research

Institute for Electric Innovation

701 Pennsylvania Avenue, N.W.

Washington, D.C. 20004-2696

202.508.5551

acooper@edisonfoundation.net