Snapshot of Energy Efficiency Performance Incentives for Electric Utilities

Performance incentive mechanisms (PIMs) are one of the various policies that incentive enery efficiency. ACEEE’s research finds that PIMs are among the most important factors contributing to higher savings and increasing utility energy savings year to year. They can be structured to provide business opportunities that are competitive with what utilities can earn through investments in assets such as generation plants and infrastructure. The opportunity for competitive returns on investments in energy efficiency can also drive a utility culture shift that makes energy efficiency a core part of the business and leads executives to devote increased focus and additional organiztional resources toward it.

This brief provides an update to our previous research on utility energy efficiency performance incentive mechanisms. We first present a broad overview of the current national landscape PIMs, focusing first on multifactor incentives in Massachusetts, Rhode Island, Hawaii, Michigan, and New York; and next on return on equity and innovative cost recovery mechanisms in Maryland, New Jersey, Utah, and Illinois. We conclude with a discussion of the impacts of these findings.

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