Utility Administration of System Benefit Charge-Funded Energy Efficiency Programs in New Jersey: Model or Mess? An Update from the Field

Dale S. Bryk, Natural Resources Defense Council
John J. Plunkett, Optimal Energy, Inc.
Susan E. Coakley, Northeast Energy Efficiency Partnerships, Inc.

Keywords

Abstract

In March, 2001, the New Jersey Board of Public Utilities (BPU) issued a longawaited order settling debates regarding the size, shape and administrative structure of the state’s energy efficiency programs. As a result, for the next eight years New Jerseyans will enjoy the benefits of one of the most comprehensive packages of market transformation programs in the nation, supported by over $1 billion.

New Jersey is one of the first states to develop a comprehensive plan for investing energy efficiency funds in the newly competitive energy industry, and the only state in which all of the investor-owned electricity and gas utilities are working together to deliver a single set of statewide programs. Although the utilities have committed to ambitious market transformation goals and are working in a Collaborative with the Natural Resources Defense Council (NRDC) and a collection of national efficiency experts, they have labored under persistent criticism from certain sectors throughout their tenure. This is due in large part to the conflict of interest created by the state’s rate cap regulatory structure, under which efficiency investments – or anything else that reduces throughput – directly reduces utility profits. Indeed, the BPU’s decision to appoint the utilities as administrators was one of the most controversial elements of its Order.

This paper provides a preliminary evaluation of the New Jersey model of statewide market transformation programs in comparison to two other approaches: the “efficiency utility” as demonstrated by Efficiency Vermont, and state administration, as rendered by the New York State Energy Research and Development Authority (NYSERDA). We identify specific advantages and disadvantages of utility administration with respect to program design, implementation and evaluation, with a particular focus on the pursuit of market transformation objectives through policy initiatives such as codes and standards and through coordination with regional and national initiatives.