November 2006 State Policy Bulletin

November 2006

Newsletter Contents:

Guest Highlight
Doris Ikle, President of CMC Energy Services, discusses home inspections and the link to energy-efficiency.

Alliance to Save Energy Column
Senior Policy Analyst Lowell Ungar takes a look at the rebirth of state energy-efficiency policies.

State Updates
Legislative updates from California, Illinois, Kentucky, Pennsylvania, and New Jersey.

A Closer look at the New Jersey Effort to link Energy Efficiency with Home Inspections

by Doris Ikle
President, CMC Energy Services

Can energy-efficiency be linked to home inspections? Can home inspections show home buyers how to get the most out of their homes? The New Jersey state legislature is reviewing those issues right now by weighing the merits of Senate bill #2167. Introduced by Senators Bob Smith and Robert W. Singer this September, SB 2167, requires the state to adopt an energy rating code to be used by licensed home inspectors in the preparation of an energy rating for a house inspected for a potential buyer. The code is to incorporate aspects of the New Jersey Energy Star Program. Providing energy information to homebuyers at the time of sale could be the key to substantial energy-efficiency improvements, since this is the time when most home improvements are made and when the best financing terms are available. Furthermore, coupling energy inspections with home inspections reduces both the cost and inconvenience posed by an additional inspection. While homebuyers are faced with many other competing purchase opportunities, energy-efficiency improvements have an advantage because they are the only home improvements that create an income stream (the reduction in energy bills) that can offset the improvement costs.

The measure states that “The rating code shall incorporate aspects of the New Jersey Home Performance with Energy Star Program” whose goal is to offer “state residents access to trained, certified home improvement contractors that deliver state-of-the-art energy efficiency.” In a discussion with the manager of the New Jersey Energy Star Program, as well as with the U.S Environmental Protection Agency, there was agreement that there is a true synergy between stimulating interest in energy improvements among homebuyers and providing reliable contractors to deliver the improvements.

An Energy Inspection for Homebuyers

Home energy inspections done by home inspectors is a fast growing new industry developed in response to rising energy prices. There are now over 1,000 trained home energy inspectors available in 40 States, including New Jersey. Home energy inspections address the five elements needed by homebuyers: (1) a list of the improvements that would benefit their homes, (2) estimated cost savings and payback for each improvement, (3) the group of improvements that everyone can afford when financed, where savings exceed the costs, (4) information about financing, and (5) help in finding contractors.

This is a cost-effective service that is attractive to both homebuyers and inspectors. The energy inspection offering provides a detailed blueprint for upgrading the energy efficiency of the home, including both the costs and the savings for each upgrade. These improvements will increase both the comfort and the value of the house. By using this energy inspection program to implement SB 2167, 100,000 New Jersey home buyers, or 60 per cent of total homebuyers, could be reached each year. The anticipated energy savings would be $45 million per year with an average 25 percent reduction in energy use for the participating homes.

Home inspectors see offering energy inspections as a valuable service. The Kaplan Professional Schools also recognizes the potential in energy inspections, and plans to offer the Home Energy Inspection training this year nationwide. Kaplan’s expectation is to train and certify an additional 5,000 home energy inspectors each year, with a goal of having sufficient energy inspectors to reach 5 million homes each year throughout the country.

The Impact of the Energy Inspection on New Jersey’s Economy

Implementing SB 2167 with affordable home energy inspections that encourage homebuyers to invest in energy efficiency in their own economic interest will also benefit the environment and other sectors of the economy. The Table below shows the estimated gains for each sector if this bill is successful in achieving its goals.

Economic Impact Of Energy-Efficiency Program In New Jersey

(Assumes 100,000 homes per year)

The National Picture

If improved as identified in this article, SB 2167 could and should be duplicated in all States. If it were, there could be a 5% reduction in the energy used throughout the economy, and greenhouse gases would be reduced by over 4%. Once the program is mature, it would save a whopping 5.3 Quads of energy per year.

In Summary

New Jersey SB 2167 is landmark legislation that is attempting to address energy efficiency in a very significant and largely untapped market…existing homes. By focusing on home energy inspections rather than energy “ratings” in this proposed legislation, the State can reinforce and ensure the Bill’s original intent of successfully reaching this market. In doing so, New Jersey will be providing home buyers with an economically viable avenue to combat high energy prices and protect the environment.

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State Policies Give Rebirth to Utility Energy-Efficiency Programs

By Lowell Ungar
Senior Policy Analyst, Alliance to Save Energy

Utility demand-side management (DSM) programs meet customer needs by helping customers use less electricity rather than by generating more electricity. They have reduced peak electric load in this country by as much as 30 gigawatts, thus avoiding the need for as many as 100 new power plants, reducing air pollution and global warming, and saving customers billions of dollars. Yet funding for these programs was cut roughly in half in the late 1990s as the electric industry restructured.

In the past year there has been a resurgence of interest in state policies to reinvigorate and expand these utility programs and similar state-run programs. Several major new reports discuss how states and utilities can work together to serve their citizens and ratepayers using energy efficiency and other clean energy policies:

• The National Action Plan for Energy Efficiency brought together more than 50 organizations, led by Jim Rogers, chairman of the Edison Electric Institute and CEO of Duke Energy, and Diane Munns, President of the National Association of Regulatory Utility Commissioners and a member of the Iowa Utilities Board. They seek “to create a sustainable, aggressive national commitment to energy efficiency through gas and electric utilities, utility regulators, and partner organizations.”
• The Western Governors’ Association Clean and Diversified Energy Initiative set an ambitious goal of a 20 percent increase in energy efficiency by 2020 in the West; the Energy Efficiency Task Force Report examines how to achieve it.
• The U.S. Environmental Protection Agency’s Clean Energy-Environment Guide to Action details many policies and practices states are adopting to manage their energy needs and air quality in the absence of a strong national energy policy.
• The Department of Energy is to issue a report on state and regional policies that promote utility energy-efficiency programs under section 139 of the Energy Policy Act of 2005.

Together these reports set forth the state policies needed to help utilities take the counterintuitive step of initiating and supporting effective programs to reduce their own sales. These policies include:

• Adopt energy-efficiency goals, requirements, or commitments, while reporting on progress and providing oversight. A target focuses effort and helps measure progress. For example, California conducted a study of the potential savings from cost-effective energy-efficiency programs in the state, set targets for each of its regulated electric and natural gas utilities, required each utility to submit plans to meet those targets, and approved $2 billion in funding for the planned programs over three years.
• Use energy efficiency as a priority resource. Energy-efficiency programs can often meet customer needs more cheaply than new supply-side infrastructure, usually with no air or greenhouse gas emissions and no siting controversies. The programs can also be targeted to help address critical transmission or generation constraints. As utilities in some regions plan to build the first new generating plants and transmission lines in years, they are showing more interest in alternatives. For example, Georgia Power in its most recent Integrated Resource Planning (IRP) process agreed to initiate the first energy-efficiency programs in a decade.
• Provide robust and stable program funding. Utilities and states cannot conduct energy-efficiency programs without funding. Funds can be provided as part of utility rates or through a small surcharge on utility bills (a public benefits fund or system benefits charge). In either case, it’s important that funding be maintained over many years to allow planning and development of the energy-efficiency programs. For example, Wisconsin last year increased its public benefit fund and protected it from raids to pay for state deficits.
• Set rates to incentivize utilities and customers. Typically utilities earn more by selling more energy, but customers are often best served by being helped to use less energy. It is important to “decouple” utility revenues from sales, or to provide utilities with performance incentives for effective energy efficiency programs, in order to align utility benefits with customer benefits. In addition, customer rates should be designed to reward lower energy use. For example, Northwest Natural, a natural gas utility in Oregon, has had a “conservation tariff” since 2002 that helps it promote energy savings rather than sales.
• Carefully evaluate energy-efficiency programs. Careful measurement and verification of energy savings from the programs, along with the use of appropriate cost-effectiveness tests, enables improvement of the programs and assures all stakeholders that they can rely on the energy savings. For example, in Texas savings estimates used to meet the state peak load reduction requirements are verified by a contractor to the Public Utility Commission of Texas.

Utility and state energy-efficiency programs have a tremendous potential, but experience shows they won’t happen on their own, even in states with competitive electric markets. State policies to provide the right goals, planning processes, funding, and incentives can help make utilities partners in providing low bills, reliable service, and cleaner air through energy efficiency.

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California

Executive Order 26
Issued by Governor 10/18/06
EO 26 orders the State Secretary for Environmental Protection to coordinate with the Climate Action Team to develop a plan by June 1, 2008, that will incentivize investment and compliance and enhance research in GHG reducing technologies. It will develop and demonstrate GHG reduction technologies through a variety of options: research tax credits, monetary and non-monetary incentives, public/private partnerships, investment tax credits, and accelerated depreciation.

Assembly Bill 2576
Sent to Governor 8/21/06, Signed into law 9/29/06
AB 2576 would require the Public Utilities Commission (PUC) to ensure that all electrical or gas corporations with PUC approved discount programs use a single application form, enabling an applicant to alternatively apply for any energy assistance program for which the applicant may be eligible.

Senate Bill 757
Vetoed by Governor 9/30/06, In Senate as unfinished business 10/4/06
SB 757 would require the California Environmental Protection Agency (EPA) to adopt recommendations, policies and programs by January 1, 2007, to reduce the growth rate of petroleum consumption, increase transportation energy efficiency and use of alternative fuels. It also would require the secretary of the California EPA to take action to influence the United States Congress and Department of Transportation to double the combined fuel economy of cars and light trucks by 2020, among other measures.

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Illinois

Executive Order 11
Issued by Governor 10/5/06
EO 11 creates the Illinois Climate Change Advisory Group to provide recommendations to the Office of the Governor regarding climate change policy.

Kentucky

Executive Order 1297
Issued by Governor 10/12/06
EO 1297 directs the Kentucky Department of Education to assist school districts in designing and planning school facilities that can be ENERGY STAR certified. EO 1297 also requests that the Capital Planning Advisory Board develop or adopt recommended practices or guidelines incorporating energy-efficiency and high performance criteria for the design and construction of all new government and public university buildings.

Executive Order 1298
Issued by Governor 10/12/2006
EO 1298 directs the Finance and Administration Cabinet to improve the fuel efficiency of Kentucky's transportation fleet by rightsizing and procuring more fuel-efficient/alternative-use replacement vehicles. Additionally, EO 1298 directs the Office of Energy Policy to commit $1 million during the next two years to the research, development, deployment, and commercialization of renewable energy and energy-efficient projects.

Pennsylvania

House Bill 3009
Introduced 10/6/06, Referred to Consumer Affairs Committee 10/17/06
HB 3009 would enable the Pennsylvania Public Utilities Commission to provide supplemental funding to the Low-Income Weatherization Assistance Program in order to help eligible families with reducing their home's energy consumption. Funding for this supplement will come from unanticipated sales tax revenue from energy price increases.

House Bill 3013
Introduced 10/7/06, Referred to Environmental Resources and Energy Committee 10/17/06
HB 3013 would create an energy-efficient home assistance pilot program that shall award grants of up to $5,000 to homebuyers to offset closing costs or down payment assistance for homes that meet criteria for energy efficiency, alternative energy systems, or both.

House Bill 3015
Introduced 10/11/06, Referred to Environmental Resources and Energy Committee 10/17/06
HB 3015 would lift the state tax on the sale or use of a solar energy system by an individual for nonbusiness use. The bill would also lift the state tax on Energy Star labeled products.

House Bill 3024
Introduced 10/13/06, Referred to Environmental Resources and Energy Committee 10/17/06
HB 3024 would create a lending program for electricity meter use to encourage consumers to become more informed energy users and make decisions that will reduce energy consumption, as well as encourage citizens to consider newer high-efficiency appliances.

House Bill 3026
Introduced 10/13/06, Referred to Environmental Resources and Energy Committee 10/17/06
HB 3026 would establish the Pennsylvania Energy Freedom Support Account within the Energy Development Fund to help Pennsylvania meet its energy needs while protecting the public and the environment.

House Bill 3040
Introduced and Referred to the Finance Committee 10/17/06
HB 3040 would authorize the Neighborhood Energy Assistance Tax Credit, providing financial assistance, labor, material, and technical advice to aid in the physical improvement of an individual residence that will result in more efficient use of energy and a reduction in energy costs within the individual residence.

House Bill 3048
Introduced and Referred to Finance Committee 10/18/06
HB 3048 would create the High-Performance Buildings Tax Credit, rewarding builders that promote better energy and environmental standards for construction, rehabilitation and maintenance of Pennsylvania buildings.

House Bill 3052
Introduced 10/19/06, Referred to the Environmental Resources and Energy Committee 10/20/06
HB 3052 would create the Interagency Task Force on Energy, which would work to reduce energy use in state buildings, promote energy efficiency in the state motor vehicle fleet, and provide recognition of efforts to improve state energy efficiency.

House Bill 3075
Introduced and Referred to Transportation Committee 10/25/06
HB 3075 would authorize private entities or non-state organizations to develop and operate transportation facilities in order to improve safety, reduce congestion, abate environmental pollution, advance energy efficiency or conservation, improve homeland security, and increase capacity or enhance economic efficiency.

Senate Bill 1349
Introduced and Referred to the Environmental Resources and Energy Committee 10/11/06
SB 1349 is known as the Building Energy Conservation Act and would grant the Department of Labor and Industry and the Department of Community Affairs and Economic Development to exercise specific authority to assure that building construction uses energy-efficient materials and techniques.

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New Jersey

Assembly Bill 3490
Introduced and Referred to the Environment and Solid Waste Committee 10/19/06
AB 3490 would create the position of Director of Energy Savings within the Department of the Treasury, which will assist in reducing the State's energy expenses, which already total nearly $128 million annually.

Assembly Bill 3592
Introduced and Referred to the Environment and Solid Waste Committee 10/23/06
AB 3592 would require that all newly constructed housing for which credit is issued under the "Fair Housing Act" be constructed in accordance with any building sub codes which may be promulgated for green buildings. In addition, the bill requires the Commissioner of Community Affairs to issue green building techniques and material guidelines for builders and planners of affordable housing.

Assembly Bill 3595
Introduced and Referred to Environment and Solid Waste Committee 10/23/06
AB 3595 would authorize the Commissioner of Community Affairs to amend the Uniform Construction Code's energy sub code to establish enhanced energy-saving construction requirements. The Commissioner would be required to adopt only those enhanced requirements whose additional cost will be offset in less than seven years by a resulting reduction in energy consumption.

Assembly Bill 3596
Introduced and Referred to Housing and Local Government Committee 10/23/06
AB 3596 would require the Commissioner of Community Affairs, in consultation with the Board of Public Utilities and the Home Inspection Advisory Committee in the Division of Consumer Affairs in the Department of Law and Public Safety, to adopt an energy rating code to be used by licensed home inspectors in the preparation of an energy rating for a house inspected for a buyer in contemplation of its purchase.

Senate Bill 2152
Reported from Senate Committee as a Substitute, 2nd Reading 10/23/06
SB 2152 authorizes the Commissioner of Community Affairs, in consultation with other State agencies, to make available to the public a green building manual for the purpose of ensuring that standards are available for those owners and builders who participate in any state program that encourages or requires the construction of green buildings.

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