Energy Efficiency Utility Program of Vermont (EV)

Historically, in Vermont, 22 utility companies were responsible for delivering comprehensive energy efficiency programmes. However, potential for energy saving was hindered by the application of mixed incentives for utilities, and administrative inefficiency.
Accordingly, in 1999, Efficient Vermont (EV), was created and officially named Energy Efficiency Utility Programme ("EEU Program"), a state wide programme that would deliver energy efficiency services to different sectors throughout Vermont. EV is first of its kind in the USA and funded by electric customers' bills (Public Service Board n.d.).

Efficient Vermont (EV) provides energy efficiency programmes combining technical services and financial incentives to different sectors throughout Vermont in order to harness the energy efficiency potentials. It is a private, non-profit organization and funded by a special levy of around 0.5 US-ct/kWh or 4 % on customers 'electricity bills. Previously, EV was operated under a short-term (three-year) contract with Public Service Board (PSB). Since 2010, the contract-based model has been changed to an Order of Appointment structure and given the increased responsibilities assigned to EV. Under the new model EV retains its major functions but was granted a 12-year rolling Order of Appointment that enhances programme stability (Public Service Board n.d.).

Efficient Vermont is a regional measure.

Relevant sectors

• Services
• Residential
• Industrial

Efficient Vermont covers both buildings and appliances.

The Energy Efficiency Utility (EEU) – Efficient Vermont (EV) – aims to “design and implement demand-side services and initiatives to comprehensively address cost-effective opportunities associated with electricity and Heating-and-Process-Fuels energy efficiency” (Efficiency Vermont 2011a).
EV programmes include a wide range of technical and financial supports, which cover low energy building design, insulation & air sealing, heating, ventilation and air conditioning / cooling, lighting, appliances, and swimming pools, across all sectors.

Different programmes provided by Efficiency Vermont (EV) have different specific energy efficiency requirements. For example, the Energy Leadership Challenge requires the participating business to commit to achieving 7.5% energy savings over two years. Under the Vermont Energy Star Homes programme, the home should meet the requirement of Energy Star Certification.

Through the support of different programmes, Efficient Vermont addresses a very wide range of target groups:
Some examples:

Relevant target groups

• Property development company
• System supplier
• Architect
• Engineering consultant
• Installation contractor
• Facility management company
• Investor-occupier
• User
• Investor

As Efficiency Vermont’s programmes combine information, financial incentives, energy audit, etc., in most cases the direct beneficiaries will be investors and users of energy-efficient buildings and appliances.

The indirect beneficiaries of Efficiency Vermont’s programmes are numerous but actors on the supply side especially benefit indirectly, due to the increasing demand of energy efficiency products and services.

Direct beneficiaries

• User

• Investor

Indirect beneficiaries

• System supplier

• Architect

• Engineering consultant

• Installation contractor

• Facility management company

• Retail company

Relevant barriers

• Economic and financial barriers: Efficient Vermont provides financial incentives to home owners and thus addresses their difficult access to financing/lack of capital, for taking up energy efficiency measures.
• Knowledge and information barriers: The policy also addresses their lack of knowledge about building energy efficiency technologies and their cost-benefits
• Organisational barriers: The establishment of EEU also overcomes the problem faced by utilities, caused by mixed incentives, in providing energy efficiency programmes. That is, they sell energy on one hand and have to implement energy efficiency programmes to reduce energy use on the other hand.

Relevant incentives

• Increased (re-sale) value of the property: For investors, increased (re-sale) value of the property and unique selling proposition (USP) are the two major incentives to join in the energy efficiency programme provided by the EEU.
• Saved energy costs: For investor-occupiers, saved energy costs during the building use phase is an additional major incentive.

The activities of the EEU combine different types of measures which can almost be considered a policy package in their own right, although they are also combined with other measures:
Financing: For example, in 2011, Efficiency Vermont (EV) was in partnership with the “Vermont’s Weatherization Assistance Programs” providing low-income consumers with free replacements for inefficient older appliances, with ENERGY STAR appliances. EV also provided incentives for installing biomass-fuelled central heating systems, in collaboration with the government. In addition, EV provided a financial incentive of up to $7,500 per project for small businesses to improve their building energy performance (Efficiency Vermont 2012).
Providing information: To address the information/knowledge barriers faced by residential consumers about energy efficiency technologies and their cost-benefits as well as different energy efficiency programmes, EV set up a website (www.efficiencyvermont.com), a free hotline, and other informational resources.

Energy advice: With their access to each electricity account in the state, EV assists consumers to analyse their electricity use and offer free provision of energy consumption meters (Efficiency Vermont 2012; Hamilton 2010). Additionally, since 2011, EV also launched the Energy Leadership Challenge to encourage large electricity consumers to reduce their electricity usage by 7.5% over two years. Under this programme, EV helps each participant to create a comprehensive plan for energy savings and provides both technical and financial resources (Efficiency Vermont n.d.).
Regulation: In Vermont, the law enabled a franchise for a regulated EEU and the special levy for funding it (Sedano 2011).
Competitions & awards: The Efficiency Vermont Awards are given out annually. The Awards encourage innovations in both residential and commercial building projects.
Voluntary energy labelling: EV works closely with the builder to help identify the energy–efficient measures needed to achieve ENERGY STAR certification. EV then provides third party verification for a home that meets the requirements.
Virtually all new residential construction in Vermont should meet the “Residential Building Energy Standards” (RBES). An update to the Commercial Building Energy Standards (CBES) became effective January 3, 2012.
MEPS and energy labels for appliances are set by the federal government in the USA. The voluntary ENERGY STAR endorsement label for very energy-efficient appliances and homes can be especially used by EV in its programmes to define incentives or inform consumers, as the example above shows. Read more in our file on ENERGY STAR. Explore the policy guide and find the good practice example

The most innovative element of “Efficiency Vermont” is “EV” itself – that it is a state-wide independent administrator that designs, manages, and implements energy efficiency services for all sectors in Vermont.

Given the high success of EV in achieving energy savings – 2 % per year – it appears little can be improved here. However, EV could add efficient use of other resources to its portfolio or aim for an integrated optimisation of energy and resource efficiency.

In Vermont, the law enabled a franchise for a regulated Energy Efficiency Utility (EEU) and the special levy for funding it (Sedano 2011).

• A regulatory agency, Public Service Board (PSB)
• Department of Public Service (DPS), a separate state agency which is responsible for monitoring, reviewing, and verifying energy savings claimed by Efficiency Vermont. It also gives recommendations to the PSB on strategies for Efficiency Vermont.
• The Fiscal Agent manages the Energy Efficiency Utility Fund provided for EV (Public Service Board n.d.)

Funding
The Energy Efficiency Utility (EEU) Programme is funded by customers' electricity bills, known as the Energy Efficiency Charge. This charge is set by the Public Service Board (PSB) annually, collected by the electricity distribution utilities, and sent to the Fiscal Agent for depositing in the Energy Efficiency Utility Fund (Public Service Board n.d.).

Test procedures
No specific test procedures for energy efficiency are needed for EV itself, but the programmes it implements will rely on test procedures generated, e.g., in the preparation of MEPS and energy labels such as ENERGY STAR.

Others
EV needs highly qualified staff with knowledge of energy efficiency solutions and potentials as well as programme design, implementation, and evaluation.

The concept of an Energy Efficiency Utility (EEU) was developed by an agreement among all Vermont electricity utilities, the Vermont Department of Public Service, and other interested parties (Hamilton et al. 2005; Public Service Board n.d.).
Next, Vermont legislated for the creation of a franchise for a regulated Energy Efficiency Utility (EEU) and the special levy for funding it.
The franchise had to be selected and awarded the first three-year contract with a specified energy savings target. Since then, the contract-based model has been changed to a 12-year Order of Appointment structure.
EV then implemented its programmes to achieve its targets.
Finally, there was detailed monitoring of energy savings and costs, by programme and evaluation of cost-effectiveness. Department of Public Service (DPS) monitors, reviews, and verifies energy savings claimed by Efficiency Vermont.

Quantified target
Quantified targets are set for a three-year period. An indicator system has been well constructed and serves as a basis for various targets ranging from energy savings and resource benefits (i.e. present value of lifetime savings for all resources), market effects targets (e.g. increasing market shares for a particular efficiency technology), to administrative efficiency (Hamilton 2005).

International co-operation
There is no specific international co-operation involved in the Energy Efficiency Utility Programme, but the experience of Efficiency Vermont has been shared internationally.

• The organisation responsible for the design of the fund is the Public Service Board (energy regulator), whereas Efficiency Vermont is, itself, responsible for its programmes (Energy efficiency fund).

• Efficiency Vermont (Energy efficiency fund);
• Regulatory agency, Public Service Board (PSB) (energy regulator);
• Department of Public Service (DPS), a separate state agency which is responsible for monitoring, reviewing, and verifying energy savings claimed by Efficiency Vermont (government department); 
• The Fiscal Agent (also a government department) manages the Energy Efficiency Utility Fund provided to EV.

Efficiency Vermont can monitor the data needed for evaluation of each programme, such as number of participants or beneficiaries, the energy efficiency actions they have taken, and the unitary gross energy savings achieved by each action, as well as EV’s own programme costs.
EV can also monitor and analyse consumers’ electricity consumption because they have access to each electric account in the state (Efficiency Vermont 2012; Hamilton 2010).

• Annual saving verification;
• Technical Advisory Group for resolving issues that may arise from savings verifications and for developing energy characterization and savings calculations;
• Technical Reference Manual characterising energy-saving measures on the basis of several key parameters;
• ISO New England Measurement & Verification that is measured via an annual sampling plan for Efficiency Vermont custom business projects of different scales; 
• Quality Management that consists of the Efficiency Vermont Administrative Efficiency Quantifiable Performance Indicator (Admin QPI) Plan and the Efficiency Vermont Service Quality and Reliability Plan (SQRP). (Efficiency Vermont 2011a)

• Minimising free-rider effects: EV’s programmes aim for high participation rates and energy savings and are thus likely to minimise the share of free-riders. For example, EV also provides financial incentives to low-income consumers, e.g. the free replacement of inefficient older appliances with ENERGY STAR ones (Efficiency Vermont 2011a). Savings from these activities would otherwise not happen without these initiatives of EV.
• Minimising snap-back effects: Efficiency Vermont (EV) covers programmes or activities that minimize the snap-back effect. For instance, in their support programmes to low-income consumers; once an older appliance is replaced by an energy efficient one, there can be no snap-back. The same principle is applied to the installation of energy efficient technologies in industrial enterprises, which is financially and technically supported by EV. Additionally, EV also launched pilot programmes of low energy buildings in both residential and public sector (Efficiency Vermont 2012; Efficiency Vermont 2011b).
• Dynamic market transformation and/or innovation: Efficiency Vermont, as an energy efficiency programme operator, provides technical assistance and financial incentives to consumers across different sectors in order to encourage them to take up energy efficiency options. Thus it increases the demand of energy-efficient products and solutions, and contributes to the dynamic improvement of energy efficiency.
• Avoiding lost opportunities: Efficiency Vermont (EV) has designed programmes or activities that avoid lost opportunities. For example, EV launched Energy Leadership Challenge in 2011 to encourage large electricity consumers to reduce their electricity usage by 7.5% over two years. Under this initiative, EV has helped them to create a comprehensive plan for energy savings and provides both technical and financial resources (Efficiency Vermont n.d.).
• Minimising rebound effects: Efficiency Vermont (EV) provides education and information to a broad scope of actors. For example, its customer support and development provides consumers with education on energy-related topics (Efficiency Vermont 2011a). This may help to minimize the rebound effect.
• Creating Spill-over effects: Efficiency Vermont (EV) includes activities designed to maximise spill-over effects. For instance, EV organizes the Better Buildings by Design conference annually, which provides building professionals with a platform for information exchange and learning on various building energy efficiency innovations. As well as energy saving measures taken by enterprises in the Energy Leadership Challenge, the initiative may be further spread among the enterprises in the same industry (Efficiency Vermont 2011a).

Sustainability aspects
Total Resource Benefits (TRB) savings, which also include water saving, is a key performance indicator for programmes of Efficiency Vermont (EV).

Co-benefits
Efficiency Vermont expands its services to low-income users by providing free replacement of inefficient older appliances with ENERGY STAR ones. Also, the increased use of energy efficiency products increases the job opportunities in the market of energy efficiency product and service.

The following barriers came to light during the implementation of the policy:
Vermont, as a small state, has few very large customers in industry and the public sector. Thus, it is possible and practical for one single entity to be in charge of an energy efficiency programme for the whole state. However, if the principle were transferred to other large states, more entities would be needed. However, this may sacrifice the benefits of a single entity (Hamilton et al. 2005).
Since the Efficiency Vermont model is funded by electricity ratepayers, resource efficiency has not yet been financially supported (Hamilton et al. 2005).

Efficiency Vermont (EV) formulates plans where a three-year target of energy savings are specified. Here we take the 2009-2011 target as an example.
The total annual energy savings target during this period was 359,700 MWh/yr, whch is more than 2 % of total consumption. This is a very high target unprecedented in the World at that time.

During the 2009-2011 period, the total electricity saving amounted to 304,000 MWh/yr, which is around 2 % of total electricity consumption in Vermont. Over the lifetime of the energy-efficient technologies and buildings installed, this will avoid 2,135,000 tons of CO₂ emissions (Efficiency Vermont 2012).
These annual savings have been quite stable, but with a peak in 2008 (see figure).

A 85% of the estimated energy savings potential was realised in the period of 2009-2011.

During the period of 2009-2011, a budget of US$105,140,904 was planned (Efficiency Vermont 2012).

During the period of 2009-2011, the actual cost was US$103,945,415 (Efficiency Vermont 2012).
Programme participants and other sources contributed another US$ 18 million (Efficiency Vermont 2012).
Efficiency Vermont delivered energy savings in 2009, 2010, and 2011 at 3.8, 4.1, 4.3 US cents/ kWh saved, respectively. This compares to retail electricity rates around 12 US cents/ kWh consumed.

The societal benefit-to-cost ratio between 2009 and 2011 was expected to be 2.88 (Efficiency Vermont 2008)

Efficiency Vermont provides good economic value for ratepayers and society as a whole. The benefit-to-cost ratio of EV services was 2.4 to 1, 2.4 to 1 and 2.2 to 1 in 2009, 2010, and 2011, respectively. Although somewhat lower than expected, this is still very good.

The Efficiency Vermont model was expected to be cost-effective for the society as a whole as well as for consumers participating and benefitting from EV’s programmes, given the expected benefit-to-cost ratio of EV services that was higher than 2.0 for the period of 2009-2011.

The Efficiency Vermont model is cost-effective for the society as a whole as well as for consumers participating and benefitting from EV’s programmes. This is demonstrated by the actual benefit-to-cost ratio of EV services that was higher than 2.0 for the last three years.