Cities are increasingly acting as market catalysts to encourage and require building owners to improve energy performance. However, cities implementing building performance policies that require actions like audits or re-tuning may experience conflicts with their regulated utilities’ efficiency programs, which depend on energy savings being additional—not attributable to market adoption or preexisting laws. These utility programs preclude free ridership, meaning that the energy savings should be achieved by someone who otherwise would not have acted in the absence of the incentive or rebate. Utilities may decline to offer incentives where cities require particular actions, in turn dissuading cities from enacting ordinances that would lead to further efficiency improvements. This regulatory challenge impedes what could otherwise be a shared goal of improving energy efficiency.
Finding solutions that allow city ordinances and utility programs to coexist is vital as cities are taking climate and energy matters into their own hands. Cities and utilities have so far navigated this problem informally. One potential approach is to apply established models from the world of energy codes, where some state regulators have permitted utilities to earn energy savings credit from supporting adoption of energy codes, or from improving code compliance. We consider how this approach and other frameworks could be applied to building performance policies. More specifically, this paper lays out a theory for how utilities can collaborate with local partners to drive deeper energy savings, with oversight from regulators, and examines the question of attributing the savings between the city and utility.
Published in August 2018, this paper was complementary to IMT’s Putting Data to Work toolkit that was released in February 2018.