State Action on Electricity

Much of the regulation of the U.S. electricity sector takes place at the state level, from the technology used to generate power to how much customers pay for it. In response to concerns about climate change and other issues, states are implementing a variety of policies that have contributed directly or indirectly to a steady decline in greenhouse gas emissions from the U.S. power sector since its peak in 2007.  

Utility-targeted policies

The most well known state electricity policies target the sources of electricity for consumption in the state. Briefly, these are:

  • Carbon limits – These tend to be technology-neutral, and serve to limit the greenhouse gas emissions that can be generated on a per unit basis (a performance standard) or an absolute basis (a cap). Fourteen states currently set carbon limits on electricity generators.
  • Portfolio standards – These set a minimum requirement for the amount of electricity that must be provided from preferred technologies. The most common are Renewable Portfolio Standards that favor wind and solar (but sometimes biomass, hydroelectricity, or other renewable fuels). A few states have Alternative Energy Portfolio Standards to promote natural gas or advanced nuclear technologies. Clean Energy Standards have recently been passed that include existing nuclear plants with renewable technologies.

Closely associated with portfolio standards are the accounting framework needed to make sure that each unit of clean electricity is “counted” by only one utility. Renewable Energy Credits (RECs) are the accounting unit for eligible clean energy, and multiple registries exist for tracking the creation and retirement of RECs.

Efficiency Standards

States can also mandate that utilities reduce energy consumption in the state. For example, Maryland passed legislation (the EmPOWER Energy Efficiency Act) that set per capita energy reduction targets that utilities help meet.

Renewable and Alternate Energy Portfolio Standards

Energy Efficiency Standards and Targets

A range of state policies are contributing to the decline in greenhouse gas emissions from the power sector.

Consumer-targeted policies

Other policies work to incentivize consumers to improve their energy efficiency or their use of clean energy. These primarily address financial hurdles that consumers currently face, but sometimes (as is the case for green pricing programs) they address customers’ limited access to markets.

Net Metering

This policy allows residential or commercial buildings that generate electricity on-site (typically through rooftop solar panels) to receive financial compensation for any excess electricity they generate but do not use. This approach has generated some controversy because of rapidly falling rooftop solar panel prices, but is currently very common in the U.S.

Net Metering Programs

Green Pricing

These require utilities to offer ways for consumers to buy “green” electricity if they want, even if it costs more than the standard service. Since it is impossible to directly track the electrons flowing through wires to a customer’s house, the program may use RECs to accurately account for the sale of qualifying power. Green electricity products are also common in “retail choice” states, where regulations have been changed to allow customers to select their electricity supplier.

Green Pricing Programs

Public Benefit Funds

These are state-level programs that ensure continued support for cost-effective energy efficiency and/ or renewable energy programs. The funds are supported through either small charges on customers’ bills or specified contributions from utilities. The funds are used to invest in research and development, demand-side management, and low-income energy assistance. Currently, 20 states and the District of Columbia have specific PBF legislation and/or regulatory orders. An additional six states—while not maintaining formal PBFs—do fund renewable energy and/or energy efficiency programs.

Public Benefit Funds

Property Assessed Clean Energy (PACE)

PACE programs let property owners take out a loan to install clean energy technology, such as solar panels, or energy-saving retrofits, and pay it back through assessments on property tax bills. If the property is sold before the loan is paid off, the new owner takes over payment.

Property Assessed Clean Energy (PACE) Programs

On-bill Financing

These programs address the high upfront costs of clean energy and energy efficiency technology in a slightly different way than PACE programs. The monthly finance charge for the technology is added to an owner’s utility bill. In some cases, the utility pays the upfront costs, but third parties can also be involved.