2003 Winner
State of Vermont
Innovations in American Government Awards
Innovations in American Government Awards

Recently, the topic of energy has become quite controversial, with academics, businesses, and environmentalists engaged in heated debate. The central tension seems to be between consumption versus conservation. Can society reach a workable compromise between individual needs and the planet's depleting resources? How should the costs (financial and environmental) be distributed? The State of Vermont has established a program that conserves energy, helps businesses, and protects the environment. Efficiency Vermont, its statewide "energy efficiency utility" (EEU), provides a comprehensive and consistent set of energy efficiency programs to Vermont electric consumers. By integrating what was formerly a loose patchwork of energy efficiency programs throughout the state, the EEU successfully attains the associated economies of scale and significant cost benefits.

The three-year-old program improves upon the former energy efficiency structure in several ways. Under the former delivery model, each electric utility company was responsible for developing and delivering its own set of energy efficiency programs, with no statewide program coordination. Each electric company, no matter how large or small, had to acquire the expertise and resources to fulfill its energy efficiency mission mandated under the law.The costs of the efficiency programs were rolled into each utility's general rate structure, and were therefore not directly apparent to customers. Regulators, charged with ensuring compliance with state law, spent considerable time and effort reviewing each utility's program proposal and, in many cases, litigating major deficiencies. Today, under the new practice, all these problems have been cured. The State has made it easier for electric companies to deliver this statutory obligation through one centralized EEU.

The system is almost entirely funded via a direct charge on customers' bills, which makes it self-sustaining. Apart from reducing administrative and program hurdles, it assures an equitable distribution of services and benefits across the State. In achieving energy efficiency, there is an inherent difficulty in achieving multiple policy objectives that may have conflicting goals. This is evident in the electric companies' desire to sell as much electric power as possible while balancing the State's requirement of helping customers conserve that same power. Efficiency Vermont has resolved this through a performance-based contract with the Vermont Public Service Board. Under this contract, all the policy objectives are clearly prioritized so that one goal is not achieved at the expense of the other. The contract includes elements like performance indicators, targets, and specific requirements attached to these priorities.

Though the EEU program is unique, it is replicable in any state where utilities are facing increasing economic and environmental pressures. Already, the states of Maine, Wisconsin and Oregon are moving toward a state-run energy efficiency model. The model has also attracted interest among utility, governmental, and NGO representatives in Brazil, Australia, and China.

By relying on the two simple principles of integration and conservation, Efficiency Vermont has achieved remarkable energy savings and total resource benefits for the entire State. These benefits include substantial savings of electricity, fossil fuel, and water. Clearly, this self-funded, business-savvy, and environmentally friendly program has a bright future.

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