State regulators passed new rules this week that will require utility companies to lower energy consumption and could save customers money.
The updated energy efficiency standards mark a major shift in the Louisiana Public Service Commission’s approach. In the past, utilities have managed their own efficiency programs. Louisiana will now use an independent administrator to oversee a state-run program.
Supporters of the change say it will add needed transparency and note an inherent conflict utilities face: If customers consume less energy, the utility makes less money. Utility companies opposed the addition of an administrator.
The Alliance for Affordable Energy, Louisiana’s utility watchdog, has advocated for the change since 2009. They say a utility-run model has stifled the ability of the state to take a more robust approach to saving power and, in turn, lowering energy bills.
“It was a long time coming,” said Logan Burke, the alliance’s executive director. “Louisiana residents deserve energy savings and all the benefits that come with them.”
Spearheaded by Commissioner Craig Greene, the five-member body voted 3-2 to advance the updated energy efficiency standards Wednesday.
“Customers want and need to lower their bills,” Greene said as he cast his vote. “They need tools to do this, and our bill has the potential to unleash competition in the energy efficiency market.”
Commissioners Davante Lewis and Foster Campbell also voted in favor of the rule.
The tight vote reflected some of the tension between commission members and at times, the meeting turned heated.
Eric Skrmetta, who has served on the commission for 15 years, opposed the addition of a third-party administrator, questioning the need. He said he worried how much power the commission would give to the administrator. Mike Francis, the commission’s chairman, also voted against the measure.
The rule requires the commission to hire an independent administrator by August so the entity can start working with utilities to build out a statewide energy efficiency program. The commission will have final approval over the initiative’s budget and design. Ahead of the vote, the rule was amended to require a certain proportion of the program’s budget go to administering programs directed at low-income residents and renters — 15% and 10%, respectively.
Under the new standards, utilities will no longer be able to charge customers to make up for reduced revenue due to lower energy consumption resulting from energy efficiency programs — another sticking point for companies. The mechanism, known as “lost contribution to fixed costs,” allowed the companies to charge customers for not using power to recoup the loss.
Energy efficiency advocates refer to these as “ghost recovery charges,” and say they prevent customers from receiving the full benefit of power-saving measures. A Together Louisiana analysis found utility companies charged Louisiana customers $37 million over the past nine years to compensate for their energy efficiency programs.
“We have been compensating utility companies for electricity that they never sold, that we never used,” said Together Louisiana analyst Erin Hansen.
Utilities will be able to charge customers if they can prove they are underearning because of energy efficiency measures, but the companies are required to take the year’s energy usage into account for their future revenue planning.
The new statewide energy efficiency program is required to start in January 2026. Utilities will be required to lower energy use by 0.4% in the first year then just over half-a-percent over the following four years. The administrator will also be tasked with tracking compliance with the rules’ targets. The companies will contribute 1.5% of their annual revenue to help pay for the program.
