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Blog Dec 22, 2020

Why electric companies offer energy efficiency rebates

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Every for-profit corporation aims to maximize profits, yet electric companies offer energy efficiency rebates to their clients. These rebates are meant to encourage consumers to conserve energy by adapting energy-efficient equipment and to develop cultures and behavior that promote energy conservation by avoiding wastage and unnecessary usage. The companies often provide energy efficiency products like bulbs, and other times, and sometimes they give attractive discounts just to encourage consumers to conserve as much energy as possible. 

Various rebate programs vary from one institution to another. They all have one underlying purpose which is to have you save some bucks off your electricity or power bill. These incentives are not only financial but also include the provision of energy saver water heaters, HVAC systems, building insulation as well as other electrical appliances. There is a database where you can get to know state incentives and policies for efficiency programs and renewable energy. This site is the Database of State Incentives for Renewable & Efficiency (DISIRE). 

These rebates might seem counterproductive since you would expect that these companies would encourage more consumers to make more money. You would expect the companies not to worry about consumers wasting energy as long as they pay for it. However, that is not the case. Energy conservation as it turns out significantly benefits energy companies and creates avenues for the companies to make more money. Here are a few reasons as to why they offer these rebates.

Marketing Purposes

First and foremost, all companies want to keep their customer base growing. Part of growing a customer base involves advertising and marketing. The more potential clients know about your business, the more likely they are to start using your services. In the electricity market, most consumers look for companies that offer them discounts and help them save on energy costs. So, if an electric company seems to be assisting their customers to save money even if it is through rebates, they will no doubt attract more customers, while maintaining their loyal base. As long as the customer is saving something on their bill, they will select that company that enables them to save.

Reduce the Cost of Production

Maximizing a company’s profit goes hand in hand with increasing sales, and reducing the cost of production. Electricity companies have very expensive equipment that requires consistent maintenance. It is a capital intensive business. As the population continues to grow, and more people require services from the electricity companies, it makes sense to encourage existing consumers to conserve energy so that the companies can distribute that energy to new clients without having to spend on more infrastructures. The companies solve two challenges with one solution. They increase their customer base, sell more electricity, and make more profit without having to spend more, or with minimal spending on equipment and rebates. 

Balancing Demand and Supply

There are electricity companies where energy demand is more than they can supply. Such companies are forced to buy energy from neighboring areas to satisfy the demand in their area, but that is a costly solution. If the companies wanted to solve this problem without having to purchase extra electricity, they would need to build new power plants, which would eat into their profits by increasing the cost of production. Since there is a law capping the price of electricity to a particular level, it means that increasing the charges on their clients would not be an option, and even then the customers could switch to other companies.  The best alternative and short term solution that is also cost-effective is to encourage existing consumers to conserve energy as much as they can, so that the companies can use the excess to meet the extra demand. It is cheaper incorporating new clients in the same grid than building new facilities. 

Public Policy

In a bid to encourage the use of clean energy and to conserve the environment, governments in most world countries have made it a public policy to conserve energy, to conserve the environment. These policies are in a bid to sustainable use available resources keeping in mind that future generations will also need the same. Some governments have gone to an extent of setting aside some money from the tax that they use exclusively for this purpose. Good examples of state governments that have taken it upon themselves to encourage energy conservation include California and New Jersey. In New Jersey, the state has the New Jersey Clean Energy Program which gives financial incentives on behalf of the state, while in California; they have the California Energy Commission that is responsible for this purpose. 

As a Matter of Law

Some states have to incentivize conservation as a law. Companies that fail to achieve reaching the conservation targets risk facing stiff penalties. For this reason, companies have no other option but to institute measures that will ensure energy conservation, albeit to the level set by the authorities within which the jurisdiction they lie. 

Transitioning to Clean Energy

Electricity or rather energy companies are gradually progressing towards renewable sources of energy like wind and solar power. Most have realized that the current sources are unsustainable and will soon be depleted or scarce hence the need to set up a measure that will see them ready to tap into the available clean and renewable sources, the main being wind and solar. Offering rebates to their existing customers is a means of ensuring a wholesome transition process. With time, they will have to set up the needed infrastructure, and their clients will also be ready, hence there will not be a drastic effort trying to move clients from using conventional sources of energy, to renewable. To some extent, most companies are setting up the ground for this smooth transition. Such a gradual transition is not as hectic and will be cost-effective. 

Now that you know why electricity or energy companies offer energy efficiency rebates, it is also important that you know the various energy efficiency programs in your state and take advantage of the same. Only a few select states are mentioned here, but every state has its program.

Texas

According to the law in Texas, all transmission and distribution utilities (TDUs) should meet the set energy efficiency goals. According to the Energy Efficiency Resource Standards (EERS), all utilities should achieve savings of up to 0.4% of a company’s peak demand. Utility programs have to administer the programs to meet these goals while the REPs implement them. To recover the costs of offering the energy efficiency programs, the companies include the Energy Efficiency cost Recovery Factor (EECRF) rate in the tariffs and permits. 

Washington

In Washington, consumers are served by municipal utilities, public utility districts, rural cooperatives, and investor-owned utilities. Each of these utilities has to provide energy efficiency programs. The Utilities and Transportation Commission, responsible for the state’s regulation carries the oversight for the provision of the energy efficiency programs. Being a non-structured state, Washington has no public benefits funding to finance the programs and thus the investor-owned utilities have to recover their costs for these programs through tariff riders. 

Pennsylvania

In 2008, this state established the EERS following the enactment of Act 129. The law required that every electricity retail company file an energy efficiency and conservation plan which they did in 2009. In these plans, every company explained how they were reducing consumption and how they would provide energy efficiency measures to households with low incomes. Companies have to propose within those plans the cost-recovery tariff mechanism to raise finances with which to fund the energy conservation programs. For more information on the plans and budgets for energy efficiency programs, you can check the State Spending and Savings Tables.  

New York

New York’s energy efficiency programs are the responsibility of the New York Public Service Commission (PSC). Consumers in this state pay a mandatory system benefits charge (SBC) that is added to their utility bills. This fee is included in the utility bills irrespective of the source of the customer’s electricity. It is this charge that supports energy efficiency programs in the state for all customers and research purposes for these programs. Two other public power authorities are independent of the Commission’s jurisdiction that also offer energy efficiency programs to their consumers. These power authorities are the Long Island Power Authority and the New York Power Authority.

Energy Efficiency Loans 

Investing in energy efficiency is rather expensive considering the initial costs of equipment and installation. However, local and state governments as well as energy service companies offer a variety of loans to enable homeowners to invest. There are a variety of programs from which you can obtain a loan. You just need to identify the kind of loan you need, the nature of your facility, and the cost of investment. You can then approach the appropriate institution for the same, as long as you fulfill the institution’s requirements, with the most essential being a good credit score.

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