Alliance to Save Energy Disappointed in FERC Decision to End PJM Energy Efficiency Payments

The Alliance to Save Energy (ASE) is disappointed in the decision by the Federal Energy Regulatory Commission (FERC) allowing PJM Interconnection to end capacity market payments for energy efficiency resources.

"ASE firmly believes FERC's action could impede investment in energy efficiency," said Paula R. Glover, ASE President. "Promoting the growth of energy-saving innovation is essential, not only to emissions reduction, but to energy affordability, reliability, and the creation of jobs across industry sectors."

The Issue

After review of a filing by PJM that was supported by its Independent Market Monitor, FERC reversed the grid operator's 15-year policy of issuing capacity market payments for energy efficiency resources.

• Capacity payments to efficiency providers will end in the 2026-2027 delivery year.

• PJM argued that the benefits of energy efficiency resources are not driven by capacity payments.

• FERC found that PJM's proposal "continues to recognize the importance of energy efficiency by appropriately reflecting it in the load forecast," through reduced demand projections. This decreases the amount of capacity needed to be purchased in the market, which lowers customer costs.

• Several intervenors, including energy efficiency providers, disagreed with PJM's logic and its description of energy efficiency.

The Impact

ASE shares the view of energy efficiency providers that energy-savings initiatives function as a measurable resource that should be given financial value.

"The cheapest kilowatts are the ones we don't use, which is why wholesale markets have historically captured - and paid for - their value," Glover said. "By ending capacity payments, this decision puts further pressure on ratepayers to cover the costs of these critical programs."

ASE believes energy efficiency is valuable because it:

• Lowers consumer costs: Energy efficiency investments since 1980 have resulted in significant energy bill savings, particularly benefiting low- and middle-income households.

• Enhances resilience: Energy efficiency resources equip homes to handle extreme weather, reducing risks from utility outages and improving overall safety.

• Supports the economy: Energy efficiency firms added the most jobs of any technology in 2023, according to the U.S. Department of Energy.

About the Alliance to Save Energy

The Alliance to Save Energy is a coalition that promotes energy efficiency across all sectors of the economy. Through research, policy advocacy, education, and outreach, ASE works to ensure a clean, sustainable energy future.

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