New Jersey § 48:3-87

§ 48:3-87.

a. No later than one year after the date of enactment of P.L.2018, c. 17 ( C.48:3-87.8 et al.), 1 the Board of Public Utilities shall require each electric public utility and gas

public utility to reduce the use of electricity, or natural gas, as appropriate, within

its territory, by its customers, below what would have otherwise been used. For the purposes of this section, a gas public utility shall reduce the use of natural

gas for residential, commercial, and industrial uses, but shall not be required to

include a reduction in natural gas used for distributed energy resources such as combined

heat and power. Each electric public utility shall be required to achieve annual reductions in the

use of electricity of two percent of the average annual usage in the prior three years

within five years of implementation of its electric energy efficiency program. Each natural gas public utility shall be required to achieve annual reductions in

the use of natural gas of 0.75 percent of the average annual usage in the prior three

years within five years of implementation of its gas energy efficiency program. The amount of reduction mandated by the board that exceeds two percent of the average

annual usage for electricity and 0.75 percent of the average annual usage for natural

gas for the prior three years shall be determined pursuant to the study conducted

pursuant to subsection b. of this section until the reduction in energy usage reaches

the full economic, cost-effective potential in each service territory, as determined

by the board. b. No later than one year after the date of enactment of P.L.2018, c. 17 ( C.48:3-87.8 et al.), the board shall conduct and complete a study to determine the energy savings

targets for full economic, cost-effective potential for electricity usage reduction

and natural gas usage reduction as well as the potential for peak demand reduction

by the customers of each electric public utility and gas public utility and the timeframe

for achieving the reductions. The energy savings targets for each electric public utility and gas public utility

shall be reviewed every three years to determine if the targets should be adjusted. The board, in conducting the study, shall accept comments and suggestions from interested

parties. c. No later than one year after the date of enactment of P.L.2018, c. 17 ( C.48:3-87.8 et al.), the board shall adopt quantitative performance indicators pursuant to the

“Administrative Procedure Act,” P.L.1968, c. 410 ( C.52:14B-1 et seq. ) for each electric public utility and gas public utility, which shall establish reasonably

achievable targets for energy usage reductions and peak demand reductions and take

into account the public utility's energy efficiency measures and other non-utility

energy efficiency measures including measures to support the development and implementation

of building code changes, appliance efficiency standards, the Clean Energy program,

any other State-sponsored energy efficiency or peak reduction programs, and public

utility energy efficiency programs that exist on the date of enactment of P.L.2018, c. 17 ( C.48:3-87.8 et al.). In establishing quantitative performance indicators, the board shall use a methodology

that incorporates weather, economic factors, customer growth, outage-adjusted efficiency

factors, and any other appropriate factors to ensure that the public utility's incentives

or penalties determined pursuant to subsection e. of this section and section 13 of P.L.2007, c. 340 ( C.48:3-98.1 ) are based upon performance, and take into account the growth in the use of electric

vehicles, microgrids, and distributed energy resources. In establishing quantitative performance indicators, the board shall also consider

each public utility's customer class mix and potential for adoption by each of those

customer classes of energy efficiency programs offered by the public utility or that

are otherwise available. The board shall review each quantitative performance indicator every three years. A public utility may apply all energy savings attributable to programs available

to its customers, including demand side management programs, other measures implemented

by the public utility, non-utility programs, including those available under energy

efficiency programs in existence on the date of enactment of P.L.2018, c. 17 ( C.48:3-87.8 et al.), building codes, and other efficiency standards in effect, to achieve the

targets established in this section. d. (1) Each electric public utility and gas public utility shall establish energy

efficiency programs and peak demand reduction programs to be approved by the board

no later than 30 days prior to the start of the energy year in order to comply with

the requirements of this section. The energy efficiency programs and peak demand reduction programs adopted by each

public utility shall comply with quantitative performance indicators adopted by the

board pursuant to subsection c. of this section. (2) The energy efficiency programs and peak demand reduction programs shall have a

benefit-to-cost ratio greater than or equal to 1.0 at the portfolio level, considering

both economic and environmental factors, and shall be subject to review during the

stakeholder process established by the board pursuant to subsection f. of this section. The methodology, assumptions, and data used to perform the benefit-to-cost analysis

shall be based upon publicly available sources and shall be subject to stakeholder

review and comment. A program may have a benefit-to-cost ratio of less than 1.0 but may be appropriate

to include within the portfolio if implementation of the program is in the public

interest, including, but not limited to, benefitting low-income customers or promoting

emerging energy efficiency technologies. (3) Each electric public utility and gas public utility shall file with the board

implementation and reporting plans as well as evaluation, measurement, and verification

strategies to determine the energy usage reductions and peak demand reductions achieved

by the energy efficiency programs and peak demand reduction programs approved pursuant

to this section. The filings shall include details of expenditures made by the public utility and

the resultant reduction in energy usage and peak demand. The board shall determine the appropriate level of reasonable and prudent costs

for each energy efficiency program and peak demand reduction program. e. (1) Each electric public utility and gas public utility shall file an annual petition

with the board to demonstrate compliance with the energy efficiency and peak demand

reduction programs, compliance with the targets established pursuant to the quantitative

performance indicators, and for cost recovery of the programs, including any performance

incentives or penalties, pursuant to section 13 of P.L.2007, c. 340 ( C.48:3-98.1 ). Each electric public utility and gas public utility shall file annually with the

board a petition to recover on a full and current basis through a surcharge all reasonable

and prudent costs incurred as a result of energy efficiency programs and peak demand

reduction programs required pursuant to this section, including but not limited to

recovery of and on capital investment, and the revenue impact of sales losses resulting

from implementation of the energy efficiency and peak demand reduction schedules,

which shall be determined by the board pursuant to section 13 of P.L.2007, c. 340 ( C.48:3-98.1 ). (2) If an electric public utility or gas public utility achieves the performance targets

established in the quantitative performance indicators, the public utility shall receive

an incentive as determined by the board through an accounting mechanism established

pursuant to section 13 of P.L.2007, c. 340 ( C.48:3-98.1 ) for its energy efficiency measures and peak demand reduction measures for the following

year. The incentive shall scale in a linear fashion to a maximum established by the board

that reflects the extra value of achieving greater savings. (3) If an electric public utility or gas public utility fails to achieve the reductions

in its performance target established in the quantitative performance indicators,

the public utility shall be assessed a penalty as determined by the board through

an accounting mechanism established pursuant to section 13 of P.L.2007, c. 340 ( C.48:3-98.1 ) for its energy efficiency measures and peak demand reduction measures for the following

year. The penalty shall scale in a linear fashion to a maximum established by the board

that reflects the extent of the failure to achieve the required savings. (4) The adjustments made pursuant to this subsection may be made through adjustments

of the electric public utility's or gas public utility's return on equity related

to the energy efficiency or peak demand reduction programs only, or a specified dollar

amount, reflecting the incentive structure as established in this subsection. The adjustments shall not be included in a revenue or cost in any base rate filing

and shall be adopted by the board pursuant to the “Administrative Procedure Act.” f. (1) The board shall establish a stakeholder process to evaluate the economically

achievable energy efficiency and peak demand reduction requirements, rate adjustments,

quantitative performance indicators, and the process for evaluating, measuring, and

verifying energy usage reductions and peak demand reductions by the public utilities. As part of the stakeholder process, the board shall establish an independent advisory

group to study the evaluation, measurement, and verification process for energy efficiency

and peak demand reduction programs, which shall include representatives from the public

utilities, the Division of Rate Counsel, and environmental and consumer organizations,

to provide recommendations to the board for improvements to the programs. (2) Each electric public utility and gas public utility shall conduct a demographic

analysis as part of the stakeholder process to determine if all of its customers are

able to participate fully in implementing energy efficiency measures, to identify

market barriers that prevent such participation, and to make recommendations for measures

to overcome such barriers. The public utility shall be entitled to full and timely recovery of the costs associated

with this analysis. g. For the purposes of this section, the board shall only consider usage for which

public utility energy efficiency programs are applicable. 1

L.2018, c. 17, eff. May 23, 2018.