Energy Efficiency Standards

Kentucky does not have a statewide energy efficiency resource standard (EERS) to require energy efficiency savings from its electricity or natural gas utilities. Under Governor Steve Beshear’s Energy Plan, Kentucky set a voluntary goal of reducing its projected 2025 energy consumption by 18%.

Resource Planning

Each electric utility under Kentucky Public Service Commission (PSC) jurisdiction must file a resource plan every three years. Utilities are on a staggered filing schedule so each plan filing is six months after the previous utility's filing. Integrated resource plans have a 15-year forecast timeframe. Utilities are required to consider conservation, load management and demand-side measures as part of their plan to meet future energy needs.

Rate Structures & Incentives

Cost Recovery

The PSC may provide for full cost recovery of those programs through rates. Efficiency programs can be approved as part of the utility's rate case or as a separate proceeding.

Lost Revenue Recovery

The PSC may approve energy efficiency programs for utilities and can allow utilities to include a customer surcharge to recover lost revenues from approved and cost-effective programs.

Utility Incentives

The PSC has the authority to approve utility incentives for approved and cost-effective demand-side programs.

Noncompliance Penalty

Kentucky does not have a mandatory energy efficiency requirement for utilities and therefore does not have any policies for noncompliance.

Stakeholder Collaboration

Kentucky utilities run their own utility-specific energy efficiency stakeholder groups that may include industry, commercial customers, academics, housing advocates, non-profits, governments, chambers of commerce and others identified by the utilities. These groups bring together key stakeholders within the service territories to address key issues related to utility energy efficiency plans and programs.

Program Evaluation

Cost-Effectiveness Tests

For approval, energy efficiency programs must be shown to be cost-effective, though there is no methodology specified in statute for determining cost-effectiveness. 

The PSC determined that having the results from multiple cost-effectiveness tests available provides a broad view of the potential impacts of a proposed program, and ordered that the Total Resource Cost Test (TRC), Rate Impact Measure (RIM), Participant Cost Test (PCT) and Utility Cost Test (aka Program Administrator Cost Test, PACT) are all required to pass for the approval of a new demand-side program, or additional documentation must be provided to justify the need for the program. As with most states, the TRC is the primary screening test for cost-effectiveness.

Net vs. Gross

Kentucky utilities are not required to report net savings or account for free-ridership or spillover effects. They report gross savings for their approved energy efficiency programs. On a utility-by-utility basis, however, utilities do report both gross and net savings and may also use net savings calculations for their program planning.

Technical Resource Manual

Kentucky does not have a statewide TRM for its utilities' energy efficiency programs.

State Energy Plan or Vision

Former Governor Beshear's energy plan, Intelligent Energy Choices for Kentucky's Future, provides a framework for aggressively increasing the use of renewable energy sources, improving energy efficiency, developing cleaner methods for the use of fossil energy resources, diversifying the state's electricity and transportation energy portfolios and creating stronger integration of the state's agriculture and energy economies. In its energy efficiency strategy, it has a goal of offsetting 18% of the state's total energy demand through efficiency by 2025.

State Agency Energy Reduction Requirement

Kentucky does not have a specific policy for the reduction of energy use by state agencies, though it does recommend the development of strategies as part of its energy plan and requires state buildings to purchase cost-effective energy efficient products.

EE in State Buildings

Kentucky requires that all construction or renovation of public buildings for which 50% or more of the total capital cost is paid by the state must be renovated or designed to meet high-performance building standards. This legislation also requires that all building leases for the state or any of its agencies meet ENERGY STAR high-performance building standards after July 1, 2018. Public buildings must purchase ENERGY STAR qualified products if life-cycle cost analysis determines they are cost-effective.

Building evaluation criteria and benchmarks are set by the High Performance Buildings Advisory Committee and Finance and Administration Cabinet; LEED certification is required for new buildings unless compliance is shown to cause the agency an "extraordinary undue burden."  

The Kentucky Finance and Administration Cabinet created and uses a software program (CEMCS or Commonwealth Energy Management and Control System) to benchmark energy use in state government buildings. Current state policy is to publicly disclose building performance for all buildings in the CEMCS as they are added to the system, and as the budget allows over time.

Key Policymaker Contacts