New Jersey Approves Energy Efficiency Plan to Reduce Utility Costs

The New Jersey Board of Public Utilities on July 15 approved a one-year transition plan that reshapes the state’s energy efficiency programs ahead of the next program cycle, with the dual objective of lowering customer costs and preparing the electric system for a more flexible, technology-driven grid. The transition period, running from July 1, 2027, through June 30, 2028, introduces changes to program administration, utility compensation, and energy savings measurement intended to improve cost-effectiveness while supporting the state’s long-term clean energy strategy.

The regulator approved updates to the way utilities administer energy efficiency programs, including revisions to utility rate-of-return calculations and the adoption of a gross savings methodology that measures actual energy reductions achieved by efficient equipment rather than relying on projected savings. State officials estimate the revised approach can deliver equivalent energy savings at roughly 30 percent lower program costs, allowing efficiency investments to stretch further while continuing to support New Jersey’s energy and emissions reduction objectives.

The plan is also designed to reduce administrative expenses associated with statewide efficiency programs. The changes are expected to avoid more than $531 million in utility costs over the next decade by streamlining program administration across millions of electric and natural gas customers. A portion of customer utility bills funds these programs, making lower administrative costs directly relevant to long-term ratepayer affordability.

A central objective of the plan is to lay the groundwork for New Jersey’s planned Virtual Power Plant program, scheduled to launch in 2027. The initiative will encourage broader deployment of connected technologies such as smart thermostats, smart water heaters, electric vehicles, and heat pumps that can respond to grid conditions. Rather than relying primarily on customers to reduce electricity consumption during periods of high demand, the program will coordinate thousands of connected devices to help balance the grid, improve system reliability during extreme weather, reduce the need for additional infrastructure investment, and moderate electricity costs.