Legislative Analysis
Phone: (517) 373-8080
ENERGY WASTE REDUCTION PLANS
http://www.house.mi.gov/hfa
Senate Bill 273 as enacted Analysis available at
Public Act 229 of 2023 http://www.legislature.mi.gov
Sponsor: Sen. Sam Singh
House Committee: Energy, Communications, and Technology
Senate Committee: Energy and Environment
Complete to 2-5-24
SUMMARY:
Senate Bill 273 amends the Clean and Renewable Energy and Energy Waste Reduction Act to
revise or add provisions related to energy waste reduction plans. The bill is part of a package
of energy-related bills that also includes Senate Bills 271, 277, 502, and 519 and House Bills
5120 and 5121. Senate Bill 273 will take effect February 13, 2024. Among other things
described in detail below, the bill does all of the following:
• Requires utilities (including municipally owned and member-regulated electric
utilities) to adopt and file periodic energy waste reduction plans beginning in 2025.
• Generally requires energy waste reduction programs to achieve, beginning in 2026,
year-over-year energy savings (based on sales) of 1.5% for electric utilities and 0.875%
for natural gas utilities. (Previously the standards were 1.0% and 0.75%, respectively.)
• Provides for increased financial incentives for utilities that exceed the above savings.
• Provides for programs to electrify appliances and equipment that would otherwise use
fossil fuels.
• Requires energy waste reduction programs to assist low-income residential customers
achieve energy savings and implement related health and safety measures.
• Requires workforce and contractor development to provide advanced energy waste
reduction measures.
Energy waste reduction plans
Since December 31, 2021, electric providers whose rates are not regulated by the Michigan
Public Service Commission (MPSC) have not been required to implement energy waste
reduction programs1 for their customers under the act. The bill requires these providers (i.e.,
municipally owned electric utilities and member-regulated cooperative electric utilities) to
adopt an energy waste reduction plan in 2025 and every four years after 2025. Generally
speaking, these plans must be filed with and reviewed and approved or rejected by the electric
provider’s governing body and are enforced as provided in section 99 of the act. 2
Electric provider means any of the following:
• A person or entity that is regulated by the Michigan Public Service Commission
(MPSC) for the purpose of selling electricity to retail customers in Michigan.
• A municipally owned electric utility in Michigan.
• A cooperative electric utility in Michigan.
1
https://www.michigan.gov/mpsc/regulatory/ewr
2
http://legislature.mi.gov/doc.aspx?mcl-460-1099
House Fiscal Agency Page 1 of 9
 The bill also requires that, under a filing schedule established by the MPSC, an electric provider
or electric and natural gas provider subject to MPSC rate regulation must file a plan in 2025
and, after 2025, must file a plan no sooner than eight months after receiving a final order on
an integrated resource plan (IRP) as provided under section 6t of 1939 PA 3, the MPSC
enabling act, unless otherwise authorized by the MPSC. 3
A natural gas provider subject to MPSC rate regulation would have to file a plan by 2025 and
every four years after 2025 under a filing schedule established by the MPSC.
Efficient electrification measures
Electricity providers must file the waste reduction plan as described above as part of a customer
energy optimization plan, which can also include a plan to offer and promote efficient
electrification measures. (These provisions do not prohibit an electric utility from offering
transportation electrification programs as approved by the MPSC.)
Efficient electrification measure (defined in Senate Bill 271) means an electric
appliance or equipment installed in an existing building to electrify, in whole or part,
space heating, water heating, cooling, drying, cooking, industrial processes, or another
building or industrial end use that would otherwise be served by combustion of fossil
fuel on the premises and that meets best-practice standards for cost-effective energy
efficiency as determined by the MPSC. The term includes any of the following:
• A cold-climate air-source heat pump.
• An electric clothes dryer.
• A ground-source heat pump.
• High-efficiency electric cooking equipment.
• A heat pump or high-efficiency electric water heater.
Efficient electrification measures under a plan must either provide health and safety benefits
to occupants of the premises or do all of the following:
• Reduce total energy consumption at the premises. 4
• Reduce greenhouse gas emissions due to energy use over the life of the measure.
• For residential and commercial customers interconnected at secondary voltage, provide
annual average energy cost savings.
An electric provider can recover the costs of an efficient electrification measures program from
customers. An efficient electrification measures program cannot have the effect of increasing
electric rates for customers that do not participate in the program.
Energy waste reduction standard
Under the bill, each year beginning with 2026, and subject to section 97 of the act, 5 an electric
provider’s energy waste reduction programs must collectively achieve incremental energy
3
http://legislature.mi.gov/doc.aspx?mcl-460-6t (as amended by SB 502, http://legislature.mi.gov/doc.aspx?2023-SB-
0502). For a description of integrated resource planning (from 2017), see: https://www.michigan.gov/mpsc/-
/media/Project/Websites/mpsc/consumer/info/briefs/IRP_Issue_Brief_V2_12-20-17.pdf
4
This reduction is calculated as the amount by which the reduction in consumption of fossil fuels as a result of
electrification exceeds the increase of electricity consumption resulting from the displacement of fossil fuel
consumption as a result of electrification. (For conversion purposes, one kilowatt hour equals 3,412 Btus.)
5
http://legislature.mi.gov/doc.aspx?mcl-460-1097
House Fiscal Agency SB 273 as enacted Page 2 of 9
 savings equivalent to 1.5% of total retail electricity sales in megawatt hours in the previous
year, with an average life of at least eight years for energy waste reduction measures. [The act
previously required an electric provider’s energy waste reduction programs to collectively
achieve incremental energy savings each year through 2021 equivalent to 1.0% of total annual
retail electricity sales in megawatt hours in the previous year.]
The bill says that, as a goal, an electric provider’s energy waste reduction programs should
collectively achieve incremental energy savings equivalent to 2% of total retail electricity sales
in megawatt hours in the previous year, with an average life of at least eight years for energy
waste reduction measures, and that this goal should be included in the electric provider’s IRP
modeling scenarios under section 6t of the MPSC enabling act.
An electric provider subject to MPSC rate regulation cannot include electrification measures
in the calculation of its energy waste reduction savings for purposes of meeting the energy
waste reduction standard or for determining eligibility for the financial incentives described
below.
If an electric provider that is not subject to MPSC rate regulation implements an efficient
electrification measures plan, any reduction in energy consumption at a customer’s premises
from the conversion of fossil fuel use to electric equipment qualifies as incremental energy
savings for purposes of the above provisions, with that reduction calculated as the amount by
which the reduction in consumption of fossil fuels as a result of electrification exceeds the
increase of electricity consumption resulting from the displacement of fossil fuel consumption
as a result of electrification.
An electric provider that has a program to promote the installation of qualifying cold-climate
air-source heat pumps or qualifying ground-source heat pumps that includes incentives to
improve building envelope energy efficiency for participating homes can count savings from
the building envelope efficiency improvements toward each year’s annual savings requirement,
regardless of the original heating fuel source, subject to the following conversion rates:
• Savings from building envelope efficiency improvements for preexisting propane
heating must be credited to electricity savings at a conversion rate of 27 kilowatt hours
per gallon of propane saved.
• Savings from building envelope efficiency improvements for preexisting oil heating
must be credited to electricity savings at a conversion rate of 40 kilowatt hours per
gallon of fuel oil saved.
• Savings for building envelope efficiency improvements for preexisting natural gas
heating must be credited to electricity savings at a conversion rate of 29 kilowatt hours
per therm of gas saved.
Under the bill, a natural gas provider’s energy waste reduction program would have to achieve
the following, subject to section 97 of the act:
• Each year through 2025, incremental energy savings equivalent to 0.75% of total retail
natural gas sales (in decatherms or equivalent MCFs) in the previous year.
• Each year beginning with 2026, incremental energy savings equivalent to 0.875% of
total retail natural gas sales (in decatherms or equivalent MCFs) in the previous year,
with an average savings life of at least 10 years.
House Fiscal Agency SB 273 as enacted Page 3 of 9
 [The act previously required a natural gas provider’s energy waste reduction program to
achieve annual incremental energy savings each year equivalent to 0.75% of total annual retail
natural gas sales (in decatherms or equivalent MCFs) in the previous year.]
A natural gas provider can claim natural gas savings resulting from investments in qualifying
efficient electrification measures, or building envelope efficiency improvements made as part
of projects involving qualifying efficient electrification measures, if the savings are not also
counted toward an electric utility’s savings goals. When a natural gas provider and an electric
provider are both involved in a qualifying efficient electrification measures project, including
a project that involves both building envelope efficiency and qualifying efficient electrification
measures, the providers must work together to reach an agreement on how savings claims will
be allocated. The MPSC may adopt standards or default provisions for the allocation of savings
claims if the providers are unable to reach an agreement.
Financial incentives
The act allows an energy waste reduction plan of a provider subject to MPSC rate regulation
to authorize a commensurate financial incentive for the provider for exceeding the energy
waste reduction standard, determined using savings metrics described below, with payment
subject to MPSC approval.
The bill allows payment of a financial incentive to be based on performance metrics, if agreed
to by a provider, in addition to the savings metrics described below. The performance metrics
can include metrics for delivering low-income programs.
In addition, a natural gas provider that spends at least 67% of its total energy waste reduction
budget on measures that reduce space heating loads is eligible for an additional incentive of
2.5% of the provider’s actual energy waste reduction program expenditures for the year.
Measures that reduce space heating loads means improvements to any of the
following:
• Building envelopes, such as air sealing, insulation, or efficient windows and
doors.
• Heating distribution systems and heating system controls.
• Ventilation systems.
Savings metrics under the bill
Under the bill, the total amount of a financial incentive for an electric provider that achieves
the following amount of annual incremental savings, expressed as a percentage of its total
annual retail electricity sales (in megawatt hours) in the previous year, with an average savings
life of at least eight years, cannot exceed the following:
• For savings of more than 2.17% of sales, an incentive of the lesser of the following:
o 35% of customer life cycle cost reductions.
o 25% of the actual energy waste reduction program expenditures for the year.
• For savings of more than 2% of sales, up to 2.17%, an incentive of the lesser of the
following:
o 32.5% of customer life cycle cost reductions.
o 22.5% of the actual energy waste reduction program expenditures for the year.
House Fiscal Agency SB 273 as enacted Page 4 of 9
 • For savings of more than 1.83% of sales, up to 2%, an incentive of the lesser of the
following:
o 30% of customer life cycle cost reductions.
o 20% of the actual energy waste reduction program expenditures for the year.
• For savings of more than 1.66% of sales, up to 1.83%, an incentive of the lesser of the
following:
o 27.5% of customer life cycle cost reductions.
o 17.5% of the actual energy waste reduction program expenditures for the year.
• For savings of more than 1.5% of sales, up to 1.66% of sales, an incentive of the lesser
of the following:
o 25% of customer life cycle cost reductions.
o 15% of the actual energy waste reduction program expenditures for the year.
Life cycle cost reductions means the net present value of life cycle cost reductions
experienced by the provider’s customers as a result of implementation, during the year
for which the financial incentive is paid, of the energy waste reduction plan.
The total amount of the financial incentive for a natural gas provider that achieves the
following amount of annual incremental savings expressed as a percentage of its total annual
retail natural gas sales (in decatherms) in the previous year, with an average savings life of at
least 10 years, cannot exceed the following:
• For savings of more than 1.25% of sales, an incentive of the lesser of the following:
o 32.5% of customer life cycle cost reductions.
o 22.5% of the actual energy waste reduction program expenditures for the year.
• For savings of more than 1% of sales, up to 1.25%, an incentive of the lesser of the
following:
o 30% of customer life cycle cost reductions.
o 20% of the actual energy waste reduction program expenditures for the year.
• For savings of more than 0.875% of sales, up to 1%, an incentive of the lesser of the
following:
o 15% of customer life cycle cost reductions.
o 10% of the actual energy waste reduction program expenditures for the year.
Previous savings metrics
Before the bill’s amendments, the total amount of a financial incentive for an electric provider
that achieved the following amount of annual incremental savings, expressed as a percentage
of its total annual retail electricity sales (in megawatt hours) in the previous year could not
exceed the following:
• For savings of more than 1.5% of sales, an incentive of the lesser of the following:
o 30% of customer life cycle cost reductions.
o 20% of the actual energy waste reduction program expenditures for the year.
• For savings of more than 1.25% of sales, up to 1.5%, an incentive of the lesser of the
following:
o 27.5% of customer life cycle cost reductions.
o 17.5% of the actual energy waste reduction program expenditures for the year.
• For savings of more than 1% of sales, up to 1.25%, an incentive of the lesser of the
following:
o 25% of customer life cycle cost reductions.
House Fiscal Agency SB 273 as enacted Page 5 of 9
 o 15% of the provider’s actual energy waste reduction program expenditures for
the year.
Before the bill’s amendments, the total amount of the financial incentive for a natural gas
provider that achieved the following amount