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Section 10. Penalties. (A) If the Commission determines, after notice and opportunity for hearing, that a retail electric distribution or natural gas utility has failed to comply with an energy efficiency or peak demand reduction requirement of Section 2, the Commission shall assess against the utility a civil penalty for each such failure in an amount equal to: (1) $0.10 per kWh of undercompliance or noncompliance by the retail electric distribution utility; or (2) $1.00 per therm undercompliance or noncompliance by the natural gas utility. (3) $100 per kW of undercompliance with the peak reduction requirement (B) The costs of any civil penalty assessed under this subsection shall in no circumstance be recoverable by the utility from utility customers through rates, surcharges, or under any other cost recovery mechanism, including those created pursuant to Section 7. (C) Revenue from any civil penalty assessed under this subsection shall be deposited to the credit of the [[energy efficiency fund] created [[in Section 11]] for the sole purpose of reinvestment in energy efficiency programs. ACEEE recommends that penalties be set higher than alternative compliance payments, such as the buyout option (previous section), to encourage utilities to proactively use energy efficiency programs or the alternative compliance payment and minimize penalty situations (Furrey et al. 2009). The use of defined penalties for non-performance is not a common practice at the state level. Rather, the “penalties” seem to take the form of the potential to not earn eligible incentive amounts (Kushler et al. 2006). The use of actual penalties for noncompliance, however, acts as an enforcement mechanism, forcing utilities to either save energy (for which they can recover the cost) or to have their shareholders pay for it. This also provides some assurance that energy savings will be achieved as penalty funds are to be used for energy efficiency programs run through the state energy office or other associated agency. Ohio uses a “forfeiture” mechanism to ensure compliance in meeting energy savings targets. For more information on Ohio’s model, see ORC §4928.66(C), available at http://codes.ohio.gov/orc/4928.66. 21PDF Image | Energy Efficiency Resource Standards
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