expired at the end of 2007, although most were extended as part of the financial rescue legislation enacted in October 2008. It is too early to evaluate the impact of the 2005 tax credits.
Joint actions of states and electric utilities have played a major role in advancing energy efficiency. Many state utility regulatory commissions or legislatures require electric utilities to operate energy efficiency programs, also known as demand-side management (DSM). Most of these programs are funded through a small surcharge on electricity sales. In some states, utilities are allowed to earn more profit on their energy efficiency programs than on building new power plants or other sources of energy supplies, thereby reducing or removing the utilities’ financial disincentives to promote energy savings.
Overall, state/utility energy efficiency programs reduced electricity use in 2004 by about 74 TWh, or 2 percent of electricity sales nationwide (York and Kushler, 2006). But certain states stood out. California, Connecticut, Minnesota, Vermont, and Washington reduced electricity use in 2004 by 7–9 percent. Further, energy savings have risen since 2004 because overall DSM funding has increased. Assuming typical energy-savings rates, national savings reached approximately 90 TWh in 2006.
Policy initiatives have also improved the efficiency of energy conversion and supply, specifically by expanding the use of combined heat and power (CHP), also known as cogeneration. Installed CHP reached 82 GW, at a total of more than 2800 sites, by 2004 (Hedman, 2005). It is estimated that the use of CHP systems resulted in total energy savings of about 2.8 quads in 2006, with perhaps 60 percent attributable to the Public Utilities Regulatory Policies Act (PURPA) of 1978 and other policy initiatives (Elliott and Spurr, 1999).
Complementing the minimum efficiency standards and financial incentives just discussed, the ENERGY STAR® product-labeling program informs U.S. consumers