They’re Back! Utility Rebate Programs Spark Sales of Energy-Efficient Equipment

March 26, 2004
Utility rebate programs are back in popularity after taking the electrical wholesaling industry by storm in the early 1990s.

Utility rebate programs took the electrical wholesaling industry by storm in the early 1990s. Power-generating companies needed their customers to cut back on power consumption, and offering customers financial incentives to install energy- efficient electrical products was a heck of a lot cheaper than building new power plants.

Rebate programs help end users design new buildings and retrofit thousands of inefficient buildings with energy-efficient lighting systems, motors, variable-speed drives, efficient coolers, HVAC systems and insulation. As part of demand-side management programs, rebates accomplished their mission: slashing energy bills for building owners while cutting back on utilities’ customer demand.

But working on the dark side of the rebate boon were the folks who figured out how to beat the system and bilk utilities out of rebate dollars. They tried to pass off a building’s existing inefficient electromagnetic ballasts as newer, more efficient electronic ballasts by making laser copies of the labels from electronic ballasts then slapping the bogus labels on old ballasts, claiming that they had installed a new ballast.

At least one electrical distributor was caught setting up a dummy electrical contracting business and then sending it phony bills from the distribution business for the delivery of energy-efficient products. Paperwork was then submitted to utility programs for the installation of energy-efficient products.

A 1994 Electrical Wholesaling article told the tale of utility customers who installed energy-efficient equipment, got the rebate, and then reinstalled the older products because of insufficient light levels or the higher cost of maintaining the more efficient system.

Concerns over these scams, as well as the measurability and verification of the impact of these programs, budget crunches and consolidation eventually forced utilities to curtail their programs. By the mid- to late-1990s, utility rebate programs were scarce.

But over the last few years, rebate programs have gained prominence again. Power shortages in California, increasing demand in the Northeast, last summer’s blackout and renewed concerns over the cost of new construction have fueled the rebirth of rebate programs. An article in this month’s issue of Electrical Wholesaling offers information on close to 40 rebate programs in the United States.

This generation of utility rebates differs from the 1990s. Energy-service companies (ESCOs), which focus on the financing, design and installation of energy-efficient electrical systems as well as HVAC and other building systems, still control large chunks of this business, particularly retrofits done in government facilities, schools, universities and large office complexes. But electric utilities bought quite a few ESCOs over the past decade and run them as a separate business to handle retrofits for customers.

The utilities themselves have seen major consolidation. As a result, there are more regional utilities that operate in a number of states, particularly on the East Coast and in California.

The utilities’ demand-side management programs that use rebates as a demand-slashing tool have evolved, too. They often are much more complex than simply offering money for the installation of products. Rebates are now often based on the watts saved, and custom rebate programs are common.

One thing that hasn’t changed: the regions of the country where rebates are most popular. Utilities in California and the Northeast seem most interested in rebates as a tool to slash energy usage.

This time around, not all rebate programs are sponsored by individual utilities. For instance, the MotorUp Premium Efficiency Motor Initiative offers substantial rebates for the installation of efficient motors. The MotorUp program is co-sponsored by several utilities in the Northeast. Details on the program are available at

In the lighting market, the EPA’s EnergyStar program offers rebate coupons for the purchase of compact fluorescent lamps and other energy-efficient lighting products.