UPDATE: Massachusetts Targets 1.4% Cuts In Electricity Usage

Massachusetts is moving ahead on a statewide energy efficiency program that targets a 1.4% cut annually in electricity consumption through next decade.

The proposal backed by Gov. Deval Patrick and state Attorney General Martha Coakley is being touted as the most aggressive in the U.S. Many states are ramping up efficiency programs as they look for ways to cut consumer energy costs and reduce the emissions of heat-trapping greenhouse gases linked to climate change.

The Massachusetts program aims to both eliminate load growth and make absolute cuts in consumption, ramping up to the 1.4% annual reduction in usage by 2012. The state estimates by 2020 the program would cut by 30% expected consumption, which assumes annual demand growth of roughly 1%.

The program would be run by the state's four large utilities: NStar (NST), National Grid PLC (NGG), Fitchburg Gas & Electric Co., which is owned by Unitil Corp. (UTL), and Western Massachusetts Electric Co., which is owned by Northeast Utilities (NU). The statewide plan would include performance incentive for the utilities. Massachusetts also is in the process of cutting the tie between sales volume and utility returns.

The stepped-up programs would be funded through an increase in electricity rates, an existing charge on bills and revenue from auctions of emission allowances under a regional program to limit carbon dioxide emission from power plants. A spokesman for the state's Executive Office of Energy and Environmental Affairs estimates the program once ramped up in 2012 would add an estimated $3 a month to the electricity bill of a typical household. The proposal won approve this week from the state's Energy Efficiency Advisory Council and now goes in front of the state public utilities department for final approval.

"This historic agreement will ensure energy cost savings for consumers for years to come, and make Massachusetts the most energy efficient economy in the nation," Patrick said in a statement.

The statewide proposal would reach its annual goals by increasing enrollment in the utility-run programs, improving energy assessments and providing greater incentives to switch to more efficient lighting, appliances and other technologies.

-By Mark Peters, Dow Jones Newswires; [phone]; [e-mail]