Act 129 Phase V: the targets, the budgets, and what actually changed

Pennsylvania's fifth phase of Act 129 energy efficiency programs began on June 1, 2026 and runs through May 31, 2031. The Public Utility Commission entered the Final Implementation Order on June 18, 2025 at Docket M-2025-3052826, and all four electric distribution companies have since filed Phase V plans.

For a building owner in Pennsylvania, Phase V is $1.22 billion of ratepayer-funded incentive money with a five-year clock on it. For an owner who also registers the resulting savings with the AEPS program, the same project can carry a second revenue line. This page covers what Phase V requires. The second revenue line is covered in how Tier II AECs work.

What Phase V requires

The Commission set consumption reduction, peak demand and low-income targets for each EDC, funded against a statutory budget cap of 2% of each company's 2006 revenue.

Statewide, that is an acquisition cost of $370.69 per MWh and a target equal to 2.25% of baseline consumption — where "baseline" is the frozen forecast of June 2009 through May 2010 sales, not current load.

Three things that changed from Phase IV

Seven EDCs became four. Met-Ed, Penelec, Penn Power and West Penn Power now operate as FirstEnergy Pennsylvania Electric Company and file a single plan covering four rate districts. Anyone working from a Phase IV program list is working from a stale map.

Peak demand is measured differently. Phase IV counted coincident demand reductions from energy efficiency. Phase V allows either those or verified reductions from load-shifting programs, because efficiency-derived peak reductions are no longer eligible to participate in the PJM Forward Capacity Market. The practical effect is that demand response and managed EV charging now have a clear route into EDC portfolios.

Cost-effectiveness is screened under a new test. Phase V uses the 2026 Total Resource Cost Test adopted at Docket M-2024-3048998, together with a Phase V avoided cost calculator and version 5.1 of the incremental measure cost database. Measures that scored marginally under the Phase IV test may score differently now — which cuts both ways.

What is not fixed

The Implementation Order models a portfolio mix, and the modeled mix moved during the proceeding: the assumed allocation to solar was lowered from nine percent to five, and traditional efficiency raised from 67 percent to 71, before the final targets were set.

Those figures are modeling assumptions, not requirements. The order states that the allocations are not binding on the EDCs as they develop their plans, and that an EDC "could choose to design an EE&C plan with different funding allocations across the five portfolio components or even choose not to offer a certain component type at all."

Anyone budgeting a project against those percentages is budgeting against a forecast. The binding numbers are in each EDC's plan, at Dockets M-2025-3057325 (Duquesne Light), M-2025-3057327 (FirstEnergy Pennsylvania), M-2025-3057328 (PECO) and M-2025-3057329 (PPL).

Combined heat and power and custom industrial projects are in scope

Duquesne Light's Phase V plan — filed to comply with the Commission's order of March 26, 2026 — provides that measures "including combined heat and power ('CHP') projects, distributed energy resources, and microgrids may be considered and approved if found to be cost effective," and evaluates custom rebates under its Large Industrial Energy Efficiency Program where the Total Resource Cost score exceeds 1.0.

FirstEnergy Pennsylvania's plan "includes measures for combined heat and power projects and custom projects which may involve fuel switching from electricity to fossil fuel."

PECO's business program notes that "there are some instances where equipment fueled by natural gas is eligible for our programs, such as combined heat and power (CHP) systems," and is open for Phase V applications.

The Implementation Order describes CHP as "the lowest cost resource type for both MWh and MW, but also unpredictable," noting that "these projects are large, complex, and have unpredictable timing."

Where the second revenue line comes from

Act 129 is an obligation on electric distribution companies under 66 Pa.C.S. § 2806.1. The Alternative Energy Portfolio Standard is a separate obligation on suppliers and distribution companies under Act 213 of 2004. They are administered separately and share one piece of machinery: the PUC Technical Reference Manual, which both use as the savings calculation reference.

Under 52 Pa. Code § 75.63(b), an alternative energy credit may be certified by the Commission for each megawatt-hour of electricity conserved by qualified alternative energy systems or demand side management. Efficiency is not a workaround in this market — it is a named, eligible resource.

It is also barely used. In energy year 2025, Pennsylvania's Tier II obligation was 13,654,235 credits and Tier II compliance spending reached $367.6 million. Credits cleared at a weighted average of $26.92, against a $45.00 alternative compliance payment that effectively caps the market. Of everything retired against that obligation, waste coal supplied 50.5%, pumped storage 24.5% and conventional hydro 11.6%. Energy efficiency supplied 0.5%.

A market that size, sourced that narrowly, priced that close to its cap, is the opportunity.

Whether an Act 129 rebate and a Tier II AEC can both be claimed on the same measure is a separate question, and the published record does not settle it in either direction. We do not state a position we cannot source.

Sources

• Act 129 Phase V Final Implementation Order, Docket M-2025-3052826 (June 18, 2025) — https://www.puc.pa.gov/pcdocs/1883669.pdf
• PA PUC — Energy Efficiency and Conservation Program — https://www.puc.pa.gov/filing-resources/issues-laws-regulations/act-129/energy-efficiency-and-conservation-eec-program/
• 2026 Total Resource Cost Test Final Order, Docket M-2024-3048998 — https://www.puc.pa.gov/pcdocs/1855583.pdf
• Duquesne Light Phase V EE&C Plan, revised May 21, 2026 — https://duquesnelight.com/docs/default-source/wattchoice/act-129/eec-phase-v-revised-plan-5-21-26.pdf
• 52 Pa. Code § 75.63 — https://www.law.cornell.edu/regulations/pennsylvania/52-Pa-Code-SS-75-63
• PA AEPS 2024/2025 Annual Report — https://pennaeps.com/reports/

Frequently asked questions

When does Act 129 Phase V start and end?

Act 129 Phase V runs from June 1, 2026 through May 31, 2031. The Pennsylvania Public Utility Commission entered the Final Implementation Order on June 18, 2025 at Docket M-2025-3052826. The preceding Phase IV ran from June 1, 2021 through May 31, 2026.

What are the Act 129 Phase V savings targets?

Statewide, Phase V requires 3,299,104 MWh of consumption reduction and 583.3 MW of peak demand reduction over five years, including 245,980 MWh from low-income programs. By company: Duquesne Light 261,583 MWh, PECO 1,111,685 MWh, PPL 828,231 MWh, and FirstEnergy Pennsylvania 1,097,605 MWh.

How much funding is available under Act 129 Phase V?

The Phase V budget is $1,222,942,605 over five years. Each electric distribution company's budget is capped by statute at two percent of its revenue as of December 31, 2006.

Which utilities participate in Act 129 Phase V?

Four electric distribution companies: Duquesne Light, PECO, PPL, and FirstEnergy Pennsylvania Electric Company. FirstEnergy Pennsylvania is the consolidation of the former Met-Ed, Penelec, Penn Power and West Penn Power, which participated separately in Phase IV.

Is combined heat and power eligible under Act 129 Phase V?

Yes. Duquesne Light's Phase V plan provides that combined heat and power projects may be considered and approved if found to be cost effective, and FirstEnergy Pennsylvania's plan includes measures for combined heat and power and custom projects. PECO's business program notes that combined heat and power systems are among the gas-fueled equipment eligible for its programs. The Implementation Order describes CHP as the lowest cost resource type in the modeled portfolio, while noting the projects are large, complex and unpredictable in timing.

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