South Dakota Opts Out of Energy Rebates Under Inflation Reduction Act
A few states have recently introduced energy rebates for consumers who enhance the energy efficiency of their homes. This initiative comes shortly after New York took the lead in implementing such rebates in May. However, South Dakota has chosen to decline the federal funding associated with two new programs established by the Inflation Reduction Act, a significant climate law passed in 2022.
The Inflation Reduction Act allocated $8.8 billion for consumers through two Home Energy Rebates programs. Individuals can potentially receive up to $8,000 in Home Efficiency Rebates and up to $14,000 in Home Electrification and Appliance Rebates. These programs aim to mitigate the costs of retrofitting homes and upgrading appliances to be more energy-efficient, ultimately helping consumers reduce their utility bills and decrease carbon emissions.
Eligibility for the rebates and the amount of money that can be accessed vary depending on factors such as household income and the overall energy reduction of the home. Most states have indicated their intention to launch rebate programs for their residents, with an August deadline to formally decline federal funds and a January 31, 2025 deadline to submit program applications to the U.S. Department of Energy.
States have the flexibility to design their programs within certain parameters and must apply for funding before distributing rebates to consumers. New York was the first state to roll out its rebates in May, followed by Arizona, Maine, New Mexico, Rhode Island, and Wisconsin. Many other states and Washington, D.C., have submitted applications or had them approved for rebate programs.
South Dakota is the only state that has publicly announced its decision not to administer the rebates. During a July appropriations hearing, Jim Terwilliger, the commissioner of the South Dakota Bureau of Finance and Management, expressed that the state believed it was not the right fit for them. South Dakota Governor Kristi Noem’s spokesperson, Ian Fury, stated that the state would not participate in the program, citing disagreements with the policy and administrative burden as reasons for opting out.
Other states like California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Illinois, Indiana, Michigan, Minnesota, New Jersey, New Hampshire, Massachusetts, North Carolina, Oregon, Tennessee, Vermont, Washington, and West Virginia have applied for federal funding for rebate programs. These states along with the District of Columbia have collectively applied for $4 billion in funding thus far.
The Inflation Reduction Act allows states to use up to 20% of the funding for administrative purposes, and South Dakota’s decision not to participate will result in the reallocation of the $68.6 million earmarked for the state to others. Fury mentioned that this was not the first time South Dakota had rejected federal spending, as the state had previously declined extended unemployment benefits during the Covid-19 pandemic in 2020.
In contrast to South Dakota, Florida initially rejected the federal funds for the rebate program but has since changed its stance. Governor Ron DeSantis vetoed the state’s authority to spend approximately $5 million on administering the rebates in 2023. However, Florida is now preparing for a phased launch of the rebate programs in late 2024 and a full launch in early 2025.
Consumers will be able to access rebates at the point of sale when purchasing appliances directly from retailers or qualified contractors aiding with energy efficiency projects. Each state is implementing its program differently, with some offering rebates in phases. For instance, New Mexico is starting with a $1,600 rebate for low-income consumers in single-family homes purchasing insulation from participating retailers.
Additionally, New Mexico residents may qualify for subsequent rebates such as $8,000 for an ENERGY STAR-certified electric heat pump, $4,000 for an electrical panel, $2,500 for electrical wiring, $1,750 for an electric heat pump water heater, $1,600 for air sealing, and $840 for an electric heat pump clothes dryer and/or electric stove.
It is essential for consumers and contractors to refer to their state energy department websites for specific program details and eligibility criteria. The U.S. Department of Energy advises households not to delay necessary home energy upgrades or projects, as they may be eligible for various federal programs, including tax credits, the Weatherization Assistance Program, and other state, local, and utility programs.