11

Overcoming Market Barriers to Overcoming Market Barriers to Water DSM:Water DSM:

Leapfrogging to ExcellenceLeapfrogging to Excellence

a presentation toa presentation tothe NARUC Water Staff Subcommitteethe NARUC Water Staff Subcommittee

byby

Nancy Brockway, Director,Nancy Brockway, Director,Multi-Utility Research and AnalysisMulti-Utility Research and Analysis

NRRINRRI

NARUC Summer MeetingsNARUC Summer MeetingsPortland, Oregon July 2008Portland, Oregon July 2008

22

There’s $ to be saved, if we can tap it.There’s $ to be saved, if we can tap it.

Water Supply (& Wastewater) Costs are

Rising

Water Efficiency Costs are Falling

Cash flow tappable for efficiency

$

$$

$

$

$

$

33

Technology marches forward…Technology marches forward…

44

Potential GPD savings from package of Potential GPD savings from package of residential water efficiency measuresresidential water efficiency measures

0102030405060708090

Gal

lon

s/p

erso

n-d

ay

Seattle(measured)

Oakland(measured)

Tampa(measured)

Petaluma(estimated)

INDOOR RESIDENTIAL WATER USEPre Retrofit

Post Retrofit

55

Don’t forget the energy savings!Don’t forget the energy savings!

1 4 7

10

13

16

19

22

25

$0$100

$200$300

$400

$500

$600

$700

$800

Year

Indoor Water Efficiency Package

Cost

Savings (gas)

Savings (elec)

66

If efficiency is such a good deal, then If efficiency is such a good deal, then why utility DSMwhy utility DSM??

Residents and businesses don’t install most efficient Residents and businesses don’t install most efficient end usesend uses

System costs go up, everyone pays, reliability at riskSystem costs go up, everyone pays, reliability at risk

BUT why BUT why don’tdon’t customers install efficiency? customers install efficiency? Prices don’t signal true costsPrices don’t signal true costs Even where they do, customers faceEven where they do, customers face

market barriersmarket barriers

77

What are the market barriers?What are the market barriers?

High first costs, and competition for capitalHigh first costs, and competition for capital Customer can’t/won’t incur more debtCustomer can’t/won’t incur more debt Concerned lifetime savings won’t materializeConcerned lifetime savings won’t materialize Transaction hassles exceed expected benefitTransaction hassles exceed expected benefit Uncertainty about duration of occupancyUncertainty about duration of occupancy Split incentivesSplit incentives

• E.g., builders, developers, landlords control plumbing E.g., builders, developers, landlords control plumbing and toilet choices - want cheapest units with fewest call and toilet choices - want cheapest units with fewest call backs - backs - butbut tenant pays water bills tenant pays water bills

88

How to overcome the market barriers?How to overcome the market barriers?

Lower/eliminate first costLower/eliminate first cost Eliminate debt obligationEliminate debt obligation Remove efficiency choice hasslesRemove efficiency choice hassles Marry obligation to benefits, not to individualMarry obligation to benefits, not to individual Only require payment if end use works as promisedOnly require payment if end use works as promised Have independent certification of measure qualityHave independent certification of measure quality Allow tenant/purchasing manager to reap benefits, Allow tenant/purchasing manager to reap benefits,

without committing to pay beyond time of benefitwithout committing to pay beyond time of benefit

99

To address To address all all market barriers, market barriers, include these elements:include these elements:

Tariff assigned to meter location, not individual Tariff assigned to meter location, not individual Bill & pay on the utility bill with DNPBill & pay on the utility bill with DNP Customer pays only if measure can work so that Customer pays only if measure can work so that

savings exceed paymentssavings exceed payments Independent certification that products are Independent certification that products are

appropriate & savings estimates exceed paymentsappropriate & savings estimates exceed payments Program guarantees payment to capital provider to Program guarantees payment to capital provider to

obtain unlimited, low cost capitalobtain unlimited, low cost capital

1010

Does anyone offer this?Does anyone offer this?

Full package available with Pay As You Save® Full package available with Pay As You Save® • Electric/multi-resource savings in New HampshireElectric/multi-resource savings in New Hampshire

• Residential solar hot water installation in Hawaii Residential solar hot water installation in Hawaii

• PAYS® trademarked like Energy Star® PAYS® trademarked like Energy Star® • to preserve program integrityto preserve program integrity

• www.paysamerica.orgwww.paysamerica.org

• Nancy Brockway is immediate past Board ChairNancy Brockway is immediate past Board Chair

Similar offerings (w/out all elements)Similar offerings (w/out all elements)• for CFLs in Burlington VTfor CFLs in Burlington VT

• Midwest Gas customers in KansasMidwest Gas customers in Kansas

• approved in Michigan for DTE and Consumers approved in Michigan for DTE and Consumers

• renewables in MA legislationrenewables in MA legislation

1111

Close, and yet pretty farClose, and yet pretty far

Performance-based contractingPerformance-based contracting• ““Water Service Company” identifies and installs all measures Water Service Company” identifies and installs all measures

• May or may not require money down.May or may not require money down.

• Customer shares savings per contract with WSCoCustomer shares savings per contract with WSCo

• If customer leaves premises, brings WSCo obligation with him/her.If customer leaves premises, brings WSCo obligation with him/her.

On the Bill FinancingOn the Bill Financing• Utility or approved vendor identifies/installs measuresUtility or approved vendor identifies/installs measures

• May or may not require money down.May or may not require money down.

• Repay with interest over time on utility bill.Repay with interest over time on utility bill.

• If customer leaves premises, brings OBF obligation with him/her.If customer leaves premises, brings OBF obligation with him/her.

1212

PAYS® PAYS® v. v. Rebates Alone Rebates Alone

Vendors pay for marketingVendors pay for marketing Measure cost includes all Measure cost includes all

admin (after start-up)admin (after start-up) All customers can All customers can

participateparticipate No budget limit to savingsNo budget limit to savings Uses rebates to expand Uses rebates to expand

program reach, not as limitprogram reach, not as limit Taps locked-in savingsTaps locked-in savings Independent measure Independent measure

certificationcertification

Major admin/outreach costsMajor admin/outreach costs Up to 75% of value of Up to 75% of value of

measure in rebatesmeasure in rebates Still, many customers Still, many customers

cannot take advantagecannot take advantage Limit on public tolerance of Limit on public tolerance of

rate increases for rebates rate increases for rebates limits participationlimits participation

Resources left on tableResources left on table

1313

Market Barriers Addressed?Market Barriers Addressed?Tool to Overcome Market Barrier Rebates OBF/ Shared Savings PAYS®

Eliminate first cost N Y Y

Eliminate debt obligation M N Y

Remove efficiency choice hassles N M Y

Tie pmts to benefits, not person N N Y

Must pay only if measure can work M M Y

Certified measure quality M N Y

Open to all TRC measures Y N M

Lowers price of new construction N N Y

Vendors pay outreach N Y Y

Can be multi-resource M M Y

Overcome split incentives N N Y

1414

Main Message: Be open to new ways Main Message: Be open to new ways of getting efficiency for customersof getting efficiency for customers

Natural to imitate electricity/gas programsNatural to imitate electricity/gas programs But these programs have limitsBut these programs have limits No need to limit water/wastewater DSM to old No need to limit water/wastewater DSM to old

modelsmodels Good time to experiment with new modelsGood time to experiment with new models

1515

References/ResourcesReferences/Resources Edwin Orrett, P.E., Resource Performance Partners, Inc., Edwin Orrett, P.E., Resource Performance Partners, Inc., MMWD Water Efficiency, MMWD Water Efficiency,

a presentation toa presentation to the Marin Municipal Water District, 2006 (Mr. Orrett’s graphics the Marin Municipal Water District, 2006 (Mr. Orrett’s graphics copied here with permission). More information available at copied here with permission). More information available at http://www.resourceperform.com/index.htmlhttp://www.resourceperform.com/index.html

Edwin Orrett, P.E. , Edwin Orrett, P.E. , Pay As You Save® - High Performance Resource Efficiency Pay As You Save® - High Performance Resource Efficiency System, System, Resource Performance Partners, Inc., July 2006.Resource Performance Partners, Inc., July 2006.

Paul A Cillo & Harlan Lachman, Energy Efficiency Institute, Paul A Cillo & Harlan Lachman, Energy Efficiency Institute, Pay-As-You-Save Pay-As-You-Save Energy Efficiency Products: Restructuring Energy EfficiencyEnergy Efficiency Products: Restructuring Energy Efficiency , A Report to , A Report to NARUC, December 1, 1999, available at NARUC, December 1, 1999, available at http://www.paysamerica.org/EEI_Pays_1st_paper.pdfhttp://www.paysamerica.org/EEI_Pays_1st_paper.pdf. .

Direct Testimony of Thomas S. Stanton, Direct Testimony of Thomas S. Stanton, In the Matter of the Application of In the Matter of the Application of Consumers Energy, Consumers Energy, Case No. 14347, before the Michigan PSC (outlining Staff Case No. 14347, before the Michigan PSC (outlining Staff recommendation for development of a Consumers Energy PAYS® Tariff), June 3, recommendation for development of a Consumers Energy PAYS® Tariff), June 3, 2005. Available at 2005. Available at http://www.paysamerica.org/Stanton_testimony.pdfhttp://www.paysamerica.org/Stanton_testimony.pdf