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SB 7 Energy Efficiency Programs

September 22-23, 2004

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Outline Introductions General overview of SB 7 energy efficiency

programs– Standard offer programs– Market transformation programs

Sources of information for utility programs Frequently-asked questions

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TEXASElectric Retail Service Area Map

Investor-Owned Utilities

LegendAEP Texas Central Company (AEP - Central)El Paso Electric Company (EPE)Entergy Gulf States, Inc. (EGS)CenterPoint Energy (CenterPoint)Xcel Energy (Xcel)AEP Southwestern Electric Power Company (SWEPCO)Texas-New Mexico Power Company (TNMP)TXU Electric DeliveryAEP Texas North Company (AEP - North)

EPE

Oncor

TNMP

Xcel

CenterPoint

SWEPCOTXU ED

TNMP

EGS

WTU

TNMP

Xcel

AEP-North

AEP-North

AEP-North

AEP-Central

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AMERICAN ELECTRIC POWER

Billy BernyBilly BernyRussell BegoRussell Bego

AEP TEXAS CENTRAL

AEP TEXAS NORTH

AEP SWEPCO

AMERICAN ELECTRIC

POWER

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CenterPoint Energy

Cheryl BowmanCheryl Bowman

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Entergy - Gulf States, Inc.

Karen RadosevichKaren Radosevich

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Texas-New Mexico Power

Tony ThompsonTony Thompson

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TXU Electric Delivery

Mike StockardMike Stockard

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Xcel Energy

Doug MaxeyDoug Maxey

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SB 7’s Energy Efficiency Provisions

To provide all customer classes, particularly hard-to-reach residential customers, with access to energy efficiency services and an opportunity to reduce their electricity bills

To establish a partnership between the IOU’s and the PUCT to work together to design and implement programs. The goals:– Meet SB 7’s energy efficiency goal– Reduce the need for new power plants and related

infrastructure– Help develop the energy efficiency services market

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Background and Introduction

Under SB 7, distribution utilities can no longer provide any energy service directly to customers. This includes rebate programs, technical advice, information programs, and energy audits. Very little direct customer contact is allowed.

SB 7 requires utilities in Texas to achieve an annual energy efficiency goal equal to 10% of their load growth by offering and administering energy efficiency programs.

To achieve this goal, utilities administer “standard offer” programs and “market transformation” programs. These programs are implemented by third-party project sponsors.

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Program Templates

PUCT staff, utilities, and interested third-parties have been engaged in a collaborative process to develop a set of standardized programs or templates:– Standard Offer Programs

Residential / Small Commercial Hard-to-Reach Residential Large Commercial and Industrial Load Management

– Market Transformation ENERGY STAR Homes, AC Distributor, AC Installer, plus

several targeted at other specific end-uses

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What is a Standard Offer Program?

Program administrator (the distribution utility) provides a set incentive payment to Project Sponsors for each kilowatt (kW) of peak demand savings and each kilowatt-hour (kWh) of annual energy savings derived through the installation of energy efficiency measures. – All payments are based solely upon kW and annual

kWh savings.– Higher incentive rates for residential and “hard-to-

reach” customers than for C&I customers.– Payments are not tied to the installation costs of the

measures.

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Standard Offer Program Applications from project sponsors considered on a

first-come, first-served basis. Not a bid process. Project Sponsor and customer determines efficiency

measures to be installed—program measure / technology neutral.

Payments to project sponsors are based on kW and kWh savings, as determined by actual measurement of energy savings, or by “deemed savings.”

In some instances, the incentive payment covers a small percentage of the cost of the measure. In other cases, the incentive payment can cover the entire cost.

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Incentive Payments

Under a standard offer program, all incentives are paid directly to the project sponsor, not the customer.

The project sponsor is not required to pass any incentive payment to customer.

PUCT requires that the project sponsor disclose that incentives are being made available to the Project Sponsor “through a ratepayer-funded program, manufacturers, or other entities.”

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National energy efficiency services providers A/C dealers Insulation contractors Not-for-profit housing agencies Lighting contractors Retail energy companies No project sponsor can receive more than 20% of any

program’s incentive budget. Most utilities have lower limits to allow more project sponsors to participate. Utilities also set aside a percentage of incentives for small projects.

Typical Project Sponsors

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Project Sponsor Requirements

Adequate insurance All appropriate licenses

– Licenses are not required to provide many of the common energy efficiency measures

References Evidence of technical and managerial capabilities

and experience

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Program Administrator Responsibilities

Performs outreach to energy services community.

Reviews project applications on a first-come, first-served basis. Project sponsors that meet the program’s threshold requirements are accepted. Not a bid process.

Executes a standard contract with project sponsor. Performs pre- and post-installation verifications or

inspections.

Makes incentive payments to project sponsors.

Reports results to PUCT.

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Project Sponsor Responsibilities

Execute Standard Agreement with utility Market services to utility customers

– May not use utility name or logo in advertisements– May not represent themselves, or any product or

service as being endorsed by the utility– Individual utilities may have other restrictions

Execute host customer agreement with customer Install energy efficiency measures at customer sites Provide installation and energy savings reports to utility,

as well as required customer acknowledgements

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Customer Eligibility

Any electric distribution customer of IOU offering the program– Customers may purchase electricity from any

supplier Multi-Family

– Individually metered units are residential. Master-metered are commercial

Small Commercial– Aggregate demand of all facilities under

common ownership does not exceed 250 kW

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Must produce measurable demand and energy savings

Useful life must be greater than ten years Must exceed minimum efficiency standards Typical residential measures:

– High-efficiency air conditioners and appliances– Insulation, ENERGY STAR windows, air infiltration

control, duct sealing

– CFLs, low-flow showerheads (HTR Program only)

Typical commercial measures:– Lighting, HVAC, motors

Eligible Measures

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Measures with life less than 10 years Removable measures (generally includes plug loads) Exterior lighting Cogeneration or self generation (except renewables) Fuel switching to electric Measures that require no capital investment Measures that receive incentives from other utility

programs

Ineligible Measures

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Required Forms Host Customer Agreement

– This is a standard agreement executed by the project sponsor and host customer. Contains all the customer protection provisions specified in PUCT Subst. Rule 25.181(o). Utilities typically provide template agreement forms for project sponsors to use.

Customer Acknowledgement– This is a form which is signed by the customer and submitted to

the utility by the project sponsor. With this form, the customer acknowledges that the measures have been installed to his/her satisfaction, and provide the utility with permission to inspect the installation. The host customer agreement and customer acknowledgement forms may be combined.

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Hard-to-Reach Standard Offer Program

Savings achieved through programs for hard-to-reach (HTR) customers shall be no less than 5% of the utility’s peak demand reduction goal.

HTR customers are customers with an annual household income at or below 200% of the federal poverty guidelines.

HTR Incentive rates are approximately twice as high as for other residential customers.

HTR SOP is designed to encourage comprehensive energy efficiency retrofits.

Some measures, such as compact fluorescent lamps and showerheads, are only eligible under this program.

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Market Transformation Programs

Strategic efforts to induce lasting structural or behavioral changes in the market that result in increased adoption of energy efficient technologies, services, and practices.

ENERGY STAR New Home Program is being implemented by TXU ED, CNP, Entergy, and TNMP. This program is designed to increase the market share of energy-efficient residential new construction.

AC Distributor Program is being implemented by Entergy, CNP, Xcel, and TXU ED. An upstream incentive program for distributors of high efficiency HVAC products.

Additional highly-targeted technologies.

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Market Transformation Programs

MT programs can include advertising, training, incentives, and other mechanisms to overcome the various barriers to the implementation of more efficient technologies. SOP can only provide incentives.

Utilities hire third-parties to implement these programs. No incentives provided directly to customers. End-use customer advertising and web sites can be

used to create customer demand.– This advertising usually promotes ENERGY STAR-labeled

homes and HVAC products.

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Utility Web Sites

Program Web sites have:– pages for customers and project sponsors– FAQs– Program contacts and links– Most have lists of participating project sponsor

www.texasefficiency.com – links to all utility energy efficiency web pages– links to PUCT web site

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Frequently-Asked Questions?

How can I find out if <<blank>> has a contract with <<utility>>?

The best resource is the utility program web site. Contractor lists can be mailed to customers without internet access. However, being list on the utility web site is no guarantee that the project sponsor has access to incentive funds. Being on the list implies no endorsement of the project sponsor. In providing the list, the utility may not endorse or favor any project sponsor.

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Frequently-Asked Questions?

Who is paying for this program?

The funds to implement these programs come from the transmission and distribution rates of the participating utilities. Ninety percent of the total program budget is paid out as incentives to project sponsors. Utilities retain a maximum of ten percent for administration.

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Frequently-Asked Questions?

How can a contractor install measures for free?

It depends on your home and where you live. Some measures can save a significant amount of energy, especially if you have electric heat, or very little insulation. In some cases, the incentive payment can cover the cost of the measure.

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Frequently-Asked Questions?

Do I have to be a homeowner to participate?

No. You can rent your home, with the approval of the homeowner.

Do I have to buy my electricity from <<retail co.>> to be able to participate?

No. Customers may purchase electricity from any supplier.

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Frequently-Asked Questions?

Can I apply for a rebate directly from the utility?

No. All incentives are paid directly to the project sponsor. Any arrangements made between the project sponsor and you regarding pricing and incentive payments are solely between the project sponsor and you.

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Frequently-Asked Questions?

My contractor says this program will expire soon. Is this true?

Individual project sponsor agreements with the utility may expire, but these programs are offered each year.

My contractor says his product is endorsed by <<utility>>. Is this true?

Utilities cannot endorse products or project sponsors, and project sponsors cannot claim any utility endorsement in their advertising. Such claims should be reported to the utility contact person.

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Frequently-Asked Questions?

My retail electric company is also offering rebates. Can they do this?

Affiliated and non-affiliated retail electric companies are allowed to participate in the standard offer programs as project sponsors, subject to the same requirements as others. They may provide rebates, financing, or other incentives. The retail company may pay these incentives directly, or may offer a bill credit.

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In Summary

• Utility contacts are available to help the PUCT staff.• Individual program web sites may be the best source

of information.• www.texasefficiency.com has links to all the utility

web sties.