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CPUC Energy Efficiency Policies and Investor-Owned Utility (IOU) Programs Presentation for WHPA Executive Committee March 26, 2013 Simon Baker Energy Division California Public Utilities Commission (CPUC)

CPUC Energy Efficiency Policies and Investor-Owned … · CPUC Energy Efficiency Policies and Investor-Owned Utility (IOU) Programs Presentation for WHPA Executive Committee March

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Page 1: CPUC Energy Efficiency Policies and Investor-Owned … · CPUC Energy Efficiency Policies and Investor-Owned Utility (IOU) Programs Presentation for WHPA Executive Committee March

CPUC Energy Efficiency Policies and Investor-Owned Utility (IOU)

Programs

Presentation for WHPA Executive CommitteeMarch 26, 2013

Simon BakerEnergy Division

California Public Utilities Commission (CPUC)

Page 2: CPUC Energy Efficiency Policies and Investor-Owned … · CPUC Energy Efficiency Policies and Investor-Owned Utility (IOU) Programs Presentation for WHPA Executive Committee March

Presentation Outline• Overview of California EE Policy Framework• Overview of IOU programs• Cost-Effectiveness• Goals• EM&V• Ex-ante / ex-post• Shareholder incentives• Appendices

2

Page 3: CPUC Energy Efficiency Policies and Investor-Owned … · CPUC Energy Efficiency Policies and Investor-Owned Utility (IOU) Programs Presentation for WHPA Executive Committee March

Overview of California EE Policy Framework

3

Page 4: CPUC Energy Efficiency Policies and Investor-Owned … · CPUC Energy Efficiency Policies and Investor-Owned Utility (IOU) Programs Presentation for WHPA Executive Committee March

4

U.S. Energy Use Grows While California Usage Remains Flat

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

1960

1962

1964

1966

1968

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

kWh/

pers

on

Per Capita Electricity Sales (not including self-generation)(kWh/person)

United States

California

California w/out stdsand programs

Page 5: CPUC Energy Efficiency Policies and Investor-Owned … · CPUC Energy Efficiency Policies and Investor-Owned Utility (IOU) Programs Presentation for WHPA Executive Committee March

CA Power Plant Capacity Increased by only 2/3 the National Pace in the Past 20 Years

Location 1990 # of Generators

1990 Nameplate capacity (MW)

2010 # of generators

2010 Nameplate capacity (MW)

Percent capacity change

California 739 55,026 803 72,570 31.9%

United States

5318 783,012 6,417 1,138,638 45.4%

5Source: U.S. Energy Information Administration, see http://www.eia.gov/electricity/data/state/

Page 6: CPUC Energy Efficiency Policies and Investor-Owned … · CPUC Energy Efficiency Policies and Investor-Owned Utility (IOU) Programs Presentation for WHPA Executive Committee March

California EE / Conservation “Wedges”

Page 7: CPUC Energy Efficiency Policies and Investor-Owned … · CPUC Energy Efficiency Policies and Investor-Owned Utility (IOU) Programs Presentation for WHPA Executive Committee March

Decouplingfor gas

Deregulated market begins; CPUC contemplates independent administration

ElectricityCrisis

EAP / AB 57 makes EE a top IOU priority

SB 1037 requires CPUC to set targets  for “all cost‐effective EE” IOU administration of EE 

restored; new incentive mechanism; CPUC evaluation of IOU program accomplishments

Policy Influences EE Savings Among California Utilities

Decouplingfor electric

Source: Natural Resources Defense Council (NRDC), as modified by Energy Division 12/2012

IOU EE programs begin to decline  due to over‐supply

ShareholderIncentives  begin

CPUC administration of EE (“Summer Initiative” continues thru 2003)

CPUC‐evaluated

IOU‐reported

MT eraResource Acquisitions era

Page 8: CPUC Energy Efficiency Policies and Investor-Owned … · CPUC Energy Efficiency Policies and Investor-Owned Utility (IOU) Programs Presentation for WHPA Executive Committee March

Energy Efficiency is California’s Preferred Resource

West Coast Green

8

“Loading Order” of Energy Resources:

• Energy efficiency and Demand response

• Distributed generation

• Renewable generation

• Cleanest available fossil resources

Page 9: CPUC Energy Efficiency Policies and Investor-Owned … · CPUC Energy Efficiency Policies and Investor-Owned Utility (IOU) Programs Presentation for WHPA Executive Committee March

California Long-Term Energy Efficiency Strategic Plan• 2007: CPUC adopts Big Bold Energy

Efficiency Strategies:1. All new residential construction will be zero net energy

(ZNE) by 20202. All new commercial construction in California will be

zero net energy by 20303. HVAC market will be transformed to ensure that its

energy performance is optimal 4. All eligible low-income customers will be given the

opportunity to participate in ESAP by 2020.

• 2007: CPUC orders a Strategic Plan to achieve “all cost-effective energy efficiency.”

• 2008: CPUC adopts the Strategic Plan – A roadmap for EE through 2020 and beyond

• 2009: CPUC approves IOU programs shaped by the Strategic Plan

• Action Plans to engage non-utility entities 9

Page 10: CPUC Energy Efficiency Policies and Investor-Owned … · CPUC Energy Efficiency Policies and Investor-Owned Utility (IOU) Programs Presentation for WHPA Executive Committee March

AB 32: California’s Greenhouse Gas Emission Reduction Strategies

10California Air Resources Board Scoping Plan, December 2008, Table 2.

Page 11: CPUC Energy Efficiency Policies and Investor-Owned … · CPUC Energy Efficiency Policies and Investor-Owned Utility (IOU) Programs Presentation for WHPA Executive Committee March

CPUC Role in Governing IOU Energy Efficiency Programs

• CPUC– Regulates investor-owned utilities (IOUs)– Sets rates, determines revenue requirement– Oversees IOU EE budgets and plans

• Per 2005 decision, IOUs administer EE programs approved by CPUC– Beginning in 2006, Commission staff (Energy

Division) evaluate IOU programs

11

Page 12: CPUC Energy Efficiency Policies and Investor-Owned … · CPUC Energy Efficiency Policies and Investor-Owned Utility (IOU) Programs Presentation for WHPA Executive Committee March

CPUC Statutory Mandates• Foundational mandates

– “Just and reasonable” rates – PU Code 451– “All practicable and cost-effective” conservation / EE – PU Code

701(b)• More recent provisions

– “All cost-effective EE” - PU Code Sections 454.5.(b)(9)(C) (“loading order” / electric EE procurement provision)

– Set EE goals based on “all cost-effective EE” - PU Code 454.55 (electric) and 454.56 (gas)

– Electric PGC surcharge – PU Code 381 and 399 (now expired)– Natural Gas PPP surcharge – PU Code 890-899 (no sunset)

12

Page 13: CPUC Energy Efficiency Policies and Investor-Owned … · CPUC Energy Efficiency Policies and Investor-Owned Utility (IOU) Programs Presentation for WHPA Executive Committee March

CPUC policy emphasis focused on voluntary market

Historical Agency Emphasis / Mandates

ExampleIOU Programs

Page 14: CPUC Energy Efficiency Policies and Investor-Owned … · CPUC Energy Efficiency Policies and Investor-Owned Utility (IOU) Programs Presentation for WHPA Executive Committee March

Funding Sources for Mainstream IOU Energy Efficiency Programs

Slide

- 200 400 600 800

EnergyProcurement

Electric PGC

Gas PPP

$ Millions

$175

$256

$576

17%

25%

57%

2010-2012 Avg Annual EE Budget by Funding Source (Total ~ $1 billion)

2013-14 Avg Annual BudgetTotal ~$950 million

$774

$-

$177

$- $200 $400 $600 $800

Energy Procurement

Electric PGC

Gas PPP

$ Million

17%

83%

Page 15: CPUC Energy Efficiency Policies and Investor-Owned … · CPUC Energy Efficiency Policies and Investor-Owned Utility (IOU) Programs Presentation for WHPA Executive Committee March

Overview of IOU EE Programs

15

Page 16: CPUC Energy Efficiency Policies and Investor-Owned … · CPUC Energy Efficiency Policies and Investor-Owned Utility (IOU) Programs Presentation for WHPA Executive Committee March

Key IOU Progam DesignRequirements / Incentives

16

“Sticks”: Legislative Requirements

• Portfolio budgets must be reviewed and approved by Commission

• IOUs must meet energy savings goals

• Portfolio must be cost effective

• Programs must meet the requirements of the portfolio guidance decision and pursue Strategic Plan objectives

• 20% of budget must be competitively bid by third party implementers

“Carrots”: Utility Benefits

• Shareholder incentives

• Customer satisfaction

• “Green” corporation

Page 17: CPUC Energy Efficiency Policies and Investor-Owned … · CPUC Energy Efficiency Policies and Investor-Owned Utility (IOU) Programs Presentation for WHPA Executive Committee March

17

CPUC Process for Approval / Oversight of IOU EE Programs

• Multi-Year Budget Cycle

• Transition cycle: 2013-2014• Next cycle: Post-2014

Policy Guidance

•Savings Potential / Goals•Portfolio cost effectiveness•Shareholder Incentives•20% Third-party •Strategic Plan / programmatic guidance

IOU Portfolio Applications

•Must meet savings goals•Budgets / Cost-effectiveness

•Alignment withStrategic Plan

Portfolio Implementation

•IOU Administration•Energy Division EM&V/ program implementation oversight

Page 18: CPUC Energy Efficiency Policies and Investor-Owned … · CPUC Energy Efficiency Policies and Investor-Owned Utility (IOU) Programs Presentation for WHPA Executive Committee March

CPUC Regulatory Proceedings*• Formal Proceedings

– Rulemakings (R.) – generally treat policy matters. Active EE rulemakings:

• R.09-11-014 – e.g. 2013-14 guidance decision• R.12- - Shareholder incentive reforms

– Applications (A.) – IOU requests for budget authorization and rate recovery.

• A.12-07-001 – 2013-14 EE portfolio decision• Program Implementation Plans (PIPs) contain program details

(incentive design, logic model, program targets, measure lists, etc.)• Informal Proceedings (advice letters) – “Implementation” filings

directed by CPUC decision (e.g., AL for Res upstream HVAC incentive program)

– Energy Division disposition– Commission disposition (resolution)

18*This is a selected list of Commission proceedings applicable to EE program administration, not intended to be a comprehensive description of CPUC practice and procedure.

Page 19: CPUC Energy Efficiency Policies and Investor-Owned … · CPUC Energy Efficiency Policies and Investor-Owned Utility (IOU) Programs Presentation for WHPA Executive Committee March

Mid-cycle Implementation Oversight Processes• Utility reporting of expenditures / savings claims

– Monthly and annual reports – Available at Energy Efficiency Groupware Application (EEGA)

(www.eega.cpuc.ca.gov) • Program Implementation Plan (PIP) “addendum”

– IOUs may modify incentive design, measure lists, etc. – Must notify / report via PIP addendum upload on EEGA

• Fund-shifting rules– Fund-shifting in excess of 15% of approved budget category between

specified program categories (e.g., residential, commercial) must seek approval by AL

– Fund-shifting within program categories or between program categories under the 15% threshold is authorized without AL approval. Must report on EEGA.

• ALs implementing Commission orders (e.g., compliance filings, new pilots)

19

Page 20: CPUC Energy Efficiency Policies and Investor-Owned … · CPUC Energy Efficiency Policies and Investor-Owned Utility (IOU) Programs Presentation for WHPA Executive Committee March

Post-2014 Planning Activities*

• Post-2014 portfolio guidance:– Various rulings / proposals for comment

• Goals study (est. Q2 2013)• CEC AB 758 action plan (est. Q2 2013)• Programmatic guidance ruling(s) / proposals (est. Q2 2013)• Cost-Effectiveness parameter / methodology update (est. mid

2013)• DEER update based on 2010-12 impact evaluations (est. Q3

2013)

– Guidance decision (est. Q4 2013)• IOU applications (est. Q1 2014)

20*Based on Energy Division estimates of anticipated Commission proceedings

“RecordDevelopment”

Of particular interest to HVAC programs

Page 21: CPUC Energy Efficiency Policies and Investor-Owned … · CPUC Energy Efficiency Policies and Investor-Owned Utility (IOU) Programs Presentation for WHPA Executive Committee March

BY PROGRAM TYPE BY PROGRAM DELIVERYBY SECTOR

Budget($ M)

Savings (GWh)

Agricultural 79  248 

Commercial 510  1,112 

Industrial 211  487 

Residential 328  571 

Govt Partnerships 256  267 

Cross Cutting 585  1,019 

Budget  ($ M)

Savings (GWh)

Statewide 1,166  2,027 

Third Party 538  1,408 

Gov't partnership 252  267 

RENs/CCA 75  98 

Local IOU  13  2 

Slide 21

Budget ($M)

Savings (GWh)

Codes and Standards 28  870 Third Party Programs 304  679 Non‐Residential Custom Projects 265  647 Government Partnerships 256  267 Lighting Programs 228  890 Financing Programs 190  109 HVAC 140  221 Plug Load and Appliances 104  229 Energy Advisor Program 100  295 Whole House Program 80  25 Non‐Res Deemed Incentives 64  224 New Construction 35  6 Direct Install 21  41 Multi Family Rebates 17  62 RENs and CCAs 75  98 Workforce Education  & Training 63  7 Emerging Technology Programs 39  0 Continuous Energy Improvement 14  0 Marketing, Outreach & Education 14  0 IDSM 8  0 

EE Program Characteristics*

*Data from 2013-14 Portfolio Applications. Approved budget was reduced by $200 million

Page 22: CPUC Energy Efficiency Policies and Investor-Owned … · CPUC Energy Efficiency Policies and Investor-Owned Utility (IOU) Programs Presentation for WHPA Executive Committee March

22

2013-14 EE Portfolio Organization

IOU StatewidePrograms

[62% of budget]

•Residential•Commercial•Industrial•Agricultural

•Lighting•Financing•Emerging Technologies•Codes & Standards

•ME&O*•WE&T•IDSM

Utility “Local” Programs [1%]

Third-Party Programs [25%]

State & Local Gov’t Programs [10%]

SDG&E (9) PG&E (40)

SCE (29)

SDG&E (13)

SCG (15)

PG&E (24)

SCE (30)

SDG&E (7)

SCG (20)

[%] = Percent of total budget ($1.9B Total)(#) = Number of individual programs* ME&O budgets are currently pending in an application before Commission

SoCalREN($44.8M)

BayREN($26.5M)

MEA($4M)

Community Choice Aggregator

Regional Energy Networks

IOU Portfolio[92% of budget]

Non-Utility Portfolio[4% of budget]

Evaluation[4% of budget]

Page 23: CPUC Energy Efficiency Policies and Investor-Owned … · CPUC Energy Efficiency Policies and Investor-Owned Utility (IOU) Programs Presentation for WHPA Executive Committee March

23

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Sum of Two Year Budget Sum of 2013-14 kWhTotal

Sum of 2013-14 thermTotal

Integrated Demand Side ManagementMarketing, Outreach and EducationContinuous Energy ImprovementEmerging Technology ProgramsWorkforce Education & TrainingRENs and CCAsMulti Family RebatesDirect InstallNew ConstructionNon-Res Deemed IncentivesWhole House ProgramEnergy Advisor ProgramPlug Load and AppliancesHeating, Ventilation & Air ConditioningFinancing ProgramsLighting ProgramsGovernment PartnershipsNon-Residential Custom ProjectsThird Party ProgramsCodes and Standards

2013-14 IOU Programs: Budget and Savings

Budget Electric (kWh)Savings

Gas (therm)Savings

Page 24: CPUC Energy Efficiency Policies and Investor-Owned … · CPUC Energy Efficiency Policies and Investor-Owned Utility (IOU) Programs Presentation for WHPA Executive Committee March

New Strategic Program DirectionNew “Strategic” Programs• Financing (OBF, new pilots)• Whole-house retrofit• HVAC QI / QM• Behavior (OPower energy

reports)• Integrated (EE/DR/DG) on-line

audits• Retro-commissioning• Continuous Energy

Improvement• ZNE pilots• LGP SP pilots

Continuing Programs• “Widget” rebates ($/widget)• Calculated rebates ($/kwh,

$/them)• “Upstream” mfr / distributor

buy-down• New construction• Direct install• State & institutional

partnerships

24

Page 25: CPUC Energy Efficiency Policies and Investor-Owned … · CPUC Energy Efficiency Policies and Investor-Owned Utility (IOU) Programs Presentation for WHPA Executive Committee March

2013-14 HVAC ProgramsHVAC Programs• Statewide “Core” Programs

– Commercial Upstream HVAC Equipment Incentive

– Commercial QI / QM– Residential QI / QM

• Third Party Programs– PG&E AirCare Plus– SDG&E Premium Efficiency

Programs (Silver, Gold and Platinum)

• New programs or “pilots”– Residential Upstream HVAC

Equipment Incentive – Residential “to Code” incentive

program.

Related Programs• Codes and standards (includes

standards advocacy, compliance enhancement)

• Whole-house retrofit (basic and advanced)

• Emerging technologies program (includes HVAC tech & diagnostics R&D)

• Workforce education and training (“sector strategies”)

25

Page 26: CPUC Energy Efficiency Policies and Investor-Owned … · CPUC Energy Efficiency Policies and Investor-Owned Utility (IOU) Programs Presentation for WHPA Executive Committee March

Cost-Effectiveness

26

Page 27: CPUC Energy Efficiency Policies and Investor-Owned … · CPUC Energy Efficiency Policies and Investor-Owned Utility (IOU) Programs Presentation for WHPA Executive Committee March

CPUC determines EE cost-effectiveness at the portfolio-level and on a “net” basis

• Portfolio approach allows for inclusion of individual programs or measures that do not past cost test (EUC, ETP, new construction, etc.)

• Prospective “dual test” showing examines both TRC and PAC• Commission determines actual TRC threshold deemed sufficient 27

Energy Efficiency PortfolioTRC = 2.0

ResidentialAppliance Program

TRC = 1.8

NewConstruction

ProgramTRC = 1.2

CommercialLightingProgram

TRC = 3.4

Mea

sure

s

TRC>1 TRC<1Legend:

Low-IncomeProgram

TRC = 0.8Pro

gram

sP

ortfo

lioEnergy Efficiency Portfolio

TRC = 2.0

ResidentialAppliance Program

TRC = 1.8

NewConstruction

ProgramTRC = 1.2

CommercialLightingProgram

TRC = 3.4

Mea

sure

s

TRC>1 TRC<1Legend:

Low-IncomeProgram

TRC = 0.8Pro

gram

sP

ortfo

lio

Page 28: CPUC Energy Efficiency Policies and Investor-Owned … · CPUC Energy Efficiency Policies and Investor-Owned Utility (IOU) Programs Presentation for WHPA Executive Committee March

28

0

1

2

3

4

5

6

7

8

9

10

11

Benefit-Cost Ratios 2010-2011 EE Portfolio Savings Claims*

Cost Effective >1.0

*Source: 2010-11 Annual Energy Efficiency Progress Report**Total Resource Cost (TRC) test – See Appendix

TRC**(Gross)

Utility programs ranked by cost-effectiveness

Page 29: CPUC Energy Efficiency Policies and Investor-Owned … · CPUC Energy Efficiency Policies and Investor-Owned Utility (IOU) Programs Presentation for WHPA Executive Committee March

Cost-effectiveness “frontiers”1. Market effects (a.k.a. “spill-over) - Savings that results when program participants

and/or nonparticipants adopt measures without obtaining any customer incentive as a result of some exposure to the incentive programs.

- Current methods generally do not quantify market effects (Note: 2013-14 portfolio decision approved a 5% portfolio-wide adder for spill-over)

– Difficult to quantify / demonstrate with certainty– Inclusion of market effects is well within statutory mandates

2. Non-energy benefits (NEBs)− Other than GHG benefits, current EE cost-effectiveness tests do not include the

value of societal NEBs (e.g., job creation, labor productivity, tax receipts growth, housing value, other env benefits)

− Participant NEBs (e.g., comfort, health, and safety) are accounted for in the NTG methodology, which allocated participant costs and benefits according to these influence factors.

– Difficult to quantify / demonstrate with certainty– Statutory mandates for authorizing ratepayer-funded EE programs address

energy savings, system reliability, and environmental benefits (not other societal NEBs).

29

Page 30: CPUC Energy Efficiency Policies and Investor-Owned … · CPUC Energy Efficiency Policies and Investor-Owned Utility (IOU) Programs Presentation for WHPA Executive Committee March

EE Goals

30

Page 31: CPUC Energy Efficiency Policies and Investor-Owned … · CPUC Energy Efficiency Policies and Investor-Owned Utility (IOU) Programs Presentation for WHPA Executive Committee March

31

IOUs must achieve All Cost-Effective EE:

•PUC Sec 454.5 requires that IOUs “meet unmet resource needs with all available EE and demand reduction that is cost-effective, reliable, and feasible.”

•PUC Sec 454.55 / 454.56 requires CPUC to establish targets for the IOUs to achieve all cost-effective electric / gas EE

EE is at the top of the “Loading Order”

Page 32: CPUC Energy Efficiency Policies and Investor-Owned … · CPUC Energy Efficiency Policies and Investor-Owned Utility (IOU) Programs Presentation for WHPA Executive Committee March

How EE goals are set

Assessment of total energy savings 

available by end use and sector, relative to the baseline of existing 

energy uses

Potential Study

Assessment of cost‐effective EE potential available 

Economic Potential

Technical Potential 

2013‐14 Goals & Targets

Market Potential

DEER and non‐DEER work papers

Avoided Cost Calculator Outputs

Willingness/ Awareness 

data

Goals StudyPotential study update (ET) + C&S savings update +Financing model +Strategic Plan initiatives

Attribution AnalysisScenario Analysis

C&S Savings model

for post-2014 planning…

Page 33: CPUC Energy Efficiency Policies and Investor-Owned … · CPUC Energy Efficiency Policies and Investor-Owned Utility (IOU) Programs Presentation for WHPA Executive Committee March

IOU EE Program Goals and Results, 2002-09

Page 34: CPUC Energy Efficiency Policies and Investor-Owned … · CPUC Energy Efficiency Policies and Investor-Owned Utility (IOU) Programs Presentation for WHPA Executive Committee March

Potential Study: Major Shift of Market Potential into Codes & Standards

0

5000

10000

15000

20000

25000

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Residential Commercial Industrial Agricultural Behavioral Codes and Standards34

Source: Navigant, 2011 Potential Study

GW

h

Page 35: CPUC Energy Efficiency Policies and Investor-Owned … · CPUC Energy Efficiency Policies and Investor-Owned Utility (IOU) Programs Presentation for WHPA Executive Committee March

Potential Study: CFL Market Potential, once available to IOU Programs, now transitioning into code

0

500

1,000

1,500

2,000

2,500

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

GWh

Food Service

Whole building

Water Heating

Building Envelope

Refrigeration

Laundry

Other

Outdoor Lighting

Low Income

Plug Loads

Ag/Ind Process

HVAC

Appliance

Indoor Lighting

35Source: Navigant, 2011 Potential Study

Page 36: CPUC Energy Efficiency Policies and Investor-Owned … · CPUC Energy Efficiency Policies and Investor-Owned Utility (IOU) Programs Presentation for WHPA Executive Committee March

2013 Potential by Measure Type

- 50 100 150 200 250 300 350 400

Water Heating

Boiler

Whole Building

Building Envelope

Food Service

Appliance

Low Income

Plug Load

Other

Refrigeration

Outdoor Lighting

HVAC

Process

Indoor Lighting

Page 37: CPUC Energy Efficiency Policies and Investor-Owned … · CPUC Energy Efficiency Policies and Investor-Owned Utility (IOU) Programs Presentation for WHPA Executive Committee March

Evaluation Measurement and Verification (EM&V)

37

Page 38: CPUC Energy Efficiency Policies and Investor-Owned … · CPUC Energy Efficiency Policies and Investor-Owned Utility (IOU) Programs Presentation for WHPA Executive Committee March

38

Application of EM&V results to future portfolio design

•Updating program planning values in order to create more accurate ex‐ante projections of likely savings in the next program cycle

•Making procurement demand forecast estimates more accurate

Increasing reliability of future savings estimates 

•Providing performance information to program administrators•Identifying measures that are not cost‐effective for removal or reduction in the portfolios

•Improving program processes and implementation so delivery inefficiencies are reduced or eliminated

•Developing feedback on new programs or measures for which good data does not yet exist

Improving program efficacy

•Assessing the potential for remaining energy savings•Monitoring changing market conditions to inform program design•Constructing trend data on target markets for use in strategic planning and guidance for the next cycle

Providing market feedback

38

Page 39: CPUC Energy Efficiency Policies and Investor-Owned … · CPUC Energy Efficiency Policies and Investor-Owned Utility (IOU) Programs Presentation for WHPA Executive Committee March

39

EE Evaluation, Measurement and Verification (EM&V) “101”

• Impact Evaluation is used to verify energy savings through field research. Key aspects investigated are:

– Installation Rates (How many units got installed?)– Unit Energy Savings (What savings were achieved?) –Factors include

baseline, expected life, operating hours, peak time effects)– Program influence or Attribution (To what extent did the program cause

the action?) -- Compared to other motivating factors, such as natural market changes, vendor advertising, price effects, environmental effects, etc.?)

• Lessons Learned are applied to future program designs & implementation strategies, including:

– Updated energy savings expectations– Insight into customer segments with highest savings potential– Profiles of customers unlikely to take action without utility program

facilitation

Page 40: CPUC Energy Efficiency Policies and Investor-Owned … · CPUC Energy Efficiency Policies and Investor-Owned Utility (IOU) Programs Presentation for WHPA Executive Committee March

40

Net To Gross (NTG) Ratio• Cost-effectiveness is determined on a “net” savings basis

– Net energy savings = gross savings * NTG

– Historical program average NTG = 0.7

• Key factors addressed include:

Free Riders “Market effects” / Spillover Underlying participant motivations (including non-energy benefits) Installation Rate

May also address (though current CPUC evaluations do not) Persistence/Failure Rebound / Take Back Effect

• Impact evaluations assess NTG ratios and inform planning parameter updates (DEER, etc.)

Page 41: CPUC Energy Efficiency Policies and Investor-Owned … · CPUC Energy Efficiency Policies and Investor-Owned Utility (IOU) Programs Presentation for WHPA Executive Committee March

Ex Ante / Ex Post

41

Page 42: CPUC Energy Efficiency Policies and Investor-Owned … · CPUC Energy Efficiency Policies and Investor-Owned Utility (IOU) Programs Presentation for WHPA Executive Committee March

Ex Ante vs. Ex post Savings Estimates

Ex Ante• Estimate of likely energy savings

before a measure is installed based on predictions of average operating conditions and baseline usage

• Basis for utility savings claims• Used as the basis for 2006-08/09

shareholder incentive payments, under revised CPUC policy

• Ex ante review (EAR) processes for (a) custom and (b) deemed (DEER and non-DEER)

Ex Post• Estimates of "actual" energy savings

based on onsite measurements, energy billing analysis, and other types of data collection.

• Energy Division evaluated values• Contemplated as the basis for 2006-08

shareholder incentives per original CPUC policy

• Evaluated values inform:– Assessments of program accomplishments

(evaluation reports)– Forecasts of savings potential for the next

program cycle (the new ex-ante)

42

***Both require counterfactual assumption of what would have happened in the absence of the program***

Page 43: CPUC Energy Efficiency Policies and Investor-Owned … · CPUC Energy Efficiency Policies and Investor-Owned Utility (IOU) Programs Presentation for WHPA Executive Committee March

Ex Ante Review Process• Deemed

– DEER – Database “common measures” • Periodic updates by Commission decision to incorporate “best available

information” from evaluation research

– Non-DEER – Measures or tools not captured in DEER• Based on “best available information” and extrapolations from DEER values

and/or methods, as appropriate• IOUs submit work papers for Energy Division review • Energy Division selects some subset for review; releases “dispositions” with

adjusted values, as appropriate.

• Custom– IOUs post a list of projects for Energy Division to sample– Energy Division selects a subset of projects for review; modifies parameter

assumptions savings, as deemed reasonable– 0.9 Gross Realization Rate for any projects not selected for review– Dispositions may include adjustments to modeling tools (e.g., EnergyPro for

whole-house retrofit advanced path program) 43

Page 44: CPUC Energy Efficiency Policies and Investor-Owned … · CPUC Energy Efficiency Policies and Investor-Owned Utility (IOU) Programs Presentation for WHPA Executive Committee March

Shareholder Incentives

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Recent Shareholder Incentives• 2006-08 mechanism

– Shared savings rate based on goals accomplishment– Performance basis based on ex post net benefits

• 2006-08 / 09 payments based on ex ante• 2010-12 mechanism

– Management fee with performance bonus tied to ex ante review

• 2013-14 - Pending

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Page 46: CPUC Energy Efficiency Policies and Investor-Owned … · CPUC Energy Efficiency Policies and Investor-Owned Utility (IOU) Programs Presentation for WHPA Executive Committee March

Energy Division Organizational Chart and

Staffing

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Energy Division Staffing of Demand-Side Management Group

Integrated Demand-Side Analysis(EE, ESAP, DR, DG)

Supervisor: Jaclyn Marks

Retail Rate Design

Supervisor: Paul Phillips

Demand-side Evaluation(EE, ESAP, DR, DG)

Supervisor: Carmen Best

Residential Programs(EE, ESAP, DR)

Supervisor: Hazlyn Fortune

Non-Residential Programs(EE, DR)

Supervisor: Bruce Kaneshiro

Customer Generation Programs(DG)

Supervisor: Melicia Charles

Demand-Side AnalysisBranch

Manager: Pete Skala

Demand-Side ProgramsBranch

Manager: Simon Baker

17 EE Positions

ESAP = Energy Savings Assistance ProgramDR = Demand ResponseDG = Distributed Generation (CSI Solar & SGIP)

EE-RelatedSections

Page 48: CPUC Energy Efficiency Policies and Investor-Owned … · CPUC Energy Efficiency Policies and Investor-Owned Utility (IOU) Programs Presentation for WHPA Executive Committee March

Thank You

More information:http://www.cpuc.ca.gov/PUC/energy/Energy+Efficiency/

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Page 49: CPUC Energy Efficiency Policies and Investor-Owned … · CPUC Energy Efficiency Policies and Investor-Owned Utility (IOU) Programs Presentation for WHPA Executive Committee March

Appendices

• Evaluation Reports Available to the Public• Cost-Effectiveness Tests

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Page 50: CPUC Energy Efficiency Policies and Investor-Owned … · CPUC Energy Efficiency Policies and Investor-Owned Utility (IOU) Programs Presentation for WHPA Executive Committee March

Evaluation Reports Available to the Public

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2010-2011 Energy Efficiency Progress and Evaluation Report Interim report on progress toward goals, savings, and cost effectiveness by sector on the energy efficiency portfolio. The data contained in the report is based on IOU reported savings not evaluation –verified savings. The report summarizes key findings from recent evaluations and links to full reports. Author: Energy Division (hereafter ED). Date: August 2012Link: http://www.cpuc.ca.gov/NR/rdonlyres/89718A1B-C3D5-4E30-9A82-74ED155D0485/0/EnergyEfficiencyEvaluationReport.pdf

2009 Energy Efficiency Evaluation Report Final report on achievement of goals, savings, and cost effectiveness statewide and by IOU for the 2009 bridge funding year. The data contained in the report is based on evaluation based values from the 2006-2008 evaluation work. Author: ED. Date: January 2011Link: http://www.cpuc.ca.gov/NR/rdonlyres/D66CCF63-5786-49C7-B250-

00675D91953C/0/EEEvaluationReportforthe2009BFPeriod.pdf

2006-2008 Energy Efficiency Evaluation Report Final report on achievement of goals, savings, and cost effectiveness statewide and by IOU for the 2006-2008 program cycle. The data contained in the report is based on data gathered from field based evaluations and review of the operating conditions for the portfolio. Author: ED. Date: July 2010Link: ftp://ftp.cpuc.ca.gov/gopher-data/energy%20efficiency/2006-2008%20Energy%20Efficiency%20Evaluation%20Report%20-%20Full.pdf

2002-2003 Meta Evaluation ReportFinal report the evaluation results and methods used in the 2002-2003 program cycle by the IOUs and their contractors. A summary of the total evaluation adjusted savings for the portfolio is included in the report and supporting data also summarizes the savings reported and evaluated for all programs that were evaluated. Author: TecMarket Works. Date: January 2006Link: http://www.calmac.org/publications/MECT02-03FinalReport.pdf

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Cost-Effectiveness Tests

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Standard Practice Manual (SPM) Cost TestsCost Test Key Question Answered Summary Approach

Total Resource Cost

TRC Will the total costs of energy in the utility service territory decrease?

Comparison of program administrator and customer costs to utility resource savings

Participant Cost Test

PCT Will the participants benefit over the measure life?

Comparison of costs and benefits of the customer installing the measure

Utility/Program Administrator Cost Test

UCT/PAC

Will utility bills increase? Comparison of program administrator costs to supply side resource costs

Ratepayer Impact Measure

RIM Will utility rates increase? Comparison of administrator costs and utility bill reductions to supply side resource costs

Societal Cost Test

SCT Is the utility, state, or nation better off as a whole?

Comparison of society’s costs of energy efficiency to resource savings and non-cash costs and benefits

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Summary of Costs and BenefitsComponent TRC PCT PAC RIM

Energy and capacity Benefit - Benefit Benefit

Additional resource savings Benefit - - -

Non-monetized benefits - - -

Equipment and install costs Cost Cost - -

Program overhead costs Cost - Cost Cost

Incentive payments - Benefit Cost Cost

Bill Savings - Benefit Cost

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Total Resource Cost Test

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• Energy

• Capacity

• T&D

• GHG

• Losses

• RPS Purchases

• O&M Savings

• Other Resource Benefits

• Equipment Costs

• O&M Costs

• Admin & Overhead Costs

• EM&V

Benefits Costs

Net Benefits to Region as a Whole?

Incentives

Bill Savings

NOT INCLUDED

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Program Administrator Cost Test

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Incentives

Benefits Costs

• Energy

• Capacity

• T&D

• GHG

• Losses

• RPS Purchases

• Admin & Overhead Costs

• EM&V

Is Program Cheaper Than Other Sources of Energy?