Process for Choosing Interim Programs

STATE OF MAINE	Docket No. 2002-161
PUBLIC UTILITIES COMMISSION
	June 13, 2002
Public Utilities Commission Interim Electric Energy Conservation Programs
ORDER ESTABLISHING INTERIM CONSERVATION PROGRAMS

WELCH, Chairman; NUGENT and DIAMOND, Commissioners

I. SUMMARY

By this Order, we establish the cost effectiveness tests, objectives and other criteria that we use and will continue to use to choose interim electric energy conservation programs. We decide to immediately implement the following as interim programs:

· Low-income refrigerator replacement program

· Building Operator Certification (BOC) program

· State building program

· Department of Economic and Community Development (DECD) conservation loan capitalization

· Maine Energy Education Program (MEEP) funding

· Maine energy curriculum investigation

We also decide to implement the following programs after developing additional program design details:

· Residential energy efficient lighting program

· New school construction program

Finally, we decide to further investigate the following programs that show potential for meeting our criteria for interim programs:

· Small business prescriptive rebate program

· Low-income no-charge lighting program

· Large commercial/industrial (C/I) program

II. BACKGROUND

P.L. 2001, ch. 624 (the Conservation Act),[1] enacted during the second session of the 120^th Legislature, establishes terms that govern an electric energy conservation program in Maine. Section 4 of ch. 624 directs the Maine Public Utilities Commission (Commission) to develop and implement electric energy conservation programs that are consistent with the goals and objectives of an overall energy conservation program strategy that the Commission must establish. The programs must be cost effective, according to a definition that the Commission also must establish. Various other statutory directives require the Commission to promulgate rules and hold public hearings.

Recognizing that the process of implementing electric energy conservation programs will necessarily take many months, the Legislature authorized the Commission to implement interim programs. Section 7 of ch. 624 states:

Interim programs. In order to avoid a significant delay in the implementation of conservation programs pursuant to the Maine Revised Statutes, Title 35-A, Section 3211-A, the Public Utilities Commission may use funds from the conservation program fund established pursuant to Title 35-A, section 3211-A, subsection 5 to implement on a short-term basis conservation programs that the commission finds to be cost effective. The commission is not required to satisfy the requirements of Title 35-A, section 3211-A before implementing such programs. Any programs implemented under this section must terminate no later than December 31, 2003. Funds in the conservation program fund not used for short-term programs under this section must be used in accordance with Title 35-A, section 3211-A.

The Commission intends to implement interim programs during the summer of 2002. We expect to begin implementing longer term programs during 2003.

By Proposed Order on April 26, 2002, we stated our preliminary views on interim program goals, cost effectiveness tests for interim programs, interim program candidates, and the decision making process that the Commission will use when selecting and implementing interim programs. We held a public hearing on May 10, 2002 so that interested persons could comment on the Proposed Order and other matters concerning interim programs. We also invited written comments on the Proposed Order, which were due by May 17, 2002.

In Appendix B attached to this Order, we list the persons who spoke at the public hearing and who filed written comments. Comments at the public hearing were transcribed. Written comments filed with the Commission are available from the virtual docket at the Commission’s web site (www.state.me.us/mpuc). The transcription of the public hearing is also available.[2] We discuss these comments throughout the body of this Order. Suggestions for specific interim programs are discussed in the program section of the Order.

III. BASIS FOR APPROVING INTERIM CONSERVATION PROGRAMS

The Conservation Act requires that the Commission only implement interim programs that it finds cost effective.[3] In implementing section 7 of the Act, we seek to answer three broad questions: (1) how will we evaluate the cost effectiveness of specific interim programs, (2) to what extent should we consider the provisions of newly-enacted 35-A M.R.S.A. § 3211-A (section 4 of the Act) when approving interim programs, and 3) are there other criteria to consider?

A. Cost Effectiveness

1. Appropriate tests

Cost effectiveness testing for conservation programs has a long history before this Commission. For example, the Electric Rate Reform Act stated 25 years ago that

The Commission, as it determines appropriate, shall order electric public utilities to submit specific rate design proposals and related programs for implementing energy conservation techniques and innovations … Such proposals shall, as the Commission determines, be designed to encourage energy conservation, minimize the need for new electrical generating capacity, and minimize the costs of electricity to consumers… (Public Laws, 1977, Chapter 521).

Thus, we have spent the last twenty-five years considering, and periodically reconsidering, how to test whether proposed conservation measures are likely to minimize electricity (and sometimes other) costs. The debate typically is framed in terms of which of various cost effectiveness tests should be applied. That debate is generally reducible to a debate over our goals in adopting conservation programs.

Our last thorough review of this question was in 1988, when we adopted amendments to Chapter 380, Demand Side Energy Management Programs by Electric Utilities, (Docket No. 88-178).[4] When considering the cost effectiveness of interim conservation programs, we propose to use the cost effectiveness framework established in the original Chapter 380 (Ch. 380-O).

Ch. 380-O defined three cost effectiveness tests, but principally relied upon the “All Ratepayers Test.” This test measures whether a proposed conservation program provides the same level of end use amenity (e.g. lighting or hot water) at a lower overall net cost to utilities and ratepayers taken together.

The second cost effectiveness test in Ch. 380-O was the “Rate Impact Test.” This test measures the impact of a conservation program on the overall average rate of the electric utility (in $ per kWh) rather than the total dollar cost. This is a stricter test than the All Ratepayers Test. A decline in electricity use, from a conservation program or for some other purpose, will tend to reduce the utility’s profit, to the extent the reduction in revenue from lower sales is greater than the utility’s savings from lower sales. At the present time, with utilities limited to the transmission and distribution (T&D) business and continuing to carry substantial stranded costs in their rates, it is unlikely that many conservation programs will pass the Rate Impact Test.[5]

The third cost effectiveness test in Ch. 380-O was the Societal Test, which included all elements of the All Ratepayers Test as well as “environmental benefits and any other social benefits external to the transaction between the utilities and its customers.”

Ch. 380-O provided for automatic approval of any programs that passed both the All Ratepayers Test and the Rate Impact Test and for programs that passed the All Ratepayers Test and did not have a significant (defined as one percent) impact on the average rate per kWh. There was no indication in Ch. 380-O of how, if at all, the Societal Test should be employed in analyzing conservation programs.

For purposes of determining the cost effectiveness of interim conservation programs, we will utilize the framework established in Ch. 380-O. We will rely primarily on the All Ratepayers Test to screen for cost effectiveness but will also consider whether conservation programs, or groups of programs, are likely to have a significant impact on rates.[6] In addition, just as Ch. 380-O provided the Commission with flexibility to approve programs that did not meet these thresholds, we will not automatically reject programs that fail to meet either or both of these tests if there is sufficient evidence that the programs are likely to prove cost effective by some other reasonable measure. For example, we might approve an interim program that targets specific ratepayer populations or a pilot program that aids in gathering information to develop future conservation programs or lays a foundation that promises to enhance program effectiveness over time.

2. Comments on the Proposed Order

Two parties, CMP and the Residential/Small Commercial Service Providers Coalition (the Coalition), provided comments that were almost diametrically opposed. CMP argued that we should rely upon the Rate Impact Test on the grounds that conservation funding was being recovered through a surcharge on electric rates. The Coalition argued that we should retain the All Ratepayers Test but consider the avoided cost to be the avoided cost to the individual ratepayer (i.e., the electricity rate) rather than avoided (or marginal) costs of generating and consuming less electricity.

We believe that the most appropriate approach to cost benefit determinations is to consider whether the total cost to society would be lower if a particular conservation action is taken. Adopting CMP’s suggestion of the Rate Impact Test would result in our rejecting conservation measures which produce a net decrease in total costs. Thus, we will not accept CMP’s suggested use of the Rate Impact Test. Similarly, we will reject the Coalition suggestion to use retail rates as avoided costs. The Coalition recommendation could, and probably would, have us approving conservation programs which raise overall costs. This would occur whenever the savings to an individual ratepayer would come only at the expense of imposing additional costs on other ratepayers which exceeded the savings to the participants.

Another, perhaps simpler, way of stating this issue is to compare two hypothetical cases. Each case focuses on a conservation measure which results in lower costs to the participant in the conservation program. In the first, the participant saves $100 while other ratepayers incur a cost of $50. CMP would have us reject this program because the $50 loss would violate the Rate Impact Test. In the second case, the $100 savings yields a $150 loss to other ratepayers. The Coalition would have us approve the program because the participant would save $100. Under the All Ratepayers Test, we would approve the first program, since the gain to the participant is greater than the loss to others, but we would reject the second program since it would result in a net loss. We believe this to be the right outcome and will rely primarily on the All Ratepayers Test.

In addition, Glenn Reed of NEEP offered two recommendations regarding cost effectiveness. First, Mr. Reed suggested that we analyze cost effectiveness on a multi-year basis to reflect the fact that a program may be beneficial over its entire lifetime even if it were not cost effective in one or more individual years. Here, we agree with Mr. Reed in concept, but note that all of the cost effectiveness tests should take a multiyear perspective while discounting future benefits relative to immediate benefits. This is, and has been, a common practice. Mr. Reed also suggests that we include non-electric benefits (e.g., savings of other operating costs) as well as program impacts which occur outside the program itself (e.g., post program adoption of efficiency measures). Here too, we agree in principle, but with the observation that such effects may be difficult to estimate reliably.

Finally, Competitive Energy Services (CES) is concerned that we should be certain that our cost benefit tests fully capture the effects of conservation measures on our estimates of the likely price of electric energy. Specifically, CES states: “We know that demand-side response has a very powerful effect on the establishment of market clearing prices in NEPOOL which then reduce the cost of electricity to all other ratepayers in the market. This benefit of DSM appears to be missing from the calculation methodology proposed by the Commission”.

While the concern raised by CES is theoretically correct, it is unlikely to have any significant effect on the analysis of any individual interim DSM program. In most, if not all, cases, the interim programs we will consider are too small to exert a significant impact on the energy market and a method for estimating such an effect requires development. That said, we would not rule out considering such secondary impacts where there is credible evidence that those impacts are significant and could be reasonably estimated.

3. Calculation of Costs and Savings

Beyond the specific choice of which cost effectiveness tests to use, there are also data issues. While program costs and energy savings can be considered on a case-by-case basis, certain principles apply to all programs.

First, we establish methods for converting energy savings into dollar cost savings. Ch. 380-O relied on estimations of avoided costs. While prior to restructuring the Commission periodically approved avoided costs for each of the large electric utilities, we no longer do so. When considering interim conservation programs, we will determine generation cost savings by looking to the competitive generation market. For residential and small commercial and industrial (C&I) customers, we will use the prices under existing standard offer contracts for the remaining term of those contracts, since most residential and small C&I customers take service under the standard offer. For other customers, we will base estimates of cost savings on current market conditions as reported in the trade press (e.g. the Natsource quotes of electricity prices for futures contracts). Where the futures market is thinly traded, we will rely on the next best available sources[7].

L. K. Goldfarb Associates suggested using long-term avoided costs recently developed and approved in Massachusetts. CMP proposed using the T&D utilities’ entitlement sales prices as estimates of avoided generation cost. MPS and BHE commented that standard offer prices reflect shorter term, rather than long-term, avoided costs. We will consider these viewpoints when we determine cost effectiveness analysis for long-term programs in Docket No. 2002-162. We believe the simpler approach we have accepted in this Order is adequate for judging interim programs in the short time frame in which we are operating.

We propose to base delivery cost savings (i.e., the costs saved for transmission and distribution) on the marginal T&D costs used to evaluate special rate contracts under utilities’ pricing flexibility programs. The Commission routinely approves marginal costs for some utilities. We plan to use reasonable estimates of marginal costs for utilities that have not filed marginal costs in recent years.

CMP commented that its marginal cost calculations are not particularly reliable. However, these values are quite small and will serve to represent that there is some cost, although small, associated with T&D delivery. We also note that CMP has endorsed use of these estimates for other purposes.

Finally, many states currently use cost effectiveness tests that include costs or benefits associated with non-electric resources (e.g., increased use of gas or water), customer O&M expenses (e.g., reduced maintenance on a more efficient product), post-program adoption (e.g., the removal of an efficiency measure), and so-called “spillover effects” (e.g., adoption of additional efficiency measures in response to customers’ satisfaction with the original measure). Many commenters supported including such costs and benefits, but only if they can be reliably calculated. We agree. The All Ratepayers Test does not preclude considering such costs and benefits, and we will do so to the extent they can be reasonably well quantified and are reasonably certain to occur.

4. Ability to Calculate Cost Effectiveness

Conservation programs may be divided broadly into two categories, which we will call primary-effect programs and secondary-effect programs. Primary-effect programs are those in which program funding is directly related to kWhs saved. For example, a program that pays a customer a fixed rebate to replace an existing motor with a more efficient motor is a primary-effect program. Program planners can be reasonably certain that some level of savings will occur and can either directly measure the savings or can make a reasonable calculation of savings based on engineering estimates.

Secondary-effect programs are those in which funding is paid to an intermediary, who in turn uses the money for one of a variety of purposes aimed at influencing an energy consumer’s behavior. For example, an education or advertising program funds an entity that then influences consumers to use less energy or use it more efficiently. In this instance, cost effectiveness is more difficult to measure, since there is no direct link allowing program planners to measure behavior that results from the program.

While we recognize that both types of programs have advantages and disadvantages, we will strongly favor primary-effect programs in the interim period.[8] Secondary-effect programs necessarily require more investigation before we can ascertain effectiveness and therefore we are less likely to be able to evaluate their cost effectiveness sufficiently to implement them on an interim basis this summer. Most commenters agreed with our preference, with some commenters asserting that only primary-effect programs should be operated in the interim period. While favoring primary-effect programs, we will not foreclose the possibility of offering secondary-effect programs, because some education and training programs appear to pose clear benefits to consumers.

B. Other Objectives Stated in the Conservation Act

In addition to requiring cost beneficial programs, section 4 of the Act establishes specific objectives that the Commission must consider when developing its statewide plan. Subsection 2 of Section 3211-A states that the Commission shall:

1. target 20% of funds to low income consumers;

2. target 20% of funds to small businesses; and

3. allow all other customers a reasonable opportunity to participate in a program.

In addition, the Commission must consider programs that (summarized):

1. increase consumer awareness;

2. create favorable market conditions for efficient products;

3. promote sustainable economic development; and

4. promote reduced environmental damage.

While the Act relieves the Commission of the obligation to apply the statutory criteria to its interim programs, it clearly indicates the Legislature’s preference for accomplishing specific policy goals. Thus, we choose a portfolio of interim programs that meets the statutory criteria to the greatest extent possible. When taken together, the interim programs we authorize through this Order include significant funding for low-income consumers[9]. Two programs target small businesses, while existing utility programs continue to offer measures for that customer segment[10]. The portfolio includes programs for residential, medium C/I, state-owned electrical users and schools, and provides for consideration of a large C/I program. We have authorized two relatively inexpensive programs whose goal is to increase consumer awareness. Two programs offer clear support for economic development. Simply by reducing energy use, the portfolio reduces environmental damage caused by generating facilities, but we have not attempted to quantify this effect in interim programs. Finally, in the interim, we did not explicitly attempt to “create favorable market conditions for efficient products” because that criterion is inherently a long-term goal. However, many of the programs accomplish this goal incidentally.

C. Other Criteria

The Act requires that interim programs be discontinued no later than December 31, 2003. With this in mind, we used three additional criteria when choosing interim programs.

1. Quick Start-Up

We authorize for immediate implementation programs with an established delivery system that can be activated in two months or less. Programs that best meet this criterion include those that are currently operating in Maine or nearby states, that do not require us to issue RFPs for delivery or evaluation, and that do not require complex contracts.

Commenters suggested a variety of programs that appear to be effective but that require more extensive start-up activity or whose design requires more thorough development. We have authorized Commission Staff to implement some of these programs – after developing the design details. In other instances, we will examine these suggestions as part of the long-term plan.

2. Potential as a Pilot

We consider programs that would provide information useful in choosing permanent statewide programs. However, if such a program cannot be implemented quickly, we reject it as an interim program.

3. Proven Successful Elsewhere

Because we have only a few months to choose interim programs, we rely on information already learned in Maine or in other states. While we recognize that, as one commenter suggested, the costs and benefits realized by a program in Maine might differ from costs and benefits elsewhere, we nonetheless believe that such evaluations are reasonable proxies when judging interim programs. Thus, we choose programs that have proven to be cost effective by other entities, including other State agencies in Maine.

IV. EVALUATION

Many commenters urged us to develop an evaluation procedure for each interim program at the time of program design. We agree. Each interim program design will include a means of evaluating its cost effectiveness. The design will include the means for determining and reporting the data items that will indicate program costs (e.g., Commission administrative costs, capital costs, and delivery costs) and program benefits (e.g., life cycle kWhs saved). In this Order, we summarize the monitoring and reporting procedures that will accompany each authorized program. Commission Staff will develop a more detailed determination of the data to measure before each program begins. The Commission will develop a written description of the monitoring and reporting requirements and will enter into a written agreement with each delivering entity that is appropriate for that delivery approach. For example, a contract is appropriate with a vendor or Energy Service Company (ESCO) but a memorandum of understanding is a common means of agreeing on procedures and obligations with another state agency.

The Commission will obtain the data necessary to evaluate the cost effectiveness of each program at regular intervals throughout the year, and will consider this cost effectiveness analysis to determine whether to continue, revise, or discontinue each program after December 2003.

Some commenters believe that direct metering of the equipment or the building before and after the installation of an efficiency measure is important in an evaluation. Other commenters believe that a table of engineered assumptions regarding prescriptive measure savings is appropriate. Both types of savings monitoring are used in existing conservation programs (e.g., comments indicate that Maine State Housing Authority (MSHA) and the Department of Administrative and Financial Services (DAFS) meter before and after implementation, and some ESCOs use whole-house electric bills to measure savings, while Department of Economic and Community Development (DECD) and most prescriptive motor and lighting programs use estimates linked to particular measures). We are persuaded that metering is important if a measure is non-standard or complex, but is not necessary for commonly used appliances or equipment. We direct Commission Staff to use a combination of these two savings monitoring techniques as it determines is appropriate.

Some commenters recommended obtaining baseline usage data from other states. It is likely that the short time frame required for interim programs will preclude extensive baseline data development. However, we will investigate sources of such data and use the information when it is relevant and we will consider baseline data more extensively when we develop our long-term conservation plan.

During past decades, utilities have performed extremely comprehensive evaluations on conservation programs. Such evaluations include (among other things) an estimate of free riders and of longevity of measures. They are costly to perform and require considerable statistical expertise. Some commenters urged us to consider these factors. L. K. Goldfarb Associates suggested that “business-decision level” assessment is adequate and can be done at far lower cost. We agree and will not perform overly complex evaluations on interim programs. To the extent that we learn of significant free riders or removal of measures, we will consider them in determining future program activity. We will consider whether more comprehensive evaluations are warranted for long-term programs in our Docket No. 2002-162 proceedings.

V. INTERIM PROGRAM APPROACH

A. Three Tiers of Authorized Programs

We will implement interim programs under a tiered approach. First, in this Order we authorize five programs (and recommend one task force) that will be implemented within the next two months. We also authorize two programs for implementation after Commission Staff has determined additional program design details. Finally, we list three programs that may have merit as interim programs but that we are not prepared to authorize without further study.

B. Possible Future Interim Program Authorizations

While at this time we do not authorize study of any additional interim programs, we do not foreclose the possibility of authorizing additional programs in the future if they meet our interim criteria, if funds are available, and if staffing is adequate to carry out the necessary investigations. Interested persons should provide us with proposals or other information regarding potential interim programs.

C. Interim Budget

In this Order, we specify the funding level for the Tier-1 programs. We also state our expectations about the total costs of Tier-2 programs. The funding levels for the Tier-3 programs are less certain, but we discuss the Tier-3 budget. Issues involving overall interim program funding levels, and the utility assessments necessary to achieve that funding, are decided in our Order on Interim Funding issued concurrently with this Order.

D. Utility Programs

In our April 8^th Order Extending Utility Energy Efficiency Programs, we directed T&D utilities to continue to operate their existing energy conservation programs in a manner consistent with recent program operations. After we have implemented the Tier-1, Tier-2 and Tier-3 interim programs, we will consider which of the utility programs to continue funding through the Conservation Program Fund. We expect that some utility programs accomplish useful goals but should not continue as interim energy efficient programs.[11] A utility will be able to continue offering such a program through its own funds. We also anticipate that some utility programs will be replaced by new interim programs.

E. Appendix C

In Appendix C, we provide a table that lists the interim programs that are chosen for implementation or further investigation, describes the targeted customer groups and delivery mechanism for each program, and provides the budget for programs or program groups, as well as administration.

VI. TIER-1 INTERIM PROGRAMS – FOR IMMEDIATE IMPLEMENTATION

A. Low-Income Refrigerator Replacement Program

We authorize the implementation of a refrigerator replacement program, to be delivered by the Maine State Housing Authority (MSHA) through the Community Action Program (CAP) Agencies in the manner used to carry out the recent Residential Energy Assistance CHallenge (REACH) program. The program shall include steps to ensure that inefficient refrigerators are not recycled into the State’s appliance stock. We will fund this program for one year and consider further funding based on its first-year results. The year-one cost of this program will be $200,000.

1. Cost Effectiveness

A recent study supporting the cost effectiveness of low-income appliance replacement programs in Maine indicates that a refrigerator replacement program may be marginally cost effective under the All Ratepayers Test established through this Order. MSHA, through an independent party, carried out an evaluation of the costs and savings of nine separate measures offered as part of the REACH program. Refrigerator replacement was one of the measures and was found to be cost effective from the customer perspective. The financial benefits in the REACH evaluation were based on the bundled rate, and the costs were based on the total appliance cost. These cost effectiveness findings can be used to carry out the All Ratepayers Test established in this Order. The standard offer energy rate should be used to calculate the financial benefit, and the full cost of the more efficient appliance should be used to evaluate cost effectiveness. Using the recent standard offer rate in CMP’s territory of $.0495, the 1189 annual kWh savings determined by MSHA monitoring, an appliance life of 18 years, a societal discount rate of 5 per cent, and the full cost of the replacement refrigerator would yield a benefit to cost ratio of 1.02.

2. Statutory Criteria Satisfied

a. At least 20% of program funds should be devoted to delivering efficiency measures to low income customers (Subsection 2.B(1) of Section 3211-A).

b. To the extent possible, the commission shall coordinate its efforts with other agencies of the State with energy-related responsibilities (Subsection 2.G).

d. For the delivery of conservation programs to low income residential customers, the commission, without employing a competitive bidding process, may utilize the delivery system for the Weatherization Assistance for Low Income Persons Program administered through the US DOE (Subsection 3.C).

3. Delivery System

The low-income appliance program will take advantage of the existing delivery system used for the REACH program, in which MSHA acts as program manager and the CAP agencies serve as the delivery mechanism. Thus, all aspects of the program are in place – CAP employees are trained to recognize and replace inefficient refrigerators, MSHA has ready contacts with vendors who can supply and replace refrigerators, a method for identifying the most needy customers has been established, and a tracking mechanism is in place. Clients have already been screened and audits have identified more than 500 households that would be eligible for appliance replacement given sufficient funds. MSHA and the CAP agencies will deliver the program to these pre-screened low-income households and to households screened through ongoing audits. The incremental administrative costs for offering this program are near zero.

4. Measurement and Evaluation

As one of its responsibilities under the federal program, MSHA must provide program progress reports. MSHA will distinguish measures that were funded by the Conservation Program Fund and will provide that portion of the report to the Commission. The Commission and MSHA will determine other relevant cost or benefits calculations (e.g., MSHA and CAP administrative costs) before the program begins.

5. Comments of the Parties

a. A number of commenters supported the appliance replacement program described in the Proposed Order.

b. CMP commented that its “Home Energy Efficiency Program,” operated in 2000 – 2001, would meet all of the criteria in the Proposed Order and would be effective as a low-income conservation program. Under this program, CMP contracted with an ESCO to deliver weatherization and lighting measures and to determine kWh savings caused by those measures. An independent company verified that the ESCO delivered the measures it reported. The Coalition of Residential and Small Service Providers (the Coalition) supported delivery of weatherization and energy efficiency light bulbs to low-income customers, using a method similar to CMP’s current program, asserting that this program was guaranteed to be cost effective because measures would be pre-screened for cost effectiveness.

c. Commenters warned that refrigerators must be removed from circulation to ensure that energy savings from the program persist.

d. The Industrial Energy Consumer Group (IECG) urged against the refrigerator replacement program, expressing a concern for public misinterpretation and criticism, and urged alternative means for funding low-income initiatives. IECG cited a California program that appeared to operate more cost effectively than does Maine’s program.

6. Discussion of Parties’ Comments

We have considered the advantages of ESCO delivery as opposed to CAP delivery of low-income conservation measures. We recognize that ESCO delivery has proven effective in Maine and elsewhere. However, hiring an ESCO(s) requires that the Commission issue an RFP and develop a contract for both the ESCO and for an independent evaluator. These steps take time and resources and are counter to our criteria of fast start-up. The CAP delivery mechanism has been recognized as a reasonable delivery mechanism by the Legislature in the Act, and is in place and therefore more effective for an interim program. We will consider ESCO delivery for long-term low-income programs.

We also considered the benefits of a weatherization program as opposed to an appliance replacement program. While weatherization is likely to be more cost effective, it is already being delivered through federally-funded CAP programs. Appliance replacement, however, is likely to be cost effective but is not currently funded. Thus, funding an appliance replacement program will complement rather than duplicate existing program activity.

Finally, we considered comments asserting that, for the program to be cost effective, inefficient refrigerators must not be recycled into the State’s appliance stock. We understand that MSHA disposes of the inefficient models, and we will require that this practice continue. In addition, we direct Commission Staff and MSHA to examine the California program and incorporate cost-saving measures in Maine’s program if it is possible to do so.

B. Building Operator Certification (BOC) Program

We authorize fully funding the tuition to the BOC certification program for personnel who operate and maintain school buildings in Maine. Initially, we will fund two program sessions, with maximum attendance of 30 persons per session, on a first-come, first-served basis. The cost will be about $84,000. After the completion of these sessions, we will consider funding one or more sessions for personnel who operate and maintain public buildings. For interim budget purposes, we assume that two additional program sessions will be held, so that the total cost will be $168,000.

1. Cost effectiveness

BOC is an education program and the cost effectiveness of education programs has traditionally been difficult to quantify. However, the program that we authorize has been evaluated in the Northwest and is currently undergoing an evaluation in the Northeast. It is conducted jointly by the partners in the Northeast Energy Efficiency Partnership (NEEP), and is identical to the course developed and offered in the Pacific Northwest by the Northwest Energy Efficiency Alliance (NWEEA). The evaluation conducted by the NWEEA found the benefit cost ratio was 5.89 when using an avoided energy cost of 4 cents. Based on this evaluation, it is reasonably likely that this program would be cost effective in Maine. The BOC program requires that attendees carry out on-sight efficiency investigations in order to receive the CEU credits and certification offered by the program, which increases the likelihood that attendees will act as a direct result of the training.

2. Statutory Criteria

a. To the greatest extent practicable the commission should apportion remaining available funds among customer groups and geographic areas in a manner that allows all other customers to have a reasonable opportunity to participate (Subsection 2.B(3)). This program will be offered to all school districts within the State.

b. The commission may coordinate its efforts under this section with similar efforts in other states in the northeast region and enter into agreements with public agencies or other entities in or outside the State for joint or cooperative conservation planning or conservation program delivery, if the commission finds that such coordination or agreements would provide demonstrable benefits to citizens of the State and be consistent with this section, the conservation programs and the objectives and overall strategy for the conservation programs (Subsection 2.I.).

c. To the extent practicable, the commission shall encourage the development of resources, infrastructure, and skills within the State by giving preference to in-state service providers (Subsection 3.B). The contractor for this program does not reside within the State, but the training provided will result in the development of resources, infrastructure, and skills within the State.

d. The commission may select a program service provider for one or more conservation programs without employing a competitive bidding process if the commission finds that the selection of the service provider will promote the efficient and effective delivery of conservation programs and is consistent with the objective and overall strategy of the conservation programs (Subsection 3.C.(1)).

3. Measurement and Evaluation

NEEP is conducting a comprehensive evaluation of this program as it is being offered elsewhere in New England. When offering the program in Maine, we will follow the evaluation protocols that NEEP is using elsewhere and use the resulting information in a manner consistent with its use in the NEEP evaluation.

4. Delivery System

The NWEEA developed the curriculum for this program over an extended period of time. It has trademarked the course and has licensed NEEP to deliver the program through its partners in the Northeast. NEEP currently offers the program through its partners at a variety of locations in New England, and has already established tentative dates for a session in Maine. NEEP does not typically contract for this program. Thus, delivery can occur immediately, at a low incremental cost and with minimal contractual effort.

5. Comments of the Parties

a. The Educational Plant Maintenance Association of Maine supports the need to better educate its members about efficient plant operation, but notes that school budgets would rarely fund tuition of such a comprehensive course.

b. Some commenters indicated general approval for offering this program, but felt it should be offered to municipalities, state facilities, and small companies. The Coalition and others suggested that small business owners seldom attend such a program, while others asserted that education of building operators did not produce as effective results as would a primary-effect program.

c. BHE and other parties commented that BHE’s “CEM” facilities operations program serves a different audience (i.e., administrators) than does the BOC program. Thus, the BOC program complements, rather than duplicates, existing activity.

6. Discussion of Parties’ Comments

The education provided by the BOC Program will enable operating personnel to make more informed assessments of how energy is used within their own facilities and to better evaluate services offered by vendors of energy consuming equipment. Some commenters asserted that small businesses were unlikely to expend the time or money to attend the training. Others asserted that prior training initiatives had reached those people who would take advantage of them. However, discussions with the Educational Plant Maintenance Association of Maine (EPMAM) convince us that there is a pool of personnel whose decisions economically impact their school districts, who have received minimal training in some important issues, and who have a trade organization that is willing to facilitate organization of the training. While we prefer direct benefits programs during the interim period, the efforts to evaluate the BOC program reassure us that there are likely to be benefits from this admittedly secondary-effect program. Gaining direct insight into the program, while assisting our State’s schools, is a wise investment of a relatively small portion of the Conservation Program Fund. If we judge these initiatives to be cost beneficial, we will investigate whether a means exists to deliver the program to public building operators and ultimately to small businesses.

C. State Buildings Program

We authorize funding for energy efficiency renovations of State buildings. We direct Commission Staff to work cooperatively with the Maine Department of Administrative and Financial Services (DAFS) to identify projects that are cost effective using the All Ratepayers Test established in this Order and that most effectively reduce operating costs supported by Maine taxpayers and improve the working environment and productivity of the State workforce. An individual project or multiple projects can be funded, up to $1.5 million.

1. Cost Effectiveness

Projects that are approved for funding under this program will be pre-screened against the All Ratepayers Test. Energy savings will be verified whenever possible through the use of pre- and post-measure metering and measurement. When this is not possible, savings will be estimated through engineering methods.

2. Statutory Criteria

b. The commission, to the extent possible, shall coordinate its efforts with other agencies of the State with energy related responsibilities (Subsection 2.G.). DAFS is responsible for the energy consumption of all State facilities.

c. The commission may select a service provider without a competitive bidding process if it finds that the selection of the service provider will promote the effective and efficient delivery of the programs (Subsection 3.C(1)). DAFS can serve as project manager for this program. It will use a competitive bidding process to select the construction contractor.

3. Measurement and Evaluation

Projects funded through this program will first be examined for energy savings through an engineering investigation, and energy savings will be estimated for each measure. In some instances, the projects will also have metered data on pre-project energy consumption. The meters will remain in place, and DAFS will generate pre- and post-project consumption data and report that data to the Commission at regular intervals.

4. Delivery System

DAFS examines and carries out program renovation regularly. DAFS will carry out all administrative functions including contracting and metering.

5. Comments of the Parties

Many commenters supported this program, while some asserted that retrofitting existing buildings is not an efficient use of funds. NEEP recommended using the ENERGY STAR building program to efficiently identify the best opportunities.

6. Discussion of Parties’ Comments

We believe that targeting State buildings is a way to benefit a wider number of citizens than just those who directly participate in a program. We direct Commission Staff to consider the ENERGY STAR guidelines when it determines the criteria by which incremental energy savings will be determined.

D. Department of Economic and Community Development (DECD) Energy Conservation Loan Program

We authorize a one-time disbursement of $200,000 to DECD to recapitalize the DECD-managed small business loan fund. DECD loans made with Conservation Program funds must be used for electric energy efficiency and must target energy efficiency measures that DECD pre-determines to pass the All Ratepayers Test established through this Order.

Currently, DECD operates a commercial loan program for small Maine businesses (businesses with 50 or fewer employees and/or $5M or less in annual sales). The program is funded by the US Department of Energy (US DOE) and could serve more small businesses if its revolving loan fund were recapitalized. DECD staff already conducts energy audits for small businesses throughout the State, through which they identify cost effective opportunities that would be eligible for a loan. DECD currently has a list of businesses who qualify for a loan but for whom no funds exist.

1. Cost Effectiveness

Commission Staff will train DECD auditors to apply the All Ratepayers Test established in the Order, and DECD will use a portion of its loans equal to the amount of Conservation Program funding for projects that pre-screen to be cost effective. Because the majority of DECD delivery and administration costs are funded by the federal government, the cost effectiveness to Maine ratepayers is improved.

2. Statutory Criteria

a. Target at least 20% of available funds to programs for small business consumers, as defined by the commission by rule (Subsection 2.B.(2)). This program is available only to small businesses.

b. The commission to the extent possible, shall coordinate its efforts with other agencies of the State with energy-related responsibilities (Subsection 2.G). DECD will carry out all administrative functions, including contracting and post-implementation inspection.

3. Measurement and Evaluation

As one of its responsibilities to US DOE, DECD must regularly provide data on each loan. In addition, DECD and US DOE conduct post-installation visits to each site to ascertain that the efficiency measure was installed. DECD determines kWh savings through a standardized table of measure savings and interviews with the business. Thus, DECD now gathers the data necessary to determine whether the program is cost effective. It will distinguish measures that were funded by the Conservation Program Fund and will provide all data to the Commission. The Commission and DECD will determine other neces