The TRC is Failing Us ... But Not for the Reasons You Think

NHPC releases new study on utility cost-effectiveness test by Synapse Energy Economics at NARUC

PORTLAND, Ore., July 23, 2012 /PRNewswire-USNewswire/ -- Widely-used tests to evaluate energy efficiency programs are not being conducted correctly and, as a result, energy efficiency programs that offer significant benefits to homeowners, the environment, and society are not being created, according to a groundbreaking study: "Best Practices in Energy Efficiency Program Screening: How to Ensure that the Value of Energy Efficiency is Properly Accounted For." The report, authored by Synapse Energy Economics, was released this morning during NARUC's annual meeting.

"Utility cost-effectiveness testing is an important way for regulators, utilities and program administrators to determine if the benefits of a program outweigh its costs," said Robin LeBaron of the National Home Performance Council, which commissioned the study. "However, most states are NOT using a complete range of best practices that fully accounts for the value of energy efficiency, leading to incomplete and inaccurate test results. As a result, valuable energy efficiency programs that would lower utility bills and provide many other benefits are being rejected."

The study recommends use of a comprehensive set of best practices when conducting cost-effectiveness tests to ensure that each test is being applied to achieve its underlying objectives, is internally consistent, accounts for the full value of energy efficiency resources, and uses appropriate planning methodologies and assumptions. Best practices include:

• Include the full range of program impacts, including all energy savings;
• Incorporate all avoided costs, including energy, capacity, and transmission and distribution costs;
• Use an appropriate discount rate that reflects the risk of energy efficiency; and
• Properly account for free ridership, spillover, and market transformation.

"The paper provides a comprehensive review of a wide range of problems and inconsistencies in current cost-effectiveness test practices and recommends a range of best practices to address them," noted Tim Woolf, a former commissioner and lead author of the study. "These best practices align test implementation with the underlying objectives of the tests as originally designed; ensure that energy resources are developed at the lowest cost; and support public policy goals, such as promoting customer equity, serving a broad range of customers, encouraging comprehensive whole-house improvements, and avoiding lost opportunities."

The report also provides advice regarding the best test to use for specific situations. It recommends use of the societal test for individual programs, and the program administrator test at the portfolio level to ensure consumers' energy costs are reduced as a result of the programs. The full set of best practices is listed on the NHPC website (www.nhpci.org).

The National Home Performance Council encourages the implementation of whole-house retrofits for increased home energy performance and facilitates coordination among federal governmental agencies, utilities, state energy offices, contractors and others to improve whole-house energy performance. Go to www.nhpci.org for more information.

SOURCE National Home Performance Council