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Entergy Pre-Filed Evidentiary Hearing Exhibit ENT000498 - Interagency Working Group on the Social Costs of Carbon, Social Cost of Carbon for Regulatory Impact Analysis Under Executive Order 12866 (2011)
	ML12090A848
Person / Time
Site:	Indian Point
Issue date:	10/25/2011
From:	Brilling J A; State of NY, Public Service Commission
To:	; Atomic Safety and Licensing Board Panel
	SECY RAS
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STATEOFNEWYORKPUBLICSERVICECOMMISSIONCASE07-M-0548-ProceedingonMotionoftheCommissionRegardinganEnergyEfficiencyPortfolioStandard.CASE07-G-0141-ProceedingonMotionoftheCommissionastotheRates,Charges,RulesandRegulationsofNationalFuelGasDistributionCorporationforGas

Service.ORDERAUTHORIZINGEFFICIENCYPROGRAMS,REVISINGINCENTIVEMECHANISM,ANDESTABLISHINGASURCHARGESCHEDULE(IssuedandEffectiveOctober25,2011)

ENT000498 Submitted: March 30, 2012 TABLEOFCONTENTSINTRODUCTION...............................................................................................................1PROCEDURALHISTORY................................................................................................2 OVERVIEWOFTHESTAFFWHITEPAPER.................................................................3 ISSUES................................................................................................................................4Reauthorizationofprogramsfor2012-2015...................................................................4Generalconsiderations....................................................................................................4Continuousimprovement................................................................................................8Outliersandconsolidation.............................................................................................13Lowincomeprograms...................................................................................................15NationalFuelGasprograms..........................................................................................16Lighting.........................................................................................................................20Sectorbalance................................................................................................................21Surcharges.....................................................................................................................

22Yeartoyearbudgetingandaccrualaccounting............................................................25 Utilityshareholderincentives........................................................................................27Hospitalprogramproposal............................................................................................32Interruptiblegascustomers...........................................................................................32OtherissuesdiscussedintheWhitePaper....................................................................32SEQRAFINDINGS..........................................................................................................33 CONCLUSION.................................................................................................................33 APPENDICESAppendix1.Programs,targetsandbudgetsAppendix2.SBCcollectionscheduleAppendix3.2011efficiencysavingsforecastAppendix4.Utilityincentiveproposal Appendix5.Summaryofcomments STATEOFNEWYORKPUBLICSERVICECOMMISSIONAtasessionofthePublicServiceCommissionheldintheCityofAlbanyonOctober13,2011COMMISSIONERSPRESENT:GarryA.Brown,ChairmanPatriciaL.Acampora MaureenF.Harris RobertE.Curry,Jr.JamesL.LaroccaCASE07-M-0548-ProceedingonMotionoftheCommissionRegardinganEnergyEfficiencyPortfolioStandard.CASE07-G-0141-ProceedingonMotionoftheCommissionastotheRates,Charges,RulesandRegulationsofNationalFuelGasDistributionCorporationforGas Service.ORDERAUTHORIZINGEFFICIENCYPROGRAMS,REVISINGINCENTIVEMECHANISM,ANDESTABLISHINGASURCHARGESCHEDULE(IssuedandEffectiveOctober25,2011)BYTHECOMMISSION:INTRODUCTIONAuthorizationforalargemajorityoftheenergyefficiencyprogramsundertheEnergyEfficiencyPortfolioStandard(EEPS)isscheduledtoexpireDecember31,2011.Inthisorder,wereauthorizemostofthoseprogramsforthefour-yearperiodendingDecember31,2015,withrevisedtargetsandbudgetswhereappropriate.ThreegasefficiencyprogramsrunbyNationalFuelGaspursuanttoitsratecaseswillbeconsolidatedintotheEEPSprogram.Thepercentageoffundingallocatedtolow-incomeprogramsisincreased.Rulesforbudgetingfromyeartoyearareclarified.

CASES07-M-0548and07-G-0141-2-Takenintheaggregate,theEEPSelectricprogramsareonatrajectorytoachievetheCommissionsgoalofreducingelectricityuseby11.2millionMWhbytheendof2015.Staffisdirectedtoworkwithprogramadministratorstofurtherrefineprogramtargetsandbudgets,andtoimproveprogramadministration.Inadditiontoreauthorizingprograms,wewillbeginaprocessofrevisingtheutilityshareholderincentivemechanism.Incentiveshavesucceededintheirprimarypurposeofmakingenergyefficiencyapriorityforutilities;however,Staffhasidentifiedvariouswaysinwhichourcurrentincentivemechanismhasimpairedtheeffectiveadministrationofprograms.Inthisorderweoutline,forfurtherpubliccomment,arevisedmechanismthatwouldrewardincentivesintwostages,firstforindividualutilityperformance,andsecondforachievementofthestatewidegoal.Finally,thescheduleforcollectionofsurchargeswillbeadjustedtoreducecashbalances.Thiswillmitigatecollectionlevelsovertheperiod2012-2014.PROCEDURALHISTORYOnJune23,2008theCommissionissueditsOrderEstablishingEnergyEfficiencyPortfolioStandardandApprovingPrograms(the2008EEPSOrder).

1TheOrderadoptedefficiencytargetsandestablishedaprocessforapprovalofenergyefficiencyprogramstobeadministeredbythestateselectricutilitiesandNYSERDA,andauthorizedthecollectionofSystemBenefitsChargesurcharges.OnMay19,2009,theCommissionissueditsOrderEstablishingTargetsandStandardsforNaturalGasEfficiencyPrograms(the2009EEPSGasOrder).2TheOrderadoptedanoverallgasefficiencytargetandestablishedaprocessforapprovingthegasefficiencyprogramstobeadministeredbythestatesgasutilitiesandNYSERDA.SubsequentordersapprovedefficiencyprogramsandauthorizedthecollectionofcorrespondingSBCsurchargesfromcustomers.

3 1Case07-M-0548,EnergyEfficiencyPortfolioStandard(EEPS),OrderEstablishingEnergyEfficiencyPortfolioStandardandApprovingPrograms(issuedJune23,2008).

2Case07-M-0548,EnergyEfficiencyPortfolioStandard(EEPS),OrderEstablishingTargetsandStandardsforNaturalGasEfficiencyPrograms(issuedJune23,2008).

3AsofAugust22,2011,68NoticesofProposedRulemakinghadbeenissuedinthe implementationoftheEEPSprogram,and37Ordershadbeenissued.

CASES07-M-0548and07-G-0141-3-OnDecember30,2010,theCommissionissueditsOrderContinuingSystemBenefitsChargeFundedPrograms(the2010SBCIIIExtensionOrder).

4TheefficiencyprogramsaregenerallyauthorizedthroughDecember31,2011.TheOrderadoptedasix-monthextensionofSBCIIIandauthorizedthetransitionofSBCIIIenergyefficiencyresourceacquisitionprogramstotheEEPSprogram.TheOrderalsoprovidedthatcollectionswouldbespreadoutbeyond2011tobettermatchcollectionswithexpenditures.

5The2008EEPSOrderstatedthatareviewofEEPSinitiativeswouldbecarriedoutin2011toinformtheCommissionsdecisionastoreauthorizationofprograms.OnJuly6,2011StaffissuedaWhitePaperwhichreportedonthestatusofEEPSprogramsanddiscussednumerousissuesrelatedtoreauthorizationoftheprograms.Theoverallefficiencytargetsidentifiedinthe2008EEPSOrder,the2009EEPSGasOrder,andthe2010SBCIIIExtensionOrderwerealsoadoptedthroughtheendof2011.

6PubliccommentswerereceivedonorbeforeAugust22,2011,andreplieswerefiledSeptember9,2011.

7OnJuly6and7,2011,fourpublicstatementhearingswereconductedintheserviceterritoryofNationalFuelGas,relatedtothatcompanysConservationIncentive Program.Over75membersofthepublicspokeatthosehearings.InadditiontoformalcommentsfiledwiththeSecretary,numerouspubliccommentsweresubmittedviaemail.OVERVIEWOFTHESTAFFWHITEPAPERManyoftheissuesaddressedinthisorderwerediscussedatlengthintheWhitePaper.Inthisorderwewillreference,butnotrepeat,theWhitePaperdiscussions,focusinginsteadonpubliccommentsandourownevaluationoftheissues.TheWhitePaperstatedthatEEPSprogramsaremakingsatisfactoryprogress,despiteastartthatwasslowerthanprojected.AchievementofefficiencysavingsfromEEPSprogramsthroughFebruary28,2011,wassubstantiallylowerthantheaggregategoalestablished 4Case10-M-0457,etal.,SystemBenefitsCharge(SBC)Programs,OrderContinuingSystemBenefitsChargeFundedPrograms(issuedDecember30,2010).

5Asmallnumberofprogramsthatrequirelongleadtimeshavetargetsandbudgetsthat extendbeyond2011,andsomecollectionshavebeenspreadoutbeyond2011tobetter matchthetimingofcollectionswiththetimingofexpenditures.

6ANoticeofProposedRulemakingwaspublishedintheStateRegisteronJuly6,2011.

7AsummaryofcommentsisincludedasAppendix5.

CASES07-M-0548and07-G-0141-4-bytheCommissionandthetargetsestablishedintheapprovalofindividualprograms.Thegoalsandtargetswereaggressiveandambitious,andshortfallsresultedfromthetimeneededforapprovalandroll-outoftheprograms.Also,theseriousdeclineintheeconomy,coincidingwiththeroll-outofmanyprograms,isbelievedtohavehadadampeningeffectoncustomerparticipation.Considering2011forecastsinisolationfromthepreviousyears,however,revealsanencouragingtrend.ProjectionsincludedintheWhitePapershowedEEPSprogramsintheaggregateapproaching100%achievementoftargetsinthe2011calendaryear.Updatesandcorrectionstothoseforecastsnowshowexpectedelectricsavingsat87.6%oftargets,andgassavingsat67.8%oftargets.

8StaffidentifiedanddiscussedawiderangeofissuesrelatedtopotentialimprovementsintheEEPSprogram.Ratherthanreiteratetheissueshere,werefertotheWhite Paperforafulldiscussion.Staffidentifiedalimitedrangeofrecommendationsforactioninthisorder,asfollows:Actualgassavingsarelikelytobemuchhigherthan67.8%fortworeasons:nearlyhalfofNYSERDAsgastargetreflectsanindustrialprogramwithmulti-yearleadtimes,whichisnotexpectedtoproducesavingsuntil2012-2013;andancillarygassavingsfromelectricprograms,projectedbyStafftobeintherangeof20-30%oftotalgassavings,are notincludedinthe67.8%figure.Reauthorizesurchargesandthemajorityofprograms;Reallocatefundspursuanttoananalysisofoutlierprogramsandconsolidateselected programs;Clarifyrulesrelatedtoyear-to-yearbudgetingandunspentfundsfrompreviousyears,to increaseflexibilityforprogramadministrators;andEliminatethecurrentshareholderincentivemechanism.

ISSUESReauthorizationofprogramsfor2012-2015Generalconsiderations 8ForecastsdetailedbyprogramadministratorareincludedinAppendix3.

CASES07-M-0548and07-G-0141-5-StaffhasrecommendedreauthorizationofmostoftheexistingEEPSprograms,subjecttocontinuousimprovement.Alargemajorityofcommentingpartiessupportthisapproach.Beforeadoptingthisrecommendation,however,wemustconsiderwhethercontinuationoftheEEPSprogramingeneralremainsawiseuseofratepayerfunds.Weconcludethatitis.Participationinenergyefficiencyprogramsbycustomersofallsizesenablesthemtocontroltheirenergyconsumptionandrealizesavingsontheirbills.

9InvestmentinenergyefficiencyalsoensurescontinuedinvestmentinadiverseportfolioofresourcestomeettheneedsofNewYorkState.Inparticular,thelargeandgrowingdependenceonnaturalgasforelectricgenerationandheatingexposesthestatetoriskofdramaticincreasesinthepriceofgas,whichhistoryhasshownarepossible,ifnotprobable.Investmentinenergyefficiencyactsasahedgeagainstsuddenincreasesingasprices.Theenergyeconomyisvulnerabletoupheavalfromawiderangeofpossibleevents,manyofwhichwehavewitnessedwithinrecentyears,includingdramaticeconomicchanges,earthquakes,and storms.Allofthesecanaffecttherelativeavailabilityandattractivenessofvarioussourcesof powerusedforlifeandbusinessinNewYork.Measuresthatreduceourdependenceonconventionalpowergenerationremainanimportantsourceofeconomicsecurity.Moreover,wearecommittedtoreducingtheimpactofclimatechangeandotherenvironmentalhazards,throughreductionofcarbonandotheremissions.Anyfutureattempttoachieveverylargereductionsincarbonemissions,suchasthe80%reductionthatmanyscientistsdeemnecessary,willlikelycomeataveryhighcost.Energyefficiency,evenifitcostsslightlymorethantoday'scarbonemittingsupplysources,representsalowcoststrategyforachievingcarbonreductions.WerecognizethatelectricitygenerationandgasconsumptionaresignificantcontributorstocarbonemissionsintheState.Astheregulatorofthosewhodeliverthatelectricityandgas,wehavearesponsibilitytoaffectelectricityandgasconsumptiontopreserveenvironmentalvaluesandtheconservationofnaturalresources.Thebenefitsoftheportfoliodiversityhedgeandemissionreductionsarenoteasilyquantified.Nonetheless,theyconvinceusthatcontinuationofNewYork'saggressiveenergyefficiencyinitiativeisimperative,solongasthecostsofenergyefficiencyoptionsfallin 9Thefullrangeofbenefitsofenergyefficiencyisdiscussedinthe2008EEPSOrderaswellastheOrderInstitutingProceeding(issuedMay16,2007)andtheSEQRAfindings, referencedbelow.

CASES07-M-0548and07-G-0141-6-arangethatiscomparabletothecostofsupplyoptions,whichtheycurrentlydo.Wehaveusedcosteffectivenesstestsinthepasttoevaluateefficiencymeasures,andwewillcontinuetodosointhefuture,butwerecognizethattheydonotprovideapreciseandcomprehensiveanalysisofthecostsandbenefitsofanefficiencymeasure.TheStaffWhitePapersolicitedcommentsfrompartiesaboutwaysthatourcosteffectivenesstestmightberevisedtoaccommodatetheseandotherconcerns.Numerouscommentsweresubmitted,somearguingforthetesttobemoreexpansive,otherarguingformakingthetestmorestringent.Changesinenergypricesmighthaveaneffectonthecalculationofcost-effectiveness;ontheotherhand,amajorityofcommentersarguethatourcost-effectivenesstestistoonarrowandshouldaccountforawiderrangeofbenefits.WearenotconsideringarevisiontoourTotalResourceCost(TRC)testatthistime.Wewill,however,considertakingupthisissueatafuturedate.Withnarrowexceptions,theexistingEEPSmeasureswereevaluatedagainsttheTRCatthetimeoftheirapproval,andthereisnoneedtore-evaluatethematthistime.TheStaff WhitePaperrecommendedagainstsuchare-evaluation,notingtheimportanceofcontinuityof programs.WeagreethatitisimportantforEEPSprogramstohavesufficientstabilitytobecomeestablishedandtotakeadvantageofimprovementsthatcancomefromexperience.

Energyefficiencyprogramsrequiretimetogainpublicrecognition,confidence,andparticipation.AsUIU 10Takingtheseconsiderationsintoaccount,wewillactheretokeepmostofthecurrentprogramsmovingahead.Wewillcontinueourprogramofevaluation,measurementandverification,andweretaintherighttoorderprogramchanges,aswarranted,inthefuture.correctlyobserves,EEPSwasinitiatedtoservearangeofpurposes,includingeconomicdevelopment.Programsareimplementedbycontractorsmakingbusinesscommitments,anditisnotreasonabletoexpectefficiencyprogramstosucceediftheyaresubjecttobeingdiscontinuedonshortnoticewheneverthereisashiftinenergyprices.WearealsomindfulofthemarkettransformationeffectsofanefficiencyprogramthatcanproducewidespreadsavingsbeyondthespecificbenefitsofEEPS-fundedprojects.WealsoacceptStaffsrecommendationtocontinueusingthe2015goalof7.7millionMWhasaplanningtoolforourelectricefficiencyprograms.Takingintoaccountthe 10UtilityInterventionUnit(UIU),DivisionofConsumerProtection,NewYorkDepartmentofState.

CASES07-M-0548and07-G-0141-7-incorporationofSBCIIIefficiencyprogramsintoEEPS,thejurisdictionalgoalisincreasedto11.2millionMWh.

11Althoughamajorityofcommentssupportthegoal,severalexpressconcern.MultipleIntervenors(MI)statesthatthecostofEEPSprogramsistoohigh,andthe2015goalshouldbescaledbackandprogramsreducedaccordingly.MIarguesthattherecessionshouldforcearethinkingofthegoal;reductionsinwholesaleenergypriceshaveincreasedthepaybackperiodformanytypesofprojects;nonewelectricgenerationisneededfortheforeseeablefuture;andthegulfbetweenNewYorkpricesandthenationalaveragepersists.TheNewYorkIndependentSystemOperator(NYISO)suggeststhat,foritsplanningpurposes,aslightlyscaledbackgoal,extendedto2018,wouldbemoreeffectivethanthecurrent2015goal.TheNYISOpresentedananalysisclaimingthatthe2015goalcouldnotbeattainedinacost-effectivemanner.TheJointUtilitiesalsoquestionwhetherthe2015goalisattainable,especiallygiventhelikelyeffectsofchangesinlightingstandards.Theysuggestthatthegoalshouldbe revisitedafterthecompletionofefficiencypotentialstudies.TheCommissionsjurisdictionalportionofastatewide15by15goalwasdiscussedandadoptedinthe2008EEPSorder.Changesincircumstancessincethattimedonotrequireustorevisitthegoalatthistime.Thecurrentportfolioofprograms,ifextendedwithoutrevisionthrough2015andachievedata100%levelfrom2008through2015,wouldhaveresultedinexceedingour2015goalbyasubstantialmargin.

12Despitethesluggisheconomy,EEPSprogramsaremakingsatisfactoryprogresstowardourgoal,andarecost-effectivetakenasawhole.Theaggregatetargetsapprovedinthisorder,consideredinconjunctionwithsavingsalreadyachievedandotherfactors 13 11Byjurisdictionalgoalwerefertotheportionofthestatewide15%by2015goalthatcanbeachievedbyentitieswithintheCommissionsjurisdiction,includingutilitycontractswith NYSERDA.Otherportionsofthestatewidegoalwillbeachievedbyenergycodes,appliancestandards,andotherentitiessuchasLIPAandNYPA.,wouldachievethe2015goalwithamarginofapproximately21%.

12TheoriginalmarginbuiltintothesavingstargetsisreducedbythedownwardadjustmentstotargetsdrivenbychangesintheTechnicalManual.

13NYSERDAanticipatesmodestefficiencysavingsresultingfromSBCIVprograms,which wedeemtocontributetowardthejurisdictionalgoal.

CASES07-M-0548and07-G-0141-8-TheanalysisoftheNYISOwasbasedonperformancefrom2009through2011.NYSERDAdisagreeswiththeNYISOsanalyticapproach,arguingthatitfailstotakeencumberedfundsintoaccount,andcomparesdissimilarprogramsacrossvaryingsectors.Takingintoaccountthesignificantimprovementinperformanceforecastfor2011andbeyond,therevisionsintargetsandeliminationofnegativeoutliers,andthefactthatthetargetsinplacethrough2011wouldhave(ifextendedthrough2015andachievedata100%rate)resultedinexceedingthe2015goal,weagreewithStaffthatourjurisdictionalgoalfor2015remainsreasonable.ContinuousimprovementAtpresentthereare103programsapprovedunderEEPSorders,andthreeprogramsoperatingunderNationalFuelGasrateorders.TheWhitePaperrecommendeda strategyofcontinuousimprovementoftheportfolioofprogramsthatarenowinplace,ratherthananewcompetitiveprocessthatmightresultinawholesalerestructuringoftheEEPSportfolio.Staffsrecommendationentailsreauthorizationofprogramsandaccompanyingsurcharges,withrevisionofprogramtargetstotheextentpractical,aswellasminorchangesto theEEPSportfoliobasedanoutlieranalysis,andconsolidationofseveralprograms.CommentersoverwhelminglysupportedStaffssuggestedapproachtoreauthorizationatthistime.Theneedforcontinuityofoperationswasstressedbymany.TherearefiveprincipalreasonssupportingStaffsrecommendation.First,manyprogramshaveonlyrecentlybecomefullyoperational,anditwouldbeprematuretocomparetheirresultswithmorematureprograms,orwithotheralternatives.Itisimpossibletoperformacomprehensivereviewuntilmoreexperienceisgained.Second,althoughoverallprogramperformanceduringtheyears2009-2010didnotmeetouraggressivetargets,performancein2011appearstobesatisfactoryandthetrendisencouraging.Third,giventhelimiteduniverseofeffectiveefficiencymeasures,itisunlikelythatacompetitivesolicitationwouldresultinasubstantiallydifferentportfolio.Fourth,itisefficienttomaintaincontinuityofprogramoperation,forcontractors,customers,andadministrators,totheextentpossible.

14 14Asonecommenterobserved,thehealthofhundredsofsmalljob-creatingbusinessesacrossthestateisatstakeintheorderlycontinuationofprograms.Finally,consideringthetimeandeffortinvolvedinthepreviousroundofprogramapprovals,anew CASES07-M-0548and07-G-0141-9-generalsolicitationwouldbeadiversionofresources-bothofStaffandprogramadministrators-thatarefarmoreproductivelyfocusedonimprovementofexistingprograms.WeagreewithStaffsrecommendationonthegeneralapproachtoreauthorizingprograms.Acompletelistofauthorizedprograms,withtargetsandbudgets,isincludedinAppendix1.ThetargetsenumeratedinAppendix1reflectrevisionstotheTechnicalManual.TheTechnicalManual-basedrevisionswillalsobethesubjectofafutureorderrevisingtargetsfortheperiodendingDecember31,2011,forpurposesofcalculatingincentives.ItispossiblethatoneormoreofthetargetsenumeratedinAppendix1couldberevisedinoursubsequentorder;ifso,wewillprovideforanautomaticrevisionofthecorrespondingtargetsinAppendix1.One-yeartransfersoffundsthathaveoccurredpriorto2012arenotreflectedintheauthorizedfigures;ifprogramadministratorsseekcontinuationofthosetransferstheycanusetheexistingtransfer/approvalprocess,orpetitiontheCommissionforapermanentchangeinprograms.TheCommissionsjurisdictionalgoalforEEPS,adoptedinthe2008EEPSOrder,was7.7millionMWh.AddingthetargetsfortheSBCIIIefficiencyprogramsthatwereaddedtoEEPSproducesajurisdictionalgoalof11.2millionMWh.Thetargetsauthorizedinthis order,combinedwithestimatedachievementsthrough2011,willproduce13.5millionMWhofsavingsin2015.Inotherwords,ifalltargetsareachievedat100%,thejurisdictionalgoalwillbeexceededbyapproximately21%.Thereauthorizationincludesfundingforevaluation.Methodsformeasurementandverificationofenergysavings,andunbiasedapproachestoreliablyassessprogramdesignandperformance,arecriticalforseveralreasons.Thesereasonsinclude:determiningprogramefficacy;respondingtostatewideplanningandforecastingneeds;estimatinglostrevenuerecoveryandincentivepayments;updatingtheTechnicalManual;andpinpointingareasforprogramimprovement.Werequirethatevaluationfundingbemaintainedat5percentofaprogramadministratorstotalprogrambudget,spreadpro-rataacrossindividualprogrambudgets.Werecognizethatthecomplexity,scope,costandtimingofevaluationeffortscanvaryamongprograms.Also,evaluationsarenotconductedonanannualbasis.Asaresult,theactual annualevaluationneedsforindividualprogramsmaybemoreorlessthan5percentofthe programs'budgets.Therefore,wewillallowprogramadministratorstoallocatetheoverallgasandelectricevaluationbudgetsasneededamongitsgasandelectricportfoliosofprograms,solongasthetotalbudgetforallprogramsismaintainedat5percent.Allevaluationbudgetsmust CASES07-M-0548and07-G-0141-10-bereviewedandapprovedaspartofStaffsreviewofaprogramsevaluationplan.Inreviewingactualresultsinthefuture,wewillexpectStafftoviewevaluationexpensesonaportfolio-widebasis.WealsorecognizethattheadministrationcostscurrentlyincludedinNYSERDA'sapprovedbudgetsarebasedonNYSERDA'sportfolioaveragerate,whichiscurrentlysetat8%.Aswithevaluationcosts,differenttypesofprogramsrequiredifferentlevelsofadministrativeattentionandthereforetheactualcoststoadministerNYSERDA'svariousprogramswillvaryabove,andbelow,theportfolioaverage.Therefore,wewillallowNYSERDAtoallocateitsoveralladministrativecostbudgetasneededamongitsgasandelectricportfoliosofprograms,solongastheaggregateadministrationcostbudgetismaintainedattheCommissionapprovedrate.Insomecases,evaluationofsimilarprogramsandmeasureswillprovemorecosteffective,andpotentiallymorerigorous,ifconductedjointlybytwoormoreprogram administrators.Tofacilitatethisapproach,upto33%oftotalevaluationbudgetsmaybeused forjointevaluationandresearchstudiesapprovedbytheDirectoroftheOfficeofEnergyEfficiencyandEnvironment.Within120daysofthisorder,Staff,workingwiththeEvaluation AdvisoryGroup,isdirectedtoprepareaplanidentifyingprogramsandresearchareasforwhichjointevaluationwillbeperformed,thecostsofevaluation,andtheprogramadministrator(s)thatwillmanagetheevaluation.WithapprovaloftheDirectorofOEEE,evaluationfundsmaybereallocatedtotheprogramadministrator(s)selectedtomanagethejointevaluationandresearchstudies.Inaddition,forthefouryearsfrom2012through2015,wedirectNYSERDAtocontinuetofundindependentconsultingevaluationservices,tobedirectedbyStaff,toensurethatStaffandtheEvaluationAdvisoryGrouphaveadequateresourcestoexecutetheirresponsibilities.Fundingshallbe$500,000annually,fromNYSERDAsevaluationbudgetorfrominterestearnedonSBCfunds, 15 15ThisisacontinuationofthefundingarrangementestablishedinCase07-M-0548,OrderModifyingSourceofFundsforIndependentEvaluationConsultant,issuedJune24,2009.NYSERDAshallalsocontinuetofundStatewide CASES07-M-0548and07-G-0141-11-EvaluationProtocolDevelopment 16Somecommentersexpressedconcernthatwhilereauthorizationofprogramsisreasonable,theprocessforsubsequentimprovementneedstobeclarified.InJune,2011,weatarateof$750,000annuallyoverthesamefour-yearperiod,alsofromNYSERDAsevaluationbudgetorfrominterestearnedonSBCfunds.adoptedasetofpoliciesdesignedtoincreaseflexibilityintheadministrationofprograms.

17Wherecontinuousimprovementistakenverybroadly-i.e.therangeofpolicyissuesraisedbytheWhitePaperandcommenters,aswellastherefinementofprograms-nosingleprocessencompassesthatrange.StaffrecommendedinitsWhitePaperthatthestartingpointforanyindividualprogramtargetshouldbethe2011targetafteritisrestatedorreducedtoreflectnecessaryadjustmentsduetoimplementationoftheTechnicalManualandtheresultofanyreductionorrestatementinresponsetovariousprogram-specificpetitionspendingbeforetheCommission.Also,individualprogramtargetsgoingforwardshouldreflectreasonablyachievableannual levelsoftargetsandbudgetsinformedbythemostrecentannualrateofspendingand performanceandnewprojectionsofpost-start-upperformancerates.Severalprogramadministratorsstatedintheirreplycommentsthataprocessshouldbedevelopedintheupcomingmonthstorefineprogramtargetsandbudgets.NYSERDAproposesthatprogramadministratorsbeallowedtoproposetargetsandbudgetsbyprogrambasedontheirknowledgeandunderstandingofEEPSrulesandcurrentmarketconditions.ConEdison,O&R,NYSEGandRG&Eexpresssimilarpositions.ConEdison/O&RfurthersuggestthatStaffmeetwiththecompaniesprogramadministratorsassoonaspossibletoreviewthecompaniessavingstargetsandbudgetplansforthecontinuationofexistingprogramsandproposednewprogramsinthe2012-2015timeframe.NYSEGandRG&Ebelievethatthe2012targetsshouldbedevelopedbasedonananalysisoftheimpactoftheeconomicdownturnandotherlessonslearned,affectingprogramadministratorsabilitytoimplementprogramsandachievesavingstargetlevelsdevelopedfor2011.

16AsdefinedinCase07-M-0548,OrderApprovingNewSBCIIIMajorFundingCategoryEntitledStatewideEvaluationProtocolDevelopment,issuedMarch13,2009.

17Case07-M-0548,OrderAdoptingModificationstotheEnergyEfficiencyPortfolioStandard (EEPS)ProgramtoStreamlineandIncreaseFlexibilityinAdministration(issuedJune20, 2011).

CASES07-M-0548and07-G-0141-12-Becausemanyprogramshaveonlybeguntooperatefullyduring2011,ithasnotbeenfeasibletore-evaluatetargetsinmanycases.Wewillsettargetsatthistimebasedon2011targets,restatedtoreflectnecessaryadjustmentsduetoimplementationoftheTechnicalManualaswellasvariousprogram-specificpetitionspreviouslyresolvedbytheCommission.Whereaprogramadministratorhasaseriousconcernrelatedtothereasonablenessofaprogramtarget,thisconcernshouldbeaddressedtoensuretargetsandbudgetsarereasonablyset.Wewillnot,however,instituteacomplexreviewprocessencompassingeveryprogram,whichwouldbelikelytooccupyaninordinateamountoftimefromStaffandprogramadministratorsandresultinmostcasesinminimaladjustments.Ifprogramadministratorsidentifyissueswiththeircurrentprogramswhichtheybelievewillresultinsubstantivechangestotargetsand/orbudgets,theyshouldcontactStaffwithspecificproposals,tobegindiscussionsregardingthoseprograms.Wedirectprogramadministratorstosubmitassoonasispractical,andnotlaterthanMarch31,2012,anyprogrammodificationsthatwouldresultinsubstantialimpactsontargetsandbudgets.

Programadministratorsshouldprioritizesothatalimitedrangeofsubmittalsneedtobe consideredbytheCommission.

18ConsideringthewiderangeofissuesidentifiedbyStaffandbyparties,wearemindfulthatthestrategyofcontinuousimprovementcreatestheriskofoverloadingtheImplementationAdvisoryGroup.SeveraloftheissuesraisedintheWhitePaperorbypartiesarerecommendedforfurtherworkbytheIAG.TheJointUtilitiesobservethatmoremoneyneedstobeallocatedtoadministrativefunctionsiftheIAGistoperformalloftheworkbeingreferredtoit.Wedonot,atthistime,seethenecessityofincreasingadministrativebudgets.ThevariousprojectsundertakenbytheIAGneednotbeperformedsimultaneously;Staffandprogramadministratorsshouldprioritizeandmakeoptimaluseoftheirexistingresources.Thiswillresultinmoreexpeditedreviews.The2008EEPSOrderauthorizedcollectionof$6millionannuallythrough2011forastatewidecustomeroutreachandeducation/marketinginitiativetosupportEEPS.WeconcludedthatthisinitiativewouldbeanintegralpartofasuccessfulEEPSstrategybyestablishingaconsistentprogramidentityamongallprogramadministratorsandfacilitatingcustomerparticipation.InOctober2010,weapprovedanImplementationPlanforthisstatewide 18Theprocessweestablishherewillnotbethelastopportunitytoreviseprograms.

CASES07-M-0548and07-G-0141-13-initiativethroughNovember3,2012,andauthorizeditsdevelopment.

19OutliersandconsolidationTheapprovedImplementationPlanincludedsomesupplementalfundingfromtheDepartmentofPublicServiceGeneralAwarenessprogramalsoadministeredbyNYSERDA.Thestatewideoutreachandeducationinitiativehasnotyetgoneintoeffect.ThisorderprovidesnoincrementalcollectionsfromratepayersrelatedtotheImplementationPlan,andnoincrementalcollectionsinCalendarYear2012forstatewideoutreach.TheNovember3,2012expirationofauthorityfortheImplementationPlanremainsineffect.Whileweareapprovingbudgetauthorizationsforacontinuedoutreachandeducation/marketinginitiativetosupportEEPS,noadditionalspendingbeyondwhatwehavealreadyapprovedwilloccurbeforewehaveanopportunitytoreviewitsprogress.StaffwillprovideareporttotheCommissionsummarizingthestatusofthestatewideoutreachandeducation/marketingprogramandprogrammetrics,aswellasrecommendations,ifany,concerningchangesinprogramcontent,budgetsandcollections.StaffrecommendedthatfundingforoneNYSERDAprogram-theMultifamilyGeothermalHeatPumpprogram-shouldbediscontinuedandthatNYSERDAshouldanalyze whetheritsBenchmarkingandOperationsEfficiencyProgramshouldbesubsumedwithintheFlexTechprogram.NYSERDAconcurswiththeanalysisoftheHeatPumpprogramandrecommendsthatthefundingfromthisprogramshouldbereallocatedintotheMultifamilyPerformanceProgram.Thisisareasonablerequestandwillbeadopted.NYSERDAdoesnotcommentdirectlyontheWhitePapersanalysisoftheBenchmarkingProgram.Weapproachthisissueasoneofconsolidation.NYSERDAshouldfileaproposalwithinsixtydaysdemonstratingaplanfortheBenchmarkingProgram,includingananalysisofwhetheritshouldbeconsolidatedintotheFlexTechprogram.TheWhitePaperrecommendedthattheNationalGridEnhancedHomeSealingfundsshouldbereallocated.NationalGridstatesthatthisprogramcanbemadeeffectiveifredesigned.Wewillcontinuefundingforthisprogramonacontingentbasisforoneyear,subjecttoreviewandpotentialreallocation.Asaconditionforcontinuingtheprogramduringtheyears2013-2015,NationalGridmustfileapetitionbyJuly1,2012.

19Case07-M-0548,EnergyEfficiencyPortfolioStandard(EEPS),StatewideEnergyEfficiencyOutreachandEducationCampaign,ImplementationPlan(approvedOctober14, 2010).

CASES07-M-0548and07-G-0141-14-InapetitiondatedAugust15,2011,NYSEGandRG&ErequestedthatfundingfortheirHomeEnergyReportingprogramshouldbeterminated.Thatprogramcurrentlyhasanauthorizedbudgetthroughtheendof2012.Theprogramsbudgetthrough2012isreflectedinAppendix1,butreauthorizationthrough2015isnotincluded.ThatissuewillbedeterminedinthecontextoftheNYSEG/RG&Epetition.TheWhitePaperrecommendedthatNationalGridsResidentialEnergyStarProductsprogramshouldbecancelled,becausechangesintheTechnicalManualleftitwithonlyonecost-effectivemeasure.NationalGridagreeswithStaffsanalysisbutstatesthatitwillusetheflexibilityrecentlyprovidedbytheCommissiontoaddadditionalcost-effectivemeasurestotheprogram.Thisisareasonableproposal,andfundingforthisprogramwillbecontinuedforoneyear,subjecttoreviewandpotentialreallocation.Asaconditionforcontinuingtheprogramduringtheyears2013-2015,NationalGridmustfileapetitionbyJuly1,2012.StaffproposedthatNiagaraMohawksCommercialHighEfficiencyHeatingandWaterHeatingProgramshouldbeconsolidatedintoitscommercialandindustrialprograms.

StafffurtherrecommendedthateachNationalGridcompanyshouldcombineitssmallcommercialandindustrialprogramwithitslargeindustrialprograminordertoeliminatethe currentbarriertoparticipationforcommercialcustomersusingmorethan12,000Dt.Nopartyobjectedtotheserecommendations,andtheywillbeadopted.StaffalsoproposedthatthesuccessofNYSEG/RGEsBlockBiddingprogramsshouldbeduplicatedbyotherprogramadministrators.

20Otherprogramadministratorsgenerallyexpressedreservationsaboutbeingorderedtoimplementprogramsthatmightnotworkeffectivelyintheirterritoriesorwiththeirportfolios.TheBlockBiddingapproachoffersgreatpotentialforhighlycost-effectivesavingsinutility-administeredprograms.Werequireeachelectricutility,within90daysofthisorder,toeitherproposeacomparableprogramwitharecommendedsourceoffundingorexplainwhysuchanapproachwouldnotbeeffective.Autilitymayrecommendsupplantingthetargetsandbudgetsofexistingprograms,ormayrecommendalternativefundingsources.

20Blockbiddingprogramsallowenergyservicecompanies,performancecontractors,managementcompanies,andcustomerstosubmitproposalsforprojects.

CASES07-M-0548and07-G-0141-15-LowincomeprogramsTheWhitePaperreportedthatEEPSfundinglevelsforprogramsdedicatedtolowincomecustomersconstituteapproximately19%ofresidentialprogrambudgets,whilelow incomecustomersrepresentapproximately30%oftotalresidentialcustomers.Thisdisparity reflects,inpart,adeterminationthatfederalstimulusfundingundertheAmericanRecoveryandReinvestmentAct(ARRA)wouldoccupytheavailableworkforcewhileARRAfundswereavailable.Westatedinthe2009EEPSGasOrderthatourtargetsfollowing2011mightneedto reflectahigherpercentageoflow-incomefunding,followingthedeclineoffederalfunds.

21StaffprovidedadetailedanalysisintheWhitePaperandsoughtcommentsontheappropriateallocationofEEPSfundstolowincomeprograms.Manycommentersstatethataminimumof30%shouldbeallocated.TheNationalFuelAccountabilityCoalition(NFAC),a coalitionoffifteenwesternNewYorkorganizations,arguesthattheallocationshouldbe50%,

becausewhole-housedeepsavingsprogramsprovidelocalbenefitsintermsofjobsandindirectbenefitssuchasimprovedhousingstock.Othercommenters,includingmostutilities,donotopposeanincreaseintheallocationtolowincomecustomers,butstressthatachievementoftheCommissionsenergyefficiencygoalsmustbethehighestpriority.Wehavenot,generally,requiredstrictproportionalityinallocatingfundsamongcustomerclasses.However,energycostsposeaproportionallyhigherburdenonlowincomecustomersthanothercustomers.Itisconsistentwithourpolicygoalsandwiththestronglevelofpubliccommentonthisissuetoprovideincreasedenergyefficiencyservicestomeettheneedsoflow-incomehouseholds.Energyefficiencymeasuresthatweatherizehomes,suchasareprovidedinourcurrentlyauthorizedgaslow-incomeenergyefficiencyprograms,areofparticularvaluetolowincomehouseholdssincetheyhelppermanentlyreduceheatingcosts.Further,withtheexpirationofone-timeARRAweatherizationfunding,qualifiedinstallationcontractorsareavailabletomeetthedemandfromincome-qualifiedcustomers.Consideringthesefactors,wewillincreasefundingforlow-incomeprogramssothattheyrepresentapproximately30%ofthecollectionsattributabletoresidentialcustomers.Theneedanddemandforlow-incomeprogramsisgreatestintheareaofweatherization.

Therefore,inordertomakethemosteffectiveuseofthefundsallocatedtolowincome 212009EEPSGasOrder,pg.12.

CASES07-M-0548and07-G-0141-16-programs,NYSERDAsgas-fundedEmPowerprogramwillbeallocatedanincreaseof$18.6million.22Wearecommittedtomaintaininglowincomeprogrambudgetsatequitablelevels.Total2012electricbudgets,pursuanttothefiguresenumeratedinAppendix1,arereducedfrom2011collectionsby$7.7million.Gascollectionswillbeincreasedbyacommensurateamount,tofundaportionoftheincreaseintheEmPowerbudget.Asofthemidpointofthisyear,NYSERDAreportssubstantialunencumberedbalancesinitsgaslow-incomeprograms.

23Althoughend-of-year2011balancesarenotknownatthistime,itislikelytheywillbesufficienttofundtheremainderofthebudgetincreaseauthorizedhere,atleastthroughthe2012calendaryear,dependingonhowquicklyexpendituresunderthisprogramareaccelerated.

24NationalFuelGasprogramsWewillmonitorthecashflowoftheEmPowerprogram;whenexpendituresbegintomatchbudgetedlevels,wewillconsideroptionstomaintainfullfundingoftheprogram.NYSERDAshouldprovidenotlessthansixmonthsnoticeofanydateonwhichitestimatesthat totalexpendituresfortheEmPowerprogramwillhaveequaledorexceededtotalcollectionsplus balancescarriedforward.NationalFuelGas(NFG)currentlyadministersthreeefficiencyprograms-knowncollectivelyastheConservationIncentiveProgram(CIP)--pursuanttoordersissuedinaratecase.25 22Untiltheissuesthathaveaffectedprogressinthemultifamilyprograms,suchastheeligibilityofinterruptiblecustomers,havebeenresolved,wewillfocusadditionallow incomefundingontheEmPowerprogram.TheauthorizationfortheseprogramsexpiresNovember30,2011.StaffproposedthattheprogramsbebroughtintotheEEPSprogram,sothattheycouldbetreatedonthesamefootingastheotherefficiencyprogramsrunbyutilitiesandNYSERDA.

23Thesebalancesresult,inpart,fromtheavailabilityofARRA-fundedprogramsoperatingduringthesametimeperiod.

24NYSERDAsgas-fundedEmPower,LowIncomeMultifamily,andLowIncomeSingle familyprogramswillbeanexceptiontoourdirective,asdiscussedinthesectiononSurcharges,thatuncommittedbalancesfrompriortoJanuary1,2012arenotauthorizedtobespent.25Case07-G-0141,ProceedingonMotionoftheCommissionastheRates,Charges,Rulesand RegulationsofNationalFuelGasDistributionCorporationforGasService,OrderAdoptingConservationIncentiveProgram(issuedSeptember20,2007).

CASES07-M-0548and07-G-0141-17-NocommentersopposedtheintegrationoftheNFGprogramsintoEEPS.Instead,commentswerefocusedonthesubstanceoftheprograms.RegardingthetransitionintoEEPS,NFGnotesthereisaone-monthgapbetweenitscurrentauthorization,expiringNovember30,2011,andtheproposedJanuary1,2012datefornewauthorizationofEEPSprograms.NFGproposesthatitbeallowedtocontinueitsCIPprogramsintheirpresentformthroughtheendof2011.Thisisareasonableproposalandisadopted.TheNationalFuelAccountabilityCoalitionsubmittedcommentsrelatedtoboththeCIPtransitionandthebroaderEEPSprogram.

26NFGstatesthattheCIPhasbeensuccessfulandshouldbecontinuedinitspresentform,andthat,althoughadministrativelythiscanoccurwithintheEEPSprogram,thedistinct featuresoftheCIPshouldberetained.30%ofCIPfundingisdedicatedtoitslowincomeprogram,35%toaresidentialrebateprogram,and15%toasmallbusinessprogramwiththeremainderdevotedtooutreachandevaluation.NFACmakesfourpoints:thelowincomeallocationshouldbeincreased(to50%);awhole-house,deepsavingsapproachshouldbepreferredoverrebateprograms;programadministrationshouldbeshiftedentirelytoNYSERDA;andanumbrellaonestopshoppingoutreachprogramshouldbeadopted.NFACpresentsananalysisconcludingthatthecurrentsurchargestructureisregressive,thatrebateprogramsarenotaccessibletolowincomecommunities,andthatrebateprogramsarelesscost-effectivethanwhole-houseprograms.NFGrequeststhatitbeallowedtomaintainthecurrentcontractualrelationshipthatithaswithNYSERDAfortwoCIPprogramsadministeredbyNYSERDAonbehalfofthecompany-theLowIncomeUsageReductionProgram(LIURP)andthenon-residentialrebateprogram.TheCIPnon-residentialrebateprogramisadministeredbyNYSERDAundertheExistingFacilitiesprogram,andtheCIPLIURPprogramisadministeredbyNYSERDAundertheEmPowerprogram.NFGhasauniquecontractualarrangementthatrequiresNYSERDAtospendtheCIPfundsthatitreceivesforthesetwoprogramslocally,withinthecompanysserviceterritory.

27 26NFACcommentswerereinforcedbynumerouspubliccommentsfromindividualsandorganizationssubmittedthroughemail,aswellasbriefercommentsfiledwiththeSecretary byseveralparties.NFGisconcernedthatiftheCIPprogramsaremergedintoEEPSwithoutretaining 27Inaddition,unspentoruncommittedCIPfundsforthesetwoprogramsarereturnedtoNFG.

CASES07-M-0548and07-G-0141-18-thecurrentcontractualarrangementwithNYSERDA,thefundscollectedfromtheNFGratepayersfortheLIURPandnon-residentialrebateprogramscouldbespentonprogramsprovidedbyNYSERDAinotherutilitiesserviceterritories.WeagreethatEEPSfundsforindividualutilityprogramsshouldbespentintherespectiveserviceterritories.TherequirementthatNFGCIPprogramfundsadministeredbyNYSERDAshouldbespentonlyinthecompanysserviceterritorywillberetainedanditisadoptedwithregardtotheCIPLIURPandnon-residentialrebateprogramsonly.NFGsoutreachandeducationbudgetiscurrently15%oftotalCIPspending.NFGstatesthatitisimportanttocontinueoutreachandeducationandnotesthatpreliminarydataregardingcustomerattitudesaboutconservationinthecurrentenvironmentofcontinuinglowgascostshasdiminishedcustomerspriorsenseofurgencyaboutreducingenergyusageandbills.However,thecompanybelievesthatfundingforoutreachandeducationcanbereducedby25%andstilladequatelyaddressconcernsaboutcustomerawareness.NFGproposesthatthe

$375,000reductioninoutreachandeducationspendingcaneitherberefundedtocustomersorre-allocatedtotheresidentialconservationprogramsinthecompanysserviceterritory.BasedonStaffsreviewofNFGsproposedoutreachandeducationinitiative,weconcludethatthecompanycanachieveitsoutreachobjectiveswithabudgetthatis9%ofthetotalenergyefficiencyprogrambudget.ThisadditionaldecreaseinfundingforenergyefficiencyoutreachandeducationiswarrantedbecauseNFGsenergyefficiencyprogramsarerelativelymatureanditwillbringtheseexpendituresinlinewiththoseofotherEEPSprogramadministrators.Wewillthereforeauthorizeatotaloutreachandeducationbudgetof$903,600forNFGsenergyefficiencyprograms,representingareductionof$596,400fromcurrentlyauthorizedlevels.Wedirectthatthe$596,400reducedfromoutreachandeducationbeallocatedtotheLIURPandresidentialrebateprogramsinamannerthatbringsthetotalfundingforLIURPequaltothatoftheresidentialrebateprogram.Directingalargershareofavailablefundstoprogramsforlowincomecustomersisreasonablegiventhedemanddemonstratedbypublic participationinthisproceeding,andtherelativelyhighproportionofincome-eligiblehouseholds inNFGsserviceterritory.AswithotherEEPSprograms,outreachandeducationprogramsshouldbeestablished,wherepractical,foreachEEPSprogram.Todeterminetotalprogramfunding,we CASES07-M-0548and07-G-0141-19-allocatethe$903,000outreachbudgetequallyamongthethreeprograms,resultingintotalprogrambudgetsasshowninthetablebelow.Thelargerthanproportionalshareofoutreachandeducationprogrambudgetsthatweallocatetothecommercialrebateprogramappearstobewarrantedbasedontheperformanceofthatprogramtodate.WealsodirectNFGtofile,within30days,aproposedoutreachandeducationplan,includingproposedbudgets 28,foreachofitsenergyefficiencyprograms,forapprovalbytheDirectoroftheOfficeofConsumerPolicy.Totheextenttheapprovedoutreachandeducationprogrambudgetsdifferfromtheproportionalallocationweassumeherein,fundingforprogramdeliverywouldbeadjustedaccordinglywithintheprescribedtotalprogrambudgets.ThefundinglevelsapprovedherewillmakeNationalFuelsoutreachbudgetscomparabletothoseofsimilarEEPSprograms.AuthorizedBudgetsw/O&EandEM&VfundsembeddedAuthorized%w/O&EandEM&VfundsembeddedEM&VBudgetforeachprogramEM&Vas%ofAuthorizedBudgetsCIPResidential NaturalGas ApplianceRebates$4,063,67940.5%$203,184 5%CIPLowIncomeUsageReductionProgram(LIURP)$4,063,67940.5%$203,1845%Non-Residential Equipment ReplacementProgram(NRCIP)$1,912,64119%$95,6325%Total$10,040,000100%$502,0005%NFGrequeststhatitscurrentrebatescheduleberetainedbecauseitiseffectiveanditiscompatiblewiththeEEPSrebateschedule.Thisisareasonableproposalandis adopted.NFGhasemployedasurchargereconciliationprovision.Thiswillnotbecontinued,andNFGwillaccountforsurchargesinthesamemannerasotherutilitiesunder 28Theoutreachandeducationplanshouldcontaindetailedbudgetproposalsincluding:(a)specificbudgetamountsforeachindividualelementoftheO&E/marketingbudget;(b)alistanddescriptionoftheO&E/marketingvehiclestobeused;and(c)anexplanationofthe targetaudienceforeachprogramcomponent.

CASES07-M-0548and07-G-0141-20-EEPS.Elsewhereinthisorder,weclarifyrulesforcarryingbudgetsforwardandweauthorizeborrowingfromfutureyearsbudgetsunderlimitedcircumstances.NFGprogramshaveoperatedunderbudgets,buthavenothadcorrespondingsavingstargetsestablishedbytheCommission.WedirectStafftoworkwithNFGtodevelopspecificenergysavingstargetsforeachofthethreeCIPprogramsforcalendaryears2012through2015.NFGnotesthatNYSERDAprogramsarestatewideinnature,andsurchargescollectedfromNFGcustomersarenotguaranteedtobespentwithintheNFGterritory.Asdiscussedabove,thefundscollectedfortheNFG-specificprograms(i.e.,theCIPprograms)willcontinuetobespentexclusivelywithintheNFGserviceterritory.WithrespecttootherNYSERDAprogramsfundedthroughSBCsurcharges,wewillcontinueourpracticeofmaintainingaroughgeographicequitywithoutrequiringNYSERDAtomatchcontributionsandoutlaystoserviceterritoriesonadollarfordollarbasis.Toalargeextent,thedemandfor programswithinacommunity,andtheactivityoflocalorganizationstospreadinformationand facilitateparticipation,aremajorfactorsthatwillaffectthegeographicdistributionofoutlays.RegardingNFACsproposalthatincentiveprogramsshouldbereduced,theWhitePaperdiscussedtherangeofprogramdeliverymethodsutilizedintheEEPSportfolio,andtheimportanceofmaintainingareasonablebalance.Differentmethodswillbemoreeffectivewithdifferentcustomersectors,andweagreewithStaffthatthebalancereflectedinourcurrentportfolioisreasonable.TheanalysispresentedbyNFACwasspecifictotheNFGserviceterritory.Asdescribedabove,weareincreasingfundsforNFGswhole-houseprogramaccordingly.RegardingNFACsproposalthatNYSERDAshouldadministerallprograms,thisissuewasconsideredwhentheEEPSprogramswereinitiatedin2008,andwillnotberevisitednow.Argumentsbasedoncomparativeachievementsaredifficulttoevaluate:NYSERDAandutilityprogramshaddifferentstartingtimesandareorientedinmanycasestowarddifferentcustomersandefficiencymeasures.LightingDueinlargeparttoNYSERDAsmarkettransformationefforts,compactfluorescent(CFL)bulbsarenowwidelyavailable.EvaluationresultshaveshownthatduetothesuccessofNYSERDA'sCFLprogram,theCFLmarkethasbeenstrengthenedandNewYorkers CASES07-M-0548and07-G-0141-21-nowpurchaseCFLsregardlessofprogramactivity.Giventhesefactors,andtherecentupdatestolightingcodesandstandards,itisclearthatlightingeffortsneedtorefocusfromCFLstosolidstatelightingandothernewand/oremergingtechnologies.InitsT&MDoperatingplan,NYSERDAproposescontinuedtechnologyR&Dandinfrastructureandmarketdevelopmentforadvancedlightingtechnologies.InitscommentsNYSERDAalsoproposesmodifyingitsexistingCFLResidentialPoint-of-SalelightingprogramtofocusonLEDsandsolidstatetechnology,aswellasexteriorandspecialtyCFLbulbs,whichhavealargeremainingpotential.Inredesigningtheprogram,NYSERDAcitesseveralkeyfactorstotakeintoaccountincludinglackofcustomerawarenessaboutnewlightingtechnologyandstandards,andtheneedforproducttestingandstandards.NYSERDAhashadgreatsuccessinmakingCFLscost-effectiveandwidelyavailable.TheCFLResidentialPoint-of-Saleprogramnowrequiresretooling.NYSERDAisdirectedtofile,byDecember1,2011,anupdatedplanforitsResidentialPoint-of-Saleprogram includingitsapproachtoaddresscustomerawarenessandproducttestingandstandards.IntheinterimNYSERDAshouldnotinitiatefurtherCFL-relatedpromotionsunderthisprogram,butshouldworkwithStafftodeterminethetypesofadvancedlightingproductsthatcanbe supportedbytheprogram.NYSERDAshouldalsoworkwiththeImplementationAdvisoryGroup,asrecommendedintheWhitePaper,toassesshowotherEEPSprogramswithlightingcomponentsshouldbemodifiedtoreflectlightingtrendsanddevelopments.SectorbalanceTheUtilityInterventionUnitoftheDepartmentofState(UIU)observesthattheresidentialsector,whichrepresents39%ofelectricitysalesbyvolume,receivesonly19%ofEEPSprogramfunding.Fromtheoutset,wehavenotimposedastrictruleofproportionalitywithrespecttoEEPSfunding,becauseenergyefficiencybenefitsallcustomers.Sectorequityisonevaluetobeconsidered,amongmanyothers,inapprovingefficiencyprograms.

29 292008EEPSOrder,Appendix3,pg.3.

Ourprogramapprovalshavealsovaluedcost-effectivenesshighly,whichultimatelyworksinthebestinterestofallcustomers.Anon-participatingresidentialcustomer,forexample,isbetterservediftheEEPSgoalismetattheleastcost,regardlessoftheportionoffundingallocatedto CASES07-M-0548and07-G-0141-22-residentialprograms.

30Takingthisintoconsideration,aswellastheneedforprogramcontinuityatthistime,wewillnotorderasubstantialreallocationoffundingamongsectors.Thisisnot,however,todismissthelegitimateconcernraisedbyUIU.Thebalanceoffundingamongsectorswillcontinuetobeconsideredasprogramrevisionsareproposedinthefuture.Therehasbeenasubstantialtimelagbetweenthecollectionofsurcharges,thecommitmentoffundstocustomerprojects,andtheactualexpenditureoffunds.NYSERDAprojectsacashbalanceofapproximately$397millionasofDecember31,2011forthecombinationofitsSBCandEEPSprograms.Thisbalanceincludesfundsthathavebeencommittedtoprojectsbutnotyetexpended.ManyNYSERDAprojectshavemulti-yearleadtimesbetweenapplication,commitment,andexpenditure.SurchargesAdifferent,thoughrelated,sumistheuncommittedbalanceofEEPS-onlyprogramsforalladministratorsincludingNYSERDAandutilities.AsofJuly1,Staffstatedthat therewasabalanceofover$300millioninuncommittedsurcharges,reflectingallEEPS programs,bothelectricandgas.Programadministratorscommentedthatthisnumberislikelytobemuchsmallerbytheendof2011asprojectcommitmentsincrease.TotaluncommittedbalancesasofDecember31,2011willnotbeknownwithcertaintyuntil2012.Staffrecommendedthatcollectionsshouldbebroughtintobetterparitywithexpendituresandcashbalances.StaffrecommendedagradualscalingbackofbalancesratherthananimmediatesuspensionofEEPSsurchargerecoveries.Staffsrationaleisthatmanyprogramshaveonlyrecentlybegunspendingmoneyattheirtargetrates,andmanyprograms havethepotentialtoexceedtheirtargetrates.Inordertomeetthe15by15goal,some programsmightneedtobeexpanded,ornewprogramsmightneedtobeauthorized.Thecosttoachieveenergysavingsmightincrease.UntiltheCommissiondetermineswhetheranyportfoliochangesareneededtoachieveitsgoal,Staffstateditisprematuretosuspendorreduce surcharges.Moreover,surchargebalances,andthereasonsforsurchargebalances,varywidely amongprogramsandamongprogramadministrators.Someprogramsmayhavesurplusbalancesbecauseofthetimelag,butmaybeabletoeliminatethebalancethroughhigh 30Ourincreaseinallocationtolowincomeprogramstakesthelevelofresidentialsalesintoaccount.

CASES07-M-0548and07-G-0141-23-performance.Staffrecommendedthatmodificationofsurchargerecoveriesshouldbeconsideredafteranotheryearofexperienceisgained.AmajorityofcommenterssupporttheStaffrecommendation.Programadministrators,contractors,andpublicinterestgroupsemphasizedtheneedforcontinuityatthistime,aswellasthepossibilitythatthesurchargebalancecouldbesubstantiallyreducedbytheendof2011.AcontraryviewwastakenbyUIUandMI.UIUagreeswithStaffthatanacross-the-boardreductioninsurchargesisimpractical;nevertheless,asurchargebalanceofthissizeshouldnotbemaintainedduringatimeofeconomichardship,andareasonablealternativetoanacross-the-boardreductionshouldbeimplemented.MIarguesforcomprehensivereductionsinsurchargelevels,aspartofareductionintheoverallsizeoftheEEPSprogram.AccordingtoMI,thecurrentsurchargebalanceshouldbedealtwithinthatcontext,reducingthebalancewhilesimultaneouslyreducingprogram budgetlevels.Withrespecttocashbalances,NYSERDAsbalancecanbereducedtonearzerowithnoadverseeffectonprograms.BecauseSBCcollectionsweresuspendedin2011,a substantialincreaseincollectionswouldordinarilyoccurin2012asSBCcollectionsresume.ReducingNYSERDAscashbalancecanmitigate2012collectionsandavoidanincreasethatwouldotherwiseoccur.2013and2014collectionscanlikewisebymitigatedbyafurtherreductionofNYSERDAscashbalance.RegardinguncommittedEEPSauthorizations,therearefourgeneraloptions.Atoneextreme,authoritytospendthosefundscouldsimplyberolledforward,tobespentasfullyaspossiblebyprogramadministratorsinadditiontotheannualbudgetsbeingapprovedinthisorder.Theconsequenceofthisapproach,iftheentirebalancewerespentinadditiontothebudgetsapprovedinthisorder,couldbetoexceedour2015goalsubstantially,butatatotalcosthigherthanwouldhavebeenneededtomeetthe2015goal.Theoppositeapproachwouldbetoorderanimmediaterefundtocustomers,oncethesizeofuncommitted2011balancesisknown.Theconsequenceofthisapproachwouldbean immediatereductioninsurcharges,beyondtheavoidanceofincreasesaccomplishedbyreducing cashbalances,withtheriskthatthebudgetsapprovedfor2012-2015willbeinsufficienttomeetthetargetsapprovedinthisorder.ThisinturncouldforcetheCommissioninthefutureeithertoraisesurchargesortoabandonthe2015goal.

CASES07-M-0548and07-G-0141-24-Twointermediateapproachesare:(1)refundthebalancestocustomersoveraperiodofyearsinamannerthathelpstolevelizecollectionschedules;or(2)retainthebalancesforaperiodoftimeuntilourcosttoachievethe2015goalhasbeenfurtherclarified,andusethebalancestomitigatefuturecollectionsiftheyarenotneededtoachieveefficiencygoals.Thesetwointermediateapproachesarenotmutuallyexclusive.Themostimmediateneed,andopportunityforcollectionreductions,istoreduceunnecessarycashbalances.Thiscanbedonewithoutexcludingthepossibilitythatuncommittedfundsmightultimatelybeneededtomeetthe2015goal.AsStaffhaspointedout,wearelikelytohavebetterinformationregardingthecosttoachievethe2015goalafterprogramshavebeeninfulloperationforanotheryear,andaftertheimpactsoflightingstandardshavebeendetermined.In2012wewillalsohaveafinalfigureonuncommittedbalances.Itwouldbeunwisetoforfeittheflexibilitythatmaybeneededasweprogresstowardthe2015goal.Aflexible,intermediateapproachisthemostreasonable.Wewillorderarevisionincollectionschedules,designedtoreducecashbalances.

31Thismeasurewillreducecollectionsbelowbudgetauthorizationlevelsbyapproximately$284millionin2012,$198millionin2013,and$33millionin2014.Inaddition,weemphasizethatwearenotauthorizing theexpenditure,duringthe2012-2015period,ofuncommittedfundscollectedpriortoJanuary1,2012.32Aprogramadministratormayfileapetitionforsuchauthorizationforparticularprograms.Uncommittedfundsasusedhereexcludesadministrativeandevaluationexpensesaswellaspre-committedfunds,i.e.fundsallocatedtoacompletedapplicationwhichhasbeendeterminedtomeetbasiceligibilitycriteriabutforwhichtheprogramadministratordoesnothaveinhandanexecutedcontract.Elsewhereintheorderweadoptrulesforcarryingfundsforwardfromyeartoyear,andforborrowingfromfutureyearbudgets.Thecarry-forwardrulewillnotapplytouncommittedfundsinthetransitionfrom2011to2012, 33 31TheseschedulesaredetailedinAppendix2.andimplementation 32Exceptionstothisruleare:anyfundsauthorizedinorderspriortoOctober13,2011andscheduledtobecollectedsubsequenttoDecember31,2011;anduncommittedfundsfrom NYSERDAsgas-fundedEmPower,LowIncomeMultifamily,andLowIncomeSingle Familyprograms,whichmaybeutilizedtofundtheincreaseinNYSERDAsEmPower program,asdiscussedabove.

33Asdiscussedabove,threeNYSERDAlow-incomeprogramswillbeauthorizedtocarry uncommittedbalancesforwardinto2012.

CASES07-M-0548and07-G-0141-25-oftheborrowingruleswillnottakeintoaccountsuchuncommittedfunds.Weintendtoreviewprogresstowardthe2015goalandtheprojectedcosttoachievethegoal,withinatimeframethatwillallowuncommittedfundstobeusedtoreducecollectionsor,ifneeded,tobeallocatedtoprogramstowardtheachievementofthegoal.Accordingly,werequireallprogramadministratorstoprovideanaccountingreportnotlaterthanMarch31,2012,ofuncommittedbalancesforelectricandgasprograms.TheaccountingreportshallincludetotalcollectionsfromtheinceptionofeachEEPSprogram(includingSBCprogramsincorporatedintoEEPS);totalactualexpenditures;totalcommitments(includingfundsallocatedtoacompletedapplicationwhichhasbeendeterminedtomeeteligibilitycriteriabutforwhichtheprogramadministratordoesnothaveanexecutedcontract);andtheresultinguncommittedbalancesforeachprogram,respectively.Inaddition,toinformanyfuturechangestothecollectionschedulethatwemaydeemappropriate,eachprogramadministratorshallfile,notlaterthanJune30ofeachyearfrom 2012through2015,aforecastofestimatedend-of-yearcashbalances,expenditures,and commitments,through2018.Althoughtargetsandbudgetsaresetonanannualbasis,programparticipationrateswillnotbeconstant,foravarietyofreasons.Someprogramsareseasonalinnature;some takelongerthanotherstodevelopcustomerrecognitionorcontractorreadiness;someinvolvemulti-yearplanningandimplementation.YeartoyearbudgetingandaccrualaccountingStaffrecommendsthatbothspendingandenergysavingsshouldbecountedonacommitmentaccrualbasis;thatis,intheyearinwhichthespendingiscommitted.Staffalso proposesclarifyingtherulesforbankingandborrowingfundsfromyeartoyear.TheJointUtilitiesarguethatmoreflexibilityisneeded,andenergysavingsshouldbesubjecttobankingandborrowingofupto33%overathree-yearperiod.Bankingand borrowingofenergysavingsarerelevantprimarilytoshareholderincentives.Inlightofour intentiontoreviseincentives,describedbelow,theutilitiesproposalmaybemoot.Ifnot,itcanbeaddressedatthetimeafinaldecisionismaderegardingincentives.Totheextentthatbankingandborrowingofsavingswouldbeutilizedsolelyforreportingpurposes,independentof incentives,wedonotfavorit;itpresentstheriskofprogramsfallingfarbehindtargets.

CASES07-M-0548and07-G-0141-26-NYSEG/RG&Esupporttheuseofaccrualcommitmentaccounting.

34Withrespecttotheuseoffundsfrompreviousorfuturebudgetyears,therearetwoissues.Firstistheabilitytorolloverunusedfundsfromoneyeartothenext.Secondistheabilitytoborrowfromfutureyearswhereaprogramisfullycommittedandthereisunmetdemand.NYSERDAsupportstheuseofaccrualcommitmentaccounting,butaddsthatreportingwillalsobeneededonanas-acquiredbasis,asevaluationwillbeperformedonthatbasis.TheAssociationforEnergyAffordability(AEA)alsosupportsaccrualaccounting.Withregardtothefirst,Staffrecommendedastraightforwardrule.Bothspendingandsavingswillbeaccountedforonacommitmentaccrualbasis,i.e.theywillbecountedintheyearinwhichthespendingiscommitted.Unspentoruncommittedfundswillremainavailablebeyondtheyearforwhichtheywereoriginallybudgeted,untilDecember31,2015.Thiswillallowprogramadministrationandimplementationtobeperformedwithoutinterruption.TheJointUtilities,NYSEG/RG&EandNYSERDAsupporttheStaffrecommendation.Wewill adopttheStaffrecommendation,withanexceptionregardingbalancesremainingasofDecember31,2011,asdiscussedabove.Thesecondissue-borrowingfromfutureyears-presentsmoreconcerns.

35 34NYSEG/RG&Ehaveconcernsabouttheimpactonutilityincentives.Thefactthataprogramhasoverspentitsbudgetwilloftenbeanindicationofsuccess,butmightalsoindicatethatcustomerincentivesaretoohigh.Moreover,evenwheretheprogramisasuccess,thereareconcernsofmaintainingportfoliobalance,aswellasensuringthatprogramcommitmentsdonotoutpacesurchargeauthorizations.Takingthoseconcernsintoaccount,Staffproposedasetofrulesunderwhichprogramadministratorsshouldbeallowedtoborrowfundsfromfuturebudgetyears.

35OnAugust18,2011,weaddressedapetitionofCentralHudsonrequestingauthoritytoborrowfrom2012budgetstomaintainprogressintwosuccessfulprogramsthatwould otherwisehaveexhaustedtheirfundsin2011.Wenotedthattherewereasyetno2012 budgetsfromwhichtoborrow;buttoavoidinterruptionofsuccessfulprograms,weincreasedby$3.5millionthe2011authorizationfortwoprograms.Case07-M-0548,OrderAuthorizingIncrementalCommercialElectricEnergyEfficiencyProgramFundsfor2011, effectiveAugust18,2011 CASES07-M-0548and07-G-0141-27-NYSERDAandNYSEG/RG&EgenerallysupporttheStaffrecommendation.

36WefindthattheflexibilityincludedinStaffsrecommendationrepresentsareasonablebalanceagainsttheriskofprematuredepletionofprogrambudgets,andtheriskthatborrowingmaybeneededsimplybecauseincentivesaretoogenerous.WewilladoptStaffsrecommendationtoallowforborrowingfromfutureyears,underthefollowingrestrictions:NYSERDAnotesthatadditionalflexibilitymaybeneededinthecaseofprogramswithlongleadtimes,wherepost-commitmentchangesmightbenecessary.TheJointUtilitiesarguethatborrowingofupto33%overathree-yearperiodshouldbeallowed,toincreaseflexibility.AEArecommendsthattargetsshouldbesetovermulti-yearperiodstoavoidtheseissues.(1)intenttoexceedtheannualbudgetforaprogrammustbefiledwiththeSecretaryfourweeksinadvance;theDirectorofOEEEmayallowanexceptiontothisruletoprovideforminorend-of-yearexceedances;(2)inatimelymanner,asdeterminedbytheDirectorofOEEE,theprogramadministratormustsubmitananalysisofwhetherextraordinaryspendinglevelsare drivenbycustomerincentivesthataretoohigh,includingcomparisonwithincentivesforsimilar programsrunbyotherprogramadministrators;(3)subjecttosuchfilingandanalysis,aprogrammaybeoverspentby20percentperyear;(4)withtheconcurrenceoftheDirectorofOEEE,a programmaybeoverspentbymorethan20percentperyear;(5)inaggregateforelectricityorforgas,aprogramadministratorsEEPSannualbudget(includinganycarryoversfromprioryears)maynotbeoverspent,exceptthatwiththeconcurrenceoftheDirectorofOEEE,aggregatespendingmayincreaseto110percent,providedthattheprogramadministratorhaspresentedaplanforrestoringaggregatespendingtonomorethan100percentbyDecember31,2015,whichplanmustdemonstratemaintenanceofabalancedportfolio;and(6)eachprogramadministratorwillnotifytheDirectorofOEEEwhenaggregatespendingforabudgetyearreaches80percent.OurOrderConcerningUtilityFinancialIncentives(2008IncentivesOrder)establishedamechanismtoholdutilitiesaccountableandrewardthemforexcellentUtilityshareholderincentives 36NYSEG/RGEproposethatborrowingshouldbeallowedtoexceed120%foranindividualprogramifthefundswillbereallocatedfromanunderperformingprogramwithinthesamecustomerclass.Thiswouldextendtheproposedborrowingruletoborrowingamong programs,whichraisesadditionalissuesandwillnotbeadoptedhere.

CASES07-M-0548and07-G-0141-28-performance.

37OnAugust18,2011weconsideredwhethertomodifythecalculationforrewardofincentivesfortheperiodendingDecember31,2011.Followingourappraisalofestimatedresults,wedeterminedthatpositiveandnegativeincentiveadjustmentsshouldbeawarded,andthatutilitieswouldhavetheopportunitytodemonstratetheimpactoftheeconomicrecessionontheirperformance.TheWhitePaperexpressedconcernovertheapplicationofthismechanismtoutilityperformanceinthe2008-2011period,aswellasthecontinuationofthemechanismin2012-2015.

38Thequestionthatwetakeuphereiswhat,ifany,changesshouldbemadetotheincentivemechanismgoingforwardintothe2012-2015period.TheWhitePaperstatedthatincentiveshadsucceededingainingtheattentionofutilitymanagement;butthepaperrecitedanumberofwaysinwhichtheexistenceofincentivesseemedtobehavingcounterproductiveeffects.Staffrecommendedeliminatingtheincentivemechanism,subjecttoareassessmentpriortotheendof2012.Commentsonthisissuepresentawiderangeofviews.TheJointUtilitiessupporttheideathatincentivesshouldberedesignedduring2012.Thisapproachshouldbeinformedby efficiencypotentialstudiesprovidingmorerealistictargetsandcostestimates.Duringtheinterim,positive-onlyincentivesshouldbeinplace,tomaintainmotivationforutilities.CentralHudsonaddsadiscussioninitsindividualcomments.CentralHudsonstronglydisagreeswithStaffsassessmentoftheimpactsofincentivesonutilitybehavior.AccordingtoCentralHudson,manyoftheproblemsattributedbyStafftoutilitymotivationsareactuallytheresultofalackofpotentialstudiestosetrealistictargets,orthefailuretoestablishclearboundariesbetweenutilityandNYSERDAprograms,orthefailuretoproperlyaccountfornon-energybenefitsintheincentivemechanism.CentralHudsonstatesthatanincentiveprogramshouldbedesignedtakingthesefactorsintoaccount.Pace/NRDC/NEEParestronglyopposedtotheeliminationofincentives.TheyarguethatmanyoftheproblemsrecitedbyStaffactuallyresultfromlackofflexibility,lackof 37Case07-M-0548,OrderConcerningUtilityFinancialIncentives(issuedAugust22,2008) 38Case07-M-0548,etal,OrderGrantingRehearing,ReaffirmingUtilityShareholderIncentivesfor2009through2011,andAdjustingCertainProgramTargetsandBudgets (issuedAugust22,2011).

CASES07-M-0548and07-G-0141-29-clearlydefinedrolesforNYSERDAandtheutilities,anddelaysinprogramapproval.Althoughrevenuedecouplingmechanismsremovedisincentivesforutilities,theydonotprovideaffirmativeincentives.TheNationalAssociationofEnergyServiceContractors(NAESCO)agreesthatthecurrentincentiveregimeiscounterproductive.NAESCOalsocautionsthatacollaborativeinitiativetorevisetheincentivesthreatenstotakeaninordinateamountoftimeandattention.NAESCOrecommendsthatutilitiesshouldbeallowedamodestadministrativefee,andthattheirefficiencyprogramexpendituresshouldbecapitalized,withrecoverycontingentonafindingthattheyhaveproducedsavings.NYSEG/RGEsupporttheStaffrecommendationtoeliminatetheincentivemechanism;moreover,theyarguethattheeliminationshouldbepermanent.NYSEG/RGEarguethattheexistingregulatoryrelationshipbetweenutilitiesandtheCommissionisadequatetoensureastrongeffortbyutilitiestomeetefficiencygoals.Totheextentthatanincentive systemwillincludenegativeadjustments,itwillneverbefairtoimposethatriskonutilities where,asinthecaseofenergyefficiency,mostofthefactorsdeterminingsuccessareoutoftheutilitiescontrol.

39MultipleIntervenorsalsosupportStaffsrecommendation,buttheydonotrecommendreconsideringincentivesfollowing2012.MIarguesthatutilitiesshouldnotneedanincentivetoperformataskassignedtothembytheCommission,andagreeswithStaffthatincentiveshavegivenrisetoskewedmotivations.UIUagreesthattheincentivemechanismshouldbereformed,butdoesnottakeapositiononwhetheritshouldbeeliminatedintheinterimperiod.Efficiencycontractors,whoworkdirectlywithutilitiesandNYSERDA,providevaryingviewsonthisissue.WilldanEnergySolutionsadvocateseliminatingnegativeincentives,toresolvemostoftheissuesidentifiedbyStaff,butmaintainingpositiveincentivestomotivateutilities.CommunityEnvironmentalCenter(CEC)findsitdishearteningthatincentiveargumentshavebecomeadiversionfromtheimportanttaskofmeetingefficiencygoals,andstatesthatinitsexperienceConEdisonhasmadeitsbesteffortstoachievetargetsdespite regulatorydelays.CECrecommendsthatperhapsutilitiesshouldbegivenanoptionwhetheror 39Forexample,customerswillingnesstoparticipate.

CASES07-M-0548and07-G-0141-30-nottoparticipateinincentivesinthe2012-2015period.TheAssociationforEnergyAffordabilityfullyagreeswiththeStaffrecommendation,statingthatincentiveshaveencourageddefensivebehaviorratherthaninnovativebehavior.Inthe2008IncentivesOrder,westated,Asutilitiesgainexperienceinprogramplanningandimplementation,otherapproachestoincentivescouldbeconsidered.

40Weexpectdiligentandcapableperformancefromutilities,inallareassubjecttoourorders.Inmanyfieldsofutilityactivity,ourexpectationofperformance,coupledwiththe potentialforprudenceadjustmentsorpenaltyactions,issufficient.Insomeareasofactivity, suchasreliabilityandcustomerservice,weemploymetricstiedtopotentialrevenueadjustmentstospurperformance.WeagreewithStaffthattheincentivemechanismascurrentlyconfiguredneedstobeimproved.Thisisnottostatethatincentiveshavenothadapositiveeffect;itisimpossibletomeasurewhatthestatusoftheEEPSprogramswouldhavebeenintheabsenceofanincentivemechanism.AsStaffnotes,withoutquestiontheincentiveshavemadesuccessfulefficiencymeasuresahighpriorityforutilitymanagement.Yetincentivesappeartohavehadcounter-productiveeffectsas well.Becauseofthehighprioritythatweplaceonefficiency,wecontinuetoholdthatefficiencyisanactivitythatwarrantsanincentivemechanism.However,Staffhaspersuadedusthattheinteractionandcooperationinvolvedinrefiningtargetsandadministeringprogramscanbeadverselyaffectedbyametricthatleadsdirectlytonegativeadjustments.Forthatreason,weintendtoenactanincentivemechanismthatcontainsonlypositiveadjustments.Thecurrentmechanisminitiatespositiveincentivesat80%achievementoftargets.Intheabsenceofametricfornegativeadjustments,itismorereasonabletorewardutilitiesonlyforachieving100%oftheirtargets.Theabsenceofaspecificmetricfornegativeadjustmentsdoesnot,however,implyanydiminutioninourexpectationofperformancefromutilities.TherearenumerousoptionsavailabletotheCommissionwhereautilitysperformanceisdemonstrablypoor,includingdisallowancesoradjustmentstoreturnonequityinratecases,andpenaltyactions.

40Case07-M-0548,OrderConcerningUtilityFinancialIncentives(issuedAugust22,2008),pg.35.

CASES07-M-0548and07-G-0141-31-Anotherimportantfactorindevisinganincentivemechanism,ashighlightedbyStaff,istheneedforbettercooperationamongprogramadministrators.Towardthatend,weenvisionatwo-stepincentivemechanism,withthefirststeporientedtowardindividualutilityperformanceandthesecondsteporientedtowardachievementofourstatewidejurisdictionalgoal.Underthesecondstep,thepotentialforeachutilitytoearnanincentivewouldbetieddirectlytotheabilityofprogramadministratorsasawholetoachieveourgoal.Theperiodoverwhichincentivesarecalculatedisanotherconcern.Inourincentivesorderof2008,wespecifiedthatincentiveswouldbecalculatedannually,inordertoprovideaccountabilityonaregularbasis.Subsequentordersrevisedthissothatincentiveswillbecalculatedthrough2011.Todiscourageshort-termdecision-makingbyutilities,weareinclinedtocalculateutility-specificincentivesonafour-yearbasis,i.e.,individualincentiveswouldbeawardedbasedonachievementof100%ofautilitysaggregatetargetfrom2012through2015.Monthlyreportsandothermechanismswillallowustoreviewprogressinthe interim,andtakeactionifprogressappearstobeunsatisfactory.Thesecondstageincentive wouldbeawardedbasedontheachievementofourjurisdictionalgoalof11.2millionMWh,i.e.fromtheinceptionofSBC/EEPSthrough2015.Thetotalpotentialadjustmentsinourcurrentincentivestructurearebasedonanestimateof20basispointsperyearforallutilities.Inpractice,thefiguresatstakeforindividualutilitieswerecloserto10basispointsperyear,duetothelevelofprogramtargetsassignedtoNYSERDA.Usingcurrentprojections,basingincentivesforutilitiesona5basispointfigurewouldcreatetotalopportunitiesoverafour-yearperiodofapproximately$36millionforelectricutilitiesand$14millionforgasutilities.Becausetheproposedmechanismwouldonlyawardpositiveincentives,itmaybemorereasonabletoutilizeasmallertotalincentivepoolthanweutilizedinthepast.Underthestructurethatweenvisionhere,thetotalswouldbeawardedifeachutilityachieves100%ofitstargetand100%ofthestatewidegoalisachieved.

41Wewillnotadoptanewincentivemechanisminthisorder.Weintendtodoso,alongthelinesdiscussedhere;however,wewillseekfurtherinputfrominterestedpartiesbeforeproceeding.WewilldirecttheSecretarytoestablishanoticeandcommentperiod,oranother 41Becausethereiscurrentlynostatewidegasgoalfor2015comparabletothe15by15goalforelectricity,theapplicabilityofthesecondstageincentivetogaswouldrequirefurther deliberation.

CASES07-M-0548and07-G-0141-32-appropriateprocess,whichshouldbeconcludedintimeforustoenactanewmechanismwithinthefirstquarterof2012.Wheneveranewmechanismisadopted,weintendthatitwillbeeffectiveasofJanuary1,2012.Intheinterim,asofJanuary1,2012,therewillbenoincentivemechanismintheabsenceofafurtherorder.Ourproposalforanewincentivemechanism,tobeeffectiveJanuary1,2012,isoutlinedinAppendix4,andwillbeissuedforcomment.AcoalitionknownastheGreenGroupEnergyCollaborationProgram(GREENCO)proposesaninitiativetoleveragepublicdollarswithprivateinvestmenttoacceleratetheadoptionofefficiencymeasuresintheStateshospitals.GREENCOparticipantsrepresentawiderangeofinterestsincludingthehospitals,NYSERDA,utilities,majorfinancialinstitutions,andenergyefficiencyadvocates.AccordingtoGREENCO,theapproximately200hospitalsinNewYorkspend$620millionannuallyonenergybills,andtheirenergyuseistypically2.5timesgreaterpersquarefootthanthatoftheaveragecommercialbuilding.HospitalprogramproposalGREENCOsuggeststhatanEEPSprogramspecificallydesignedforhospitalsshouldbeadopted.TheprogramshouldbedesignedtotakeadvantageoftheopportunitiesforcollaborationandleveragedfinancingrepresentedbytheGREENCOcoalition.Atthistime,GREENCOhasnotmadeaspecificproposal.WeencourageGREENCOtodevelopaproposal, andwedirectStafftoworkwithGREENCOrepresentativestoprovideguidance.Anissueonwhichwearenottakingactioninthisorder,butwhichengenderedagreatdealofcommentamongparties,isStaffsproposaltoexpandeligibilitytosomecategories ofinterruptiblegascustomers.Alargemajorityofpartiesindicatedsupportforthisproposal,orsomevariationonit,andmanyindicatedawillingnesstoworkwithStafftorefinetheproposal.WedirectStafftoworkwithstakeholdersanddevelopaspecificproposalonthisissue,forourconsiderationatthesoonestdatepractical.InterruptiblegascustomersTheWhitePaperdiscussednumerousissuesrelatedtoimprovingtheEEPSprogram,butrecommendedthatmanyshouldbeaddressedbytheCommissionovertime.Wehaveadoptedthatapproach.Itisourintentiontoconsidertheseissues,totheextentpracticalOtherissuesdiscussedintheWhitePaper CASES07-M-0548and07-G-0141-33-andtotheextentthatCommissionactionwouldservethegoalofcontinuousimprovementoftheoverallEEPSprogram.SEQRAFINDINGSPursuanttoourresponsibilitiesundertheStateEnvironmentalQualityReviewAct(SEQRA),inconjunctionwiththisorderwefindthatprogramsapprovedherearewithinthe overallactionpreviouslyexaminedbyusinCase07-M-0548andwillnotresultinanydifferentenvironmentalimpactthanthatpreviouslyexamined.Inaddition,theSEQRAfindingsoftheJune23,2008orderinCase07-M-0548areincorporatedhereinbyreferenceandwecertifythat:(1)therequirementsofSEQRA,asimplementedby6NYCRRpart617,havebeenmet;and(2)consistentwithsocial,economic,andotheressentialconsiderationsfromamongthereasonablealternativesavailable,theactionbeingundertakenisonethatavoidsorminimizesadverseenvironmentalimpactstothemaximumextentpracticable.CONCLUSIONWiththisorderweauthorizeenergyefficiencyprogramsandassociatedbudgetsandsurcharges,asdescribedherein.TheCommissionorders

1.SystemBenefitsCharge(SBC)fundingforEnergyEfficiencyPortfolioStandard(EEPS)programstobeadministeredbyCentralHudsonGas&ElectricCorporation (CentralHudson);ConsolidatedEdisonCompanyofNewYork,Inc.(ConEdison);NewYorkStateElectricandGasCorporation(NYSEG);NiagaraMohawkPowerCorporationd/b/aNationalGrid(NiagaraMohawk);OrangeandRocklandUtilities,Inc.(O&R);RochesterGasandElectricCorporation(RG&E);CorningNaturalGasCorporation(Corning);KeySpanGas EastCorporationd/b/aNationalGrid(KEDLI);TheBrooklynUnionGasCompanyd/b/aNationalGridNY(KEDNY);NationalFuelGasDistributionCorporation(NFG);St.LawrenceGasCompany,Inc.(St.Lawrence);andNewYorkStateEnergyResearchandDevelopment Authority(NYSERDA)isapprovedbyprogramassetforthinAppendix1ofthisorder.The annualprogrambudgets,evaluationbudgets,andenergysavingsgoalsfortheprogramsshallbeassetforthinAppendix1ofthisorder.IntheeventthattheenergysavinggoalsforanyprogramidentifiedinAppendix1arerevisedbytheCommission,inanorderpriorto CASES07-M-0548and07-G-0141-34-December31,2011,withrespecttotheperiodendingDecember31,2011,suchrevisedgoalswillbeautomaticallyincorporatedintothetablessetforthinAppendix1.InthecaseofNYSERDA,theannualNewYorkStateCostRecoveryFeebudgetsshallbeassetforthinAppendix1ofthisorder.FundingmaynotbereallocatedamongprogramswithoutfurtherapprovalbytheCommission,exceptthatflexibilityfortheutilityadministratorstoimplementlimitedreallocationsforallprogramsintheirportfoliosundercertaincircumstances,previouslyadoptedbytheCommission,whichflexibilityiscontinued.2.Within60daysofissuanceofthisorder,NYSERDAshallsubmittotheSecretaryasupplementalrevisiontotheSBCOperatingPlan.ThesupplementalrevisionshallincorporatechangestoNYSERDAsapprovedEEPSprogramsmadeinthisorder,andshallcomplywithguidelinespreviouslyprovidedbytheDirectoroftheOfficeofEnergyEfficiencyandEnvironmentandpriordirectivesfromtheCommission.3.Within60daysoftheissuanceofthisorder,CentralHudson,ConEdison,NYSEG,NiagaraMohawk,O&R,RG&E,Corning,KEDLI,KEDNY,NFG,andSt.Lawrence shallsubmittotheSecretarysupplementalimplementationplans(forNFGthiswillbeanewrequirement).ThesupplementalimplementationplansshallincorporatechangestotheirapprovedEEPSprogramsmadeinthisorder,andshallcomplywithguidelinespreviouslyprovidedbytheDirectoroftheOfficeofEnergyEfficiencyandtheEnvironmentandpriordirectivesfromtheCommission.4.Flexibilityastothetypesofmeasuresandthelevelofparticularfinancialinducements/incentives/rebatesshallcontinueaspreviouslyapprovedbytheCommission.5.BeginningJanuary1,2012,eachprogramadministratormayencumberfundsfromabudgetauthorizedforthefollowingcalendaryear,subjecttotherestrictionsandprocessesdetailedinthebodyofthisOrder.6.Beginningwithcalendaryear2012budgets,eachprogramadministratormaycarryforwardanyunusedbudgetallocationintothefollowingcalendaryear,providedthatunusedallocationsincalendaryear2015maynotbecarriedforwardinto2016withoutspecificauthorizationfromtheCommission;andprovidedthatfundscarriedforwardwillnotbe transferredtoadifferentprogram,excepttotheextentotherwiseallowedbyordersofthe Commission.7.Onnotlessthansixmonthsnotice,NYSERDAshallfilewiththeSecretaryanoticeregardinganyanticipatedshortfallinfundingforitssupplementalgas-fundedEmPower CASES07-M-0548and07-G-0141-35-program.Forpurposesofthisclause,ashortfallinfundingisdefinedasapointatwhichavailablefundswillbecomeinsufficienttooperatetheprogramatthebudgetlevelidentifiedinAppendix1,Table9ofthisorder.Includedinthisfilingwillbemonthlyprogramlevelexpendituresandcommitments,andthenumberofapplicationsreceivedandaccepted,fortheprevious12monthsandprojectedforthefollowing12months.8.CentralHudson,ConEdison,NYSEG,NiagaraMohawk,O&R,RG&E,Corning,KEDLI,KEDNY,NFG,St.LawrenceandNYSERDAshalleachincorporatereportsontheseprogramsintotheperiodicquarterlyprogramandevaluationreports,annualprogramreportsandevaluations,andmonthlyscorecardreportsalreadyrequiredfortheEEPSprogramstheyadminister(forNFGthiswillbeanewrequirement).9.InthesupplementalrevisionstotheSBCOperatingPlan,andinthesupplementalimplementationplans,CentralHudson,ConEdison,NYSEG,NiagaraMohawk,O&R,RG&E,Corning,KEDLI,KEDNY,NFG,St.LawrenceandNYSERDAaredirectedto alsoincludethefollowinginformationrelatedtotheiroutreachandeducation(O&E)/marketing programsand,ifnecessary,tosubmitnewbudgets:(a)specificbudgetamountsforeachindividualelementoftheO&E/marketingbudgetfor eachyearoftheprogram;(b)alistanddescriptionoftheO&E/marketingvehiclestobeused;(c)anexplanationofthetargetaudiencesforeachprogramcomponent;(d)atimelineforthedevelopment,implementationandevaluationoftheO&E/marketingefforts;(e)howtheO&E/marketingprogramsrelatetotheentitysgeneralandotherO&E/marketingprograms;and(f)theeffortsthatwillbeundertakentominimizeanyoverlapand/orcustomerconfusionthatmayresultfromO&E/marketingactivitiesinthesameoradjacentmarketareas.10.AllO&E/marketingplancomponentsofthecompliancefilingswillbesubjecttoreviewandcertificationbytheDirectoroftheOfficeofConsumerPolicythattheyconformtotherequirementsofthisorder,beforetheyshallbeimplemented.11.CentralHudson,ConEdison,NYSEG,NiagaraMohawk,O&R,andRG&EshallestablishbycontractwithNYSERDA,ascheduleofpayments,nolessfrequentlythanquarterlycommencingJanuary1,2012,totransferelectricSBCfundstoNYSERDAforNYSERDA-administeredprogramsassetforthinAppendix2,Table3ofthisorder.

CASES07-M-0548and07-G-0141-36-12.CentralHudson,ConEdison,NYSEG,NiagaraMohawk,O&R,RG&E,KEDLI,KEDNYandNFGshallestablishbycontractwithNYSERDA,ascheduleofpayments,nolessfrequentlythanquarterlycommencingJanuary1,2012,totransfergasSBCfundstoNYSERDAforNYSERDA-administeredprogramsassetforthinAppendix2,Table7ofthisorder.13.TheelectricSystemBenefitsCharge(SBC)isaugmentedsuchthatbeginningonJanuary1,2012,thelevelofoverallSBCelectricrevenuecollectionsissupplemented,tobecollectedinthemannershowninTable4ofAppendix2.14.ThegasSystemBenefitsCharge(SBC)isaugmentedsuchthatbeginningonJanuary1,2012,thelevelofoverallSBCelectricrevenuecollectionsissupplemented,tobecollectedinthemannershowninTable8ofAppendix2.15.Eachutilityaffectedbythisordershallfiletariffamendmentsand/orstatementsonnotlessthan30days'noticetobecomeeffectiveJanuary1,2012,incorporating therevisionsdescribedherein.TherequirementsofSection66(12)(b)ofthePublicServiceLaw astonewspaperpublicationofthechangesproposedbythesefilingsiswaived.16.TheprogramsintheConservationIncentiveProgramofNFGwillbesubjecttotherulesandordersgoverningtheEnergyEfficiencyPortfolioStandardprograms,undertheconditionsdescribedinthisOrder,effectiveJanuary1,2012.17.NFGshallfiletariffamendmentsand/orstatementsonnotlessthan15days'noticetobecomeeffectiveDecember1,2011,incorporatinganextensionuntilDecember31,2011,ofitsexistingenergyefficiencyprograms.TherequirementsofSection66(12)(b)ofthePublicServiceLawastonewspaperpublicationofthechangesproposedbythesefilingsiswaived.18.Within30daysoftheeffectivedateofthisorder,NFGshallfileoutreachplansforeachofitsthreeprograms,conformingtotherequirementsspecifiedinclause(9)above.19.ThebudgetsapprovedinthisorderaretobefundedbyanSBC;theydonotrepresenttraditionalrateallowancesinthesensethatanyunder-spendingshallresultinthe utilitydrawingdownlessmoneyfromtheSBCcollections.Efficienciesinthatregardareforthe benefitofratepayers,notshareholders.CentralHudson,ConEdison,NYSEG,NiagaraMohawk,O&R,RG&E,Corning,KEDLI,KEDNY,NFG,St.LawrenceandNYSERDAshall CASES07-M-0548and07-G-0141-37-managetheEEPSandSBCfundsprudentlyandwithinthebudgetsauthorizedbytheCommission.20.NotlaterthanMarch31of2012,eachprogramadministratorshallfilewiththeSecretaryanaccountingofuncommittedbalancesattheendofthepreviouscalendaryear,asdescribedinthebodyofthisorder.21.NotlaterthanJune30of2012andofeachyearthereafterthrough2015,eachprogramadministratorwillfileaforecastofend-of-yearcashbalances,expenditures,andcommitments,asdescribedinthebodyofthisorder.22.Annualaccountingforprogramssubjecttothisordershallbeperformedonanaccrualandcommitmentbasis,asdiscussedinthebodyoftheOrder.23.Within90daysoftheeffectivedateofthisorder,eachelectricutilityadministeringEEPSprograms,notpresentlyofferingaBlockBiddingprogram,shallsubmitafilingwithrespecttoBlockBiddingprogramsasdiscussedinthebodyofthisorder.24.OnorbeforeDecember1,2011,NYSERDAshallfileanupdatedplanforitsResidentialPoint-of-Salelightingprogram.25.NYSERDAshallfundanindependentevaluationconsultantandstatewideevaluationprotocoldevelopmentasdescribedinthebodyofthisorder.26.AsofJanuary1,2012,theutilityshareholderincentivemechanismapplicabletoprogramsauthorizedinthisorderisdiscontinued,asdescribedinthebodyofthisorder.27.TheSecretaryinhersolediscretionmayextendthedeadlinessetforthherein.28.Theseproceedingsarecontinued.BytheCommission,JACLYNA.BRILLINGSecretaryDigitallySignedbySecretaryNewYorkPublicServiceCommissionJaclynA.Brilling Appendix1:TableofProgramsAPPENDICESAppendix2:SurchargeCollectionScheduleAppendix3:2011ForecastsAppendix4:UtilityIncentiveProposalAppendix5:CommentsoftheParties

APPENDIX32011ELECTRICSAVINGSFORECAST PA2011NetAnnual MWhForecastAdjusted2011NetAnnualMWhTarget(perTechManualII)ForecastasaPercentofTargetCentralHudson47,67828,034170.1%ConEdison174,621161,956107.8%NiagaraMohawk311,877214,455145.4%NYSEG58,20763,81891.2%O&R15,92619,20482.9%RG&E44,12641,610106.0%NYSERDA558,010876,85563.6%TOTAL1,210,4451,405,93286.1%2011GASSAVINGSFORECAST PA2011DthForecastAdjusted2011NetAnnualDthTarget(perTechManual II)ForecastasaPercentofTargetCentralHudson24,06727,29688.2%ConEdison260,011277,37493.7%Corning6,57616,07340.9%KED-LI161,875148,223109.2%KED-NY294,308252,466116.6%NiagaraMohawk429,777408,479105.2%NYSEG87,202188,39546.3%O&R7,67314,69152.2%RG&E190,627332,89757.3%St.Lawrence6,19713,36546.4%NYSERDA987,9561,936,87551.0%TOTAL2,456,2693,616,13567.9%

APPENDIX4EEPS-ProposalforUtilityShareholderIncentivesIncentivesProposal1)Atotalincentivepoolwillbecalculatedbasedonestimatesofa5-basis-pointequivalentoverthefour-yearperiod.2)Theincentivepoolwillbedividedintotwosums(StepOneandStepTwo).StepOnewillrepresenttwo-thirdsofthetotalandStepTwowillrepresentone-third.3)TheStepOneandStepTwofundswillbeallocatedamongutilitiesproportionallybasedontheirpercentageoftotalutilitytargets.4)StepOne:Eachutilitywillhavetheopportunitytoearnanincentiveifitreaches100%ofitsaggregatetarget,foryears2012-2015,bytheendof2015.The amountitcanearnwouldbeitsproportionalshareofStepOne.5)StepTwo:Allutilitieswillearnanincentiveiftheentirestatewidejurisdictionalgoal(includingNYSERDAsshare)isachievedby2015.Theamountforeachutilitywouldbeitsproportionalsharebasedonitsshareoftheutilitiesaggregate targets.Ifthegoalisnotreached,noutilityreceivesanincentivefromStepTwo.6)Determinationofanyincentivethatautilityisqualifiedforunder(4)or(5),andthemechanismforpayment,willbemadein2016.7)Therewillbenoformulaicnegativeadjustmentsprovidedintheincentivemechanism.Eachutility,however,willbesubjecttoadjustmentinratecases,penalties,orotherproceedings,intheeventofpoorperformancethatisnotexcusedbymitigatingfactors.Note:TheCommissionwillrequirefurthercommentontheapplicationofthisframeworktogastargetsandgoals,asthereisno2015jurisdictionalgoalforgas comparabletothatforelectricity.Themannerinwhichancillarysavingsare countedwouldalsoneedtobedetermined.

APPENDIX5

SUMMARY

OFPUBLICCOMMENTSUtilityInterventionUnitoftheDepartmentofState(UIU)EEPSisacriticallyimportantprogrambenefittingNewYork,andshouldbecontinued.InrenewingEEPS,theCommissionshouldbearinmindtheoriginalintentoftheprogram, whichwasnotmerelycost-effectivenessbutalsotoslowclimatechange,andtoproducejobsfor NewYorkers.EEPSshouldbeconsideredalongwiththeSBCprogramsinacomprehensiveway.Eachhasaspectsthatcouldbenefittheother,e.g.therelativelyuncomplicatedadministrativestructure oftheSBC,andthestringentevaluationprogramofEEPS.Theoutreachandeducation programsandworkforcedevelopmentshouldbeintegrated.TheexistingsurchargebalanceshouldbereturnedtoratepayersinamannerthatdoesnotdisrupttheEEPSprograms.Anacrosstheboardreductionincollectionsisnotpractical;butthealternativeisnottodonothing.TheTRCtestshouldnotbeapass-failtest,butshouldbeconsideredasaninput.TheTRCshouldalsobeamendedtoincreasetheweightofgreenhousegasreduction,aswellasjob creation.Thepercentageoflowincomebudgetsshouldbeincreasedtoaproportionallevel.Thisisparticularlyimportantgivenfederalspendingcuts.Investmentinwhole-houseweatherization programsarehighlycost-effective,wheneconomicmultipliereffectsaretakenintoaccount.

Further,thepercentageofresidentialbudgetsshouldbeincreasedfromthecurrent18%toa proportional39%.TheNFGCIPprogramshouldbeincorporatedintoEEPSinawaythatdoesnotcompromisethebestfeaturesoftheprogram.Effortstoachievegreateradministrativeflexibility,reduceoverlap,andrefineincentivesshouldbepursued.JointUtilitiesTheJointUtilitiesAreConEdison,Orange&Rockland,theNationalGridcompanies,andCentralHudson.Althougheachoftheseutilitiespresentedseparatecomments,comments aresubmittedjointlyonanumberofcentralissues:TheWhitePaperproperlyconcludedthattimingissuesandtheeconomicdownturnareresponsibleformostoftheshortfallin2009-2010,andthefocuson2011resultsisreasonable.Staffsrecommendedstrategyofreauthorizingmostprograms,withcontinuousimprovement,is reasonable;buttheremustbeatransparentprocessforexpeditedapprovalofnewormodified programs.DelegatingmoreauthoritytoStaff,versusrequiringCommissionaction,wouldavoid unnecessarydelays.

APPENDIX5-2-Uncommittedprogramfundsshouldberolledoverintofutureyears,althoughPAsshouldhavetheopportunitytoproposenewprograms.PAsshouldnotbeforcedtoproposeBlockBiddingprograms,butshouldbeallowedtoconsiderwhethersuchprogramsfitwithintheir territories.Using2011targetsandbudgetsasastartingpointforreauthorizationisreasonable,butbeginning2013theseshouldbeadjustedtoreflectpotentialstudies.Thejurisdictionalportionofthe2015goalremainsareasonabletarget;butafterappraisingallfactorstheCommissionshouldconsiderwhetherthegoalisattainablewithinthecurrenttimeframeandbudget,especiallygiven thepotentialeffectofchangesinlightingstandards.Afurtherdecisionshouldbemadepriorto 2013,informedbypotentialstudies.Althoughthe2015goalshouldnotbeextendedatthistime, itwillbeimportantinthefuturetoextendtheprogramsbeyond2015.Surchargecollectionsshouldnotbesuspended.Thereisastrongchancethatthesurchargebalancewillbereducedbytheendof2011.Ifcollectionsareadjusted,thereshouldbeanautomaticmechanismtoallowcollectionstoresumeatfullpaceifafundbalance representslessthanthreemonthsestimatedspending.Interferencewiththecontinuityof programsshouldbeavoided.Costeffectivenesstestsshouldbeexpandedtoaccountforbenefitssuchasshorttermmarketpriceeffects,environmentalexternalities,reducedcapitalspending,andreducedstreetwork.ThelargestdifferencebetweenNewYorkandmostotherstatesisNewYorksinsistence onapplyingthetestatthemeasurelevelratherthantheprojectlevel.Thisresultsinlost opportunities.Althoughexistingprogramsshouldnotbereevaluatedwithanewtest,newprogramproposalsshouldbesubjecttoanupdatedTRCanalysis,usingnewLRACs.TheIAGshouldparticipateindevelopingnewLRACs.TheimpactofnewlightingstandardsshouldbediscussedandresolvedbytheIAG.

LowincomecustomersparticipateinEEPSprogramsotherthanthededicatedlow-incomeprograms.Definitionoflow-incomecustomersthroughutilitybillingsystemsisproblematic.Althoughlow-incomecustomersdedicatealargerportionoftheirincometoenergy,lowincomehouseholdstendtouselessenergyonaverage.Withouttakingapositionon thecorrectpercentage,meetingefficiencygoalsshouldbethehighestpriority,andresources shouldnotbeshiftedfromotherresidentialprograms.TheIAGshouldtakeuptheissueofeligibilityforinterruptiblegascustomers,whichshouldnotbelimitedtotemperature-controlledcustomers.Impactsonutilityrevenueswillbeacrucialissue,alongwithequipmenttypes,budget,andfuelconversions.TheCommissionshouldusecautioninconsideringself-designedprogramsforlargecustomers.Thecostofaself-designedprogrammaybelargerthantheindividualcustomers surchargecontribution.Also,suchprogramswouldrequirescreeningandevaluation,whichcouldbeburdensome.

APPENDIX5-3-AmortizingEEPSrecoveryovermulti-yearperiodsshouldbeconsidered,althoughStaffcorrectlyidentifiesthepotentialdrawbacks.TheIAGshouldconductastudytoproduceuniformeligibilitystandardsforpartiallyexemptcustomers.ThepaymentofanyamountofEEPSsurchargeshouldmakeacustomereligible.Financialobstaclescaninhibitcustomerparticipation.Programadministratorsshouldbeencouragedtosubmitinnovativefinancingproposals.Programadministratorsshouldbegivenmuchmoreflexibilitytorespondtocustomerdemandandchangingcircumstances.Theyshouldbeabletoshiftfundsamongprograms,and resultsshouldbeassessedattheportfoliolevel,nottheprogramlevel.Ratherthanaccounting forspendingandachievementsonanannualbasis,athree-yearwindowwithvariabilityupto33%shouldbeused.Staffiscorrectthatuncommittedprogrambudgetsshouldberolledoverfromyeartoyear.BettercoordinationbetweenNYSERDAandutilitiesisessential.TheIAGshouldaddressthisissue;however,theIAGwillneedmoreresourcestoperformallofitstasks.The IAGisavaluableforum,butitmusthaveadditionalsupportstafftobemoreeffective.Multifamilyprogrameligibilityforutility-runprogramsshouldbeincreasedto200units.ThiswouldexpandparticipationwithoutunderminingtheNYSERDAprogram.Utilityshareholderincentivesshouldnotbeeliminated.Theyshouldberedesigned,andinformedbyefficiencypotentialstudies,andnegativeincentivesshouldbeeliminated.Staffsdescriptionsofutilitybehaviorinfluencedbyincentivesarenotsupportedbyfacts.NoadditionalEEPSfundingshouldbeprovidedforworkforcedevelopment.

NYSERDAprovidesnobasisforstatingthatitshouldbetheexclusiveproviderinthelargeC&Isector.UtilityC&Iprogramshavebeensuccessful,andaretailoredtothetypesof customersthatareprevalentinindividualutilityterritories.Cost-effectivenessmustbebalancedwithportfoliobalanceasagoal.Instatingthatitsprogramsarelesscostlythanutilities,NYSERDAdrawsinappropriatecomparisons.Thelarge majorityofitssavingshavecomefromitsresidentialCFLlightingprogram,whileutilitieshave beenrequiredbytheCommissiontoimplementmoreexpensiveprograms,suchasdirectinstall smallbusinessprograms.Requestsforspecialinterestfundingshouldberejected.LimitedEEPSfundingshouldremainwithprogramadministrator-runprograms.Beforereallocatingresourcestolowincomeprograms,morestudyisrequiredtodeterminethecontributionsoflowincomecustomersandtheextenttowhichtheyparticipateinprogramsnotdirectlyorientedtowardlow-income.

APPENDIX5-4-Staffshouldworkdirectlywithprogramadministratorstosetnewprogramtargets.Itislikelythatthecosttoachievewillincrease,asmanyoftheearliestsavingsweretheeasiesttoacquire.NewYorkStateEnergyResearchandDevelopmentAuthority(NYSERDA)Thecurrent15by15goalisreasonable,andthemajorityofprogramsshouldbecontinuedonamulti-yearbasis.TheNYISOsanalysisofthe2015goalusesaflawedapproach,comparingdissimilarprogramsandnotcountingencumberedfunds.Thereasonsforshortfallsinthefirstthreeyearsextendbeyondtheeconomyandtimingissues.SeveralrulesimposedbytheCommissionhaveimpairedimplementation,includingthe useoftheTRCformeasures,andthecumbersomeprocessforapprovingmodificationof programs.AspartoftheprocessofcontinuousimprovementadvocatedbyStaff,theCommissionshouldconsideralternativestothecurrentregulatoryprocess.TheJointUtilitiesarecorrectinproposingthatfundsshouldbefreelytransferrableamongapprovedprograms.But PAsshouldnothavethediscretiontoimplementnewprogramswithoutCommissionapproval.Thestartingpointforprogramtargetsshouldbe2011targets,refinedasneeded,althougheffortneedstobemadetoaccountforprogramswithlongleadtimes.Targetsshouldbeusedforplanningpurposes;establishinghardannualtargetscanbecounterproductive.Whenconsideringshiftingoffundsamongprograms,budgetsshouldacknowledgeprogramsthattend tohavelongleadtimes.Staffsproposalsregardingborrowingfromfuturebudgetyearsisgenerallyreasonable;however,flexibilitywillbeneededforprogramswithlongleadtimes.Theproposaltoreportonacommitmentaccrualbasisisreasonable.Measureincentivelevelsshouldbereviewed,toanalyzewhethersomeprogramsappeartobesuccessfulonlybecausetheyareofferinghigherincentivesthanarenecessary.Costper MWhachievedshouldbeafactorinallocatingfundsamongprograms.IftheCommissiondeterminesthatnewprogramsareneededtomeetitsgoal,itshouldnotallocateuncommittedsurcharges,assuggestedbyStaff.Itshouldaddtoexistingsurcharges,takingintoaccountthatexistingsurchargelevelsare$44millionperyearlowerthananticipated inthe2008EEPSOrder.Inidentifyingoutliersandrecommendingactionregardingthem,programadministratorinputisessential.RequiringtheTRCtobeappliedatthemeasurelevelhasledtomissedopportunitiesforsavingsmuchdeeperthancanbeattainedusingthecurrentapproach.TheCommissionscurrent ruleoveremphasizesshort-termsavingsandcouldmakeitmoredifficulttoachievelongterm goals.TheTRCshouldbeappliedattheprogramandportfoliolevels.Screeningatthemeasure levelandscreeningduringimplementationshouldonlyberequiredunderconditionsthatprovidemuchgreaterflexibility.

APPENDIX5-5-AsidefromtheTRC,costperunitofenergysavedshouldbetakenintoaccount.NYSERDAscostperunitofenergysavedismuchlowerthantheaverageforallPAs.Staffisincorrectwhenitsaysthatstand-aloneauditprogramstendnottobeeffective.NYSERDAsFlexTechprogramisreportingameasureadoptionrateof65%.Staffscriticism ismoreonpointwithregardtosmallcustomerauditprograms,wherethemeasureadoptionrate islower.Staffsanalysisofprogramdeliveryoptionsdidnotdiscusscustom-designedprograms,whichhavebeenveryeffective.Staffiscorrectinadvisingthataflexibleapproachtogeographicequityshouldbemaintained.Lightingprogramswillneedtoberevised.Evenwithnewstandards,anupstreamprogramwillstillbeimportanttogainingwidespreadmarketacceptanceofnewlighting technologies.TheIAGisanappropriateforumfordiscussingthisissue.Thepercentageoflow-incomefundingshouldbeincreased.DemandforEEPSprogramswillincreaseasfederallyfundedprogramsarereduced.Thedeclineinfederalstimulusfundingthreatenstohaltthemomentumofweatherizationprogramsandstrandtheworkforce.TheCommissionanticipatedthisinits2009GasEEPSorder,andtheCommissionshouldnow followthroughonthatrationale.Althoughitwouldbereasonabletoallocate40%ofresidential fundstolow-income,30%istheminimumthatwouldbeappropriate.NYSERDAshouldhavetheflexibilitytotransferfundsfrommarket-rateresidentialprogramsintolowerincomeprograms,basedondemandforservices.InterruptiblegascustomersshouldbemadeeligiblefortheEEPSprogram.Theineligibilityofinterruptiblecustomersgreatlyreducesthepotentialreachofthemultifamily programs.Includingthesecustomerswouldalsoaidinthetransitionawayfrom#4and#6 heatingoil.Thisinitiativeshouldincludenotonlymultifamilybuildingsbutallinterruptible customers.Self-designedprogramshavepotentialandwarrantconsideration.Arecentpaper,however,cautionedthatthereareinsufficientdatatosupporttheseprogramsatthistime.Collectionofsurchargesshouldnotbeamortized.Notonlywoulditincreaseoverallprogramcosts,butitcouldleadtounintendedconsequencesforutilitybalancesheets.Theissueofintergenerationequityisnotcompelling,asthelife-spanofefficiencyinvestmentstendstobeshorterthanotherutilityinvestments.Itisalsounclearwhetherstandardaccountingruleswould allowforthistypeofcapitalization.PartialSBCcustomersshouldbefullyeligibletoparticipateinEEPSprograms.Theyrepresentalargeamountofefficiencypotential,andcurrentinconsistenciesinthewaytheyareservedpreventsthispotentialfrombeingrealized.

APPENDIX5-6-ProgramadministratoroverlapisacriticalissuethatshouldbeahighpriorityforresolutionbytheCommission.TheissueshouldnotbedelegatedonlytotheIAG;itshouldincludeabroadergroupofstakeholders.ATechnicalConferenceshouldbeconvened.Staffshouldreevaluateitsstatementthatcleardelineationisnotapromisingapproach.Cleardelineationisnotinconsistentwiththegoalofgreatercollaboration.Infact,clear delineationmakescollaborationworkbetter.Thecurrentdelineationinthelowincomesectorhasproducedgoodresults,andNYSERDAhasbeenabletocollaboratewithmanyPAs.Simplyrequiringidenticalincentivelevelswillnotbeproductive.Similarly,increasingtheunitcapfor themultifamilyprogramwillexacerbateprogramoverlapissues.OnemodeofdelineationintheC/Isector,thatwouldresolvecurrentproblems,wouldbeforNYSERDAtoberesponsibleforcustomerslargerthan100kW,withutilitiesresponsiblefor smallercustomers.ApolicyforapplyingadjustmentfactorsshouldbedevelopedbytheEvaluationAdvisoryGroup,tobetterpromoteconsistencyinreportingandmeasuringagainstgoals.Interactiveeffectsamongprogramsalsoneedtobeconsidered.Statewidestudiesandjointevaluationefforts shouldbecontinued;however,moredefinitivebudgetallocationsareneeded.NYSERDAs effortsinevaluatingprogramsareseverelyhamperedbylackofaccesstonon-participantdata,whichishamperedbyprivacyrules.TheStatesparticipationintheEM&VForumisinvaluableandshouldbecontinued.TheefficacyofmarketingeffortsisenhancedwhenPAshavetheflexibilitytorespondbychangingbudgets.Thereremainsalargeuntappedmarketforenergyefficiency,andOEM willbeessentialindevelopingit.EvaluationofOEMshouldcontaintwoapproaches:marketingperformancemeasurement(MPM);andevaluation,measurementandverification.EM&Viseffective,butnotascarefullytailoredtoOEMasMPMis.Combined,theyprovidea morecompletepicture.NYSERDAsworkforcedevelopmentprogramshavebeensuccessful.Becauseanticipatedfederalfundingwasnotawarded,however,additionalfundingwillbeneededtobuild onthissuccess.NYSERDAanticipatesaneedforapproximately$6.5millionperyear.UtilityshareholderincentivesshouldnotbepaidfromuncommittedEEPSfunds;theseshouldbededicatedtoefficiencyprojects.Suggestionsthatthesplitincentiveproblemcanbeaddressedsimplybeincreasingincentivesareshortsighted.Theymightassistinachievingneartermgoals,buttheywilldonothingtosolvethelong-termproblemofsplitincentivesandtheyareunlikelytochangebehavior.Energy-alignedleasesareawaytoaddresstheprobleminalongtermsystematic fashion.Territory-specificpotentialstudiesarenotneededandareunlikelytorevealsignificantdeviationsfromstudiesthathavealreadybeenperformed.NYSERDAhasinitiatedacomprehensivestatewidepotentialstudyencompassingnotonlyefficiencybutrenewableenergyandgreenhousegasreductionpotential.

APPENDIX5-7-TheutilitiesproposaltoestablishfinancingmechanismsforC/Icustomersshouldbesupported,andshouldnotoverlapwiththerevolvingloanfundforsmallercustomersthatNYSERDAisrequiredtoestablishunderstatute.NationalFuelAccountabilityCoalition(NFAC)NFACcomprisesfifteenmemberorganizations.NFACsupportsthebroadgoalsofEEPSbuthasfourspecificconcerns:Programsorientedtowardlow-incomecustomersshouldreceive50%oftotalfunding.Therearefivepointsinfavorofthisposition:(1)A50%low-incomeallocationwillcorrectforotherregressiveaspectsoftheEEPSprogram.EEPSvolume-basedfeestructuresareregressive,becauselow-incomehouseholdstendtousemoregasthanhigh-incomehouseholds.Also,theemphasisonappliancerebateprogramsfavorshigher-incomehouseholds.Low-income customershavedifficultyparticipatingintheseprograms.Participationratesinthe high-incomezipcodesofNFGsterritoryarethreetofourtimeshigherthaninthe low-incomezipcodes.(2)Low-incomeprogramscreatemorejobsthanappliancerebateprograms.ThisshouldbereflectedintheTotalResourceCostanalysisofprograms.(3)Morelow-incomeallocationisneededtoaddressthecurrenteconomiccrisisfacedbylow-incomeNewYorkers.(4)Agreaterlow-incomeallocationisneededtoavoidstrandingtheinvestmentinworkforcetraining.AstheCommissionacknowledgedinanearlierorder,low-incomefundingshouldbeincreasedafter2011toavoidstrandingthegreenjobs infrastructurethathasbeendeveloped.(5)Theexistenceofotherlow-incomeprograms(e.g.WAP)doesnotsupportlowerfundingforEEPSlowincomeprograms.ThedeclineinfederalfundsfortheseprogramscreatesagapthatshouldbefilledbyEEPS.EEPSshouldutilizemorewhole-houseprograms.Manyexpertsconsiderthewhole-houseapproachtobethebestpractice.Whole-houseprogramsarenotnecessarilylesscost-effectivethanrebates,andmaybemorecost-effective,especiallyifjobcreationisfactored.

Whole-houseprogramshaveamuchlargereconomicmultipliereffect(locally)thandoappliancerebates.EEPSprogramadministrationshouldbestreamlinedandshiftedentirelytoNYSERDA.CompetitionbetweenNYSERDAandutilitieshasledtoconfusionandunderperformance.ShiftingallresponsibilitytoNYSERDAwouldeliminateoverlapandenableone-stopshopping forcustomers.ItwouldalsofacilitatetheintegrationofotherNYSERDAprogramsintoEEPS.Utilitiesasprogramadministratorshaveconflictinginterests,andmaybemoreinterestedinbuildingtheirbrandsthaninprovidingthebestefficiencyservices.TheEEPSprogramshould bemoretransparentandaccountable.

APPENDIX5-8-Theoutreachandmarketingprogramshouldpresentone-stopshoppingtosimplifyaccesstoefficiencyprogramsforcustomers.NationalFuelGas(NFG)StaffsgeneralrecommendationtoextendEEPSprogramsthrough2015,subjecttoimprovements,isreasonable.TheConservationIncentiveProgram(CIP)shouldbeincorporatedintoEEPS,butsomeofitsuniquefeaturesshouldremainunchanged.Therebateschedule,andlow-incomefunding, shouldremainatcurrentlevels.Therebateprogramhasbeensuccessful.Ifrebatelevelsare orderedtobeswitchedtothelevelsforotherEEPSprograms,atransitionperiodshouldbeallowed.Thecommercialrebateprogram,contractedtoNYSERDA,hasbeensuccessful,andthepartnershipwithNYSERDAshouldberetained,withNYSERDAdedicatingallfundstothe NFGserviceterritory.Similarly,thelow-incomeweatherizationprogramshouldberetained, andoperatedbyNYSERDA.CurrentfundingfortheCIPlow-incomeprogramis30%ofthe total,andmuchmorethan30%ofresidentialfunding.Theexistingoutreachandeducation programshouldberetained,althoughfundingcouldbereducedby25%.BecauseauthorizationforCIPexpiresNovember30,2011,andnewEEPSauthorizationswillnotoccuruntilJanuary1,2012,aninterimextensionshouldbegrantedtomaintainCIP.WithrespecttoNYSERDAsstatewideprograms,NYSERDAshouldberequiredtoidentifycustomersintheNFGterritorywhoareparticipatinginNYSERDAprograms,sothat NFGcanworkwithNYSERDAtoincreasecustomerparticipation.ThedisadvantagesofamortizingEEPSrecoveryoutweightheadvantages,primarilybecausetheadditionofcarryingchargeswouldincreasetotalcosts.Staffsrecommendationsforyeartoyearbudgetingmechanismsshouldbereplacedbyasurcharge/refundmechanismsimilartotheonecurrentlyusedbyNFG.Thiswouldpreventthe accumulationofunspentfunds,andallowoverspendingbudgetswherewarranted.EdwardRath,ErieCountyLegislatorThecurrentalignmentofCIPprogramsiseffectiveandthechangesurgedbyPeopleUnitedforSustainedHousingshouldnotbeadopted.

NOTE:NumerouscommentswereprovidedinformallythroughemailtotheSecretaryregardingtheNationalFuelprograms.ManysupportedthepositionofNFACthattheprograms shouldberealigned.Othersstatedthattheprogramsshouldbecontinuedintheircurrent configuration.PaceEnergyandClimateCenter,NortheastEnergyEfficiencyPartnerships,andNaturalResourcesDefenseCouncil(alsojoinedbysixotherorganizationsadvocatingforcleanenergypolicies)

APPENDIX5-9-EEPSshouldbecontinuedandfundedatcurrentlevels.RecentdevelopmentsinIAGcooperationandstreamliningofapprovalsareencouraging,butinsufficient.Moremustbedonetoavoiddelaysinapprovalofnewormodifiedprograms.DelegationtoDPSStaffshouldbe increasedtoavoidthedelayscausedbySAPA.OncePAshaveexhibitedcompetencyat managingprograms,theyshouldnotneedCommissionapprovalforeveryprogramchange.

Staffshouldclearlyarticulateaprocessformodificationofprogramsandapprovalofnew programs.Greatlyimprovedstatewidecoordinationofprogramdeliveryisneeded.TheWhitePaperdoesnotoffersolutionstotheproblemofoverlap.TheIAGshouldmakethisatop priorityforthecomingyear,andtheIAGwillneedgreaterresourcestoaccomplishthisalong withitsothertasks.Onewaytoincreasecooperationisthroughasinglestatewidewebsite directingcustomerstoprograms,similartowhatisdoneinCalifornia.Itisimperativetoretainutilityshareholderincentives.Staffincorrectlyblamesincentivesformanyoftheimplementationproblemsthatareactuallycausedbyslowapprovals, lackofflexibility,andunclearrolesforNYSERDAandutilities.TheexistenceofRDMs removesdisincentivestoutilityactivity,butitdoesnotprovideanincentive.Utilitiesmustbe encouragedtomakeefficiencypartoftheirbusinessmodel;thisshouldbedonewithclear verification,andscaledincentivesthatrewardexemplaryperformancebeyondthetarget.Negativeadjustmentsarealsoessential,althoughutilitiesmaybeexcusedwhereprogramapprovaldelaysarenottheirfault.TheTRCtestaswellasitsapplicationneedstobechanged.Thiscannotbedelayed.Programsshouldbeevaluatedattheportfoliolevel.Anavoidedcoststudyshouldbeperformed, followedbyaTechnicalConferencetomakelongoverduechangestothetest.Asocietaltestshouldbeadded,andwholesaleenergypriceimpactsshouldbeconsidered.(furtheranalysisiscontainedinanappendix,describedbelow)Onlyasmallportionofthestatesbuildingshaveundergoneefficiencyretrofits.Marketbarrierssuchassplitincentivesareresponsibleforsomeoftheshortfalls.Energy-alignedleases areonewaytoovercomethebarrierofsplitincentives.Innovativefinancingmethodsare anotherway;amulti-yearloan-lossreservefundshouldbeconsidered.EEPSprogramadministratorsshouldbeprovidedwithmethodsforbetterintegrationofcodesandstandardsdevelopment.LIPAandNYPAefficiencyactivitiesneedtobemonitored andtheirperformanceconsideredalongsideEEPStoevaluateprogresstowardstatewidegoals.Self-directedprogramsforlargecustomersshouldnotbeadopted.Suchprogramswouldstillrequireindependentevaluation,andthecustomerwouldlosetheabilitytoleverageotherEEPSfunds.Performanceinthemultifamilysectormustimprove.Theunitcapof75unitsshouldberemoved;largermultifamilybuildingshaveagreaterpercentageofpublicareas,sotheprojected savingsfromsmallerbuildingsareoverstated.Multifamilyprogramsmustbedelineatedfrom C&Iandsmallbusinessprograms.Low-incomeprogramsareimportant,andtheCommissionshouldconsidertheneedtoincreasefundinginlightofreducedfederalfunding.

APPENDIX5-10-OptimalAnalysisofCost-EffectivenessTests:StaffiscorrectthattheProgramAdministratorsCosttestisproblematic.StaffidentifiedthreevariantsonthecurrentTRCthatwouldbeimprovements.The5.5%discountrateinthe currenttestistoohigh.Additionalbenefitsthatshouldbeincludedinthetestare:HigherCO2emissionvalues.StaffdiscussesapotentialincreaseoftheCO2valuefrom$15pertonto$50perton.ArecentNewEnglandstudydeterminedthatthecostofCO2mitigationismorelikelytobe$80/ton.98%ofthefuturecostofCO2mitigationisexternalto themarketpriceofenergy.Operatingandmaintenancecostsavings.Efficiencymeasurescanhaveasignificantimpactonmaintenancecostsforcustomers,e.g.reducingthecostofreplacingbulbs.These benefitsshouldbecountedforspecificprograms,wheretheyaresignificantandreasonablyquantifiable.DemandReductionInducedPriceEffects(DRIPE).DRIPEhasbeenassumedinthepasttobeashort-livedphenomenon;asmarketsadjusttolowerpricesbydelayingsupplyincreases, whichincreasesprices.ArecentNewEnglandstudyshowsthatthepriceimpactsofDRIPEare greater,andlastmanyyearslonger,thanhavebeenpreviouslyassumed.TheWhitePaperalsostatesthatDRIPErepresentsatransferpayment;thisisnotthecase.Higherdemandrequiresuseofmoreexpensivegeneratingresources;reducingdemandhasasocietalbenefit.Moreover,totheextentDRIPErepresentsatransfer,itisatransferthatbenefitsNewYorkers.Non-regulatedenergybenefits(NEBS).NEBSresultfromefficiencymeasuresinvariousforms.Manyofthemaretangibleandquantifiable,suchassavingsinwater,oil,keroseneandpropaneuse.WhereNEBSaresignificantandreasonablyquantifiabletheyshouldbeincludedintheTRCcalculation.NewYorkStateElectric&GasandRochesterGasandElectricCorporationTheStaffrecommendationtoreauthorizeexistingprogramsandthestrategyofcontinuousimprovementshouldbesupported.Theexistingprogramshaveacquiredmomentumandaremakingsatisfactoryprogress.Theprocessofcontinuousimprovementshouldallowfor modificationorreplacementofprogramsasindicatedbyavailableevidence.Targetsfor reauthorizationsmadeinOctober2011shouldbeestablishedcollaborativelybetweenStaffand theprogramadministrators.TheprogramsshouldbedevelopedonatrajectorytoachievetheStates15by15goal;butannualtargetsshouldbeusedflexiblyforplanningandevaluationpurposes.Extendingthegoalsto2018,atlowerlevels,wouldrisklosingmomentumatthistime.

Negativeoutliersshouldbediscontinued,butonlyafteracarefulreviewastowhethertheyhavethepotentialtoimprove,orwhethertheyserveanimportantportfolioneed.

APPENDIX5-11-TheCompaniesCommercialandIndustrialPrescriptiveProgramshouldbeconsolidatedwithitsCustomRebateProgram;apetitionwillbefiledrequestingthisconsolidation.Uncommittedsurchargebalancesshouldremaininplaceforthetimebeing.Therearenumerousfactorscontributingtouncertaintyregardingthetotalofuncommittedfunds, particularlythemannerinwhichNYSERDAisfundedthroughutilitycollections,whichmakes theCompaniesunabletoaffirmthefiguresrecitedbyStaff.2011commitmentsmaycauseasignificantreductioninthesurchargebalance.TheTotalResourceCostTestshouldcontinuetobeappliedasis.Althoughtherearepotentialtheoreticalimprovementstothetest,theywouldalsomakeitmorecomplexandless consistentandreliableinapplication.StaffshouldworkwiththeIAGtostudyprogrammodificationsthatmightbeneededregardinglightingmeasures.WithrespecttoT12applications,thereshouldbenointerruptioninprogramsatleastthrough2012.ThecontinuationofCFLmeasuresisamorecomplexissue.Lowincomeprogramsshouldnotbesubjecttoastrictpercentage.Lowincomemeasuresshouldbeofferedwithinexistingprograms.MeetingtheStatesefficiencygoals shouldbethehighestpriority.AsubcommitteeoftheIAGshouldbeformedtoconsidereligibilityofinterruptiblegascustomers.Althoughtheproposal,asstatedbyStaff,primarilyaffectsdownstatecustomers,itisrelevanttotheCompaniesandthesubcommitteeshouldbeopentoanyprogramadministrator.

Splitincentivesmustbeaddressed,andmakingprogramsattractivetopropertyownersis essentialtomaximizeparticipation.Self-directedcustomerprogramsareunnecessary.TheCompaniesBlockBiddingprogramsalreadysatisfythatdemand.Moreover,participantsinthatprogrammaygainaccess toalargershareoffundsthantheywouldthroughaself-directedprogram.SBCcollectionsshouldcontinuetoberecoveredasexpenses.Consistentstatewideeligibilitystandardsshouldbedeveloped.Staffsrecommendationsforyear-to-yearbudgetingrulesaregenerallysound.Appliedtoshareholderincentives,however,theymayproduceinequities,whichisanotherreasonto eliminateincentives.Withrespecttoproposedrulesforborrowingfromfutureyears,Staffs proposalisreasonable,butcouldbeimprovedintwoways.Programsshouldbeallowedtoexceedannualbudgetsbymorethan120%iftheyareusinguncommittedfundsfromapreviousyear.Theyshouldalsobeallowedtoexceed120%ofanannualbudgetiftheyareusingfunds formanunderperformingprogramthatservesthesamecustomersector.ProgramadministratoroverlapshouldbeaddressedbyhavingNYSERDAfocusonmarkettransformationandutilitiesfocusondirectofferingstocustomers.TheIAGhasbeeneffective,andithasnotbeenfocusedonincentivestothedetrimentofitsothertasks.

APPENDIX5-12-Utilityshareholderincentivesshouldbeeliminated.Staffisincorrectthatincentiveshavecausedutilitiestoaimlow,butthereareindependentreasonsforeliminatingincentives.

CoordinationwithNYSERDAwillbeeasiertoaccomplishintheabsenceofutilityincentives.

Moreover,astheCompanieshavearguedsince2008,utilitieshavelimitedinfluenceoverthe behaviorofcustomers,anditisunwisetosubjectutilitiestoincentivesbasedonresultsover whichtheyhaveminimalcontrol.Ifutilitiesareretained,theyshouldbepositiveincentivesonly.TheProcessportionsofevaluationbudgetsshouldbedirectedto:programmarketing,outreachactivities,state-widemarketing,andstate-wideefficiencypotentialstudies.Impact evaluationsshouldcontinue.Statewideoutreachandeducationfundsshouldberedirected,inpart,toutilities.Thepercentageofprogramfundsforoutreachandmarketingshouldnotdecline.OutreachandmarketingshouldbeevaluatedusingapercentageoftheEM&Vbudgets.Additionalfundingforworkforcedevelopmentisnotwarranted.

PartiesarguingthatutilitiesuseEEPSfundingforself-promotionareincorrect.TheappropriateusesofEEPSfundingareclearlydescribedinEEPSorders.ConsolidatedEdisonandOrange&Rockland(theCompanies)TheCompaniesfiledasupplementtotheJointUtilitycommentstowhichtheyalsosubscribed;thesupplementalcommentsreferprimarilytoissuesmorespecifictotheCompaniesserviceterritories.Lookingbeyond2012,EEPSprogramsshouldbereworkedtoprovideholisticsolutionsthataddressdemandmanagementandpowerqualityandaresupportedbyratestructuresthat encourageoff-peakuse.ConEdisonhassuccessfullyreducedpeakdemandthroughitsTargeted DSMprogram,andmorecapitalinvestmentintransmissionanddistributioncouldbedeferredif EEPSweremorefullyintegratedintothisapproach.TargetsforEEPSprogramsshouldbeadjustedtoreflectlessonslearnedinthe2009-2011period.Examplesofinformationgainedthroughexperienceincludechangedestimatesof marketdemand,andtheimpactsofseasonalfluctuationsindemand.Sectorequityisanimportantgoal.Regardlessofthepercentageoffundingdetermined,noadditionalprogramsneedtobecreatedtoservelow-incomecustomers.EEPSprogramscouldoperatemoreefficientlyifprogramadministratorswereprovidedmoreflexibilityinshiftingmoneybetweenprogramsandchangingprogramstorespondto marketconditionsandtestnewinitiatives.Shiftingmoneyamongprogramsshouldbeperformed onanintra-classbasis.Shiftingmoneyamongprogramsshouldnotresultinanautomaticshiftingofprogramtargets.

APPENDIX5-13-ConEdisonsmulti-familyprogramsshouldbeexpandedtobuildingswithmorethan75units.ThiswouldnotconflictwithNYSERDAsprogram,becausesomecustomerspreferNYSERDAswholebuildingapproachandotherspreferConEdisonsapproach.TheCityisincorrectinstatingthattherearenoprogramsforone-and-twofamilybuildingsinNewYorkCity.ThosebuildingsareservedbyseveralConEdisonprograms.InadditiontodirectcommentsfromConEdison,numerouscontractorsworkingwithConEdisononEEPSprogramssubmittedcommentssupportingEEPSingeneralandthe continuationofConEdisonprogramsinparticular.ConEdisonandO&Rwillproposeimprovementstoseveraloftheirprograms.St.LawrenceGasCompany,Inc.EEPSprogramsshouldbereauthorizedthrough2015.TheresidentialprogramsofSt.LawrenceGashavebeenhighlysuccessful.Splitincentivesneedtobeaddressedtoimprovethe performanceofcommercialprograms.Unspentprogramfundsshouldberolledoverintofuture years.Rebatelevelsshouldbereviewedonanongoingbasis.AssociationforEnergyAffordability,Inc.(AEA)TheWhitePaperprovidesacomprehensiveassessment,anditscorerecommendationthatprogramsshouldbecontinuedatcurrentfundinglevelsshouldbeendorsed.Utilityincentivesshouldbeeliminated.Staffiscorrectthattheyhavehadcounterproductiveresults.Multifamilyshouldbeconsideredaseparatecustomersector.ThemultifamilyprogramforNewYorkCityneedstobecorrected.Thebuildingstockdiffersconsiderablyfromstockin otherpartsofthestate,andmetricsdesignedforupstatebuildingswillnotworkforNewYork Cityprograms.TheTechnicalManualfailstoreflectthesedifferences.Further,thecapof75 unitsshouldbeeliminated.Theaveragecommonareaelectricusagecalculatedforlargerbuildingscannotbeappliedtosmallerbuildingswithoutdistortingprogramresults.Addingeligibilityofinterruptiblecustomersishighlyimportant.Thiscouldbedonebyestablishingaminimumannualgasusageasthecriterionforeligibility.AEAwouldliketo participateinanIAGsubcommitteetoaddressthisissue.Annualbudgetingshouldbeeliminatedinfavorofmulti-yeartargets.Savingsandexpendituresshouldberecordedonacommitmentaccrualbasis.

ThesuccessfulexperienceofNYSEGsmultifamilyprogramshouldbestudiedandreliedon.Lowincomefundingshouldbeincreasedtoatleast30%oftheresidentialallocation.Coordinationwiththedrop-offinfederalstimulusfundingisessential.Buildingsthatmeetthe APPENDIX5-14-WAPcriteriaforeligibilityshouldbetargeted.Somepercentageofhouseholdsinmarketratemulti-familybuildingsarelow-income.Splitincentivesinmulti-familybuildingsneedtoberesolved.Onewaytodothisistoincreaseincentivelevels,and/orprovidemeasuresfreeofcustomerparticipation.CFLsshould beprovidedfree.Incentivesshouldbeincreasedtorecognizetheimpactofthesecondary refrigeratormarket,andtoincentivizebuildingownerstoreplacerefrigerators.CommunityEnvironmentalCenter(CEC)Aftersomedelays,theinfrastructureofenergyefficiencydeliveryisinplace,andshouldbemaintained.PAsshouldbegivengreaterflexibilityinrespondingtomarketconditions.In particular,theincentivemodificationcapof20%shouldbechanged.Surchargesshouldnotbereducednow,whenprogramsareachievingathigherlevels.TheTRCshouldbemodifiedtoaccountformoreenvironmentalbenefits.Becausethiswilltaketime,inthemeantimethecost-effectivenesshurdleshouldbereducedto0.7asaproxy forthelikelychangesinthetest.Theproposed$50/tonmonetizationofcarbonisreasonable, althoughahigherfigurewouldbeconsistentwithstudiesperformedinEurope.Thetechnicalanalysisofrefrigeratorsavingsneedstotakeintoaccountthesignificantsecond-handmarketforrefrigeratorsinNewYorkCity.Lightingcontinuestobeanessentialfeatureofefficiencyprograms.Apackageapproachtoefficiencyprojectsismuchmoreeffectivethanameasure-by-measureanalysis.Thelow-incomepercentageshouldbeincreased,especiallyinlightofreductionsinfederalfunding.Theparticipationoflow-incomecustomersinmarket-rateprogramsisminimal.

Low-incomeprogramsmeetingcost-effectivenesstestsdonotpresentsignificanttrade-offswith otherpolicygoals.Asignificantportionofmultifamilybuildingsaredualfueled,andexpandingeligibilitytothesecustomersisessentialtoexpandingparticipationinthissector.A$9millioninitial budgetwouldbereasonable.ConEdisonhasmadebesteffortstoachieveitstargets,notwithstandingStaffsdescriptionofutilitybehaviorasaffectedbyincentives.Staffdelaysmayhavemorethananythingelsetodowithinabilitytomeettargets.Utilityopt-outsshouldbeconsidered.Community-basedoutreachstrategiesaremoreeffectivethanmedia-basedstrategies.Also,asingleinteractivewebsiteshouldbeavailableforallprograms.NYSERDAsworkforcedevelopmentprogramshavebeeneffective.

APPENDIX5-15-NewYorkIndependentSystemOperatorTheEEPSprogramingeneralisavaluableinitiative.ForecastsofenergyefficiencymustberealisticfortheISOtoplanNewYorkspowersystem.Experienceshowsthatfull achievementoftheCommissionsgoalby2015isnotfeasible.Totalexpenditureshavenotyet exceeded$250millionperyear.BasedonexperiencesincetheinceptionofEEPS,itappears thatmostoftheprojectedsavings(1,397GWh)canbeobtainedfor$195million,whilethelast48GWhcostnearly$70million.Actualsavingsreportedforthe2011calendaryeardonotshowalargeincreaseinsavings.TheCommissionhaspublicpolicyreasonsforsupporting somelowerperformingprograms,butmaintainingthoseprogramsmeansthatoverallprogram goalswillnotbereached.TheCommissionshouldreduceannualspendingtotherangeof$200-250millionuntiltheabilitytospendhigherlevelsinacosteffectivemannerhasbeendemonstrated.Reducingspendingto$250millionwouldallowtheEEPSgoaltobeachievedin2017.Whennegativeoutliersareremovedfromtheportfolio,theirtargetedsavingsshouldberemovedfromthegoalaswell.Whilecontinuityofprogramsmustbemaintained,theTRCneedstoberevisitedfrequently.NationalGridNationalGridsupportsStaffsrecommendationsthatitreallocatefundsawayfromitsHomeSealingIncentivesProgramanditsResidentialEnergyStarProductsprogram.Newprogramswillbeproposedfortheuseofthosefunds.NationalGriddoesnotagreethatitshould berequiredtoproposeablockbiddingprogram.TheTRCtestisthebesttestformeasuringcost-effectiveness.TheEvaluationAdvisoryGroupshouldstudywhetherchangesininputsshouldbeadopted.Problemswithprogramoverlapinthedownstateareaareexaggerated.AgreatdealofcooperationhastakenplacebetweenGridandLIPA,ConEdison,andNYSERDA.OnLong Island,theutilitiesparticipateinaLongIslandGreenHomesConsortiumwithNYSERDA.Sharingnon-participantdatarisksviolationoftheCommissionsprivacypolicies.CentralHudsonDevelopingenergyefficiencyisanimportantpriority.TheCommissionhastakenmanystepsinfurtheranceofthisgoal,andtheprogramsarenowatacrossroads.Continuityof fundingisessential.Butincreasedcooperationamongstakeholders,andnewstudiesof achievableefficiencypotentialneedtobeperformed.Staffsbasicrecommendationforcontinuityissound,butthecontinuousimprovementofprogramsneedstobeinformedbypotentialstudiesexaminingtechnical,economic,and APPENDIX5-16-achievabilityissues.Experiencehasshownthattheassumptionsunderlyingtheoriginalprogramtargetsinmanycaseshavebeenflawed,andthisneedstobecorrectedwithbetterstudies.Althoughchangesinlightingstandardswillneedtobeaccountedfor,lightingprogramsarebyfarthemostproductiveofsavingsandshouldbecontinuedatleastthrough2012.Withrespecttosectorequity,therearepolicyreasonstomaintainbalance,andtodedicatefundstosometypesoflower-performingprograms.Thosedecisions,however,needtoberecognizedinthemetricsbywhichprogramadministratorsareevaluated;otherwiseprogram administratorsareplacedintoanuntenableposition.Themechanismforcostrecoveryshouldnotberevised.

ItwouldbedifficulttoeliminatetheoverlapbetweenutilitiesandNYSERDA.Bothacompetitiveapproachandacooperativeapproachhavemeritsandproblems,butacooperativeapproachispreferable.Thechiefbenefitofacompetitiveapproachisthatpoorperforming measuresandprogramswouldbeweededout;butthatprocessistime-consuming,andinthe meantimecustomersarepayingforthemistakes.Forcooperationtowork,utilitiesand NYSERDAwillneedtofindimprovedwaysofsharinginformation.Also,potentialstudieswill helpinsettingincentivelevelsandotherstepsneededtoenhancecooperation.Theshareholderincentivemechanismhassucceededininducingperformance.Negativeadjustmentshavenoclearpurpose,becausefailuretoreachtargetsdoesnodirectharm.Even so,CentralHudsondoesnotopposethepotentialfornegativeadjustments,ifsetreasonably, whichrequiresdetailedpotentialstudies.Settingincentivesproperlywillavoidthetypeof discussionsoverposthocadjustmentsthatwehaveseenwithrespecttothe2009-2011period.Staffscharacterizationofutilitybehavior,inthecontextofitsincentivesdiscussion,isinaccurateandservesnopurpose.Staffoftentakespositionsthatserveitsowninterests,asdo utilities.Ifutilitieswereaiminglow,onewouldexpectthattheirtargetswouldhavebeen achieved.Anyconflictthatmightexistwithrespecttotargetswouldbegreatlyamelioratedby theuseofpotentialstudiesandarevisedTRC.CooperationbetweenutilitiesandNYSERDA canbemadetoworkwithinanincentiveprogram.TheconfusionexperiencedduringthefirstthreeyearsofEEPSmayjustifyaposthocadjustmenttopenaltylevels,butthepotentialforfutureposthocadjustmentswillmakeitverydifficultforutilitiestoplan.Totheextentthat incentivesmaydriveutilitiestowardinvestingmoreinhigher-performingprograms,thatisa goodthing;totheextentthatmightdisruptportfoliobalance,andcompromiseotherpolicy concerns,thosepolicyconcernsneedtoberecognizedinthemetricssoutilitieswillhave incentivestopursuethem.Whiletheimpactofincentiveshasoccupiedsomeoftheutilitiestime,particularlyintheirinteractionwithStaff,utilitiesspendagreatdealoftimesharinginformationaboutprogramimprovementinforumsotherthantheIAG.Positiveincentivesshouldremaininplaceduring2012,whilepotentialstudiesareperformed.Tailoringincentivestouniqueutilitycharacteristicsmaybeappropriate.Central Hudsonhasout-performedallotherprogramadministrators,anditsachievementshouldberewarded.

APPENDIX5-17-MultipleIntervenorsStaffsrecommendationtoreauthorizethemajorityofprogramsisunreasonable.The15by15goalwasneversupportedinthefirstplace,andsubsequenteventshaveunderminedit further.Itshouldbescaledbacksubstantially.ThegulfbetweenNewYorksenergypricesand averageU.S.priceshasnotimproved,nonewcapacityisneededinthenearfuture,andmarket developmentssuchaslowergaspriceshaveunderminedtherationaleforandfinancialmetricsforefficiencyprograms.EEPSmustbeconsideredinconjunctionwithSBC,RPSandotherprogramssupportedbyratepayers.Iftherecessioncausedunder-performanceofEEPS,the recessionalsomadecustomersmoresensitivetothesecharges.Ataminimum,allprograms shouldbereevaluatedunderacost-effectivenesstest.Annualchargesforlargecustomersshouldbecapped.Otherstateshavedonethis.Failuretodosowillcontributetolargebusinessesmovingoutofthestate.ElectricEEPSprogramcostsshouldbeallocatedtoclassesbasedonfundsdedicatedtoeachclass.InformationregardinginterclassequityhasnotbeenprovidedbyStaff,andcannotbe evaluatedbycommenters.AmortizationofEEPScostsovermultipleyearswouldincreasethetotalcostoftheprogram.LargecustomersshouldbeaccordedtheflexibilitytodirectallorsomeoftheirEEPSsurchargesintoself-directedefficiencyprograms.Notonlywouldthisensureanequitable distributionofsurchargecollections,butitwouldenableeachcustomertoaddressitsown uniqueefficiencyneeds,whichmightnotbeservedbyuniformprograms.Inthealternative,eachutilityshouldbedirectedtoimplementablockbiddingprogram,whichisbettersuitedtomeetingtheindividualneedsoflargecustomers.TheTRCtestneedstoberevised.Aspresentlyconstructed,itdoesnotaccountforthecostofcustomerincentives.Moreover,itreliesonhardtoquantifybenefitsthatmakethetest easiertopass.Finally,therearemanyprogramsandmeasurethatbarelypassthe1.0 threshold,meaningthatthereisnomarginforerrorintheCommissionsfindingofcost-effectiveness.Utilityshareholderincentivesshouldbeeliminated.UtilitiesshouldnotneedacostlyincentivetoperformataskassignedtothembytheCommission.Competitionamongprogramadministratorsforapprovalofprogramsisbeneficial,buttheapprovalofprogramsshouldbeperformedinawaythatminimizesdirectcompetitioninprogramimplementation.ThecurrentoverlapofresponsibilitybetweenNYSERDAandutilities isinefficient.CityofNewYorkGenerally,EEPSprogramsshouldbereauthorizedasrecommendedbyStaff.Alackoffundingcontinuitywoulddisruptprograms.Itisnotclear,though,whythecurrentfactors inhibitingperformance,suchasthesluggisheconomy,willnotcontinuetoundermine APPENDIX5-18-performance.Moreanalysisneedstobeperformedoftheroleofprogramdesignindelayingachievementoftargets.AlargeamountofenergyefficiencypotentialremainsinNewYorkCity.ThispotentialcanbetappedbycooperativeeffortsbetweentheCityandEEPSprogramadministrators.Alackofclearinformationsharinghascausedconfusionamongcustomersandadministrators.The IAGshouldestablishtworegionalsubcommittees,oneeachforupstateanddownstate,toallowforbettercoordination,andmoreprogramstargetedtotheneedsofthedemographicsandbuildingprofilesofdownstate,aswellastreatmentofthecomplexlandlord-tenantissuesthatexistdownstate.NYSERDAshouldincreaseitspresenceinNewYorkCity.Also,ConEdison shouldberequiredtoproposeablockbiddingprogram.LightingmeasuresmustremainacentralcomponentofEEPS.OpportunitiesforefficientlightingintheCitysonemillionbuildingsremainverylarge.Theroleoflightingshouldbeexpended,notretracted.TheGreenLightNewYorkcentershouldbefunded.Also,theprocessfortakingnewstandardsintoaccount,proposedbyStaff,shouldbetransparentandinvolved opportunityforpubliccomment.Intheefforttomeetefficiencytargets,theimportanceofmarkettransformationshouldnotbeunderstated.Markettransformationeffortsshouldbeincreased.ThefueluserestrictionsonEEPSprogramsshouldberelaxedtosupportmoreoil-to-gasconversions.ThiswouldfurthertheCitysemissionreductionprograms.Fundingforlow-incomecustomersneedstobeequitable,andStaffsanalysisshouldberefinedand/orconfirmedfollowedbyacommitmentofmoreEEPSresourcestolow-incomecustomers.Eligibilityshouldbeexpandedtointerruptiblecustomers.Althoughthereasoningforexcludingthemattheoutsetwassound,multifamilyprogramsinparticularhavebeenimpeded greatlybytheineligibilityofinterruptiblecustomers.TheCityhasastronginterestinworking withIAGmembersandotherstodevelopthisproposal.EEPScostrecoveryshouldnotbeamortizedovermulti-yearperiods,primarilybecausethiswouldincreasethetotalcostsoftheprogram.EM&Veffortsneedtobecontinued,andacentralizeddatabaseshouldbemadeavailabletostakeholders.BenchmarkingeffortsmodeledaftertheCitysshouldbeusedasatemplatefor astatewideinitiative.Fundingforoutreachandmarketingeffortsshouldnotbereducedasprogrammature,butEM&Vmethodsshouldbeappliedtooutreachefforts.NationalAssociationofEnergyServiceCompanies(NAESCO)Thecurrentstructureofutilityincentivesproducescontinuouscontroversy.Itshouldbereplacedwithasimpleadministrativefeeandanopportunitytoearnareturnonequity.

APPENDIX5-19-MerecoordinationbetweenNYSERDAandutilitiesisnotsufficient,evenifitisattainable.Asingleconsolidatedprogramshouldbeofferedtocustomers.Theinsistenceonmeasuringcost-effectivenessbymeasure,ratherthanbyproject,hasimpairedtheimplementationofeffectiveprograms.ThemembershipoftheIAGshouldbeexpandedtoincludeotherstakeholders.Theeffectsofefficiencyonwholesalemarketsshouldbeconsideredincost-effectivenesstests.Staffreliesonastudyrelatedtodemandresponseprograms;energyefficiencyonthescaleofEEPShasdifferenteffectsthandemandresponseandcannotbeobviatedbyforward contractingandhedgingstrategies.ConsumerPowerAdvocatesSelf-directedprogramsbylargecustomersareunnecessary.Suchprogramswoulddrainrevenuefromthelargereffort.Thecostofanefficiencyprogramforalargecustomerislikelyto bemuchhigherthanthesurchargepaidbythatcustomer.Utilityincentivesshouldbeeliminatedinthenearterm,andconsideredinthecontextofratemaking.IncentivesmustbecorrectedtoprovideforgreatercooperationbetweenNYSERDAandutilities.Utilitiesarebusinessesandmustbeexpectedtopursuetheirown interests.Adelineationofresponsibility,withlargecustomersunderNYSERDAprogramsand smallercustomersunderutilityprograms,wouldbeeffective.NewYorkStateDepartmentofEnvironmentalConservation(DEC)OfficeofEnvironmentalJusticeLowincomefundingshouldbeincreasedto30%ofoverallfundingfortheresidentialsector.TheIAGshouldestablishasubcommitteetoevaluateenvironmentaljusticeconcernsin theEEPSprograms.Low-incomecustomersaremorelikelytoliveinrentalhousing,whichis underservedintheEEPSprograms;low-incomehouseholdsarealsomuchmorevulnerableto fluctuationsinenergyprices.GreenEnergyCollaborationProgram(GREENCO)Greencoisacollaborativeofmanystakeholdersconcernedwithenergyuseinhospitals.EEPSprogramsshouldbereauthorizedwithcorrespondingfundinglevelsandastrategyofcontinuousimprovement.TheGreencoinitiativeshouldbecomepartofthatimprovement.

Hospitalsareenergy-intensive;thereareapproximately200inNewYork.Duetotheneeds facedbyhospitals,itisdifficulttofindfinancingforenergyefficiencyinvestments.AnEEPS programshouldbetailoredtotheneedsofhospitals,andshouldbeintegratedwithfinancing mechanismstoencourageparticipation.EEPSfundingcanbeleveragedwithprivatecapital.GreencointendstoworkwithStafftocreateaspecificproposal.Atpresent,thereisnoclearprocessforimprovementofprogramsorproposalofnewprograms.

APPENDIX5-20-BarrierstocooperationbetweenNYSERDAandutilitiesmustbeaddressed.Anewincentivemechanismspecificallydesignedforahospitalprogramshouldbedeveloped.Programadministratorsshouldalsobegrantedmoreflexibilitytoadjustprogramstomeetthespecific needsofahospitalprogram,astheneedsarise.Evaluationeffortsarecrucial.Hospitalboardsandfinancialinstitutionsarefarmorelikelytocommitcapitalresourcestoprogramsiftheyknowthatprojectionsarerealisticandperformancewillbeevaluated.NortheastEnergyEfficiencyPartnership(NEEP)TheCommissionshoulddirectutilitiesandNYSERDAtoparticipateinregionalprogramandpolicyefforts.Jointstudiescanavoidduplicativeefforts.Thisisparticularlytruewith respecttonationaltrendslightchangesinlightingstandards.Coordinationshouldbeincreased,particularlywithNYSERDAsT&MDefforts.Utilitiesshouldbemoreinvolvedinadvancingcodesandstandards.

NewYorkshouldmaintainitsparticipationintheRegionalEM&Vforum.ForumprojectsareselectedwithreferencetoneedsidentifiedbyNewYorksCommission.NEEPhasbeenanactiveparticipantinNewYorksEvaluationAdvisoryGroup.ConservationServiceGroupTheoverallgoalsoftheEEPSprogramaresound,andprogramsshouldbecontinuedsubjecttoimprovement.Abruptchanges,evenminorones,canhavelargeimpactsoncontractorswhoimplementprograms.Hundredsofemployersacrossthestatedependonthe orderlycontinuationofprograms.TheadministrationofEEPShasbeenunnecessarilycomplexandburdensome.Agreatdealofproductivityissacrificedduetotheconfusionofmultipleadministratorsinthesame markets,narrowcost-effectivenesstests,fuelrestrictions,lackofasinglesourceforinformation,burdensomereporting,andlackofconvenientfinancing.Efficiencyprogramsshouldbecoordinatedonaregionalbasis,followingtheGovernorsregionaleconomicdevelopmentstructureforthestate.Goalsshouldnotbelowered.Considerationofgoalsshouldnotbethoughtofasanexerciseinaccuracy.TheTechnicalManualisflawed,andits90%net-to-grossratioisquestionable.Becausegoalsmightnotbemetusingcurrentassumptions,theyshouldnotbe reduced.ApplyingtheTRCtomeasuresisoverlyrestrictive.Itplacesahugeburdenoncontractors.Itshouldbechangedimmediately.Inthelongerterm,aTechnicalConferenceshouldbeconductedtoreformthetestitself.TheProgramAdministratorCostTestispreferred,supplementedwithaSocietalBenefittest.

APPENDIX5-21-Themarkettransformationapproachtoefficiencyisimportant.Itresultseventuallyinwidespreadsavingsachievedwithnopublicsupport.Higherlevelsforworkforcedevelopmentshouldbesupported.Technicalproficiencyisthegreatestsinglefactorinachievingtrueenergysavings.Also,thedeeperintotheenergy marketstrainingprogresses,themoremarketsaretransformed.Fundingforlow-incomeprogramsshouldbeincreased.TheSBCT&MDactivitiesneedtobeintegratedwithEEPSprograms,especiallyinthecontextofoutreach.WilldanEnergySolutionsContinuityofprogramsisessential.Continuousimprovementshouldbemadeinconsultationwithstakeholdersincludingcontractors.Itshouldalsofollowaclearprocesswith fasterapprovals.Third-partyprogramadministratorsshouldbeabletoproposeinnovative programs.PAsshouldhavetheflexibilitytoraiseincentivesasneeded.Ingeneral,PAsshould begivenbroadergoalsandbudgetsandmoreflexibilitytoimplementthem.TargetsforfutureyearsshouldnotattempttomakeupshortfallsfromthefirstyearsofEEPS.Utilityincentivesshouldbepositive-only.EliminatingnegativeincentiveswillsolvemostoftheissuesraisedbyStaff;butitneedstoberecognizedthatutilitiesarefor-profit companiesthatwillrespondtoincentives.Themechanismneedstobesimpleandstraightforward.ClearerlinesneedtobedrawnbetweenNYSERDAandutilityprograms.NYSERDAandutilitieshavebeenabletocooperateonindividualprograms;however,therearecustomer sectorsmuchbettersuitedforexclusivetreatmentbyNYSERDA,suchaslargeretailerswith multiplelocationsthroughoutthestate.Dollarspermegawatthourshouldbetheprimarymetric.Budgetsforoutreachandmarketingshouldnotdeclineasprogramsmature.EfficiencyFirstNationalGridsEnhancedHomeSealingprograms(EHSIP)shouldnotbeterminated.Manyprogramissueshavebeenresolved.TheprogramanalysiscontainedintheWhitePaper doesnotreflectrecentimprovementsinprogramadministration.FreeBPIcompliantenergyauditsavailablefromNYSERDA,LIPAandothersdeterhomeownersfromobtainingasecondEHSIPaudit,whichlimitsthenumberofpotentialparticipants.TheTechnicalManualisoutdatedandshouldnotbereliedonforprogramanalysis.

APPENDIX5-22-TheTRCtestignoresnumerousbenefitsofEHSIP,includingcorrectionofventingproblems,eliminatingdangerofgasandcarbonmonoxideleaks,andcreationoflocaljobs.Notallcontractorsperformequally,andtheprogramcouldbeimprovedsignificantlywithbettermonitoringofindividualcontractorperformance.TRCEngineersLowincomeprogramsneedtobeincreased,bothforthesakeofequityandtoreplacedecliningfederalfunds.Thestatehasdevelopedanexperiencedgreen-collarworkforce,andthe declineinfederalfundingthreatenstostrandmanyoftheseworkers.Equitysuggestsfundinglowincomeprogramsat40%oftheresidentialallocation.Takingotherconcernsintoaccount,a25%levelmightbereasonable.TheaffordablemultifamilycomponentofEEPSprogramsislikelytoseeanincreaseindemand.Lowincome projectstendtocostmore,notnecessarilybecausetheenergycomponentislesscost-effective, butbecauseahighernumberofhealthandsafetyimprovementsareinvolved.Anadderto recognizethisshouldbeincorporatedintotheTotalResourceCosttest.SplitincentivesshouldbedealtwithbyreferringtotheMPPprogramundertheSBCrules.Theserulesensuredthatbothownersandtenantsexperiencedreducedenergybills.TheTotalResourceCosttestneedstoincreasetheemissionfactor.$50/tonforacarbonfactorisconservative.ApplyingtheTRCatthemeasureleveliscounterproductive.TheprohibitionagainstlowincomebuildingsintheElectricReductioninMasterMeteredBuildingsprogramshouldberemoved.Ifnecessary,thiscouldbelimitedtobuildings heatingwithfossilfuels.FreeLightingCorp.Theeconomicdownturnhashadastrongeffectoncustomerparticipation,particularlyforsmallbusinesses.Incentivelevelsneedtobeincreasedtominimizefinancialriskforparticipatingcustomers.Thisisthesortofcommon-senseadjustmentthatneedstobemadeas programsadjusttoexperience.LongIslandJobswithJusticeNewBuffaloImpactCoalitionforEconomicJusticeCommonCause PartnershipforthePublicGoodEEPSiscurrentlyunderservinglow-and-mediumincomecustomers.Lowincomecustomershavemuchgreaterenergyefficiencyneedsthanothercustomers.Whole-houseprogramsarealsobeneficialforjobcreation.EEPSwouldalsobemademoreefficientifitwereadministeredentirelybyNYSERDA.

APPENDIX5-23-FacilitySolutionsGroupSmallbusinesseshavenotbeenadequatelytargetedbyefficiencyprograms,andtheylacktheresourcestoinitiateprojects.TherulesoftheSmallBusinessDirectInstallProgram needtobesimplifiedforthesmallbusinessownertoallowgreaterparticipation.Thiscouldbedonethroughon-billfinancing,greaterincentivelevels,betterpromotion,orincreaseof customersize.SchoolFacilitiesManagementInstituteNYSAssociationforSuperintendentsofSchoolBuildingsandGroundsEnergyconsumptionisanimportantcomponentofstrappedschooldistrictbudgets.EEPSprogramsareavitalpartofastrategytocontrolcosts;EEPSprogramsshouldbe continued.

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