ML12090A848

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 State of NY, Public Service Commission
To:	Atomic Safety and Licensing Board Panel
SECY RAS
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ML12090A819	List: ML12090A820 ML12090A822 ML12090A823 ML12090A824 ML12090A825 ML12090A826 ML12090A827 ML12090A828 ML12090A829 ML12090A830 ML12090A831 ML12090A832 ML12090A833 ML12090A834 ML12090A835 ML12090A836 ML12090A837 ML12090A838 ML12090A839 ML12090A840 ML12090A841 ML12090A842 ML12090A843 ML12090A844 ML12090A845 ML12090A846 ML12090A847 ML12090A848 ML12090A850
References
RAS 22161, 50-247-LR, 50-286-LR, ASLBP 07-858-03-LR-BD01
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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.