Methodology for Energy Savings claim for Incentive Programs and Codes & Standards(C&S) accounting

1. Methodology for Energy Savings claim for Incentive Programs and Codes & Standards(C&S) accounting Presented by: Armen Saiyan P.E. For the California Technical Forum July 24 2014

2. Brief Overview of Concept • As Codes and Standards become increasingly stringent, and traditional ECMs become part of the code, utility incentive programs are struggling to survive. The standard approach has been to drop ECMs from their list of offerings. • Our conceptual proposal of accounting will allow for programs to incentivize for code measures without double counting for C&S savings. • In addition we believe that incentivizing for code measures would accelerate early market adoption of code compliance vs. naturally occurring market adoption, especially at the beginning of the code cycle.

3. Current Method of Accounting for C&S • Statewide (SW) C&S claim uses a workpaper prepared by HMG in 2005 • Savings are calculated on a high level basis and proportioned to service territories based on sales. Reference: HMG - Codes and Standards Program Savings Estimate V3 CALMAC Study ID: SCE0241.01

4. Current Method of Accounting for C&S Cont. • In an effort to avoid any double counting for C&S savings already accounted for in the SW C&S claim, the standard approach for utility programs are to drop off measures from their list of offerings to avoid any double dipping. • This leaves many opportunities for efficiency yet untapped that would need to rely on natural market adoption of code to fill in the gap. • The current state of regulatory conditions and increase in code stringency leads to the eventuality that traditional utility incentive programs will no longer exist in the same structure it is currently in and demonstrates that there is a need for fundamental changes. • This proposed methodology may be one of many possible solutions to this problem.

5. Portfolio C&S Savings

6. Participating Customer Savings Calculations at Project Level and Incentive Program Framework • Two Tiered accounting process with a dual baseline for all custom calculation projects • Two Tiered Incentive Programs Existing Baseline Consumption Code Compliant Project receives a Low Tier Incentive for project savings. Beyond Code Project receives High Tier Incentive for total project savings A requirement threshold of 5% above code at beginning of code cycle and potentially progress to 15% by end of code cycle depending on market uptake. Code Baseline Consumption Proposed Consumption ROB baseline modifications are considered only for specific measure types (i.e. HVAC units, Chillers) and evaluated on case by case basis Project savings calculations and total program claim to closely represent actual grid impact (still subject to EM&V realization rate).

7. Non-Participating Customer Savings Calculations at Project Level • Retrieve Information from Local Code Enforcement Agency on development quantities and project types. • An alternative for retrieving the proper information can be taken from the HERS database. • Modify Statewide C&S savings calculation methodology and distribute on a per SF basis. • Net out Participating Customers from total SF of development within service territory. • Distribute on a per SF basis SW C&S savings to appropriate development categories.

8. Additional Benefits • Statewide C&S savings calculation methodology assumes approximately 25% Net savings for Code due to naturally occurring market adoption and an additional 50% reduction for non-compliance, lack of enforcement, and other items outside of Utility Program influence to determine what Utilities can claim for. • The largest negative effect is the naturally occurring market adoption. Keeping a lower tier incentive to help projects meet code accelerates the code adoption in the market and would make utilities directly responsible. This is especially true in our current environment where the significant jump in stringency of the code has seemingly disincentivized the market with moving forward with efficiency projects. Reference: HMG - Codes and Standards Program Savings Estimate V3 CALMAC Study ID: SCE0241.01

9. Additional Benefits cont. • Participating customer C&S savings can potentially be accounted for at 100% of gross mostly due to programs influencing the market on early code adoption. • In addition, Utility program administrators go through a higher QA/QC process for each project review, eliminating a good majority of the non-compliance portion. • Utilities can further ensure code enforcement by requiring permits when applying for an incentive, this has never been enforced in the past. • This point may require more study to determine what the exact amount of the increase in C&S savings is claimable. Note: Percentages provided in this figure are arbitrary to demonstrate a potential increase in C&S savings for every 10% removed from the high level C&S savings estimate a potential of 40% can be returned through Incentive programs. Thus growing the pie for C&S savings claim.

10. QUESTIONS