Draft SMECO EmPOWER Plans April 14, 2011

Lighting & Appliances The major components of the program will include ENERGY STAR® lighting, appliances, consumer electronics, and refrigerator, freezer and room air conditioner recycling Lighting –ENERGY STAR standard screw-in CFLs –ENERGY STAR Specialty CFLs –ENERGY STAR fixtures (interior and exterior) –Table lamps, desk lamps and torchieres –LED products – night lights and other interior LED products

Lighting & Appliances (cont’d) Appliances –ENERGY STAR products including refrigerators, clothes washers, room air conditioners (RAC), dehumidifiers, electric resistance water heaters and electric heat pump water heaters. Consumer Electronics –This program will provide midstream incentives to retailers and other industry partners to stock and promote energy efficient televisions, set top boxes, home theatres and computer monitors Recycling –Removal and recycling of their old working refrigerators, freezers and room air conditioners.

Lighting & Appliances (cont’d) MeasureAverage Incentive CFL (standard and specialty)$1.30 ENERGY STAR Fixtures$10 LED (replacement lamps and Fixtures)$10 - $30 Clothes Washers$50 Refrigerators$50 Dehumidifiers$25 Electric Water heaters$25 - $300 Recycling/RAC/Fridge$25-50 TV’s, Computer Monitors, Set Top Boxes$10-$30

HVAC The SMECO Residential HVAC Program is designed to provide incentives and rebates to SMECO customers and participating contractors to encourage the purchase and correct installation of energy efficient heating and cooling equipment. Measures include: Rebates for a range of ENERGY STAR® HVAC Equipment Rebates for identifying and sealing leaks in the air duct distribution system (Duct Sealing) Rebates for a Diagnostic Tune-up on an existing air conditioner and/or heat pump

HVAC The equipment program will continue to provide incentives for ENERGY STAR qualified equipment for central ducted systems including central air conditioning, and air source heat pumps when replacing an existing HVAC system. Additional products to be offered under the Residential HVAC program include Ductless Mini-split systems. To increase the interest and participation level for both HVAC contractors and consumers, the QIV program will become part of the HVAC Equipment program as a Tier 2 incentive level program.

HVAC The SMECO HVAC Equipment rebate program proposes to include new construction. The caveat for inclusion of new construction in the HVAC equipment program will be that the builder/contractor cannot participate in the ENERGY STAR for New Homes program Ductless Mini-splits are equal to or higher in energy efficiency ratings for both SEER, EER and HSPF ratings as compared to ducted HVAC equipment. They also are an excellent option for major additions, as well as whole house HVAC systems To date there have been very few rebates submitted for Duct Sealing, those that have been submitted have come through the Home Performance with ENERGY STAR program. To increase contractor and consumer participation, incentives for Duct Sealing are being increased by $100

HVAC The following changes to the Equipment Rebate program design include: The current Tier 1 Equipment rebate level will be eliminated. –Funding for Tier 1 rebates will be shifted to the Quality Installation Verification (QIV) program to help with the $100 incentive increase for QIV. The current Tier 1 will be replaced with the current Tier 2 Equipment Rebate Efficiencies –≥ 15 SEER and ≥12.5 EER Central A/C, and –≥ 15 SEER and ≥12.5 EER and 8.5 HSPF for Air Source Heat Pumps) Tier 2 will then include Tier I Equipment Rebate Efficiencies plus the Quality Installation Verification (QIV) component

HVAC The Performance Tune-Up (initially launched as the Diagnostic Tune-up (DTU) Program in 2010) has experienced very low participation in 2010/11. Through contractor group meetings, feedback was obtained on why they believed the DTU program was not receiving greater participation. Contractor responses included: Incentives are not enough to make an impact with consumers Requirements are too restrictive for the amount of time required to provide DTU service; and Customer confusion on the difference between individual contractors’ service agreements and SMECO’s Diagnostic Tune-up Program. Therefore, the Diagnostic Tune-up program will be marketed as a Performance Tune-up and is designed to increase the operating efficiency of existing air conditioning and heat pump ducted systems where the customer’s HVAC equipment is not yet ready for replacement.

HVAC Additional enhancements to the Performance Tune-up include; Requirements will be modified to simplify the Performance Tune-up service. Based on results from other utility tune-up programs, baseline efficiency will be established so contractors can perform required service on an A/C or heat pump and then perform one efficiency test vs. two as in the past. This will allow contractors to perform the Performance Tune-up service without overburdening contractors with data collection. The rebate incentive will be increased from $75 to $125.This increased incentive is necessary to address 50%-75% of the incremental cost and will gain additional consumer attention and participation. Special testing instruments are necessary to conduct services required in the Performance Tune-up program. Not all contractors currently have these required instruments. To increase participation in the program, a onetime incentive of $500 will be paid to contractors who enroll in the program and submit their first 50 rebate applications that are approved for payment. This will incentivize contractors to invest in the required tools, training, and instruments to offer these services on an ongoing basis.

HVAC Measure Incentive Performance Tune-up$125 Duct Sealing$300 Equipment Rebates --CAC Tier 1$300 CAC Tier 2 (includes QIV)$600 Air Source Heat Pump Tier 1$350 A S H P Tier 2 (includes QIV)$650 Ductless Mini-Split AC$300 Ductless Mini-Split HP$350

Retrofit Programs SMECO proposes to work with industry stakeholders and the Maryland Energy Administration (MEA) to help continue the transformation of the residential retrofit market. SMECO proposes to continue with a two pronged approach to encouraging whole home retrofit, using the Quick Home Energy Check up to create awareness and a market for the Home Performance with ENERGY STAR program. SMECO looks forward to discussing program enhancements with MEA, PSC staff and other EmPOWER MD utilities. OPC made specific recommendation on how to improve the transfer rate from QHEC to HPwES. Recommendations include: Development of a single application process for QHEC and HPwES Incentives and rebates linked to completion of the whole home retrofit

Retrofit Programs Quick Home Energy Check-up The customer receives a detailed observational audit from a BPI- certified contractor and the following energy efficiency measures where suitable: Compact Fluorescent Lamps (CFLs) Faucet Aerators Efficient-flow showerheads DHW pipe insulation Water heater tank wrap (electric tanks only) Water heater temperature turn down

Retrofit Programs Home Performance with ENERGY STAR SMECO proposes the following incentive structure for the HPwES program: Customer Incentives: Increase maximum rebate from $1,300 to $1,900 (not including the HVAC rebate component). The current air sealing, insulation, water heater, and audit rebates for HPwES are currently 15% of the cost of eligible measures, up to $1,300 maximum. The proposed change would double the incentive to 30% of the cost of eligible measures, up to $1,900.

Retrofit programs Home Performance with ENERGY STAR SMECO proposes the following incentive structure for the HPwES program: Contractor Incentives: SMECO proposes to maintain the same level of contractor incentives offered during the program’s earlier phases to ensure that we continue building the contractor infrastructure in Southern Maryland. Contractor incentives would include: $1,000 bonus at the completion of the 10th job in the program. $200 bonus for all jobs completed, with an additional bonus of $200 if the contractor installs a new HVAC system in addition to core home performance measures. BPI accreditation assistance ($750 for first year of accreditation only) Contractors also receive an incentive for each direct install measure installed in a customers home, if the customer completes the Home Performance work.

Energy Star New Homes Program The SMECO ENERGY STAR for New Homes Program seeks to accelerate the market penetration of homes in SMECO’s service territory that meet and exceed the Environmental Protection Agency (EPA) ENERGY STAR guidelines An updated incentive structure has been developed and approved that addresses the higher efficiency levels (and associated costs) required by the EPA’s new ENERGY STAR Version 3 specifications. Version 3 requires that a home be built to the new “ENERGY STAR Reference Design” that includes a comprehensive set of specifications for HVAC equipment, the building envelope, lighting and appliances.

Home Energy Reporting Program The Home Energy Reporting Program integrates customer energy usage data with external information including demographics, housing and geographic data. The analysis is used to develop specific, targeted recommendations that educate and motivate customers to implement energy efficiency measures and manage their energy use. The reports provide customers: Targeted recommendations based on an analysis of the household’s energy usage, housing characteristics, and program participation that incorporate energy efficiency program information such as, for an older home, consider a Home Performance with ENERGY STAR audit Tips describing how they can easily take action to reduce their energy consumption comparable to the energy management tips SMECO has been providing as part of General Awareness and;

Home Energy Reporting Program A graph of that customer’s energy use compared to the average of 100 “neighbors” (e.g., customers in similar sized homes with similar characteristics living nearby). The group of “neighbor” customers is selected to be large enough so that the energy use of another individual customer cannot be derived and confidentiality is carefully maintained. The objective of the program is twofold: to influence customer behavior related to energy use; and to drive customers to participate in the other SMECO residential offerings. By using data analytics and information targeting, the program is able to identify consumers who are most likely to participate in a specific program and, in turn, promote that program to appropriate customers. Case studies have shown that over time the Home Energy Reporting System has led to a 15% - 22% increase in participation in utility sponsored programs and 1.5 – 3.5% energy savings for participants.

Limited Income Energy Efficiency Program SMECO’s LIEEP program helps bring the benefits of the EmPOWER Maryland program to SMECO’s neediest customers. It offers a broad array of energy efficiency, health and safety and building performance measures to income- qualified electric customers in primary, owner occupied single-family residences, at no additional cost other than the general EmPOWER Maryland surcharge on their energy bills. The program pays 100% of the cost of energy efficiency improvements.

Limited Income Energy Efficiency Program SMECO proposes the following measures: Air sealing (e.g., caulking, weather stripping) Insulation Windows and exterior door repair Heat pump tune-up, repair or replacement Heat pump replacements Central air conditioner tune-ups Central air conditioner replacements Duct sealing and insulation High-efficiency lighting Major appliances (refrigerators, freezers, clothes washers, room air-conditioners) Water heater tune-up, repair or replacement (excluding propane, gas or oil water heaters) Water heater tank wraps and pipe insulation Low-flow showerheads Faucet aerators Health and safety repairs

Limited Income Energy Efficiency Program For the 2012 – 2014 LIEEP Program, SMECO proposes to open up participation to renters with the caveat that the property owner may not increase the rent as a result of the improvements made to the rental unit due to program participation. Qualifying units eligible to participate in the program will be limited to single family residential units (attached or detached). A Terms and Conditions form acknowledging acceptance of all program requirements must be signed by the property owner prior to acceptance into the program.