Show me the money… $ $ $ Show me the money… $ $ $ Efficiency Vermont s Investment Plan

Q. What IS money, anyway? A store of value; A store of value; A means of exchange; A means of exchange; Not everything, but a great way of keeping score; and Not everything, but a great way of keeping score; and Unlike electricity, not necessarily fatal if consumed directly (hence the derived demand for energy)…. Unlike electricity, not necessarily fatal if consumed directly (hence the derived demand for energy)….

Time is money… Q. Do you believe a dollar in the future is worth MORE because of future generations? A. If yes, I want to borrow as much money as you ll lend me right now for as long as possible. Q. Which would you rather have, $1,000 today or $1,000 in ten years? A.Duh!

You and Your Discount Rate… Money s worth today depends on when you get it. Money s worth today depends on when you get it. You (and every member of species homo economicus) implicitly or otherwise apply an annual DISCOUNT RATE to future money outlays and income (even if you re certain to spend or receive it). You (and every member of species homo economicus) implicitly or otherwise apply an annual DISCOUNT RATE to future money outlays and income (even if you re certain to spend or receive it). Until yesterday, Efficiency Vermont calculated our PRESENT WORTHS of future money (benefits and costs) using a 6.8% discount rate. Until yesterday, Efficiency Vermont calculated our PRESENT WORTHS of future money (benefits and costs) using a 6.8% discount rate. From now until the DPS changes it again (with PSB approval), we re using a 5.8% discount rate. From now until the DPS changes it again (with PSB approval), we re using a 5.8% discount rate. This is the OPPORTUNITY COST of investing the public s money somewhere else, i.e., in some other public good. This is the OPPORTUNITY COST of investing the public s money somewhere else, i.e., in some other public good.

Not all money is the same… Q. How do we count money at Efficiency Vermont (and VEIC)? A. Let me count the ways….

Different Ways of Counting Money at Efficiency Vermont Societal Benefits and Costs Societal Benefits and Costs All costs and benefits, including externalities, comparative risk adjutment All costs and benefits, including externalities, comparative risk adjutment Total Resource Benefits and Costs – per contract Total Resource Benefits and Costs – per contract Benefits: Societal minus externalities Benefits: Societal minus externalities Costs: Not including CRA Costs: Not including CRA Total Resource Benefits and Costs – per 5270 and PIP Total Resource Benefits and Costs – per 5270 and PIP Costs: with Comparative Risk Adjustment Costs: with Comparative Risk Adjustment Electric System Benefits and Costs Electric System Benefits and Costs Benefits: TRB without fossil, water Benefits: TRB without fossil, water Costs: TRC minus participant, third-party cost Costs: TRC minus participant, third-party cost GMP Value Test GMP Value Test

The Color of Money….

DSM Cost-Effectiveness Indicators Net benefits = PW Benefits – PW Costs Net benefits = PW Benefits – PW Costs The economic bottom line (>>0) The economic bottom line (>>0) Measure of increase in wealth Measure of increase in wealth Benefit/Cost Ratio = PW Benefits / PW Costs (>>1.0) Benefit/Cost Ratio = PW Benefits / PW Costs (>>1.0) Simple comparative indicator Simple comparative indicator Misleading Misleading Cost of saved electric energy ($/kWh) Cost of saved electric energy ($/kWh) PW costs / PW lifetime kWh PW costs / PW lifetime kWh for comparison with avoided supply for comparison with avoided supply Like yield, except inverse, and accounting for lifetime Like yield, except inverse, and accounting for lifetime Net cost of saved peak demand ($/kW-yr) Net cost of saved peak demand ($/kW-yr) = (PW costs minus PW electric energy benefits) / PW kW-yr = (PW costs minus PW electric energy benefits) / PW kW-yr

Supply Curves for Energy Efficiency Savings

The Money Show for Efficiency Vermont Societal Total Resource (per Contract) Total Resource With CRA per PIP Cost of saved electric energy Net cost of saved peak demand Total Resource With CRA per PIP and 5270 Comparison of benefits and costs Cost of saved electricity Electric System Comparison of benefits and costs Cost of saved electric energy per kWh Net cost of peak demand savings GMP Value from Energy Efficiency Fund Net Resource Benefits divided by EVT costs (NRB/EVT) >>1.0

Conclusions Prospective performance Everything pretty much cost-effective from all perspectives. A few red flags. What about the future? Prospective initiative economic assessment New avoided costs. Using analysis to make decisions about budget allocation over time. Portfolio economic performance. Where are we on the supply curves for residential efficiency?